A Closer Look at President Trump's Executive Order on Energy Independence

HIGHLIGHTS:

• President Donald Trump's Executive Order (EO) entitled "Promoting Energy Independence and Economic Growth" is a broad directive accomplishing a number of the Trump Administration's energy-related priorities.
• The EO focuses on encouraging domestic energy production by "unraveling the red tape" and initiating rollbacks on more than 30 Obama-era environmental documents and regulations, including the Clean Power Plan.

President Donald Trump's Executive Order (EO) entitled "Promoting Energy Independence and Economic Growth" is a broad directive designed to accomplish a number of the Trump Administration's energy-related goals.

The EO, issued on March 28, 2017, is sweeping in nature, with a focus on encouraging domestic energy production by "unraveling the red tape" and initiating rollbacks on more than 30 Obama-era environmental documents and regulations. Its directives will take years to fully implement, particularly the regulatory rewrites that will be required to adhere to Administrative Procedures Act (APA) process.

Below is a section-by-section analysis of the Order.

Section 1. Policy

This section of the EO establishes broad policy directives that set the Trump Administration's tone for energy-related policy. The order encourages "clean and safe development" of domestic energy resources, referencing, in this order: coal, natural gas, nuclear material, hydropower, and other domestic sources including renewables. The order also encourages agencies to take actions to promote clean air and clean water, while inserting a caveat that agencies must also respect "the proper roles of the Congress and the States" – echoing federalist environmental doctrine typical of Republican administrations. The order simultaneously discourages "regulatory burdens" that "unnecessarily encumber" energy production, and directs the review of existing regulations to this effect. This is fully fleshed out in Section 2.

The final paragraph under the policy section also directs the use of the "best available peer-reviewed science." This language dovetails with Republican efforts to reform the U.S. Environmental Protection Agency's (EPA) Science Advisory Board (SAB) and add greater transparency in future decision making. To date, the House has passed two bills on party lines related to the use of the "best available" science: H.R. 1430, the Honest and Open New EPA Science Treatment (HONEST) Act on March 29, 2017, and H.R. 1431, the EPA Science Advisory Board Reform Act on March 30, 2017.

Of note, the EO's only mention of national security or international policy asserts that "prudent development" of natural resources is essential to ensuring geopolitical security. Absent is any mention of the U.S. commitments to the Green Climate Fund or the Paris Agreement of 2015. Although Trump campaigned on promises to withdraw the United States from the Paris Agreement, White House Press Secretary Sean Spicer stated on March 30, 2017, that the Administration is still "reviewing" the agreement but expects to have a decision by the time of the upcoming G7 summit on May 26-27, 2017.¹ A group of more than 1,000 companies – including Fortune 50 businesses such as HP and Johnson & Johnson – have signed a letter to the Administration and Congress calling on the government to continue U.S. participation in the Paris Agreement.² Some within the business community support a withdrawal while others favor the long-term policy certainty the Agreement seeks to engineer and see business opportunities in the fulfillment of the Agreement.

Rep. Kevin Cramer (R-N.D.), who served as an energy advisor to President Trump's campaign, is currently circulating a "Dear Colleague" letter, which encourages the U.S. to remain a party to the Agreement rather than losing "its seat at the Paris table to defend and promote our commercial interests." The letter instead advocates for the U.S. to reduce its current commitment to reduce greenhouse gas (GHG) emissions by 26 percent to 28 percent by 2025 – a goal many say is infeasible without implementation of the Clean Power Plan – while also urging President Trump to follow through on his promise to end financial commitments to the Green Climate Fund. By exploring such a compromise, the Administration may find additional support from the business community.

Section 2. Immediate Review of All Agency Actions that Potentially Burden the Safe, Efficient Development of Domestic Energy Resources

This section directs the "heads of agencies" to review all agency actions that potentially burden the development or use of domestically produced energy resources, noting in particular fossil fuel and nuclear resources while omitting hydropower and other renewables. The section defines "burden" as "to unnecessarily obstruct, delay, curtail, or otherwise impose significant costs" on activities related to development of energy resources. Of note, Section 1 of the EO directs that "departments and agencies" review existing regulations and suspend, revise or rescind those that "unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law." While this section provides a definition of "burden," the meaning of "unduly" is left ambiguous, leaving portions of the Order particularly vulnerable to subjective interpretation and possible future legal challenges.

Indeed, several directives in the EO are similarly equivocal, leaving uncertain even basic questions regarding jurisdiction of the EO. It is not traditional that EOs apply to independent regulatory agencies such as the Federal Energy Regulatory Commission (FERC), U.S. Nuclear Regulatory Commission (NRC) or U.S. Securities and Exchange Commission (SEC). In keeping with this tradition, the interim guidance issued by the White House's Office of Information and Regulatory Affairs (OIRA) on President Trump's "Reducing Regulation and Controlling Regulatory Costs" EO exempted independent regulatory agencies. Similar clarification would be par for the course.

Substantively, Section 2 outlines the process by which agencies should carry out the review of these policies in three steps. This process is to be overseen by Office of Management and Budget (OMB) Director Mick Mulvaney and Assistant to the President for Economic Policy Ashley Hickey Marquis.

• 1. Within 45 days, each agency submits a plan to complete its review to the OMB Director, providing a copy to the Vice President, the Assistant to the President for Economic Policy, the Assistant to the President for Domestic Policy and the Chair of the Council on Environmental Quality (CEQ).
• 2. Within 120 days, each agency completes its review and provides a draft final report with specific recommendations that could "alleviate or eliminate aspects of agency actions" burdensome to domestic energy producers.
• 3. Within 180 days, the report is finalized, unless the OMB Director, in consultation with the other listed officials, extends the deadline.

Several agencies have made progress on the implementation of this directive, despite the slow rate at which President Trump's political appointees are being confirmed for positions at the EPA, the Department of Energy (DOE) and the Department of the Interior (DOI). EPA has announced that Chief of Staff Ryan Jackson will chair the task force to review potentially burdensome regulations. Other members of the task force include Jackson's Deputy Chief of Staff Byron Brown and Deputy Associate Administrator for Policy Brittany Bolen. Indeed, the slow pace of the confirmation process sets the stage for Schedule C employees and/or the transition and beachhead teams at each of these agencies to play a significant role in drafting the reports, which will shape agency policy for the duration of the Administration.

Section 3. Rescission of Certain Energy and Climate-Related Presidential and Regulatory Actions

(a) This section revokes the following executive actions:

• (i) Executive Order 13653, "Preparing the United States for the Impacts of Climate Change," issued Nov. 1, 2013. This EO directed federal agencies to plan for environmental impacts of climate change, including high temperatures, heavy downpours, permafrost thawing, ocean acidification and sea level rise. The Order also convened a task force on climate preparedness and resilience that contained representatives from state, local and tribal governments. This EO served as a statement of administrative priorities, establishing a commitment to climate resilient investment and directing agencies to increase support for and collaboration with state, local and tribal governments. The order also directed numerous agencies to provide data and decision-support tools on climate preparedness and resilience, and its rescission was accompanied by the elimination of Data.gov portals that provided data related to climate change. Local and state governments that relied on these data sources may need to begin utilizing alternate data, such as that collected by universities, which will be less consistent.
• (ii) Presidential Memorandum on "Power Sector Carbon Pollution Standards," issued June 25, 2013. This memorandum, which accompanied President Obama's Climate Action Plan, directed the EPA to establish carbon pollution standards for existing and new power plants by specific deadlines, the last of which was June 30, 2016. The rescission of this memorandum removes a legal hurdle from the rollback of the Clean Power Plan and other power plant regulations.
• (iii) Presidential Memorandum on "Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment," issued Nov. 3, 2015. This memorandum established a doctrine of "compensatory mitigation" in regard to climate change. Unlike previous mitigation directives, this order directed agencies, in their planning and permitting for landscape-scale conservation and mitigation, to offset harm caused by resource development rather than simply avoiding adverse effects. For example, the memorandum encouraged agencies to develop financial incentive-based conservation credits that could be used to offset potential adverse effects or environmental harm.
• Rescinding this memorandum limits the extent to which National Environmental Policy Act (NEPA) and Endangered Species Act (ESA) reviews apply this doctrine of compensatory mitigation, returning to a more passive consideration of the potential long-term harms caused by resource development. Undoubtedly, the Trump Administration will be far more conservative than the Obama Administration in calculating the potential cost of these long-term harms.
• (iv) Presidential Memorandum on "Climate Change and National Security," issued Sept. 21, 2016. This memorandum directed the federal government to consider the impacts of climate change in the development of national security-related policies. Of note, the accompanying report from the National Intelligence Council, which identified potential threats that climate change could pose to national security during the next two decades, was not rescinded alongside the memorandum.

Also of note, not included in this section is EO 13693, which had been listed in an early embargoed summary of the order. EO 13693, "Planning for Federal Sustainability in the Next Decade," issued March 19, 2015, directed agencies to establish agency-wide energy efficiency and renewable energy targets. As with the Paris Agreement, parts of the business community have encouraged the U.S. to maintain its commitments to energy efficiency and renewable energy. If EO 13693 is rescinded at a later date, agencies would be permitted to withdraw their sustainability plans – save for the Department of Defense, whose 25 percent renewables by 2025 target was codified in the National Defense Authorization Act of 2007.³

(b) This section also rescinds the following reports issued by President Obama pertaining to emissions reductions:

• (i) Climate Action Plan: June 2013. In addition to outlining an array of administrative actions intended to reduce carbon emissions and improve energy efficiency, the plan directed EPA to publish the Clean Power Plan by 2015.
• (ii) Climate Action Plan Strategy to Reduce Methane Emissions: March 2014. This plan outlined the Obama Administration's intention to curb methane emissions from an array of sources, including landfills, coal mines, agriculture, and oil and gas production. The plan included a timetable for review of specific sets of regulations, all to be completed by 2016.

(c) This section rescinds the final guidance issued on Aug. 5, 2016, by the Council on Environmental Quality (CEQ) that requires federal agencies to consider GHG emissions and the effects of climate change in NEPA reviews. As with the rescission of the Presidential Memorandum on "Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment," this action is primarily meant to ease permitting for fossil fuel energy projects by reducing the time and costs associated with project reviews.

Beyond permitting for fossil projects, however, the guidance applies government-wide and will also have significant impacts on the transportation sector and implementation of the Fixing America's Surface Transportation (FAST) Act of 2015. The permitting process for transit and infrastructure projects may become easier and less time-consuming, as NEPA reviews for these projects will no longer be required to take GHG emissions into consideration.

Section 4. Review of the Environmental Protection Agency's "Clean Power Plan" and Related Rules and Agency Actions

This section directs the Administrator of the EPA to review three regulations published on Oct. 23, 2015:

• (i) "Carbon Pollution Emission guidelines for Existing Stationary Sources: Electric Utility Generating Units," also known as the "Clean Power Plan." (Final Rule)
• (ii) "Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources: Electric Utility Generating Units." (Final Rule)
• (iii) "Federal Plan Requirements for Greenhouse Gas Emissions from Electric Utility Generating Units Constructed on or Before January 8, 2014; Model Trading Rules; Amendments to Framework Regulations; Proposed Rule." (Proposed Rule)

The Clean Power Plan (CPP) is currently on hold as the result of a stay enacted by the U.S. Supreme Court on Feb. 9, 2016, so states' compliance with the plan is currently voluntary. The EO directs the EPA to "suspend, revise, or rescind the guidance," with or without publishing the rules accomplishing this end for notice and comment. EPA announced on April 5 its formal review of the CPP, which will also review the compliance dates established in the order to ensure they are "reasonable and appropriate" given the Supreme Court's stay. In the announcement, EPA stated its intent to review and possibly rewrite a new rule governing GHG emissions limits for power plants; a process which, if the timeframe for the writing and publication of the CPP is to be a guide, could require more than a year of notice and comment even after a draft rule is published.

On April 4, 2017, EPA also announced it is withdrawing the two proposed rules governing the CPP's implementation: the Clean Energy Incentive Program (CEIP) and Federal Implementation Plan and Model Training Rules.⁴ The Federal Register notice justifies the withdrawal of both rules on the grounds that neither is required under the Clean Air Act (CAA) and focusing on the Acts principles of cooperative federalism aspires to prevent federal plans to implement emissions guidelines under the law. Given the Supreme Court's stay of the CPP, the EPA asserts that the compliance dates "must be reviewed" and that states should not be required to "work towards meeting the compliance dates" at this time. under the

This section also directs the EPA to review and possibly rescind the accompanying legal memorandum for the CPP, as well as enabling the Attorney General to request that courts stay the litigation pertaining to the CPP as the EPA addresses the CPP administratively.

Section 5. Review of Estimates of the Social Cost of Carbon, Nitrous Oxide, and Methane for Regulatory Impact Analysis

Again citing the requirement that agencies use the "best available science," this section directs the withdrawal of documents issued between 2010 and 2016 establishing the "social cost of carbon" for regulatory impact analysis. As of 2015, the EPA had set this value at $36 per metric ton and $42 per metric ton for 2020. President Trump's EO directs agencies to return to the guidance in OMB Circular A-4 of September 2003, under which analysis from the international perspective is optional.⁵

This section also immediately disbands the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG), which provided regular advisement on updates to the data point's calculation. The group consisted of presidentially appointed technical experts from a number of agencies.

Section 6. Federal Land Coal Leasing Moratorium

This section directs the Secretary of the Interior to "take all steps necessary and appropriate to amend or withdraw" the federal government's moratorium on federal coal leasing enacted by Secretary of the Interior Sally Jewell's Order 3338 on Jan. 15, 2016, and to "commence Federal coal leasing activities." Secretary of the Interior Ryan Zinke signed Secretarial Order 3348 on March 29, revoking Order 3338.⁶

The moratorium was enacted amidst concerns that the government was not receiving fair market value for the leases. A 2013 Interior Department Inspector General Report found lost bonus revenues of $2 million in recent lease sales and $60 million in potentially undervalued lease modifications.⁷ In response to these concerns, Zinke has chartered a Royalty Policy Committee to advise on the fair market value for mineral and energy leases to ensure the public "continues to receive the full value of the natural resources produced on federal lands."⁸ Opponents have expressed concern that this fair market value will no longer take into effect the social cost of carbon, noting that approximately 40 percent of the U.S. coal production comes from publically owned lands.

Section 7. Review of Regulations Related to United States Oil and Gas Development

(a) This section directs EPA Administrator Scott Pruitt to review and potentially rewrite the "Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources" rule, more commonly referred to as the "New Sources" or NSPS rule, made final on June 3, 2016. The industry-opposed NSPS rule would require new and modified fossil-fuel fired power plants to limit their carbon dioxide pollution. This regulation fell outside of the window for Congressional Review Act (CRA) action but has been the subject of fierce opposition from Congressional Republicans and the oil and gas industry alike. Accordingly, there have been efforts to block the rule through litigation. The Independent Petroleum Association of America (IPAA) and Western Energy Alliance, with the support of a broad coalition, filed suit against the rule in August 2016. The legal challenges have taken issue with the rule as excessive, uneconomical and unjustifiable given the decrease in methane emissions from the sector over a time period in which production has spiked. Oral arguments are scheduled for April 17, 2017.

(b) This section directs the Secretary of the Interior to review and potentially rewrite the following regulations intended to curb methane emissions from oil and gas operations. Of note, three out of four of these regulations were finalized in the final two months of the Obama Administration. Each of these four regulations were also subsequently identified for review in Zinke's Secretarial Order 3349 signed March 29, 2017.⁹

• (i) The Bureau of Land Management's (BLM) "Oil and Gas; Hydraulic Fracturing on Federal and Indian Lands," also known as the "Fracking Rule," which has been the subject of several lawsuits since it was made final on March 26, 2015. The rule was gutted in June 2016 when the U.S. District Court for the District of Wyoming struck down the provision on the grounds that the BLM lacks congressional authority to regulate hydraulic fracturing. Critics also alleged the BLM cost estimates were grossly underrepresented and that the regulation was duplicative of state regulations. The federal government has filed an appeal to the 2016 ruling, and oral arguments were held on March 20, 2017, but the DOI's Fiscal Year (FY) 2018 budget is expected to divert financial resources away from defending Obama-era regulations in litigation, crippling the government's ability to defend the rule. By directing the Secretary of the Interior to review and potentially rewrite the regulation, the Administration is hedging itself should the appeal be successful.
• (ii) The National Park Service's (NPS) "General Provisions and Non-Federal Oil and Gas Rights," made final on Nov. 4, 2016. This rule updated the regulations on oil and gas development on lands and waters of the National Wildlife Refuge System (NWRS), requiring 319 operations which were previously grandfathered to comply with 9B regulations last updated in 1979.¹⁰ Opponents challenged the rule on the grounds that 9B compliance would interfere with the common law principle that mineral rights owners are "entitled to reasonable use of the surface to recover the minerals."¹¹ Rep. Paul Gosar (R-Ariz.) has introduced a CRA resolution of disapproval against this regulation, though neither chamber has acted on it to date.
• (iii) The U.S. Fish and Wildlife Service's (FWS) "Management of Non-Federal Oil and Gas Rights," made final on Nov. 14, 2016, and which concerns implementation of the previous rule. Rep. Kevin Cramer (R-N.D.) has introduced a CRA resolution of disapproval against this regulation, though neither chamber has acted on it to date.
• (iv) "Waste Prevention, Production Subject to Royalties, and Resource Conservation," also known as the "Methane Rule," made final on Nov. 18, 2016. This rule updated the BLM's existing regulations for methane emissions, a move which had been urged by the Government Accountability Office (GAO) and the Inspector General of the Interior Department, as the existing regulations have not been modernized in more than 30 years. Unlike the EPA's NSPS rule, the BLM rule applies to existing sources. The BLM estimated that the rule would cost $110 million to $279 million per year, while saving society up to $188 million annually by preventing the escape of pollutants and allowing more natural gas to be sold.
• Despite BLM's estimates that the rule would reduce the profit of such operators by less than 0.2 percent,¹² some in industry have expressed concern that the regulation disproportionately impacted small-business and would be much more costly. Moreover, the slow permitting process for pipeline right-of-ways already makes it difficult for producers to safely transport their product to market, critics alleged.
• The House has passed a CRA resolution of disapproval on this regulation, which sets the stage for its expedited, "filibuster-proof" consideration in the Senate. Indeed, while the EO directs the Secretary of the Interior to review the rule, the Senate still intends to take up the resolution of disapproval, as it would go further than the EO by actually rescinding the rule and forbidding the BLM from issuing a "substantially similar" rule.

Section 7 also enables the Attorney General to request the delay of further litigation against rules identified in this section. This could have particularly challenging implications for the Methane Rule, for opponents may have difficulty bringing suit should the Senate pass the resolution of disapproval while the DOI is also administratively reviewing the rule.

Notes

¹Trump to decide by late May whether to stay in Paris climate pact, The Hill, March 30, 2017

²Business Backs Low-Carbon USA

³U.S. Army Energy and Water Management Program: Renewable Energy

⁴Federal Register, 82 FR 16144, April 3, 2017

⁵Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866

⁶Secretary of the Interior Order No. 3348: Concerning the Federal Coal Moratorium

⁷DOI Office of Inspector General: Final Evaluation Report – Coal Management Program, U.S. Department of the Interior

⁸DOI: Secretary Zinke Takes Immediate Action to Advance American Energy Independence

⁹Secretary of the Interior Order No. 3349: American Energy Independence

¹⁰NPS: National Park Service Updates Non-federal Oil and Gas Regulations

¹¹Rep. Gosar Sets the Record Straight on Bill Protecting Private & State-Owned Mineral Rights from Federal Overreach

¹²BLM: Questions and Answers for Methane Waste Prevention Rule

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.