New Administration, New Focus on Environmental Policy
As the Biden administration ("Administration") gets to work, many companies will be keeping a close eye on shifting policy at the federal level. However, activity at the state attorney general level may prove just as, if not more, impactful to businesses in the coming months and years. The recent election left the state attorney general landscape relatively unaltered—there were only ten state attorney general races in November 2020, all of which involved victories for incumbents or successors within the same party—but state attorney general action will likely shift considerably in reaction to the new Administration and its policy goals. This shift will affect multiple sectors, but, given the Administration's focus on climate change, may be felt most significantly by companies in the energy industry and others whose businesses and operations directly intersect with environmental issues.
Within hours of taking office, and as expected, President Biden signed several executive orders on environmental issues, as well as a letter confirming the United States' intention to rejoin the Paris Agreement. This early flurry of action signals more of what is to come, as the orders largely focused on energy and climate issues: revoking the Keystone XL permit, instituting a moratorium on oil and gas leases in the Arctic National Wildlife Refuge, reversing Trump-era rollbacks on vehicle emissions, and reinstating a working group on the social costs of global warming. The Administration acted through executive order to achieve these early environmental objectives, but acknowledged that much of what is to come will need to be accomplished through regulatory and legislative action. Indeed, with Democratic majorities now in both chambers, the new Administration has less need to rely on executive orders than its predecessor and will likely seek legislative change wherever possible to avoid the legal challenges that often accompany executive action.
State Attorney General Response to Expected Policy Change
As the Administration continues rolling out its environmental policy initiatives, much of the reaction from state attorneys general is expected to track along party lines. Republican attorneys general are likely to respond to anticipated policy shifts on multiple fronts, including through coordinated involvement in legislative and proposed rulemaking processes. As with the Democratic state attorneys general under the prior administration, Republican attorneys general are also likely to aggressively pursue legal challenges to policy changes, acting unilaterally or in coordinated, multistate coalitions where practicable.
Depending on the issues, some Democratic attorneys general, by contrast, will look for opportunities to bolster the Biden administration's environmental policy agenda, both by continuing to pursue any currently pending challenges and through new actions, particularly related to last minute policy changes from the Trump administration—again working through multistate coalitions wherever possible. Connecticut Attorney General William Tong, for example, recently announced participation in several multistate coalitions pursuing lawsuits related to Trump-era policies on air quality standards, greenhouse gas emissions, scientific transparency, migratory birds (and endangered species), and energy efficiency of consumer appliances. In order to leverage their collective strength, Democratic attorneys general will also look for ways to defend and enforce the new Administration's policy initiatives, by, for example, filing amicus briefs or intervening to support newly enacted regulations or policies, and exercising their enforcement authorities to fill the void while the Administration's policies are being developed.
While much of the response to legislative developments will track party lines, companies should also expect that attorneys general will look for opportunities to use bipartisan collaboration to impact policy, particularly where energy and environmental policies overlap with investor and consumer protection. In 2018, for example, an 18-state bipartisan coalition wrote to the Federal Energy Regulatory Commission ("FERC") to encourage a rate adjustment that would require utility companies to pass along corporate tax savings under the Tax Cuts and Jobs Act to consumers. Thus, even though party affiliation may predict much of the state attorney general policy reaction, companies should not treat political leanings as determinative of an attorney general's potential impact to their industry.
In general, companies should expect that state attorneys general will be very active on environmental issues in the coming years and should keep a close eye on the pronouncements from attorney general offices in the states in which they operate. Staying well-informed of publicized priorities and legal and investigative activities will help companies understand where attorney general action has the most potential to impact their business. Companies should also consider how best to proactively engage with attorneys general in states in which they operate so they can create and maintain an open dialogue regarding issues facing their business and industry.
Renewed Focus on Environmental Enforcement
While the expected legislative activity on environmental issues will take time to translate into enforceable law, it is unlikely state attorneys general will stand idle before moving into a new wave of enforcement. Galvanized by the new Administration's emphasis on the environment and seeking to offset a perceived relaxing of environmental enforcement under the prior administration, state attorneys general may immediately start ramping up environmental enforcement actions, even before new, more stringent environmental regulations are enacted.
Recent challenges to Trump-era environmental policies indicate that environmental enforcement remains a priority for states despite the slowdown in prosecutorial activity over the last few years. In May 2020, for example, nine state attorneys general filed a lawsuit against the U.S. Environmental Protection Agency ("EPA") challenging a temporary policy that allowed the agency some enforcement discretion for noncompliance resulting from complications of the COVID-19 pandemic. Though the complaint focused on alleged procedural flaws in the policy's enactment, in announcing the lawsuit, California Attorney General Xavier Becerra described the policy as an attempt to use the pandemic as an excuse to ignore environmental violations. This suit demonstrates that certain states are closely scrutinizing potential environmental noncompliance during the pandemic, are unlikely to apply leniency to such violations, and expect companies to continue to advance their sustainability efforts and green initiatives. Other challenges that may foreshadow areas of increased enforcement include a 21-state suit challenging eased restrictions for coal-fired power plants (which led the D.C. Circuit to vacate the policy at issue), a 21-state suit calling for review of the EPA's rescission of emissions regulations for methane and other volatile organic compounds from new sources in the energy sector, and a 20-state joint letter to Congress urging that the 2021 National Defense Authorization Act include provisions regulating per- and polyfluoroalkyl substances ("PFAS"), which was sent within days of the North Carolina Attorney General filing a PFAS contamination suit against several companies. Relatedly, as companies face pressure to minimize environmental impact, state attorneys general will also focus on investor protection through disclosure enforcement. In this regard, even companies with strong environmental compliance and sustainability metrics may face prosecutorial activity from state attorneys general probing their financial disclosures, public statements, and sustainability reports.
Emphasis on the environment is also evident in the emerging trend of state attorneys general creating dedicated environmental justice units. Such offices lend support and resources to nonprofit and community driven environmental challenges, in addition to independently initiating litigation. Many states are also touting such offices as dedicated to representing low-income or otherwise marginalized populations in environmental challenges. Creation of these units should signal to companies that state attorneys general are expanding the resources dedicated to environmental issues, particularly among so-called fence line communities, turning increased attention to community impact, and potentially arming citizen suits with the clout of the attorney general office. Given the Administration's announced focus on environmental justice and climate, these state units are more likely to continue to grow in importance and may work hand in glove with the Administration going forward.
The Complexity of State Attorney General Enforcement Activity
Companies should keep in mind that, as a general rule, state attorneys general have broad authority to investigate and pursue civil and criminal enforcement actions, and that such power is not limited to enforcing state laws. In many states, the attorney general also has broad discretion regarding whether to pursue an investigation, and such discretion is generally not reviewable by the courts. Moreover, the investigative tools available to attorneys general are often derived from state statutes that lack certain protections commonly available in private litigation, a factor that is further aggravated when multiple state attorneys general collaborate in investigative actions. As these nuances illustrate, it is important at the onset of any such investigation or enforcement action that counsel representing the target entity carefully consider appropriate mechanisms for challenging or quashing the action, while also working to avoid unnecessary escalation of minor issues and keeping efficient resolution as the ultimate goal.
Companies should also keep in mind that state attorney general action in the environmental space will not necessarily track party lines. Enforcement may take a more bipartisan shape, even when it involves policies that were championed by the left at the legislative stage. In some instances, investigations related to environmental issues have involved near nationwide participation from state attorneys general. There is also the potential for collaboration between federal agencies and the states. These large scale collaborations are attractive to state attorneys general because they drastically expand the reach, and therefore potential impact, of their regulatory authority while at the same time conserving the limited resources of their offices. For the same reasons, such collaboration also poses heightened risks to companies facing such actions.
Conclusion
Environmental issues are certain to be a priority for many state attorneys general in the coming years, especially given increased focus under the new Administration. In the face of these shifting priorities, companies should take stock of their objectives, assess vulnerabilities, and stay vigilant with respect to compliance. The power of state attorneys general is both significant and complex, and will likely have a considerable role in shaping environmental policy shifts and the resulting impact on business in the coming years.
