Regulatory: Collapse of the Energy Bill and the Coming Regulatory Tide

In late July, the Obama Administration's effort to obtain comprehensive energy legislation collapsed. Nonetheless, the next two years will be the most active period for new federal regulatory activity since the early-1970s, when the Nixon Administration imposed price controls and developed the bedrock principles that continue to govern environmental regulation.

This enormous level of regulatory activity will result from the legislation that the 111th Congress has adopted in the past 18 months. The health care reform legislation will require hundreds of regulatory actions, which will reshape the insurance, pharmaceutical and hospital industries. The 2,300 page long financial reform legislation, signed by President Obama on July 21, will necessitate adoption of 95 rules by the SEC, 61 rules by the CFTC, 54 by the Federal Reserve, and 80 rules between the newly created Consumer Financial Protection Bureau and the Financial Stability Oversight Council.

On July 22, the Senate leadership abandoned efforts to adopt comprehensive Greenhouse Gas (GHG) emission legislation, which would have given EPA tailored authority to regulate carbon dioxide emissions, including a cap and trade system. Instead, the Senate will focus on regulatory responses to the Deepwater Horizon oil spill, modifications of the principles governing offshore oil and gas drilling generally, and promoting alternative energy industries. The new legislative effort will, for example, attempt to eliminate the $75 million liability cap established by the Oil Pollution Act and impose greater financial assurance requirements for drillers, which may price all but the largest multinationals out of the Gulf of Mexico. (Full disclosure: I argued the case in which a federal court issued a preliminary injunction against the Administration's deepwater drilling moratorium).

The shift in legislative priorities will not slow regulatory activity in the GHG area. EPA is committed to using its existing authority, however ill-suited to the task, to make progress on limiting carbon dioxide emissions. EPA has already issued rules limiting GHG emissions from cars and requiring the largest GHG industrial plants (power plants, refineries) to obtain permits imposing limits on future emissions. In early July, EPA also modified its Clean Air Interstate Rule to reduce sulfur dioxide and nitrogen oxide emissions from coal-fired electric generating plants. Even though comprehensive energy legislation may have failed, the alternative technology subsidy and energy tax parts of that bill (i.e., measures providing incentives for natural gas fueled vehicles) can be repackaged and moved forward separately as job creation measures.

Accordingly, the most intensive regulatory activity in 2011-2012, and the greatest concentration of costs for the commercial sector, will occur in the energy and environmental areas.

John F. Cooney is a partner in the Washington, D.C., office of Venable.

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John Cooney

John F. Cooney is a partner in the Washington, D.C., office of Venable.

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