Environmental Priorities of the Biden Administration Shape the Future Regulatory Landscape for the Industry
For the past year, the Biden administration has been assembling its regulatory chess pieces on the board. Having identified some priority environmental issues, it is now poised to begin promulgating regulations and implementing other initiatives to address these priorities. Over the next two to three years, the Biden administration is expected to roll out numerous new requirements that could impact the metalcasting industry. These issues are currently being discussed and addressed in the AFS environmental committees.
The objective of this article is to provide summaries of some of these priority environmental issues so metalcasters can be informed and begin to prepare for the potential impacts. Each of these topics could warrant a more in-depth analysis that may be addressed in future Modern Casting articles.
Perhaps the showcase issue for the Biden administration is climate change—described as the long-term alteration of temperature and typical weather patterns. The cause of climate change is attributed largely to the burning of fossil fuels such as natural gas, oil, and coal that generate greenhouse gas (GHG) emissions.
According to climate scientists, the earth is now 1.1C warmer than it was in the 1800s. As part of the Paris Agreement, world leaders strive to keep global temperatures from exceeding an increase of 1.5C over the pre-industrial levels. To achieve this goal, signatories to the agreement pledge to use any available technology to reduce GHG emissions to prevent long-lasting harm and achieve global net-zero carbon emissions by 2050. Developed countries have agreed to take the lead on and provide financial assistance to countries that are less developed and vulnerable to climate change.
Executive Orders & Initiatives
Soon after his inauguration, President Biden issued several Executive Orders and other actions to address climate change. First, he expressed the administration’s intent to adopt the Paris Agreement, a legally binding international treaty to limit global warming and achieve global net-zero carbon by 2050. Next, he identified a government-wide approach and strategy to address climate change and announced a moratorium on new oil and natural gas leases on public lands and offshore waters. He proposed a $2-trillion plan to achieve carbon-free electricity by 2035 and nationwide net-zero carbon emissions by 2050 that would Congress to pass comprehensive climate change legislation to implement this plan.
The president also recognized the disproportionate impact of climate change on disadvantaged communities and pledged that 40% of the overall benefits of a net-zero carbon goal would accrue to these disadvantaged communities.
Finally, he set administration goals to address climate change, including:
50% reduction of 2005 GHG levels by 2030.
Carbon-free power sector by 2035.
Nationwide net-zero carbon emissions by 2050.
Reduce carbon emissions from industrial sources with carbon capture technology.
Non-carbon sources of energy (e.g., hydrogen, renewables, nuclear, and waste).
Purchase and production of low- and zero-carbon industrial goods.
Promote electric vehicles (EVs) and EV infrastructure.
Unfortunately for the Biden Administration, most of these efforts have stalled because Congress has not passed the comprehensive legislation needed to implement these climate change goals. Fortunately for President Biden, existing executive authority may allow for substantial regulatory actions to address some of these efforts.
Existing Authority to Regulate GHG Emissions
In 2003, EPA denied a petition to regulate GHG emissions from motor vehicles claiming it did not have authority under the Clean Air Act (CAA) and it was not appropriate to regulate GHG emissions at that time due to the uncertain link between GHG emissions and global warming. This action was challenged in court, and eventually heard by the U.S. Supreme Court. In Massachusetts v. EPA, the Court ruled that EPA did have authority under the CAA to regulate GHG emissions as an “air pollutant.” The Court instructed EPA to make a finding to determine if GHG emissions endanger public health and welfare; EPA was obligated to reduce emissions of air pollutants that endanger the public health and welfare.
Pursuant to the Court’s ruling, EPA made an endangerment finding and concluded that GHG emissions threaten both public health and public welfare, and that GHG emissions from motor vehicles contribute to that threat. As a result, EPA was allowed to finalize the proposed GHG emission standards for light-duty vehicles. This action also opened the door for EPA to regulate GHG emissions as air pollutants from stationary sources under the CAA.
Regulating GHG Emissions From Stationary Sources
In 2015, the Obama administration EPA promulgated the Clean Power Plan (CPP) rule to reduce GHG emissions from existing coal-fired power plants by over 30% by 2030. The rule called for power plants to switch to lower carbon fuel sources to reduce GHG emissions. The Trump administration replaced the CPP in 2019 with the Affordable Clean Energy (ACE) rule to reduce GHG emissions by over 30% by 2030 with the implementation of heat-rate efficiency improvements for coal-fired power plants and no requirement to switch to lower GHG emission fuels.
In January 2021, the U.S. Court of Appeals for the D.C. Circuit vacated the ACE rule stating that EPA had misinterpreted the CAA by concluding that only emission reduction measures could be implemented at the source and that no fuel switching was allowed. The court stated that “EPA has not just the authority, but a statutory duty to regulate greenhouse gas pollution, specifically from power plants.” Accordingly, the Biden administration has a blank slate to develop a new regulation to reduce GHG emissions from existing power plants by all appropriate measures.
As the courts made it clear, EPA not only has the authority to regulate GHG emissions from existing power plants, but also may be obligated to do so to protect human health and welfare. Armed with this mandate, EPA has recently announced that it plans to develop new rules to reduce GHG emissions from industrial sources beyond power plants, which represent approximately one-third of all GHG emissions nationwide.
With EPA’s authority and intent well-established to regulate GHG emissions from industrial sources, metalcasting operations can expect significant direct and indirect impacts from new GHG emission limits. For example, some larger facilities that are already required to report GHG emissions may have to meet new GHG emissions. Nearly all metalcasting operations may be impacted by higher energy costs, less reliable energy supplies, and expanded GHG emissions reporting. Unfortunately, it is difficult to determine a good time frame for when such impacts may become a reality.
Financial Risks Associated With Climate Change
In addition to the statutory authority under the CAA and the policy initiatives in place to reduce GHG emissions, the Biden administration is also focused on the potential financial risks associated with climate change. On May 20, 2021, President Biden issued the Executive Order on Climate-Related Financial Risk. This order instructed the U.S. Treasury Secretary to assess climate-related financial risks to the stability of the U.S. financial system and to prepare a report on how best to address these risks and what type of climate-related financial disclosures may be needed.
On April 11, the Securities and Exchange Commission (SEC) proposed regulations that would require publicly traded companies to include certain climate-related disclosures in their statements and periodic reports. The required information about climate-related risks also would include disclosure of a company’s greenhouse gas emissions as a metric to assess its exposure to such risks. The climate-related disclosures are aimed at providing reliable information about climate risks to help investors make informed investment decisions regarding climate issues that can pose significant financial risks to companies, and help companies more efficiently and effectively disclose these risks and meet investor demands.
The proposed rules also would require a company to disclose information about its direct GHG emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2). In addition, a company would be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3). The proposed rules would include a phase-in period for all companies, with the compliance date dependent on the company’s filer status, and an additional phase-in period for Scope 3 emissions disclosure.
While the proposed rule directly impacts publicly-traded companies only, their customers and suppliers (including metalcasters) could be impacted by the rule as the regulated companies will likely request GHG emissions data and other climate related information from them to meet their Scope 3 requirements. The extent of the impact on customers and suppliers will be determined as the rule is clarified and finalized.
In addition to these proposed government rules, many companies are requesting information about GHG emissions, carbon footprint, and other climate-related issues from companies in their supply chain as part of corporate sustainability and Environment, Social Governance (ESG) programs. Metalcasting operations that are asked, or may be asked in the future, to provide this information to their customers will need to begin the process of identifying their carbon footprint and consider measures to reduce GHG emissions.
Environmental justice was an issue that was initiated in 1994 by President Clinton when he instructed federal agencies to identify and address disproportionately high and adverse human health and environmental effects of their programs, policies, and activities on minority and low-income communities. He also called for the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. Meaningful involvement would ensure that all people have an opportunity to participate in decisions about activities that may affect their environment and health.
Since 1994, environmental justice has risen and fallen as a priority issue for the federal government, and eventually became a routine, administrative “checkbox” process with little force or will to implement and enforce in a meaningful way. President Biden has changed the emphasis for environmental justice, making it a high priority and incorporating it into other priority issues such as climate change.
Just recently, EPA and the Department of Justice announced a comprehensive enforcement strategy to advance environmental justice. This strategy will leverage all available legal tools to protect communities that have been overburdened by pollution and environmental injustices. A cornerstone in this strategy is the restoration of Supplemental Environmental Projects (SEPs), an enforcement tool that has been used for several decades until previous administrations halted the practice.
SEPs are local projects that companies subject to an enforcement action can agree to undertake as part of a settlement agreement to provide environmental and public health benefits to communities that have been harmed by environmental violations. Projects could include the restoration or creation of wetlands or greenways in communities, installing air and water filtration systems, supporting and funding local fire departments and emergency response teams, and the operation of environmental monitoring systems in communities. As part of the settlement agreement negotiations, local community leaders can provide input to help shape and design appropriate SEPs to bring critical benefits to minority and low-income communities that have been disproportionately impacted by environmental releases.
The heightened focus on environmental justice has led to increased community efforts and involvement in environmental actions such as rulemakings, facility permit renewals, facility siting and expansion, neighborhood complaints about environmental releases, and facility enforcement actions and settlement agreements. Local community leaders are not just notified of these actions but are invited to participate actively in the process and provide critical input to minimize potential environmental and public health impacts on communities. Many states have more advanced and aggressive environmental justice programs that go beyond the federal efforts. All of these environmental justice activities are designed to bring about much-needed change for disadvantaged communities.
EPA has also developed an environmental justice screening and mapping tool, EJSCREEN (https://www.epa.gov/ejscreen). This tool uses high-resolution maps with datasets of risk-screening environmental indicators to identify burdens on potentially vulnerable communities. EPA recently updated the EJSCREEN to include climate change indicators with flood and sea level risk data.
The message is that the Biden administration has elevated environmental justice as a priority issue and has provided tools and processes to enhance community involvement to help minimize the potential environmental and public health impacts on disadvantaged communities. Consequently, environmental justice is an important issue now for the industry, especially those facilities located in urban areas.
Air Issues: Particulate Matter
The existing national ambient air quality standard (NAAQS) for fine particulate matter (PM2.5) is 12 micrograms per cubic meter (µg/m3) for the annual average and 35 µg/m3 for the 24-hour standard. The annual average of 12 µg/m3 is perilously close to background levels in many areas of the country. Accordingly, despite the effective control measures in place at metalcasting operations, many facilities do not generally have much compliance margin to meet the existing standard should they decid to undergo plant expansions, modernization projects, or construct new operations.
Based on review of the health-risk data, the Trump administration opted to not make changes to the existing PM2.5 NAAQS. EPA is currently reconsidering that decision and is reviewing additional health-risk data. EPA’s Clean Air Scientific Advisory Committee (CASAC) has agreed that the existing annual and daily PM2.5 NAAQS are inadequate and should be tightened. A majority of CASAC members have recommended that the annual limit should be lowered from 12 µg/m3 to a range of 8 to 10 µg/m3, and the daily limit should be lowered from 35 µg/m3 to a range of 25 to 30 µg/m3. If EPA follows through on these recommendations, many metalcasting facilities will face extremely stringent, and in some cases impossible, standards to meet.
EPA is in the process of reviewing the CASAC recommendation and plans to issue a final PM2.5 NAAQS rule in 2023. Any tightening of the PM2.5 levels could have a substantial adverse impact on metalcasting operations considering any expansion of their operations.
Water Issues: Defining
Waters of the U.S.
EPA has had a difficult time defining the scope of Clean Water Act (CWA) jurisdiction to determine which water and wetland discharges should be subject to federal permitting requirements. The ongoing dispute is now before the U.S. Supreme Court (Sackett v. EPA) to determine the appropriate legal test that should be used to define the scope of “waters of the United States” (WOTUS) under the CWA.
In the key previous Supreme Court ruling on this matter, Rapanos v. United States, the Court held that the CWA does not regulate all wetlands, but a majority of the justices at the time were unable to reach agreement on how to draw those limits. Four of the justices said the CWA extends only to waters that are “relatively permanent, standing or continuously flowing” or to wetlands that are immediately adjacent to such waters. One other justice agreed that the CWA does not regulate all wetlands, but offered a different definition of WOTUS, saying federal “jurisdiction over wetlands depends upon the existence of a significant nexus between the wetlands in question and navigable waters in the traditional sense.” Federal courts have been inconsistent in applying either the “permanent, standing or continuously flowing” or “significant nexus” test to determine if a wetland is subject to CWA jurisdiction.
The Obama administration relied heavily on the “significant nexus” approach in crafting its WOTUS definition, while the Trump administration’s WOTUS rule primarily, although not exclusively, relied on the “permanent, standing or continuously flowing” approach. The Biden administration, in withdrawing the Trump-era rule, has proposed an interim definition that interprets WOTUS to mean the waters defined by the “1986 regulations,” and applicable Supreme Court decisions, including Rapanos, which is not entirely clear.
EPA and the Corps have indicated that their proposal under consideration aims to create a “durable” WOTUS definition, but stakeholders have already expressed diametrically opposed views in public comments. There is no final date for finalizing the proposed interim WOTUS definition, and the timing of the rulemaking to set a new permanent definition of WOTUS is also uncertain. Any final action by EPA and the Corps on this issue and clarity on the definition of WOTUS will most likely need to wait until the Supreme Court has issued its decision on which approach for defining WOTUS is controlling law.
Per-and Polyfluoroalkyl Substances (PFAS) – Forever Chemicals
Per-and polyfluoroalkyl substances (PFAS) are a diverse and ubiquitous group of man-made chemical substances used in fire-fighting foams, textiles, paper products, packaging, surface treatments, surfactants, lubricants, films and electronics. These chemicals, referred to as forever chemicals, may pose environmental and health concerns because they can be persistent, bio-accumulative and toxic in the environment. In addition, because the levels of concern for many PFAS are measured in single- or double-digit parts per trillion (ppt), many facilities may be exposed to a range of environmental liabilities, even though they may not know they have used these chemical substances.
EPA Administrator Michael Regan formed an EPA Council on PFAS comprised of members from numerous offices within EPA Headquarters and Regions. This council was instrumental in developing the PFAS Strategic Roadmap (released October 18, 2021) that includes a comprehensive and ambitious plan for addressing the potential risks associated with PFAS. The Roadmap provides a detailed outline of the key actions EPA plans to undertake to address PFAS with proposed time lines for each action.
One broad area of concern is EPA’s repeated reference to PFAS generally as a class as opposed to specific PFAS compounds (with a few exceptions). Industry stakeholders continue to oppose the regulation of PFAS as a broad class, advocating that each individual PFAS compound should be assessed on its own merits and potential risks to the environment and human health.
The good news for the metalcasting industry is that it does not appear that PFAS have been widely used within the industry. Regardless, given the high visibility of this issue, the low levels of potential concerns, and the significant liabilities associated with the use of PFAS, metalcasters are advised to evaluate their possible past and current use of PFAS and what potential liabilities that may be associated with those uses.
Chemical Risk Evaluation
The Frank Lautenberg Chemical Safety for the 21st Century Act of 2016 amended the Toxic Substances Control Act (TSCA) to include a process to evaluate the risks associated with chemical substances. Under this process, EPA must conduct risk evaluations to determine if there are any unreasonable risks to human health and the environment associated with use of high priority chemicals. If EPA finds an unreasonable risk, it will then propose risk management options for the chemical, including use restrictions, acceptable exposure levels, and possible bans for the chemical.
EPA has begun the risk evaluation for approximately 20 chemicals, all of which are solvents or other organic compounds. The chemical risk evaluations conducted to date have found unreasonable risks, primarily associated with workplace exposures. Despite serious industry concerns about EPA’s emphasis on workplace exposures, EPA has proposed exposure limits for the use of these chemicals. In addition, the proposed regulations for risk management options have been delayed as EPA continues to expand the scope to include potential fence line exposures to communities.
So far, EPA has not yet identified any metals as priority chemicals for risk evaluation. It is, however, just a matter of time before metals are evaluated, because the list from which EPA is pulling the high-priority chemicals includes many commonly used metal compounds. In anticipation of this likelihood, several trade associations whose members use metals are working with EPA to revise and update the Metals Framework that is specifically used to evaluate the unique risks of metals. For example, persistence may be a factor that could increase risk for an organic chemical, but persistence is one of the many beneficial characteristics of metals.
In the meantime, EPA continues to expand the scope of its authority under TSCA in evaluating the risks associated with chemicals. The agency announced on September 28, 2021, that it is reversing its decades-old practice of exempting finished articles from regulation under the federal Toxic Substances Control Act (TSCA).
In the past, EPA’s practice in evaluating new and existing chemicals has been to target the manufacture or import of individual chemicals or chemical mixtures, their use in industrial processes, and products where a regulated substance is the active ingredient, rather than finished articles. Finished products containing chemicals that EPA is evaluating for risk will now be subject to regulation under TSCA.
By expanding its regulatory authority under TSCA to essentially all manufactured products, manufacturers, importers, and customers will need to know more about the chemical substances contained in their products and the likelihood of any potential release of that chemical substance. For example, metalcasters and their customers will have to know all of the chemical substances that may end up in the finished product, the likelihood that those chemical substances may be released from the typical use of the product, and the potential exposure routes and risks associated with any such release.
This new approach will likely increase the regulatory burdens and stewardship efforts for many manufacturers beyond the raw materials and processes used to make those products. EPA has already begun to expand its regulatory authority under TSCA to articles containing chemical substances.
The issues discussed here represent some of the high-priority environmental issues for the Biden Administration. While some of them are part of well-established regulatory programs, others represent new and evolving programs. Regardless, these issues will help to shape the future regulatory landscape for the metalcasting industry and present a variety of regulatory challenges for the metalcasting operations. The AFS environmental committees will continue to monitor these issues and promote the best interests of the industry.