Industrials Regulatory News and Trends - July 14, 2023

Welcome to Industrials Regulatory News and Trends. In this regular bulletin, DLA Piper lawyers provide concise updates on key developments in the industrials sector to help you navigate the ever-changing business, legal and regulatory landscape.

Commerce reports that US factory construction is soaring. The Department of Commerce has reported its May construction figures, which indicate that new construction of US manufacturing facilities rose by 1 percent from April to May. The Wall Street Journal notes that, compared to a year ago, new factory construction in the US is up “an eye-popping 76.3%.” In addition, spending on manufacturing structures in Q1 was nearly 0.5 percent of gross domestic product – the highest since 1991 – and Q2 is projected to be higher. This growth is being attributed to the many incentives set out in the Inflation Reduction Act and the CHIPS and Science Act, passed last year in August. Goldman Sachs economists have observed that the uptake in these incentives appears to be surpassing earlier estimates.

GM says combination of EPA’s new proposed emissions standards and other agency standards may create compliance challenges. On July 5, General Motors filed comments with the Environmental Protection Agency saying that it could face compliance challenges under the EPA’s proposed vehicle emissions rules and other state and federal regulations that require a switch-over to electric vehicles. GM said that there are six state and federal regulations that “could require each automaker to exceed 50 percent EVs in at least a dozen vehicle averaging sets in the approximate 2030 timeframe.” The company concluded that it is now “concerned that either a potential lack of clarity or a lack of coordination across the agencies may hinder an automaker’s ability to remain in compliance, year-after-year, across each of these regulatory programs even while meeting EPA’s overall EV targets.”

New state laws aim to reduce theft of catalytic converters. The National Automobile Dealers Association has called on Congress to enact laws that would help control catalytic converter theft, which is driven by the valuable metals in the car part, including rhodium, platinum and palladium, which are of considerable value in manufacturing. A number of US states have already enacted laws aiming to reduce such thefts. On June 28, the Pennsylvania House of Representatives passed a bill intended to reduce the theft of catalytic converters in the state by requiring individuals selling catalytic converters to provide the year, make, model and vehicle identification number of the vehicle from which the catalytic converter was removed. Other laws tackling the catalytic converter theft epidemic went into effect on July 1 in Georgia and in Pennsylvania, and a Texas law which increases the penalties for such thefts went into effect in June.

CSB says 2019 chemical fire in Texas could have been prevented. A massive chemical fire on the Houston Ship Channel that burned for three days in 2019 could have been prevented if proper procedures were in place at the chemical storage facility, the US Chemical Safety and Hazard Investigation Board (CSB) has concluded. “Because of gaps in relevant regulations,” the report said, some tanks in the facility were not subject to oversight by the EPA and OSHA, and Intercontinental Terminals Co., the terminal operator, was not required to implement safety rules that could have prevented the fire. A recent investigation by The Texas Tribune and Public Health Watch discovered that fire, federal and state regulators had been documenting repeat problems at the huge tank farm for years, but little was ever done to address the issues. With more than 240 above-ground tanks, some with a 3.2 million gallon capacity, the facility serves the thousands of chemical plants and refineries along the Ship Channel by storing and distributing petroleum products, hazardous chemicals and gasses. The fire began March 17, 2019, after a tank’s circulation pump failed, spreading to 14 other tanks and eventually prompting several shelter-in-place advisories in neighboring Deer Park. The CSB is recommending that the company implement additional safety measures, including installing appropriate sensors and alarms. The CSB is an independent, nonregulatory federal agency that investigates the root causes of major chemical incidents.

JetBlue will not appeal federal court order against its alliance with American. JetBlue Airways said July 5 that it would follow a federal court’s ruling in May that it terminate an alliance with American Airlines. The airline said that while it strongly disagrees with the court’s reasoning, it still does not plan to appeal. Noting that it had informed American Airlines recently of its decision to terminate the three-year-old alliance, which allowed the two carriers to coordinate flights and pool revenue, JetBlue said ending the alliance with American will render “entirely moot” the objections of the US Department of Justice to JetBlue’s proposed merger with Spirit Airlines and that it will now focus on completing that merger. American Airlines still plans to appeal.

GAO: Before updating its shipyards, the Navy needs to update its best practices. A major June 28 report by the Government Accountability Office concludes that the US Navy will need considerable construction, manufacturing, and renovation work to bring its four shipyards up to date. The GAO found that the condition of the naval shipyards is poor and that their capital equipment is generally past its useful life. But first, the GAO said, the Navy needs to update its best practices as well as the design and methods for estimating project costs. The GAO particularly noted the ongoing attempts to upgrade the Portsmouth and the Pearl Harbor Naval Shipyards, which have each seen enormous project delays and ballooning costs. At present, the GAO observed, the Navy does not have a full cost and schedule estimate for its Shipyard Infrastructure Optimization Program, and it will not be able to provide one until FY 2025. In setting out its recommendations for process improvements, the GAO report said, “Absent improvements, the shipyards will be unable to support about a third of the Navy’s planned maintenance availabilities for aircraft carriers and submarines through 2040. We recommended that the Navy develop a plan to improve the shipyards’ infrastructure and incorporate results-oriented practices, such as goals and metrics, in its efforts. The Navy agreed with our recommendations and has taken some actions to address them.”