On March 28th President Trump signed the Executive Order on Promoting Energy Independence and Economic Growth (the “Executive Order”) signaling a sea change in the way that the executive branch will regulate industries and emissions that contribute to climate change. The practical outcome of the Executive Order will be determined over the next few years, but what is immediately clear is the administration’s policy statement that the Federal Government’s new priority is “avoiding regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation.” (Section 1(a)).

The Executive Order covers several topics, but the following are the key takeaways for stakeholders in the energy industry:

  1. All federal agencies must review their policies and regulations and submit a final report within 180 days that (a) identifies all policies and regulations that “burden” energy production, constrain economic growth, and prevent job creation, and (b) details how those policies and regulations will be revised or rescinded. Such revisions would, of course, have to go through notice and comment rulemaking. If there are particular policies or regulations that you believe should be targeted by an agency, you should consider engaging the Agency in making sure the particular rule or policy is addressed in the final agency report.
  2. EPA is ordered to review the Clean Power Plan and make any revisions necessary to bring it into compliance with the administration’s policy statement. Any revisions will go through the lengthy notice and comment rulemaking process, and will face legal challenges after final publication. Industries should also determine whether their state has submitted, or still plans to submit, a proposed compliance plan under the CPP and to implement that state plan through state law regardless of any federal rollback of the CPP.

As discussed in more detail below, the Executive Order has some immediate impacts, and more importantly will result in a review and overhaul of the executive branch’s policies and regulations that relate to the energy sector.

Policy Review By All Agencies

The Executive Order requires the heads of all federal agencies to “review all existing regulations, orders, guidance documents, policies, and any other similar agency actions … that potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources.” (Section 2(a)). The head of each agency has until May 12, 2017, to submit a plan for how they will carry out the review to the Office of Management and Budget (“OMB”). The agencies then have until July 26, 2017, to submit a draft final report to OMB detailing the agency actions that meet the criteria in Section 2(a) quoted above. The draft report must include “recommendations that, to the extent permitted by law, could alleviate or eliminate aspects of agency actions that burden domestic energy production.” (Section 2(d)). The agencies must issue their final reports by September 24, 2017, unless OMB grants an extension. The agencies must then implement the recommendations in the final reports.

The draft and final reports will be critically important for industries impacted by greenhouse gas emissions regulations (e.g., the power generation sector, mining and natural gas, and all associated industries). There may be opportunities for industry groups to participate through public or private comment on the draft reports, so impacted industries should closely monitor their progress.

Rescission of Climate Change Orders and Reports

The Executive Order revokes a number of executive orders issued by the Obama administration, as well as a number of climate change guidance documents. One of the most important immediate impacts of the Executive Order is to rescind the final guidance for federal agencies to consider greenhouse gas emissions as part of National Environmental Policy Act reviews prior to issuing permits. (Section 3(c)). The Executive Order also immediately disbands the Interagency Working Group on Social Cost of Greenhouse Gases and withdraws a number of technical documents issued by that group. (Section 5(b)). As a result, federal agencies must now use the OMB’s September 17, 2003, guidance for “monetizing the value of changes in greenhouse gas emissions resulting from regulations, including with respect to the consideration of domestic versus international impacts and the consideration of appropriate discount rates.” (Section 5(c)).

Hard Look at the Clean Power Plan

It is unclear what specific changes will be made to the Clean Power Plan as a result of the Executive Order, but it is likely that the EPA will either attempt to rescind the Clean Power Plan in its entirety, or propose a far less stringent set of regulations. Under the Executive Order the EPA administrator must review the Clean Power Plan “for consistency with the policy set forth in section 1 of this order and, if appropriate, shall, as soon as practicable, suspend, revise, or rescind the guidance, or publish for notice and comment proposed rules suspending, revising, or rescinding those rules.” (Section 4(a)). Notably absent from this section of the Executive Order is a timeline for EPA to conduct and complete its review of the Clean Power Plan and proposed new regulations.

Most commentators agree the EPA is likely to rescind or heavily modify the Clean Power Plan so that it no longer imposes emissions limits that will be difficult for coal-fired power plants to meet. However, the Executive Order does not – and cannot – rescind or terminate the Clean Power Plan outright. Any revisions to the Clean Power Plan, or an effort to rescind the Clean Power Plan will have to proceed according to the administrative rule making process. Several states have already indicated that they will file suit to challenge any changes to the Clean Power Plan, which may result in a stay in implementation of the changes. The Clean Power Plan itself is currently mired in ongoing litigation and its implementation has been stayed by the United States Supreme Court.

Under the Clean Power Plan the states must design and submit proposed compliance plans to meet the emissions limitations which go into effect in 2022. However, on March 30, 2017, EPA issued a guidance letter to state governors expressly stating that “[i]t is the policy of the Environmental Protection Agency (EPA) that States have no obligation to spend resources to comply with a Rule that has been stayed by the Supreme Court of the United States.” Therefore, the EPA’s current position is that states are not required to develop plans to comply with the Clean Power Plan during the pendency of the Supreme Court’s stay. Despite the judicial stay, and likely despite this recent guidance from EPA, some states – so far California and New York – may continue to develop plans to meet or exceed the emissions limits in the Clean Power Plan. Impacted industry groups, therefore, should determine whether their states intend to continue to pursue compliance with the emissions standards in the current version of the Clean Power Plan. If so, those industry groups should look for opportunities to participate in the design of the state implementation plans.

It will likely take several years before any changes to the Clean Power Plan clear the administrative and legal hurdles in front of them, although the length of that time period depends heavily on the nature and extent of the proposed changes. In the meantime, companies potentially impacted by the Clean Power Plan should monitor their state environmental regulators and, to the extent practicable, participate in any process to address the Plan’s requirements.