Takeaways

Expect to see growth in electric vehicles, innovation spending, and conservation and clean energy jobs, but a slow-down or stagnation in fossil fuel activities on federal lands. The Biden Administration has paused new oil and gas leasing on federal lands but emphasized that permits for valid, existing leases will continue to be reviewed and approved.
President Biden has directed a Federal Clean Electricity and Vehicle Procurement Strategy which calls for a plan to purchase clean and zero-emission vehicles for federal fleets, including the U.S. Postal Service, by April 27, 2021.
The Biden Administration has launched the “Justice 40” initiative to ensure that 40% of overall benefits of federal investments to disadvantaged communities, including programs such as clean transit, workforce development and pollution remediation.

The Biden Administration has identified climate as one of its most urgent and important priorities. Since his inauguration, President Biden has signed several Executive Orders which will have an impact on climate—both directly and indirectly—while his Administration has simultaneously issued a number of memoranda either freezing current activities or outlining a way forward for the Administration. In short, it is a lot of information to sort through in a week. This article attempts to distill the Biden Administration’s recent climate actions to understand the immediate impacts as well as what to expect over the next four years. We expect to see growth in electric vehicles, innovation spending, conservation and clean energy jobs, but a slow-down or stagnation in fossil fuel activities on federal lands. All of this will be reinforced by aligning the procurement efforts of the federal government and the provision of federal subsidies with these goals.

1. Clean and Zero-Emission Vehicles

Electric Vehicles are a significant focus for the Biden Administration as they reduce emissions as well as create jobs. In addition to nominating former Michigan Governor Jennifer Granholm to lead the Department of Energy, President Biden has directed a Federal Clean Electricity and Vehicle Procurement Strategy which calls for a plan to purchase clean and zero-emission vehicles for federal fleets, including the U.S. Postal Service. Combined with the “Buy American” Executive Order issued last week, this will result in a surge of electric vehicle purchases and charging stations from U.S. companies. The specific plan to accomplish this goal is to be submitted to the National Climate Task Force by April 27, 2021.

President Biden has also asked the EPA and the National Highway Traffic Safety Administration to publish a rule suspending, revising, or rescinding the Trump Administration’s fuel economy standards by July 2021.

2. Evaluating and Limiting Federal Support for Oil and Gas

While President Biden is working to advance clean energy, he is also re-evaluating federal support for fossil development. President Biden’s January 27 Executive Order directed the Secretary of Interior to pause new oil and natural gas leases on public lands or in offshore waters, conduct a rigorous review of existing leasing and permitting practices, and consider whether the government should adjust royalties for extractive industries. Importantly, the Executive Order did not provide an end date for when the review is to be completed. Approximately 25% of U.S. oil and 12% of U.S. gas is produced on federal lands, and so this will likely have a significant impact on future oil and gas development, however the Department of Interior counters that the oil and gas industry has “stockpiled millions of acres of leases on public lands and waters.” We expect the order to be the subject of several legal challenges. Indeed, Western Energy Alliance has already filed a complaint in Wyoming District Court, alleging the order exceeded presidential authority, and constitutes a violation of the Mineral Leasing Act, National Environmental Policy Act, and the Federal Lands Policy and Management Act.

On January 20, 2021, the Department of Interior (DOI) had already elevated the review of any new fossil fuel leases on federal lands to DOI leadership through its issuance of Order No. 3395. This order included elevating review of additional permits to drill on existing federal leases, for a period of 60 days. Permits on valid, existing leases will continue to be reviewed and approved, though this indicates the Biden Administration will conduct more rigorous permit reviews.

President Biden also directed agencies to eliminate fossil fuel subsidies. The Executive Order directs the Office of Management and Budget (OMB) to coordinate with the National Climate Advisor to identify and eliminate any federal fossil fuel subsidies from the FY22 budget. The Order does not define fossil fuel subsidies, but states OMB should ensure the federal government is not “directly subsidizing fossil fuels.”

3. Emissions Reductions

We know that President Biden signed an Executive Order to rejoin the Paris Agreement on day one and plans to announce the new Nationally Determined Contributions (NDC) for the U.S. Commitment to the Paris Agreement on April 22 this year. However, the overarching goal of the NDC will be achieved through a series of tighter emissions regulations. First, in his Order on January 20, 2021, President Biden requested the Environmental Protection Agency (EPA) propose a rule to suspend, revise or rescind two Trump Administration rules “as soon as possible.” Those rules are the EPA’s “Secret Science” rule, which requires researchers to disclose raw data involved in their public health studies before an agency can rely on their conclusions—which opponents argue could prevent agency consideration of health studies that can’t publish their underlying data for reasons such as privacy—and a rule finalized on December 23, 2020 which modifies the cost and benefits analysis for any new rule issued under the Clean Air Act, which is intended to prioritize financial benefits over other secondary benefits such as illness prevention. Rescinding or revising these rules will be key to the Biden Administration’s future regulation of air emissions. The rules could also be immediately overturned by Congress through the Congressional Review Act, which Pillsbury has written about here, not to mention the immediate effectiveness of the “Secret Science” rule has already been overturned in the U.S. District Court for the District of Montana.

Next, President Biden requested the EPA to suspend, revise or rescind the National Emissions Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units by August 2021. Regarding methane emissions, President Biden has requested the EPA to issue a proposed rule to suspend, revise or rescind the Trump Administration standards for methane emissions by September 2021.

Finally, President Biden has established an Interagency Working Group on the Social Cost of Greenhouse Gases and directed it to publish a Social Cost of Carbon, Social Cost of Methane and Social Cost of Nitrous Oxide by February 19, 2021.

4. Increased Spending on Clean Energy Innovation and Deployment

On the campaign trail, President Biden famously proposed a $2 trillion climate plan which promised to pursue historic investments in clean energy innovation. President Biden already has a $35.2 billion head start in authorized clean energy funding passed in the Energy Act of 2020 in December, though those funds will still need to be appropriated by Congress. Then, on January 27, 2021 through Executive Order, President Biden directed the Office of Management and Budget to prioritize federal investment for innovation, commercialization and deployment of clean energy technologies in the FY22 Budget. He also directed the Secretary of the Interior to identify steps to increase renewable energy production on federal lands and in federal waters.

While we will have more of an indication of the Biden Administration’s spending priorities once the FY22 Budget is released in March, there have already been indications that the Administration intends to use the whole power of the federal government for clean energy investment. One of these areas includes a plan reported in development to free up as much as $10 billion in grant programs at the Federal Emergency Management Agency (FEMA) to protect against climate disasters before they strike. The President could direct FEMA to spend funds on green and gray infrastructure to build up seawalls, elevate or relocate flood-prone homes, and make other steps to pre-emptively secure communities against climate disaster.

Additionally, there is currently $40 billion in available loan guarantee funding at the Department of Energy (DOE) that Biden can use for his clean energy push. The use of the DOE loan program has stagnated in the last few years and is known to be a long, bureaucratic and expensive process for would-be recipients. However, the Energy Act of 2020 modified the DOE loan guarantee program to speed review and lower costs for applicants, including (1) authorizing the use of appropriated funds to pay for credits subsidy costs and administrative fees and deferring payment of those fees until financial closing, (2) placing a 30-day limit on the Secretary of the Treasury to analyze and report on loan guarantees, and (3) setting a target period of 180 days on any decision for a loan guarantee application. The Act also expanded the list of qualifying projects to include new kinds of carbon capture, utilization and sequestration technologies, nuclear component manufacturing facilities to support advanced reactors, technologies to reduce carbon emissions from certain manufacturing processes, and energy storage technologies. We expect that President Biden’s FY22 Budget will include appropriations for credit subsidies to help defray the cost of receiving a loan guarantee for clean energy innovation.

5. Conservation and Clean Energy Jobs

President Biden has made climate action a central pillar of his Build Back Better strategy for economic recovery and to create high paying jobs. Biden’s climate actions are aimed at fostering job growth both within the clean energy sector as discussed above, and within in the areas of conservation and agriculture. Biden’s Executive Order directs the Secretary of the Interior to establish a Civilian Climate Corps Initiative. While not expressly stated in the Order, this Initiative would appear to reflect the legacy of the New Deal-era Civilian Conservation Corps. The Initiative would employee Americans to conserve and restore public lands and waters, take actions to address climate change such as increasing reforestation and agricultural carbon sequestration, and to protect biodiversity.

Biden’s Executive Order also seeks to advance environmental justice and to mitigate the energy transition’s impacts by creating new economic opportunities in frontline communities. The Order establishes the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization, and tasks it with coordinating federal investments and efforts to create new economic opportunity in coal, oil and gas, and power plant communities. Efforts will include projects to mitigate the environmental damage caused by previous energy activities, such as reclaiming abandoned mine land and plugging leaking wells, and to develop new economic hubs. The Order also establishes the “Justice 40” Initiative, directing federal efforts to deliver 40% of overall benefits of federal investments to disadvantaged communities, including programs such as clean transit, workforce development, and pollution remediation.

6. What’s Next?

While there is little in the way of clean energy spending in President Biden’s proposed $1.9 trillion COVID-19 relief bill, lawmakers have indicated there will be significant climate change provisions included in a tax and infrastructure package to be proposed in the coming months. This package will likely include many provisions from the infrastructure bill the House passed last Congress. Additionally, we will learn more details about the Biden Administration’s clean energy goals when the White House releases its FY22 Budget.

For more details, please contact the authors of this alert.

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