Following its recent opinion in Village of Morrisville v. Federal Energy Regulatory Commission, the D.C. Circuit Court of Appeals has once again waded into the issue of when a state waives its certification authority under Section 401 of the Clean Water Act (CWA). The court on July 10, 2025, rejected a licensee’s long-running effort to demonstrate that the California State Water Resources Control Board (the Board) had waived its Section 401 certification authority in connection with the relicensing of two hydroelectric projects in California. While unpublished, the court’s opinion in Nevada Irrigation District v. Federal Energy Regulatory Commission provides further guidance on the type and timing of evidence necessary to establish a coordinated “withdrawal-and-resubmission scheme” resulting in the waiver of a state’s certification authority.

Section 401 of the CWA requires any applicant for a federal license or permit that may result in a discharge to navigable waters to obtain a water quality certification (WQC) from the appropriate state or tribal authority in which the discharge will originate. Common examples of licenses or permits that may be subject to Section 401 certification include hydropower licenses and natural gas pipeline certificates issued by the Federal Energy Regulatory Commission (FERC) under the Federal Power Act and Natural Gas Act, respectively, permits for the discharge of dredged or fill material under CWA Section 404, permits issued by the U.S. Army Corps of Engineers under Rivers and Harbor Act Sections 9 and 10, and National Pollutant Discharge Elimination System permits under CWA Section 402 where EPA administers the permitting program.

Under the CWA, a state or tribe waives its Section 401 certification authority if it refuses or fails to act on a WQC application “within a reasonable period of time (which shall not exceed one year).” 33 U.S.C. § 1341(a)(1). As established in the D.C. Circuit’s opinion in Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (D.C. Cir. 2019), one circumstance under which a state waives its Section 401 certification authority is when the state and the WQC applicant engage in a “coordinated … scheme” under which the applicant withdraws and resubmits its application to reset the one-year clock to give the state more time to issue its certification. Since Hoopa Valley Tribe was issued, courts have been clarifying the evidence necessary to establish a “coordinated withdrawal-and-resubmission scheme” that results in waiver. To date, no court has found sufficient evidence to meet this standard.

Nevada Irrigation District continues this trend. In this case, the licensee challenged two orders by FERC determining that the Board had not waived its 401certification authority. The first order involved an effort to relicense the Yuba-Bear Project, which was initiated in 2011. Over several years, the licensee would withdraw and re-file its WQC application. The Board would respond with a letter indicating that the withdrawal and resubmission had reset the one-year clock for WQC issuance. The Board would also indicate that the licensee had not yet complied with the California Environmental Quality Act (CEQA). Relying on Hoopa Valley Tribe, FERC determined that the exchanges between the Board and the licensee established a “coordinated scheme” which resulted in the Board waiving its certification authority. Nev. Irrigation Dist., 171 FERC 61,029 (Apr. 16, 2020).

The Ninth Circuit vacated that order in 2022 on grounds that FERC’s finding of coordination was not supported by substantial evidence and remanded the matter back to FERC. SWRCB v. FERC, 43 F.4d 920 (9th Cir. 2022). On remand, the licensee submitted a supplemental petition, which presented new arguments and new evidence. FERC denied that petition and a subsequent request for rehearing. The licensee appealed FERC’s orders to the D.C. Circuit Court of Appeals.

The second order involved the Drum-Spaulding Project, where a relicensing proceeding was also underway. The licensee similarly withdrew and re-filed its WQC application, and the Board similarly reset the one-year certification period and observed that the licensee had not yet complied with CEQA. Following the precedent set by the Ninth Circuit in SWRCB v. FERC, FERC denied the licensee’s petition for a declaratory judgment on the waiver issue. The licensee appealed FERC’s decision to the D.C. Circuit.

On appeal, the licensee argued that FERC’s application of the “coordinated withdrawal-and-resubmission scheme” standard with respect to the Yuba-Bear Project was not based on substantial evidence. More specifically, the licensee argued that FERC should have reopened the record on remand to admit additional evidence, including several emails from the Board and an affidavit from the licensee’s consultant. The D.C. Circuit rejected those arguments, observing that the licensee’s “unforced errors” that prevented the submission of the new evidence in the original proceedings before FERC did not rise to the level of “extraordinary circumstances” requiring FERC to reopen the record.

The D.C. Circuit similarly sustained FERC’s decisions with respect to the Drum-Spaulding Project. The court rejected the licensee’s arguments that the evidence before FERC (including letters from the licensee withdrawing and re-filing its WQC application and letters from the Board confirming receipt) constituted a “functional agreement” between the Board and the licensee to provide more than a year for issuance of the WQC. The D.C. Circuit distinguished the “routine informational responses” in the record before FERC with the evidence of “mutual agreement, contractual or functional, to circumvent the statutory deadline” that the Ninth Circuit relied on in Hoopa Valley Tribe.

The D.C. Circuit’s opinion in Nevada Irrigation District v. Federal Energy Regulatory Commission can be found here.

On July 4, 2025, President Donald Trump signed H.R. 1 into law, the budget reconciliation bill known as the One Big Beautiful Bill Act (the Act). As discussed in our prior alert following the passage by the House of Representatives of the original One Big Beautiful Bill (the Initial House Bill), this legislation includes amendments to the Internal Revenue Code (the Code) that could have significant consequences for private equity funds and their portfolio companies. This alert summarizes certain key tax provisions of the Act that could impact private equity funds, their investors, and their portfolio companies, noting where relevant the differences between the Initial House Bill and the Act as finalized.

As with our prior alert on the Initial House Bill, this summary begins with what the Act does not do, which may in many regards be as important as what it does, and then provides a summary of the changes made by the Act.

What the Act Does Not Do:

  • No Carried Interest Provision. Despite suggestions in the months leading up to the passage of the Initial House Bill and the enactment of the Act that such legislation could include provisions treating carried interests as ordinary income subject to employment taxes, the Act, like the Initial House Bill before it, does not contain any provision implementing such treatment. This leaves the current treatment of carried interests in place, at least for now. This is good news for sponsors of U.S. private equity funds that benefit from the generally favorable tax treatment of income received pursuant to a carried interest.
  • No Change to the Capital Gains Tax Rate. Notwithstanding the possibility of an increase to the federal long-term capital gains tax rate discussed for the past several tax seasons, the Act, like the Initial House Bill before it, leaves in place the current maximum tax rate for long-term capital gains. Additionally, the Act does not include the addition of a “millionaire’s” tax, which had been a topic of conversation over the past few months. This will benefit investors in private equity funds upon a sale by the fund of its portfolio companies and sellers of portfolio companies to be acquired by the private equity funds, likely making portfolio company acquisitions simpler to facilitate and potentially less expensive.
  • No Retaliatory Tax on Certain Foreign Investors. The Initial House Bill added new Code Section 899, which would have imputed a retaliatory tax (from 5% to as high as 20%) on certain types of income of certain non-U.S. persons that are residents of or otherwise have sufficient nexus with “discriminatory foreign countries” that have “unfair foreign taxes.” Bringing good news for private equity funds with foreign investors, Code Section 899 was removed from the Act prior to its enactment.

What the Act Does:

  • Section 1202 Capital Gain Exclusion Provisions Expanded. The Act expands in several significant regards the provisions of Section 1202 of the Code, which enables qualified taxpayers to exclude from federal income taxation up to 100% of the gain on the sale of certain corporate stock. (As discussed in our prior alert, the Initial House Bill did not include any change to the provisions of Section 1202.) This enhancement to these provisions, like the retention of the existing long-term capital gains tax rate discussed above, will potentially benefit both investors in private equity funds and sellers of portfolio companies to be acquired by private equity funds.

Specifically, the Act:

  • Increases for many taxpayers the cap on the amount of the gain that can be excluded from income under Section 1202 for any given tax year (and also adjusts this new cap in later tax years to index it for inflation).
  • Shortens the required holding period for stock to qualify for the Section 1202 exclusion from more than five years to as little as three years (although for holding periods of less than five years, the percentage of gain to be excluded drops to either 50% (for holding periods of less than four years) or 75% (for holding periods of at least four and less than five years)), noting however that the benefit of this provision is somewhat muted by the fact that any non-excluded gain would be generally taxed at an increased 28% capital gains tax rate, and that the 3.8% net investment income tax will apply to such non-excluded gain.

  • Increases the gross asset value cap imposed on qualifying corporations able to issue Section 1202 stock from $50 million to $75 million (and also adjusts this new cap in later tax years to index it for inflation).

These expanded rules generally apply to qualifying stock issued after July 4, 2025. The prior provisions of Section 1202 will generally continue to apply to qualifying stock issued on or prior to July 4, 2025.

  • Section 199A Expanded. Section 199A of the Code (originally enacted by the Tax Cuts and Jobs Act of 2017 (TCJA)) provides an effective tax rate reduction to noncorporate owners of pass-through entities (e.g., partnerships and S corporations), serving as somewhat of a parallel to the corporate tax rate reduction enacted by the TCJA. The provision generally entitles qualified business owners to a deduction equal to 20% of the taxpayer’s allocable share of the business’s “qualified business income” (QBI), and was previously scheduled to sunset at the end of 2025. The Act, like the Initial House Bill, eliminates this sunset provision, thus making this provision permanent. Unlike the Initial House Bill, the Act leaves the deduction rate for this provision at 20% (while the Initial House Bill would have increased this percentage to 23%). In addition, the Act increases certain phase-out income thresholds intended to provide for a reduction to or elimination of an otherwise permitted deduction for higher income taxpayers, a taxpayer-favorable change that increases the number of taxpayers potentially eligible for a deduction under the provision. While the Initial House Bill also included a taxpayer-favorable provision related to these phase-out provisions, the mechanics of the Act differ from those set forth in the Initial House Bill. Finally, the Act implements a $400 minimum deduction for certain active business income (with such amount indexed for inflation in later years), but does not include a provision, as contained in the Initial House Bill, making certain dividends from electing “business development companies” (essentially, certain regulated investment companies) potentially includible within QBI. The changes made by the Act to Section 199A apply generally to taxable years beginning after 2025.
  • Section 163(j) Limitation on Interest Deductions Permanently Relaxed. Section 163(j) of the Code, originally enacted by the TCJA, generally limits the deduction for business interest expense to 30% of a taxpayer’s “adjusted taxable income,” calculated prior to enactment of the Act in a manner similar to earnings before interest and taxes (EBIT). The Act, as did the Initial House Bill, adjusts the definition of “adjusted taxable income” for this purpose, returning to an earlier iteration which was based on a calculation of earnings before interest, taxes, depreciation, and amortization (EBITDA). This revision generally will increase the base amount to which the 30% limitation applies, thus increasing the amount available to be taken as an interest expense deduction. Like the Initial House Bill, the Act’s change here applies generally to taxable years beginning after December 31, 2024. Unlike the Initial House Bill, which provided only for a temporary change (ending for taxable years beginning on or after January 1, 2030), the Act’s change in this regard is permanent. The Act, however, also includes a potentially offsetting reduction in the calculation of “adjusted taxable income” for certain foreign-source items of income, applicable to taxable years beginning after December 31, 2025. Portfolio companies utilizing significant leveraging will need to calculate the net impact of these changes to determine whether there is a net benefit or detriment.
  • Permanent Deductibility of R&D Expenses. The TCJA required certain qualifying research and experimental (R&D) expenses (immediately deductible under prior law) to be capitalized and taken into account over a period of years. The Act, like the Initial House Bill, reinstates the ability to currently deduct qualifying domestic R&D expenses (including certain software development costs) for tax years beginning on or after January 1, 2025. However, while the Initial House Bill provided this change only on a temporary basis (sunsetting for tax years beginning on or after January 1, 2030), the Act makes this change permanent. In addition to the immediate expensing for domestic R&D, the Act creates two key elections that can provide retroactive relief for certain taxpayers and flexibility regarding unamortized amounts for prior years’ capitalized domestic R&D expenses. Under the Act, certain eligible taxpayers can now elect to retroactively deduct domestic R&D expenses paid or incurred in tax years that began after 2021. In addition, for any domestic R&D expenses paid or incurred after 2021 and prior to January 1, 2025, that were capitalized, taxpayers can now elect to deduct any remaining unamortized amount either (i) in the first taxable year beginning after December 31, 2024, or (ii) ratably over the first two taxable years beginning after December 31, 2024. Foreign R&D expenditures will remain subject to the existing capitalization/amortization requirements under the Act, as was the case under the Initial House Bill. Portfolio companies with significant domestic R&D expenditures will likely benefit from these changes.
  • Permanent Deductibility and Expansion of Bonus Depreciation/Immediate Expensing. The Act permanently reinstates the ability for qualifying businesses to claim 100% bonus depreciation under Section 168(k) of the Code for qualified property acquired and placed in service after January 19, 2025 (whereas the Initial House Bill would have allowed 100% bonus depreciation to sunset after 2029). In addition, the Act, like the Initial House Bill before it, increases certain ceilings on the maximum amount available to be immediately expensed under Section 179 of the Code. Further, as first set forth in the Initial House Bill, the Act includes a new 100% bonus depreciation for the cost of certain “qualified production property” used in connection with the manufacturing, production, or refining of tangible personal property that is newly acquired or the construction of which begins after January 19, 2025, and before January 1, 2029, and that is placed in service after July 4, 2025, and before January 1, 2031 (accelerated from 2033 under the Initial House Bill). The Act generally follows the bonus depreciation rules for qualified production property originally introduced in the Initial House Bill but adds rules relating to acquired property not previously used in qualified production activities, precludes lessors from relying on the lessee’s activities for purposes of determining the lessor’s use of property in qualified production activities and excludes from “qualified products” food or beverages prepared in the same building as the retail establishment in which it is sold. Portfolio companies with significant capital expenditures will likely benefit from these changes.
  • Deductibility of Fund Management Fees. The Act, like the Initial House Bill before it, permanently disallows miscellaneous itemized deductions for individuals. This change makes permanent the TCJA’s suspension of such deductions, which was otherwise set to expire after 2025. Generally, an investor’s allocable share of a general partner’s management fee and similar investment expenses are considered miscellaneous itemized deductions. As a result, individual investors in private equity funds will generally no longer be able to deduct management fees or similar investment expenses allocated to them by the fund. This effectively increases the after-tax cost of investing in private equity for individuals.
  • Impact on Portfolio Companies – BEAT. In many PE structures, a U.S. portfolio company is owned by a non-U.S. holding company, directly or indirectly. Often, the U.S. company is paying deductible amounts to a related foreign person, such as service fees or royalties. Under existing law prior to enactment of the Act, the U.S. company could be subject to an incremental U.S. corporate tax under the Base Erosion and Anti-Avoidance Tax (BEAT) — but BEAT applied only to U.S. groups with revenues in excess of $500 million. Under the Initial House Bill, this $500 million threshold would have been removed for U.S. companies owned directly or indirectly by a company resident in certain foreign countries, a change that would have significantly expanded the scope of U.S. companies subject to BEAT. However, under the Act as signed into law, the $500 million threshold remains in place. Additionally, the Act as signed into law increases the BEAT tax rate to 10.5% (as compared to 10% when originally passed under the TCJA, 10.1% under the Initial House Bill, and the 12.5% that would have gone into effect in 2026 under the TCJA).
  • Impact of Tax Rate Increases for Certain Private University Endowments. The Initial House Bill included several provisions increasing the potential tax liability applicable to investments made by large private college and university endowments (increase to the excise tax on net investment income from 1.4% to as high as 21%), and private foundations (increase to excise tax on net investment income from 1.39% to as high as 10%). The Act as signed into law reduces the maximum rate for investments made by large private college and university endowments from the threatened 21% rate under the Initial House Bill to 8%, a substantial reduction but still much higher than the 1.4% that was the law before the Act was enacted. The Act did not increase the excise tax rate on net investment income on private foundations, despite the Initial House Bill’s attempt to do so. In the end, while this new Act does not directly restrict the large private college and university endowments in investment activities, this increased tax exposure would almost certainly reduce after-tax returns on these investments for the affected institutions, potentially leading to adjustment in investment preferences for such institutions.

In the midst of shifting political headwinds and a tight funding market, many life sciences companies are considering their M&A exit. Potential acquirers (both strategic and private equity) have plenty of dry powder and are ready to drive transactions to the finish line. However, in positioning themselves as acquisition targets, life sciences companies must carefully consider the impact of their existing strategic collaborations on any potential deal. Often, an existing collaboration can be a strong driver of M&A interest and value, but these relationships can also introduce complexities — making alignment with collaboration partners crucial for a seamless transaction.

Potential Restrictions on Sale

When a life sciences company becomes the target of a potential acquisition, it must consider whether any of its collaboration partners have direct or indirect influence over the transaction. Often, collaboration partners — entities or organizations that work jointly with the target company on specific projects, programs, or initiatives — enter into the collaboration as a preview of the target company, with the intent of later acquiring the subject asset or even the target company if the collaboration is successful. As a result, companies may first want to talk with their collaboration partners about their interest in making the acquisition. This can be challenging for a company that has multiple collaboration partners or that wants to test the market for an acquisition without signaling to its partners that a deal may be in the offing.

If the collaboration partner is not a potential acquirer (or is one of several potential acquirers), the target company will need to look at the underlying collaboration agreements for restrictions on any potential sale to a third party. In particular, lock-up periods and consent requirements may be stipulated in existing collaboration agreements. Lock-up periods may restrict the sale of the target company for a specified duration, while consent requirements may necessitate obtaining approval from the collaboration partner before proceeding with the acquisition. Additionally, the acquisition could trigger other penalties or give the collaboration partner a right to terminate the collaboration arrangement. This could be a particular concern if the collaboration is a significant factor in the acquiring the company’s interest in the target.

Collaboration agreements may also grant the collaboration partner representation on the target company’s board of directors, potentially influencing the acquisition process through voting rights or other abilities to affect significant transaction decisions.

Therefore, it is essential for the target company to thoroughly review its collaboration agreements to assess the extent of the collaboration partner’s influence on the potential transaction and to identify potential sale restrictions. If such restrictions exist, the target company should consider proactively negotiating with the collaboration partner to obtain consents, waive penalties, or determine whether the arrangement will remain post-closing. It is also important to engage collaboration partners in open communication to ensure interests are aligned.

Confidentiality and Information Sharing

To ensure a collaboration partner is aligned with a potential acquisition, information must inevitably be shared. Relevant information should only be shared on a limited, strategic basis, and the target company must carefully consider its confidentiality obligations to both its collaboration partner and the potential acquirer.

It is not uncommon for the potential transaction and related discussions to be considered confidential information of the acquirer. Therefore, when negotiating initial confidentiality agreements and the letter of intent with the acquirer, the target company should evaluate if there are any collaboration partners that are essential to the transaction outcome and reach an agreement with the acquirer as to how much information can be shared with those partners.

Similarly, during the due diligence process, the potential acquirer will assess the target company’s operations, financials, and IP and may also seek information about the collaboration — which is likely confidential under the collaboration agreement. Therefore, it is essential to work closely with collaboration partners to ensure they are aligned with respect to the transaction and are willing to permit such disclosures.

IP Considerations and Valuation

Collaborations bring strategic value, such as providing access to new markets, technologies, or expertise, and they almost always involve the creation and sharing of IP. Because IP is typically the key asset for a life sciences company, the existence of a strategic collaboration can significantly impact the valuation of a target company, and is frequently a decisive factor in an acquirer’s decision to proceed with a transaction. Therefore, understanding the potential positive and negative impacts of the collaboration on the target company’s IP rights and overall valuation is essential for negotiating a fair acquisition price and ensuring the deal closes.

Since IP is often the value-driver of a life sciences transaction, it can create the most opportunity for valuation issues and deal roadblocks. The target company must understand its ownership and use rights with respect to IP created and shared in its existing collaborations, and how that IP may be later accessed and used by the acquirer. For example, the target company may have exclusive rights to certain collaboration IP, but the collaboration partner may be the ultimate owner. This may not affect deal value if the exclusive rights are sufficient for the strategic goals of the acquirer, but to avoid deal roadblocks, the target company will need to give the acquirer assurances that those assets will continue to be available post-closing.

Licenses granted to or obtained from the collaboration partner, and related royalties and milestone payments, can also affect the target company’s operations and revenue streams. It is important to review these licenses and assess their continuity and related economics post-acquisition. Discussions with the collaboration partner to ensure the seamless transfer or continuation of licenses can prevent disruptions and preserve the value of the target company’s IP portfolio.

Conclusion

Preparing for an acquisition while managing an existing collaboration requires careful planning and strategic decision-making. By addressing potential restrictions on sale, maintaining confidentiality, and considering IP implications, life sciences companies can ensure a smooth and successful acquisition transaction.

This article was originally published on July 14, 2025 on Retail TouchPoints and is republished here with permission.

Taking your retail brand to the next level and attracting an equity investment based on the value of your brand requires not only business acumen but strategies for brand protection. Protecting your trademarks by way of registration is only a first step. Brand identity and value must also be protected by complying with consumer protection, privacy and advertising laws.

These actions, while perhaps labor intensive, are the blocks needed to build trust with customers, manage legal risk and improve your chances of an equity investment that lines up with the value you have built in your brand.

Based on our experience of counselling clients in the retail industry, we have identified 10 legal risks that threaten the value of a retail brand:

1. Failure to clear and protect your trademark.

Clearance searches and strategy with expert advice: Using comprehensive search and analysis, a trademark expert can help you determine whether your trademarks can be registered or if there are risks for registration or use due to pre-existing trademarks or other issues.

Trademark registrations in the U.S. and jurisdictions where expansion in the next five years is likely: Trademark protection is jurisdictional, so knowing where your key markets are now and will be in the next five years will help to inform your filing strategy and provide opportunities to leverage international treaties to lower the costs of trademark protection.

2. Online sales practices that use dark patterns, junk fees, negative options or other practices contrary to consumer protection laws.

State and federal laws: Many states have strict consumer protection and privacy laws. Along with these state laws, the Federal Trade Commission (FTC) Act governs the activities of businesses selling goods and services online. These regulations guard against the use of dark patterns (deceptive design tactics used in an online environment that subtly manipulate the end user’s decision) and the addition of fees to prices for goods or services that offer no value (also known as junk fees).

Failure to comply with the relevant legislation may result in investigations, claims and fines, all of which are likely to be made public and could damage the reputation of your brand and your customer relationships. Any such negative activity may adversely impact an equity investment in your business or the value of your enterprise for an acquisition when investors discover these issues during due diligence.

3. Loyalty and points/rewards programs, discounts and gift cards

Fair practices: Federal and state laws prohibit retailers from engaging in unfair and deceptive trade practices, such as promoting a loyalty program in a false and misleading manner, failing to disclose material terms and failing to provide rewards as promised. There are state actions and class actions concerning unfair and deceptive trade practices concerning loyalty and rewards programs alleging that consumers did not receive adequate notice of the rewards available, changes to the program or level of discounts available.

Clear Terms and Notice of Changes: Tactics such as Bait-and-Switch, where companies often promote rewards in marketing but hide complex terms in fine print; Devaluation of Rewards, where retailers devalue rewards after consumers have earned them by raising the number of points needed for redemption; Issues with Redemption, due to technical glitches and customer service issues that delay or even block the ability to redeem rewards; and Revocation of Rewards, where customers lose earned rewards when accounts close or due to expiration policies, often without notice, can all give rise to legal liability and have a negative impact on brand loyalty and value.

Expiration, Fees, Cash Back. Disclosure of Terms: An excellent tool to drive repeat purchases and to create brand loyalty is the use of gift cards and gift certificates. It is important for retailers to be aware of the different laws that apply to these programs in the locations where they operate to avoid class actions and state or federal enforcement actions. Compliance with state and federal laws on expiration, minimum term, when a consumer must be given cash back on a gift card balance, disclosure of terms and allowed fees should include clearly drafted terms, integration of requirements for cash back or fees into online retail experiences and training for customer service representatives to ensure effective communication with customers.

4. Inadequate or noncompliant signage in your stores.

Traditional or digital signage in physical stores still represents a key mode of messaging for any retail business with physical locations. Signage must comply with FTC advertising requirements and, depending on the nature of the content, may also have to comply with state laws. Diligence when choosing language on signs for discounts and exclusive offers is particularly important to the customer experience and may have a direct impact on brand value if unclear or misleading.

5. Lack of diligence in advertising, including by influencers and other endorsers.

FTC guidelines: The FTC has issued excellent guidance on advertising claims and in particular the role influencers or brand ambassadors play in advertising law compliance. Staying within the law requires vigilance in reviewing endorsements, as well as in the drafting of advertising and influencer agreements to require compliance.

Reviews and endorsements: The numerous opportunities for consumers to review and comment on your company, products and services, along with the many platforms such as Yelp and Amazon that employ consumer reviews, can often lead brands to manufacture reviews or manage poor reviews ineffectually. Genuine reviews not only comply with the law but also can contribute positively to brand value.

Product-specific laws: Be aware of product-specific laws, such as those for cannabis, tobacco and alcohol, and state regulations that could restrict methods of advertising, access to websites by age, or require that products not be shown in association with certain activities in advertising.

For both startup and well-established businesses, social media posts, partnering with brand ambassadors and other forms of advertising require specific knowledge and consistent review. It is easy to fall afoul of laws and regulations, so incorporating legal compliance into any advertising campaign plan is essential.

6. Not having a privacy policy or not following company policies on privacy.

Although there is no federal law governing the protection of personal information (other than health information), there is a network of state laws, as well as laws in other jurisdictions, that could apply to U.S. companies. Cybersecurity breaches and failure to have policies and adhere to them can all lead to significant legal and reputational risks. Investors and purchasers are more frequently expecting to review policies and security plans and are requiring representations and warranties with respect to privacy compliance. It will pay off in the long run to establish policies as early as possible and enforce them internally.

7. Use of third party IP without permission.

Many businesses, especially at startup, place little attention on the way they are using music, trademarks, photographs and other elements of intellectual property owned by third parties in their social media posts, advertisements and signage. Failure to properly license third-party IP can expose your business to liability, but it can also derail a potential investment or acquisition by equity investors concerned about the risk they are taking on for past infringements. Ask your legal advisor for guidance on what creative and trademark elements owned by third parties can be used without a license and, better yet, license what you want to use whenever possible.

8. Inadequate terms and conditions for sale on your website.

Every business website should have current website terms and conditions, and ecommerce sites should also have comprehensive terms governing the sale of goods or services. These terms will form the basis for your relationship with customers and are regulated primarily by state consumer protection laws. Failure to comply with state regulations may lead to claims, and more commonly, unclear terms on returns, refunds and shipping costs can lead to issues with customers resulting in reputational or customer loss.

9. Not regularly monitoring your trademark and enforcing your rights.

Ensuring your trademark is used properly internally and by licensees is essential to preserving your trademark rights and brand value. This can be accomplished through internal policies that are routinely enforced and license agreements that allow for periodic review of trademark use and quality of goods and services, and include the right to terminate for breaches.

In addition, it is important to ensure your trademark is not used without permission. There are many tools available to monitor the internet for such unauthorized use as well as the trademark registers in any country where you have trademark rights. Taking action to stop such infringement, whether by issuing cease and desist letters, opposing trademark applications or taking other legal action, will be important to preserving your trademark rights.

10. Lack of customer service.

Customer complaints, if handled well, can mitigate the risk of claims and complaints to regulators. A proactive approach to customer relations as well as a savvy social media strategy can be the difference between a brand increasing in intrinsic value or losing economic value.

Managing these risks may significantly improve your trademark value and position your company for acquisition or investment by creating a strong brand and customer relationships, as well as minimizing claims by regulators and others that could negatively impact brand value.

On July 2, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) reached a settlement with Key Holding, LLC (Key Holding) concerning its non-U.S. subsidiary’s violations of the Cuban Assets Control Regulations (CACR), 31 C.F.R. part 515. This settlement serves as a reminder not only that OFAC has broad reach under the CACR to charge U.S. entities for violations committed by their owned or controlled non-U.S. subsidiaries, but also about the risks of acquiring non-U.S. entities that may not have an adequate sanctions compliance approach.

This case additionally underscores that OFAC’s sanctions can, in some cases, prohibit transactions that appear to be “humanitarian” in nature — here, food and safety equipment. Such transactions can often be conducted lawfully, but one must be mindful of the nuances of OFAC’s regulations, and in some instances, licenses may be required.

Background

Key Holding is a privately held global logistics company based in Delaware. In December 2021, Key Holding expanded its global footprint by acquiring Key Logistics Colombia S.A.S. (Key Colombia), a Colombian company that specializes in international freight forwarding.

Between January 24, 2022, and July 31, 2023, Key Colombia facilitated logistics for 36 shipments to Cuba from various countries (i.e., Colombia, Spain, China, and Panama). Of these shipments, 33 contained “foodstuffs” and three contained “safety-related oil well machinery components.”

Key Holding discovered Key Colombia’s 36 shipments to Cuba after conducting due diligence in anticipation of its pending sale to another U.S. company. Key Holding voluntarily disclosed these shipments to OFAC, which led to a significant reduction in the penalty amount. It also adopted new technology to screen shipments automatically and instituted a compliance program at both Key Holding and Key Colombia.

OFAC determined that the base civil penalty was $1,217,651 but agreed to settle the matter at $608,825 after balancing mitigating and aggravating factors. Mitigating factors included Key Holding’s implementation of a compliance program and voluntary self-disclosure upon discovery, and the benign nature of the consumer products shipped. Aggravating factors included Key Holding’s initial failure to implement a compliance program and OFAC’s determination that Key Holding “had reason to know[] that the transactions were occurring” based on Key Colombia’s knowledge that they were facilitating shipments to Cuba. OFAC also emphasized that Key Holding had a duty to observe “extra care and attention to U.S. sanctions” because it is the owner of an international freight forwarder.

Key Takeaways

Global companies, including acquiring companies, investment funds, and others, should take away the following key lessons from this case:

  • The Trump administration is expanding the scope of the CACR. This settlement came two days after the White House released National Security Presidential Memorandum/NSPM-5 (NSPM 2025), which calls for tightening of sanctions on Cuba.

  • The CACR applies to non-U.S. entities owned or controlled by U.S. persons, reinforcing the need for vigilance in international operations even among legally distinct entities. OFAC’s Iran sanctions also directly apply to such non-U.S. entities.

  • U.S. persons contemplating the acquisition of non-U.S. entities (or other U.S. persons with non-U.S. subsidiaries, JVs, etc.) should conduct thorough due diligence to assess compliance with OFAC’s sanctions.

  • U.S. persons already owning or controlling non-U.S. entities should assess the current state of the subsidiaries’ compliance with the CACR and OFAC’s sanctions more generally.

  • Prompt voluntary self-disclosure to OFAC upon discovery of a violation, and cooperation throughout the investigation, may significantly reduce penalty amounts.

  • Establishing comprehensive OFAC compliance programs at both the U.S. level and non-U.S. subsidiary level can mitigate exposure to sanctions and potentially soften OFAC’s response in case of violations.

*Nick Erickson, a 2025 summer associate with Troutman Pepper Locke who is not admitted to practice law in any jurisdiction, also contributed to this article.

Published in Law360 on July 10, 2025. © Copyright 2025, Portfolio Media, Inc., publisher of Law360. Reprinted here with permission.

On June 2, the Texas Legislature concluded its 89th regular session with important developments affecting the energy sector, most notably in the arena of renewables, like solar and wind power. The most significant takeaways from this session came from several bills pertaining to the electric energy industry that ultimately failed to pass.

These failed bills were aimed at increasing the supply of dispatchable energy sources, like natural gas, in the state, while simultaneously imposing new hurdles on the development and operation of renewable energy projects.

All three of the below-highlighted bills passed the Texas Senate, but ultimately died in the Texas House of Representatives’ State Affairs committee without a hearing. The final outcome for these bills reflects that the policies behind them had some traction, but have ultimately not carried the day — at least for now.

S.B. 715

S.B. 715 proposed retroactive reliability mandates for electric generation sources, setting firming requirements that would have particularly affected already-existing wind and solar projects.

Certain energy research experts speculated that these mandates would have undermined the reliability of the Electric Reliability Council of Texas system and increased energy costs.[1]

S.B. 819

S.B. 819 proposed a requirement that renewable energy projects obtain permits from the Public Utility Commission of Texas that would not be required of coal, gas or nuclear energy projects.

The national trade association representing the U.S. solar energy industry raised concerns that the bill could increase energy costs and blackout risks.[2]

S.B. 388

Perhaps the proposal that would have created the greatest upheaval in Texas’ competitive energy market, S.B. 388 proposed conditions for the ERCOT grid that would have required 50% of all new generation to come from dispatchable sources.

Such sources would obviously include natural gas, coal and nuclear, but electric energy generated by solar and wind resources can only be dispatchable if it is stored in battery energy storage systems. However, the 50% requirement in this bill expressly excluded battery storage capacity, prioritizing conventional power generation methods.

Therefore, electric utilities and power generation companies seeking to deploy wind or solar resources after Jan. 1, 2026, even those paired with battery energy storage systems, would have been required to purchase dispatchable credits to meet the 50% requirement set by the statute.

Successful Bills

Despite these three dead bills, there were a few standout survivors. By the time the latter half of the legislative session rolled around, S.B. 6 was the top-priority electric bill in the House, which potentially stole the spotlight from other proposed energy bills.

S.B. 6 targets large energy users, specifically those with a demand over 75 megawatts, requiring their financial support in connecting to the grid, and allowing for deeper regulation of their behind-the-meter energy usage.

In addition, H.B. 3824’s passage created fire safety standards and testing requirements for battery energy storage system projects. And an additional $5 billion in funding was approved for the Texas Energy Fund for the 2025 and 2026 fiscal years.

Importantly, H.B. 3809 was signed by Gov. Greg Abbott on May 29, and will go into effect Sept. 1, imposing responsibilities on project owners for decommissioning stand-alone battery energy storage system project facilities without a shared grid connection point.

These responsibilities, and the associated financial burdens, include removing equipment, excavating at least three feet below the surface and gathering recyclable materials upon project conclusion.

Looking Forward

Given the overall competitive and lightly regulated nature of business in Texas, and the expected growth of data centers and other large load customers in the state, it will need all of the energy sources that it can develop.[3]

The death of the three Senate bills discussed above leaves open the ability for a wider variety of energy players to stay in the game — which aligns with Abbott’s all-of-the-above approach to power generation to supply the state’s growing energy needs.

For Texans, more sources of energy mean a greater likelihood of contingency coverage on the ERCOT system, and hopefully avoiding significant energy price spikes and negative reliability impacts.

However, given that there was a significant level of support for the ideas and concepts behind the three failed bills, Texans can expect to see similar efforts arise in the next session.

[1] Aurora Energy Research: https://auroraer.com/company/press-room/proposed-texas-legislation.

[2] Solar Energy Industries Association: https://seia.org/news/solar-industry-statement-on-texas-senate-passing-bill-that-will-harm-needed-energy-generation/.

[3] Solar Energy Industries Association: https://seia.org/news/solar-industry-statement-on-texas-senate-passing-bill-that-will-harm-needed-energy-generation/.

In Part Two of this FAQ series, we continue to break down Virginia’s Senate Bill 754, Consumer Protection Act; prohibited practices, etc., reproductive or sexual health information (Act), which amends the Virginia Consumer Protection Act (VCPA). The law went into effect on July 1, 2025.

In this installment we’re asking and answering questions concerning the specific requirements of the Act and operationalizing compliance, including FAQs related to consent, disclosures, and exceptions.

If you missed Part One of our FAQ discussing the scope, applicability, and fines and penalties available to the Virginia attorney general (AG) and private litigants, click here.

What does the Act mandate?

At a high level, the obligations of the Act are straightforward. It prohibits persons from “[o]btaining, disclosing, selling, or disseminating any personally identifiable reproductive or sexual health information without the consent of the consumer.” Unfortunately, the Act’s lack of caveats, exceptions, and nuance make compliance an involved endeavor.

How broad are the Act’s prohibitions?

The Act does not define “[o]btaining,” “disclosing,” “selling,” or “disseminating” personally identifiable reproductive or sexual health information (RHSI). Nor are these terms defined in the Virginia Consumer Protection Act (VCPA), of which the Act is part. Finally, only the word “sale” is defined under Virginia’s Consumer Data Protection Act (VCDPA). Sales under the VCDPA include the exchange of personal data for monetary consideration, which is arguably consistent with the term’s plain meaning. Otherwise, the VCDPA utilizes the term “process,” which is broader than the Act’s operative terms.

Therefore, under Virginia law, these terms must be interpreted according to their “plain meaning” (see this article for more information on the plain meaning and ordinary meaning standards under Virginia law). As such, a good starting point to glean their meaning is Webster’s Dictionary: obtain; disclose; and disseminate.

What are some examples of organizations and activities regulated by the Act?

Examples of real-world activities that could require consent include:

  • An app that collects information about a user’s menstrual cycles.

  • A retailer that sells purchase history of purchasers of contraceptives or feminine products.

  • A manufacturer of pregnancy or ovulation tests that has access to consumer sales data.

  • An advertising technology company that tracks online purchases of feminine products to serve targeted ads for similar products.

Our take: Given the broad definitions used in the Act, the law likely regulates organizations that are not traditional health care companies, and goes beyond traditional health information, as demonstrated by the examples above.

Under the VCDPA (and similar U.S. state privacy laws) “processors” of personal information and “service providers” typically are not required to obtain consent for the collection or disclosure of personal data. Does the Act limit processors’ obligations in a similar way?

No, the Act does not differentiate between “controllers” and “processors,” which means that vendors processing RHSI on behalf of other organizations are directly subject to the Act and must get consent if they obtain, disclose, sell, or disseminate RHSI.

Our take: Imposing consent requirements on downstream processors who are only obtaining or disclosing personal data on behalf of their controller customers is a significant departure from existing U.S. privacy laws, which largely shield processors from having to provide notice, obtain consents, and otherwise comply with key components of these laws.

How can organizations get consent from consumers if they obtain RHSI from third parties (without having a direct relationship or interface with consumers)?

It’s a good question. B2B2C service providers, data brokers, organizations with video cameras, buyers of data, various entities in the AdTech ecosystem, hosting companies, and similar organizations will need to determine whether and how to obtain consent. While this isn’t necessarily a new problem (e.g., the CCPA requires businesses to provide consumers with a privacy notice “at or before the point” of collecting personal information), given the Act’s private right of action, downstream RHSI collectors could face much more risk than under current U.S. privacy laws.

However, there may be ways to reduce this risk. The Act does not require a particular entity to get consent from a consumer prior to obtaining their RHSI. Rather, it indicates that a person cannot obtain or disclose RHSI “without consent” — ostensibly a data controller (or other party) with a direct consumer relationship could get consent for downstream parties to obtain and disclose RHSI. Unfortunately, this method requires controllers to act appropriately, and in many cases,fourth, fifth, and other downstream parties will have no knowledge or relationship with the upstream controllers (and no visibility as to whether any consent was obtained).

Assuming they have appropriate contact information, organizations could also get consent by sending an email or other communication to consumers before obtaining, disclosing, or disseminating their RHSI. In other contexts, organizations have become accustomed to providing notice or obtaining consent after the fact (e.g., after obtaining personal information). However, none of this seems practical or realistic in our current data processing environment.

Our take: Ultimately, employing a strict reading of the consent requirement could effectively make all downstream RHSI collection and disclosure illegal and subject to statutory damages.

What constitutes valid consent under the Act?

The Act borrows the VCDPA’s definition and explanation of “consent”:

“Consent” means a clear affirmative act signifying a consumer’s freely given, specific, informed, and unambiguous agreement to process personal data relating to the consumer. Consent may include a written statement, including a statement written by electronic means, or any other unambiguous affirmative action.

There is a lot going on in this definition, so let’s break it down.

What kind of act satisfies the “clear affirmative act” requirement for consent?

Again, the concept affirmative consent (or similar terms) has been used for some time. Not surprisingly, what it means will often depend on the circumstances at hand, how broadly or narrowly an affirmative act is construed, and the risk tolerance of persons subject to the requirement. Ultimately, affirmative consent is on a spectrum. While the Act does not provide examples of affirmative consent, a common method includes requiring a consumers to check boxes or click buttons acknowledging their agreement. On the other end of the spectrum is “consent” obtained by default — regulators would argue that simply linking to a privacy policy indicating that continued use is consent is not “affirmative.” For example, the Federal Trade Commission (FTC) takes the position that hovering over, muting, pausing, or closing a given piece of content does not constitute express affirmative consent.

What does it mean for consent to be “freely given”?

For consent to be “freely given,” the consent must be voluntary and informed. It must be given without coercion (e.g., service denial without consent), manipulation (e.g., dark patterns), or deception (e.g., misrepresenting data collection and use). In other words, the consent reflects a genuine choice made by the individual.

What is “specific” and “informed” consent?

These concepts are related when it comes to consent:

  • Specific means that the consent relates to a specific action or context. In practice, the consent is narrow in scope to a particular processing activity and is not bundled with other unrelated purposes or tied to vague or overbroad terms.

  • Informed means that the individual receives adequate notice that the individual can understand and digest. The consent indicates the purpose of the processing, the scope of the data to be processed, and the parties involved so the individual is able to determine whether to provide consent.

Does the Act include an exception for “necessary disclosures” (i.e., necessary to provide the good or service)?

No. Unlike Washington’s My Health My Data Act, opt-in consent is required even if the data processing is necessary to deliver the product or service requested by the consumer. Without a “necessary processing” exception, prior consent is required for any disclosure of RHSI. For example, prior consent would be required to disclose customer information to a fulfillment service provider to complete an order for contraceptives.

What operational steps should we take to comply with the Act?

Consider the following six steps to help your organization comply with the Act:

Step 1 – Assess applicability. Review operations and data that you process to determine if you are a “supplier” that is subject to the Act.

Step 2 – Understand your data and data flows. Identify any RHSI you collect and what you receive. Understand how that information is collected, where it is maintained, and how it is processed and disclosed. Consider whether any exceptions apply to the data.

Step 3 – Implement and update consent mechanisms. Develop a form and process to obtain affirmative, informed consent from consumers. Use the data flow analysis in Step 2 to deploy your consent mechanism at relevant collection points.

Step 4 – Update privacy policies and agreements. Update privacy policies with appropriate disclosures about collection, use, and sharing of RHSI. Review contracts with relevant data sources and downstream service providers to update as needed to ensure appropriate contractual obligations and safeguards.

Step 5 – Update SDLC process for relevant data. Update your existing SDLC process to identify technologies that could collect in-scope data.

Step 6 – Train relevant members of the workforce. Ensure that members of the workforce and business are aware of the requirements, restrictions, and processes that apply to processing of RHSI.

Conclusion

As you can see from the FAQs above, the Act has a wide application, as it includes entities that are subject to the VCPA and does not require that an entity meet data processing threshold of the VCDPA. Additionally, it may apply to businesses with business practices that are not associated with reproductive or sexual health information. The Act also provides for a right of private action, which allows consumers to sue businesses who violate the Act. As such, organizations should carefully analyze whether and how the law may impact them and implement operational processes and mechanisms to comply with the Act’s requirements.

If you have questions about the Act, or if you would like assistance with your approach to compliance, please contact Dave Navetta dave.navetta@troutman.com or Brent Hoard at brent.hoard@troutman.com for more information.

State attorneys general increasingly impact businesses in all industries. Our nationally recognized state AG team has been trusted by clients for more than 20 years to navigate their most complicated state AG investigations and enforcement actions.

State Attorneys General Monitor analyzes regulatory actions by state AGs and other state administrative agencies throughout the nation. Contributors to this newsletter and related blog include attorneys experienced in regulatory enforcement, litigation, and compliance. Also visit our State Attorneys General Monitor microsite.

Contact our State AG Team at StateAG@troutman.com.

Troutman Pepper Locke Spotlight

Solicitors General Insights: The Tale of Two Washingtons

By Stephen C. Piepgrass and Jeff Johnson

In this episode of our special Regulatory Oversight: Solicitors General Insights series, Jeff Johnson is joined by District of Columbia Solicitor General Caroline Van Zile and Washington Solicitor General Noah Purcell to discuss their respective offices, and the distinct challenges and focuses of each. Noah shares insights into the Washington Solicitor General’s Office, and Caroline discusses the multifaceted nature of the District of Columbia Solicitor General’s Office, as they balance a diverse array of appellate work and providing legal advice on novel issues.

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American Bar Association’s State and Local Government Law Section Webinar Series: State Attorneys General Enforcement Actions and Litigation: The Unwritten Rules

By Ashley L. Taylor, Jr.

Join Troutman Pepper Locke attorney Ashley Taylor, the co-leader of the firm’s State Attorneys General team, as he participates in part two of the American Bar Association’s State and Local Government Law Section webinar series titled “State Attorneys General Enforcement Actions and Litigation: The Unwritten Rules.” This session will focus on the “Multistate Investigations and Settlements” chapter from the recently published book, Consumer Protection: Understanding Enforcement Actions Brought by State Attorneys General. The webinar aims to delve into the complexities and nuances of enforcement actions initiated by consumer protection staff within state attorneys general offices.

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State AG News

Nevada’s Price-Fixing Bill Veto Sparks Debate

By Troutman Pepper Locke State Attorneys General Team and Michael Lafleur

In a recent political development in Nevada, Governor Joe Lombardo vetoed Assembly Bill 44, a legislative effort aimed at curbing alleged price-fixing practices on essential goods and services championed by Nevada Attorney General (AG) Aaron D. Ford.

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California AG Faces Legal Challenge Over Hiring Outside Counsel in Climate Lawsuit

By Troutman Pepper Locke State Attorneys General Team, Jessica Birdsong, and Troy Homesley

California Attorney General (AG) Rob Bonta faces a legal challenge from a union representing state-employed attorneys over his decision to hire an outside law firm for a high-profile climate lawsuit against major oil companies. The California Attorneys, Administrative Law Judges, and Hearing Officers in State Employment (CASE) argue that this decision violates Article VII of the California Constitution, which implicitly mandates that state work traditionally performed by civil service employees should not be outsourced to private entities.

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The Right to Regulate: Kalshi, Federal Preemption, and the Fight for State Gaming Authority

By Troutman Pepper Locke State Attorneys General Team and Cole White

A lawsuit between KalshiEx LLC (Kalshi) and New Jersey state gaming regulators in the Third Circuit is testing the balance between federal commodities regulation and state authority regarding sports betting.

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NYC Comptroller Requested Stronger Protections for New Yorkers Amidst Attenuated CFPB Authority

By Troutman Pepper Locke State Attorneys General Team, Stefanie Jackman, Chris Willis, and Kyara Rivera Rivera

New York City Comptroller Brad Lander released a report titled “Standing Up for New York Consumers – How New York State and New York City can Strengthen Consumer Financial Protection in the Trump Era,” which called for the strengthening of local consumer financial protections in response to the Trump administration’s recent actions to reduce the regulatory footprint of the Consumer Financial Protection Bureau (CFPB or Bureau).

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AG of the Week

Ken Paxton has served as the 51st attorney general (AG) of Texas since January 2015 and was re-elected in 2018 and 2022. He leads an agency of more than 4,000 employees across 38 divisions and 117 offices statewide, including approximately 750 attorneys who manage more than 30,000 cases each year. His office handles a broad range of responsibilities, including child support enforcement, consumer protection, open government compliance, and representing the state in legal matters.

Early in his tenure, Paxton launched a specialized unit to combat human trafficking. He has also overseen legal efforts addressing opioid abuse and the sale of synthetic drugs in Texas, along with public education initiatives related to these issues.

Before becoming AG, Paxton served in the Texas House of Representatives from 2002 to 2012 and the Texas Senate from 2012 to 2015. He holds a B.A. and M.B.A. from Baylor University and earned his law degree from the University of Virginia. In April 2025, he announced his candidacy for the U.S. Senate.

Texas AG in the News:

  • On July 7, Paxton issued a consumer alert warning Texans to be vigilant against scammers exploiting the catastrophic flooding in Texas, emphasizing the importance of caution when dealing with contractors and vendors, and ensuring compliance with state laws prohibiting price gouging during declared disasters.

  • On June 27, Paxton announced the appointment of William Peterson as solicitor general while congratulating former Solicitor General Aaron Nielson in his new position as tenured professor at the University of Texas School of Law.

Upcoming AG Events

  • July: RAGA | Victory Fund Golf Retreat | Pebble Beach, CA

  • July: DAGA | Presidential Partners Retreat | Santa Fe, NM

  • August: DAGA | Chair’s Initiative | Alaska

For more on upcoming AG Events, click here.

On July 3, 2025, the Federal Energy Regulatory Commission (FERC) issued a final rule revising its regulations implementing the National Environmental Policy Act of 1969 (NEPA) to remove references to the recently rescinded regulations implementing NEPA originally promulgated in 1978 by the White House’s Council on Environmental Quality (CEQ). On the same day, FERC issued an order adopting two categorical exclusions under NEPA for certain hydropower-related activities.

NEPA is a procedural statute that requires federal agencies to conduct an environmental review of any major federal action that significantly affects the quality of the human environment. In 1987, FERC added Part 380 to its regulations to implement NEPA requirements. Up until its July 3 final rule, FERC’s regulations had included a number of cross-references to the CEQ NEPA regulations.

The White House’s February 2025 interim final rule (IFR) rescinding NEPA’s implementing regulations was accompanied by a memorandum directing all federal agencies to revise or establish new NEPA implementation procedures consistent with President Trump’s January 20 Executive Order 14154, Unleashing American Energy, which directed federal agencies to “undertake all available efforts to eliminate” energy-infrastructure permitting delays. Pursuant to that memorandum, FERC’s July 3 final rule removes all references to CEQ’s rescinded regulations in 18 C.F.R. Pt. 380 and 385.2201 and, where applicable, replaces them with a citation to NEPA itself. FERC’s final rule does not make any other process changes to streamline or otherwise address delays caused by NEPA reviews.

While rulemaking actions generally require notice-and-comment procedures, FERC determined that such procedures were unnecessary for this rule, which “merely clarifies and corrects the Commission’s NEPA procedures by removing references to CEQ’s rescinded regulations.” FERC’s final rule will become effective on August 18. See here for an overview of all agencies that have recently revised their NEPA implementing procedures consistent with Executive Order 14154.

FERC took another action on July 3 that provides some limited relief from NEPA. FERC issued an order adopting two hydropower-specific categorical exclusions (CE) based on similar CEs previously established by the U.S. Bureau of Reclamation (Reclamation). A CE is a category of actions that an agency has determined do not result in a significant effect on the human environment, and therefore, does not require the preparation of an environmental assessment (EA) or environmental impact statement (EIS) under NEPA. Pursuant to the Fiscal Responsibility Act of 2023, which amended NEPA to codify the practice of an agency adopting the CE of another agency, FERC staff consulted with Reclamation and determined that the type of activities that Reclamation authorizes under two particular CEs — D.1 and D.17 — are substantially similar to the types of actions the FERC authorizes for nonfederal hydropower projects. Specifically, D.1 is a CE for “maintenance, rehabilitation, and replacement of existing facilities which may involve a minor change in size, location, and/or operation,” and D.17 is a CE for “minor safety of dam construction activities where the work is confined to the dam, abutment areas, or appurtenant features, and where no major change in reservoir or downstream operation is anticipated as a result of the construction activities.”

FERC’s order states that it plans to use D.1 when authorizing maintenance, rehabilitation, or replacement activities at existing, nonfederal hydropower projects where such activities involve a minor change in size, location, and/or operation. It plans to use D.17 when authorizing minor construction activities to improve dam safety conditions at existing, nonfederal hydropower projects.

In determining whether to apply D.1 and/or D.17 to proposed actions, FERC staff will determine whether there are any extraordinary circumstances in which a normally excluded action could have a significant effect, including when an action may affect Indian lands, wilderness areas, wild and scenic rivers, or units of a national park, or if the action may have a significant effect on public health or safety, or would affect a unique, vulnerable, or high-value natural resource. While FERC’s July 3 order authorizes FERC staff to use these two new CEs for minor maintenance or dam safety, it will likely limit delays due to protracted NEPA reviews. The order, however, does not eliminate requirements under the Federal Power Act, its implementing regulations, and standard license articles for hydropower licensees to apply for a license amendment, nor will it eliminate other statutory requirements that are triggered by FERC’s approval of an amendment application, such as the Endangered Species Act, Clean Water Act, and National Historic Preservation Act. FERC’s order did not solicit public comment on its adoption of the two CEs, but provided that it would become effective 31 days after the order on August 4.

In the past two weeks, six federal permitting agencies — the U.S. Departments of Interior (USDOI), Agriculture (USDA), Energy (DOE), Commerce (DoC), Defense (DoD), and Transportation (USDOT) — withdrew most of their National Environmental Policy Act (NEPA) implementing regulations in favor of a more streamlined approach, in most instances substituting a guidance-based regime for their former regulations. The Federal Energy Regulatory Commission also issued a more tailored final rule revising its NEPA regulations, which we discuss in depth here with a focus on its implications for hydropower projects.

These moves have been anticipated since the Trump administration’s February rescission of NEPA regulations initially promulgated in 1978 by the Council on Environmental Quality (CEQ), following two court cases holding that CEQ lacked any regulatory authority. The rescission of CEQ regulations was accompanied by a memorandum directing all federal agencies to revise or establish new NEPA implementation procedures consistent with the president’s day one Executive Order 14154, Unleashing American Energy, which ordered agencies to “undertake all available efforts to eliminate” energy infrastructure permitting delays.

The changes vary by agency, both in process and substance. For instance, USDOI, DOE, and USDA issued interim final rules (IFR) that took effect immediately upon publication and whittled down existing regulations and moved most procedures into a guidance document; DoD eliminated its departmental NEPA regulations wholesale and replaced them with new procedures, but undertook separate IFRs to roll back U.S. Army Corps of Engineers, Army, Navy, and Air Force NEPA regulations; DoC issued largely new guidance and sought comment on a host of new categorical exclusions (CEs); and USDOT used a light touch for certain NEPA regulations required by separate statute for several of its key sub-agencies.

The USDOI approach is particularly instructive, as its IFR took the following three steps:

  • Rescission of most of the existing departmental NEPA regulations, which were each originally promulgated to build off the now-defunct CEQ regulations. In the absence of CEQ regulations, each agency opted for a (mostly) clean slate at the departmental level.

  • Maintenance of regulations in subject areas most relevant to streamlining the NEPA process, including: departmental categorical exclusions, i.e., federal actions that are exempt from NEPA review; expedited reviews for emergency procedures; and applicant and contractor preparation of NEPA documents.

  • Replacement of the rescinded regulations with “non-binding” guidance documents that nonetheless contain “mandatory” words, and that purport to be consistent with the U.S. Supreme Court’s recent decision in Seven County Infrastructure Coalition et al. v. Eagle County, Co.

The IFR was accompanied by a 30-day comment period in lieu of the typical notice-and-comment rulemaking process. The public has until August 4 to submit comments on the IFR — but we would not anticipate any significant modifications to the IFRs.

USDOI asserted two bases for avoiding notice-and-comment rulemaking. First, it cites Seven County in asserting that because NEPA is a “purely procedural statute,” any regulations arising from the law are “interpretive rules” or “rules of agency procedure” exempt from notice and comment under the APA.[1] Second, and in the alternative, USDOI claims to have good cause for proceeding with an IFR because it is not tenable to continue to have agency NEPA regulations drafted as if the CEQ regulations still existed.

Perhaps anticipating a legal challenge, USDOI preemptively addresses expected concerns that third parties may have “reliance interests” in the agencies’ existing NEPA procedures. The agencies stated that the rule rescissions will not affect ongoing NEPA reviews in accordance with CEQ guidance — although we note that the referenced February 19, 2025, guidance states that ongoing NEPA analysis will be conducted according to prior NEPA implementing regulations only “until revisions are completed via the appropriate rulemaking process.” USDOI also asserted that because NEPA is a procedural statute, reliance interests grounded in substantive environmental concerns are entitled to “no weight.” Finally, USDOI noted that hypothetical reliance interests are outweighed by the need to streamline permitting processes in accordance with the Supreme Court’s holding in Seven County. (USDA and DOE adopted almost identical reasoning for their respective IFRs.)

The key question is what these changes mean for ongoing and future NEPA reviews.

  • Procedurally, there is some uncertainty regarding whether the now-rescinded NEPA regulations (CEQ and agency-specific) still apply to pending reviews. Prospectively, the lack of unifying CEQ regulations could increase the chance that agencies or sub-agencies will adopt divergent interpretations of the statutory requirements for their NEPA reviews. Nonetheless, we believe agencies are likely to treat their new guidance documents as binding, and several agencies (particularly USDOI, DOE, and USDA) are adopting a coordinated strategy that could end up reducing differences among agency approaches.

  • Substantively, it is highly likely that NEPA reviews will take less time under the new guidance-based regime and will result in fewer and less intensive mitigation measures — at least for this administration’s most favored energy sources. While faster reviews can often lead to corner-cutting and litigation risk, Seven County is almost certain to increase judicial deference to individual NEPA analyses — even ones that might have warranted remand or vacatur in the recent past.

  • To date, lawsuits challenging the withdrawal of the CEQ regulations have likely been deterred by the aforementioned court decisions holding that CEQ lacks regulatory authority. While that does not necessarily foreclose future challenges to that withdrawal or any agency-specific rescissions of NEPA regulations, we anticipate that environmental groups, already stretched thin by this administration’s flood-the-zone approach, are going to be increasingly selective in which rules and individual projects to challenge. This is particularly the case given the uphill battle such challenges are expected to face post-Seven County.

  • Nonetheless, no amount of regulatory streamlining can fully compensate for the recent depletion in agency staffing — which could continue to be a factor informing the quality and timing of agency NEPA reviews. We expect greater reliance on contractor or applicant-prepared NEPA documents as a means of compensating for staffing reductions while continuing to advance NEPA reviews.

[1] 5 U.S.C. § 553(b)(A).