Industrials Regulatory News and Trends - July 28, 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.

Bolivian lithium reserves. Bolivian President Luis Arce has announced that new geological studies show that Bolivia has the largest lithium reserve in the world, an estimated 23 million tons. The studies increase the size of the country’s reserve by 2 million tons, putting it ahead of neighbors Argentina and Chile. Speaking at the Coipasa salt flat on July 20, Arce said of the reserve, “We have to know how to manage it intelligently to exploit and transform this resource.” Global demand for lithium, an essential component in electric vehicle batteries, is soaring. Bolivia, Latin America’s poorest country, has been striving for nearly 15 years to boost its role as a lithium exporter, and this year is making significant steps. In January, it signed an agreement with Contemporary Amperex Technology of China to exploit lithium deposits; then signed further agreements with China's Citic Guoan and Russia's Uranium One Group, a subsidiary of Rosatom, in June. The latter companies say they will invest a total of $1.4 billion to build two plants which, starting in 2025, will produce 50,000 tons of lithium a year for export. An agreement with a German company to export lithium was dissolved by then acting president Janine Añez in 2020.

Interior Department will hold its first-ever wind energy lease sale for Gulf of Mexico. On July 20, the US Department of the Interior announced it will hold its first-ever wind energy lease sale for areas in the Gulf of Mexico – an auction that will take place on August 29. The areas to be auctioned by the department’s Bureau of Ocean Energy Management have the potential to generate approximately 3.7 gigawatts and to power almost 1.3 million homes with renewable energy, the department said. The three lease areas include 102,480 acres offshore of Lake Charles, Louisiana, and two areas offshore of Galveston, Texas, comprising 102,480 acres and 96,786 acres, respectively. The lease sale is part of the Biden Administration’s plans to deploy 30 gigawatts of offshore wind energy by 2030 and attain a carbon-free electricity sector by 2035.

NHTSA acting chief announces new regulatory proposal for autonomous vehicles. At a conference on July 12, Ann Carlson, acting administrator of the National Highway Transportation Safety Administration, announced a new proposed national program under which auto companies can legally deploy autonomous vehicles on the roads without conventional controls such as steering wheels or brake pedals. The ADS-Equipped Vehicle Safety, Transparency, and Evaluation Program, or AV STEP, will be the subject of a notice of proposed rulemaking by the agency this coming fall. “This is a new and exciting opportunity for all of us,” Carlson said at the symposium. The Alliance for Automotive Innovation, the primary lobbying group for the auto industry, hailed Wednesday’s decision as “an important innovation policy development.”

EPA rejects refineries’ requests for fuel exemptions. On July 14, the Environmental Protection Agency rejected 26 new requests by oil refineries for exemptions from federal biofuel-blending requirements. The rulings were considered a blow to several small refineries that had sought the waivers from requirements to blend renewable fuels into gasoline and diesel, arguing that the mandates were too costly. The EPA, however, found that none of the 26 rejected applications indicated that the company had experienced disproportionate economic hardship caused by compliance with the Renewable Fuel Standard mandates. The rejected applications sought relief from quotas for 2016-2018 and 2021-2023 compliance years. Last year, the EPA rescinded dozens of previously granted exemptions, part of a drive to reorient the program after years of legal wrangling over the waivers.

DOE sets up prize for successful recycling of wind turbine materials. On July 14, the US Department of Energy launched a new Wind Turbine Materials Recycling Prize. Funded by the Bipartisan Infrastructure Law, the 5.1 million prize aims to help the US develop a cost-effective recycling industry for two important materials used in wind turbines: fiber-reinforced composites and rare earth elements. The DOE hopes that the competition will ultimately increase the sustainability of wind energy, promote a circular wind energy economy, and support the Biden Administration’s goals of achieving a carbon pollution-free power sector by 2035 and net-zero emissions by 2050. “We need a sustainable and secure domestic wind energy supply chain to achieve our climate goals,” Alejandro Moreno, acting assistant secretary for energy efficiency and renewable energy, said. “By creating new, cost-effective recycling streams for key wind turbine materials, this prize will help ensure wind energy can continue to rapidly expand across the United States.”

Chemistry trade group sues Biden Administration over its process in regulating formaldehyde. The American Chemistry Council, a trade group representing a significant percentage of the US chemical industry, filed a complaint in federal court July 20 against the Biden Administration over recent actions targeting the use of the chemical formaldehyde. The case was brought against the EPA and the National Academies of Sciences, Engineering, and Medicine (NASEM) over the EPA's draft assessment of formaldehyde published in 2022. The lawsuit accuses the EPA of “numerous” violations of the Federal Advisory Committee Act (FACA), which mandates independence during the peer review process. “For over a year, ACC has repeatedly expressed concerns with the EPA and NASEM and their failure to comply with FACA legal requirements,” the ACC said in a statement. “Today’s complaint outlines the fundamental failure of this review process to follow the law and basic standards for scientific integrity, independent peer review, and governmental transparency.”

Senator successfully proposes defense provision to help US manufacturers. On July 21, US Senator Tammy Baldwin (D-WI) successfully included in the annual defense authorization act an amendment to help US defense manufacturers by strengthening the Buy America requirements for Navy shipbuilding. The amendment envisions that by 2033, any new US Navy ship will use 100 percent domestically produced materials, like propulsion systems, shipboard components, couplings, shafts, support bearings, and more. The NDAA has passed Congress annually since 1961, and the Senate is on track to pass the legislation. “Wisconsin has a proud tradition of shipbuilding, producing world-class products made by American workers that defend our freedom at home and abroad,” said Senator Baldwin. “By strengthening Buy America requirements for our shipbuilding industry, we can ensure that taxpayer dollars are not only going toward keeping us safe, but also supporting American jobs, growing our economy, and maintaining a defense industrial base that is critical to our national security.”

Pennsylvania state board dismisses a challenge to construction of advanced recycling plant. On July 20, Pennsylvania’s Environmental Hearing Board dismissed a legal action targeting the proposed construction of an advanced recycling facility. The suit was filed by the Clean Air Council (CAC), an environmental group, which had sought to delay the permitting process for the Encina Development Group plant on the Susquehanna River in Point Township, Pennsylvania. State officials, CAC had said, erred in declaring that the plant should be exempt from solid waste permits. A spokesperson for Encina stated that CAC’s opposition “is not new and groups like [the CAC] are combining legal action with public misinformation and fear campaigns.” Pennsylvania is one of 21 states that has enacted legislation to promote advanced recycling, a process which seeks to turn plastic waste that cannot be mechanically recycled into low-grade fossil fuels and petrochemicals by subjecting it to processes that may include high heat, pressure, microwave radiation, and/or chemicals. It is a relatively young technology which, to date, has not been applied beyond a small scale; much of the concern reported about it is that it may use significant amounts of energy … generate pollution, and perpetuate single-use plastics. Encina has said it plans to annually ship 450,000 tons of plastic to the facility for conversion into benzene, toluene, xylenes, and propylene for manufacturing more plastics. Construction on the plant is slated to begin this fall; Encina still needs to obtain air quality permits and other regulatory approvals.

Expert says military spending is what will boost manufacturing. In a July 13 Forbes op-ed article, national-security expert Loren Thompson wrote that the Biden Administration’s current effort to revitalize American manufacturing will depend heavily on military spending, ahead of civilian spending. “While numerous cabinet agencies are engaged in the effort, though, there is little doubt which department will have the biggest impact on rebuilding American manufacturing. It will be the Department of Defense,” he wrote. “That is not to say that the military has a bigger impact on industrial activity than tax policy or government subsidies, but many such proposals run afoul of the partisan divide in Congress, and thus are difficult to implement.” He noted, for example, that the US military is a huge consumer of complex industrial products. The Department of Defense will spend over $300 billion in 2024 on development and production of warfighting systems – an amount that dwarfs annual outlays for projects such as infrastructure renewal and the civil space program.

Chemical executive says EPA delays are hindering manufacturing innovation. Kimberly Wise White, vice president of the American Chemistry Council’s Regulatory and Scientific Affairs Division, wrote in an op-ed July 12 on the council’s website that if the Environmental Protection Agency continues with its current approach to implementation of the Toxic Substances Control Act, particularly its New Chemicals Program, it risks discouraging innovation. This in turn could result in companies engaging in research, development, and manufacturing of chemicals outside US borders. White stated that the EPA usually misses its deadlines for approving new chemicals. Thus, she wrote, “this lack of timeliness and uncertainty in new chemical reviews can have a significant adverse impact across the supply chain and economy and to onshoring new chemistries and technologies in the US. These missed deadlines also delay the availability of new and innovative chemistries to meet America’s climate, sustainability and infrastructure goals.”

NAM says EPA’s air regulations will backfire against manufacturers. In a July 20 op-ed article, the National Association of Manufacturers quoted Michael Canty, an Ohio manufacturer and small businessman, as saying that his business will incur higher costs under the EPA’s air-quality regulations. NAM has consistently affirmed that the EPA’s proposed air-quality regulations are likely to backfire and that if they are permitted to go into effect, they will place a significant burden on the natural gas industry. “Natural gas is a fossil fuel,” Canty said in the article, “but it’s one of the cleanest fossil fuels. It’s one of the reasons why this country has met clean air standards over the years.” Canty concluded that “these regulations are well meant, but the end result will be disastrous for businesses and the United States.”