President Trump’s energy-focused ambitions will generate work for regulators at all levels of the government.
In the first two weeks of April, the president issued several orders and a related memorandum that could potentially turn energy regulation on its head by overturning nearly a century of precedent on regulation of the electric industry, including challenging the so-called Insull regulatory compact and the role of each state in regulating the electric industry’s operations within its borders.
The Trump Administration seeks to promote “baseload” energy development by limiting states’ ability to adopt climate mitigation strategies (including cap and trade and renewable portfolio standards) and by taking new authority to permit development of reserves of fossil fuels and other minerals critical to the energy space. In combination, these actions affect nearly all aspects of the energy space and potentially portend radical changes to the balance between state and federal energy regulation if carried through.
Below, we will summarize each of these actions, outline how they fit into the context of President Trump’s broader agenda, and outline issues for the regulated community to watch.
President Trump’s Executive Orders and Memoranda
Promoting Coal and Fossil Fuels
In an Executive Order titled “Reinvigorating America’s Beautiful Clean Coal Industry and Amending Executive Order 14241,” the Trump Administration reaffirmed its position that “coal is essential to our national and economic security” and detailed a number of policies designed to expand and encourage coal-fired electricity generation:
- Encouraging Domestic Coal Mining: The Order calls for a report on coal reserves on federal land and the termination of an Obama-era moratorium on leases for coal extraction on federal land. The Order also directs the recently created Energy Dominance Council to designate coal as a “mineral” pursuant to a March Executive Order on Immediate Measures to Increase American Mineral Production.
- Encouraging Coal-Fired Electricity Generation: The Order directs federal agencies to review existing federal rules, policies, and guidance aimed at transitioning away from coal-fired generation and to revise or rescind those policies where possible. The Order also directs agencies to identify and promote opportunities for the export of American coal, and to research and provide funding or other support for the use of coal-fired energy to power artificial intelligence data centers or for the development and improvement of coal-related technologies.
- Limiting Administrative Requirements: The Order directs agencies to identify types of coal-related activities that could be categorically excluded from environmental impact reviews under the National Environmental Policy Act. The Order further calls for investigation into whether coal may be considered a “critical material” for the production of domestic steel.
A second related Executive Order titled “Regulatory Relief for Certain Stationary Sources to Promote American Energy” granted a two-year extension for coal-fired power plants to comply with federal Mercury and Air Toxics Standards emissions limitations.
Finally, a third Executive Order titled “Strengthening the Reliability and Security of the United States Electric Grid” authorized the use of emergency powers to require existing fossil fuel-fired power plants to stay online. Citing its earlier declaration of a “National Energy Emergency,” the Administration preemptively invoked Section 202 of the Federal Power Act, which allows the Federal Energy Regulatory Commission (FERC) to require specific energy generation or facility interconnection to meet energy demands in times of war or emergency. The Order directs FERC to identify regions where federal intervention may be necessary and specifically directs the agency to prevent certain large energy generation resources “from leaving the bulk-power system or converting the source of fuel” if the conversion would reduce total energy generation.
Limiting State Influence on Energy Regulations
A separate Executive Order, “Protecting American Energy From State Overreach,” seeks to limit state climate change laws that the Trump Administration claims are harming domestic energy production. Specifically calling out New York and Vermont laws imposing liability for greenhouse gas emissions as well as California’s carbon emission cap-and-trade system, the Order directs the Attorney General to identify and “take all appropriate action to stop the enforcement of” state laws that burden the “identification, development, siting, production, or use of domestic energy resources.” While we do not know what state laws the Attorney General will identify and presumably seek to preempt through litigation, likely suspects would include state decarbonization requirements and environmental justice programs. Federal agencies have already sought to curtail funding for many of these programs.
Rolling Back Federal Regulatory Hurdles
President Trump signed an Executive Order entitled “Zero-Based Regulatory Budgeting to Unleash American Energy” seeking to require reexamination of regulations which have the potential to sit on the books unexamined for long periods of time. For agencies touching upon energy issues (e.g., US Environmental Protection Agency, the US Army Corps of Engineers, and the US Department of Energy), agencies must include a “sunset rule” rendering regulations invalid no more than five years in the future unless the Director of the White House Office of Management and Budget determines that the new regulation or amendment “has a net deregulatory effect.”
Additionally, President Trump issued a memorandum to the heads of Executive Departments, “Directing the Repeal of Unlawful Regulations.” The memorandum notes that several recent US Supreme Court decisions have placed limits on the power of federal agencies, including Loper Bright Enterprises v. Raimondo (reducing deference given to agency interpretations of statutes), West Virginia v. EPA (preventing agencies from resolving “major” economic or political questions), and Sackett v. EPA (narrowing the definition of water bodies subject to federal Clean Water Act regulation). The memorandum suggests that many regulations, arguably in conflict with those decisions, remain on the books and directs the heads of federal agencies to identify any “potentially unlawful regulations” and to “immediately take steps to effectuate the repeal” of those regulations in whole or in part. The memorandum directs agency heads to, where possible, invoke the “good cause” exception of the Administrative Procedure Act to repeal regulations without the usual public notice and comment, arguing that notice and comment is “unnecessary” where the existing regulations are inconsistent with a Supreme Court ruling.
The Orders in Context
These orders collectively reorient the US energy space. Pointing to the nation’s large reserves of coal, oil, natural gas, and critical minerals as well as the capacity for nuclear, hydropower, biofuel, and geothermal energy production, the Trump Administration has repeatedly promised the development of a “Golden Era” of US energy dominance.
With these actions, the Trump Administration fleshes out how it intends to assert “energy dominance.” Below are six open questions:
1. Are fuel choices driven by regulation or by practical concerns (like technology or cost)?
The current set of executive orders implicitly assume that regulatory burden alone has compelled the transition toward renewable energy. But the truth is more complicated. While the United States historically relied on a substantial fleet of coal-burning power plants, recent years have seen many states actively encouraging energy producers to move away from fossil fuels for power generation, in favor of renewable sources of energy like wind and solar. A combination of factors have caused coal generation capacity to fall over 50% from 302 GW/year in 2013 to 181 GW/year in 2023. This switch does not necessarily fall along “red state vs. blue state” lines, with states including Texas, Idaho, and South Dakota toward the top of the nation in terms of renewable energy development. It remains to be seen whether the removal of federal limitations will reverse that trend.
2. Will this regulatory shakeup spur long-term energy development?
Large-scale energy production is a long-term investment that needs to be cost effective over decades. The combination of these orders reenforcing supports for “baseload” power may result in a situation where a project’s long-term viability is more certain. However, state renewable portfolio standard requirements or state programs encouraging renewable development may present headwinds.
3. Will future federal actions undercut state energy programs?
Energy planning seeks to balance considerations including energy security (i.e., that energy is always available), affordability, sustainability, and resilience (i.e., that energy facilities are sited in such a manner that they will be available for their expected lifespan). While the Trump Administration is clearly focused on overall affordability of energy, the recent suite of orders may undercut state-level balancing efforts, particularly those focused on “energy justice” in terms of grid planning. (For more, see here.) We will continue to watch whether this will occur.
4. How much litigation will result from the executive orders?
As we have discussed, executive orders alone cannot displace regulations or federal statutes. The mechanics of how these orders work — through processes like limiting public participation requirements — are likely to result in allegations that statutory rights to public participation are violated. Finally, states including California, Colorado, Illinois, Maryland, Minnesota, North Carolina, Oregon, and Rhode Island have passed broad-state specific legislation seeking to reduce emissions.
5. Will US Congress need to weigh in to preempt state laws?
One of the executive orders directs the Attorney General to review state programs to find issues preempted by federal law. We have discussed the drift between federal environmental policy and the policy in some states. (See here, here, and here.) Recent Supreme Court decisions in the preemption space have limited preemption to areas where Congress has spoken directly. (See here and here.)
6. How will these orders impact future renewable energy project development?
Many renewable energy projects currently in development are moving forward through this period of uncertainty based on utility planning for compliance with state regulatory requirements, such as renewable portfolio standards. If the effort to “limit state overreach” results in the weakening or elimination of state compliance standards, one of the most effective demand-pulls for renewable energy could effectively be shut down.
Stay tuned for further developments. We will further break out policies relevant to these issues in the coming weeks.
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