President Trump Declares Energy Independence and Changes the Way the Federal Government Addresses Climate

On March 28, 2017, President Trump signed a sweeping Executive Order to scale back the climate change and energy related policies and regulations issued during the Obama Administration. The Order seeks to promote the domestic production of energy—primarily from fossil fuels, like coal, oil, and natural gas, and from nuclear energy resources—by rescinding several Obama-era Executive Orders and policies and by directing federal administrative agencies to review and take steps to revise or rescind rules that “potentially burden the safe, efficient development of domestic energy.” As detailed below, some of these actions will have immediate effect, but others will take time to implement. The extent of the Order's impact, whether in the form of continued litigation or increased jobs in coal, oil, or other energy sectors, however, most likely will not be immediately known.

Reconsideration of Greenhouse Gas Regulation at Power Plants

One of the key elements of the Executive Order is the direction to the EPA to review and possibly rescind or revise President Obama’s signature climate-related regulation—the Clean Power Plan (CPP). Once implemented, the CPP would have regulated greenhouse gas (GHG) emissions from existing fossil fuel-fired power plants. The Order also requires review and possibly rescission or revision of an associated rule, the New Source Performance Standard (NSPS) regulating GHGs from new, modified, and reconstructed power plants (the GHG NSPS). 

Both of these rules are the subject of legal challenges at the District of Columbia Circuit Court of Appeals. Pursuant to the Executive Order, the Department of Justice has already requested the court to hold in abeyance both the challenge to the CPP and the challenge to the GHG NSPS until 30 days after the EPA completes its required review. These requests will likely be challenged—particularly given the status of the litigation matters. Oral arguments were held in the CPP litigation in September 2016, and the parties are currently awaiting the court’s decision. Oral arguments in the GHG NSPS challenge were scheduled for April 17, 2017, but are on hold while the court considers the government’s motion. While the court has historically granted these types of government requests, this instance may be different—particularly in the CPP litigation where the full D.C. Circuit heard the challenge, and the court has been preparing its decision for several months.

The EPA’s review and potential repeal or replacement of the CPP and the GHG NSPS will likely take between 1 and 2 years because the Agency will be required to undertake notice and comment rulemaking. The rulemaking process will be lengthy. The Obama EPA took over a year to issue the CPP after its initial proposal, and the Trump EPA may need additional time beyond that because the Agency will need to complete its review of the current rules and develop its proposed action before seeking public comment. Moreover, the Agency may be hard-pressed to quickly complete its review of these rules because it has yet to fill a number of senior positions at the EPA, including the Assistant Administrator for the Air and Radiation Division.

Any final action to repeal or revise the CPP and the GHG NSPS will likely be challenged, ensuring several more years of litigation.

Rescission of Prior Executive Actions Related to Climate Change

The Executive Order is silent regarding the United States’ continued participation in the Paris Climate Agreement. With the Executive Order, however, President Trump immediately repealed several of President Obama’s Executive Orders and Presidential Memoranda concerning climate change, including:

• President Obama’s Climate Action Plan and the March 2014 Strategy to Reduce Methane Emissions;
• Executive Order 13653, dated November 1, 2013, “Preparing the United States for the Impacts of Climate Change”;
• Presidential Memorandum, dated June 25, 2013, “Power Sector Carbon Pollution Standards”;
• Presidential Memorandum, dated November 3, 2015, “Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment”; and
• Presidential Memorandum, dated September 21, 2016, “Climate Change and National Security”.

The Order also directs the Council of Environmental Quality to rescind its final guidance concerning consideration of climate change under the National Environmental Policy Act (NEPA). While this guidance will not be effective going forward, the evaluation of climate impacts may still be required in NEPA reviews. Some courts have held, both in and outside the energy context, that NEPA compels an analysis of greenhouse gas impacts. Legal challenges in this area are anticipated, and, despite rescission of this guidance, projects could remain vulnerable to challenge if plaintiff groups assert that the administrative record does not sufficiently address climate impacts.

The Executive Order also withdraws several Obama-era guidance documents on how to value the benefits of reducing GHG emissions to society (aka the Social Cost of Carbon). In place of these documents, federal agencies are required to use a 2003 guidance document when monetizing the value of changes in GHG emissions. 

Encouragement of Domestic Energy Production

Finally, the Executive Order contains several provisions intended to foster domestic energy production. While the policy section of the Order includes renewable energy sources, its directives focus primarily on increased energy production from fossil fuels and nuclear resources.  

The Executive Order calls for the immediate review of all federal agency actions that potentially burden energy development. Every federal agency must review all existing regulations, policies, and guidance, and within six months, finalize a report recommending those actions that can be legally taken to alleviate or eliminate burdens on domestic energy production. The respective agencies are then required to begin action to suspend, revise, or rescind the regulations, guidance, or policies identified in the final report.

The Order also lifts the moratorium on federal land coal leasing and requires the review of several regulations applicable to the oil and gas sector, including:

• The New Source Performance Standards issued on June 3, 2016, concerning GHG emissions from the oil and gas industry;
• The March 4, 2016, regulation concerning hydraulic fracturing on federal and Indian lands;
• The November 2016 United States Fish and Wildlife and National Park Service regulations concerning the exercise of non-federal oil and gas rights in wildlife refuges and national parks, respectively; and
• The November 2016 Bureau of Land Management regulation concerning methane emissions from venting, flaring, and leaks at oil and gas operations on Federal or Indian lands.

Potential Impact of the Executive Order

One of intended outcomes of this order is to facilitate growth in the coal industry. Whether that will be the effect of this Order remains to be seen. To the extent that this Order also promotes expansion of the shale oil and gas revolution, market forces, not government deregulation of the coal industry and coal-fired sources, will likely be the prime driver in the energy area. 

One almost-certain outcome of this Order will be continued litigation by parties opposed to the rescission or revision of federal rules related to climate change specifically and regulation of the energy industry in general. Review and revision of the regulations called for by the Order will be a lengthy process and many of the rules under review, including the CPP, the GHG NSPS, and the hydraulic fracturing rule are currently being litigated. That litigation will likely continue throughout President Trump’s initial 4-year term and potentially beyond. Additionally, while this Executive Order creates opportunity for energy producers, projects that move forward under the new streamlined system may still face lengthy legal challenges. All this means a level of continued uncertainty for business as it plans for its energy needs.

If you have any questions on this Order or the potential impacts on your business, please contact Cindy Faur at (312) 715-5228/cynthia.faur@quarles.com or your Quarles & Brady attorney.