THE TRUMP ADMINISTRATION'S IMPACT ON EPA

AMERICAN HOME FURNISHING ALLIANCE’S 2017 REGULATORY SUMMIT

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B I L L GU ER R YPartner, Co-Chair of the National Environmental Practice

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Partisan Divide in Congress Wider Than Ever on Environmental Issues, Group Says

House Republicans cast pro-environmental votes just 5 percent of the time in 2016, while their Democratic colleagues tallied a 94 percent voting record, according to the League of Conservation Voters.

In the Senate, the average GOP member was voting pro-environment 14 percent of the time, while the Democrats' average was 96 percent.

Dramatic reduction in budgets for 2018 FY for both EPA and DOE, particularly on everything connected to climate change and energy efficiency

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PEW Survey

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PARIS CLIMATE AGREEMENT

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TRUMP THDRAWING FROM PARIS CLIMATE

AGREEMENT

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Trump Dismays, Angers Allies by Abandoning Global Climate Pact

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World Reacts as Trump Pulls Out of Global Accord

Trump said ‘I was elected to represent the citizens of Pittsburgh, not Paris’ – but city’s mayor retorts: ‘We stand with the world and will follow the agreement’

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“The world cannot wait – and neither will we.”

Over 1,400 U.S. Cities, States and Businesses Vow to Meet Paris Climate Commitments

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States Launch Climate Alliance

• Expect states to fill the perceived void

• Potential balkanization of environmental regulations

• The “elite coastal blue states” independently advancing their own environmental agendas across the board

Jerry Brown and California Will Fight Donald Trump on Climate Change

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Jerry Brown One-Ups Trump on Climate Change with G20 Announcement

ADMINISTRATOR PRUITT–OBJECTIVES AND VISION

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Administrator Pruitt’s Focus/Objectives

Prior State AG for Oklahoma that led State AG’s challenge to Clean Power Rule

Promote States’ Rights over Federal, One-Size-Fits-All Approach “Back to Basics” Agenda– Focus on Tangible Pollution benefits like

Superfund clean-ups and water treatment infrastructure

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Pruitt’s Position on Climate Change

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Paris Accord unfair to U.S. because U.S. agreed to 28% reduction targets. China didn’t have to do anything until 2030 and India conditioned all their obligations on $2 trillion in aid. (Both continue to burn coal)

CAA does not create statutory authority or jurisdiction for EPA to regulate GHGs– Congress would first need to amend the CAA to include a new tailored GHG regulatory program

Relies on Supreme Court’s 2014 ruling in Utility Air Regulating Group which vacated EPA’s “tailoring rule” requiring federal air permits for GHGs for major stationary sources

Skeptical on science on qualifying the actual direct contribution of human activities to climate change– trying to promote dialogue between red and blue scientists

Supports dramatic reduction in the budget for all EPA activities associated with climate change

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Pruitt’s Position on Federalism

Return power to states State DEQs should be the lead on crafting their State Implementation

Plans (“SIPs”) to reduce emissions tailored to state-specific concerns EPA should not dictate a federal one-size-fits-all prescription EPA should closely coordinate and support state compliance and

enforcement EPA will continue to target and focus intentional violations (like VW

cheating)

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Pruitt’s Position on Abuse of Process Sue and Settle: environmental groups suing EPA for failure to promulgate

statutorily mandated regulations and then negotiating the contact of regulations

Need to develop regulations through APA rulemaking procedures and transparency and involvement of all stakeholders

Regulatory Rollbacks Clean Power Plan Car and truck fuel-efficiency standards Wetland and tributary protections (Waters of

the United States) Limits on toxic discharge from power plants Coal ash discharge regulations Emissions standards for new, modified and

reconstructed power plants Emissions rules for power plant start-up and

shutdown

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CLEAN POWER RULE

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Pruitt’s Position on Coal

EPA should not “force or pick winners and losers in energy mix” that exclude fossil fuels

Need fuel diversity, security and reliability – including coal to address peak demand and pipeline capacity with natural gas

Should continue to provide regulatory rollbacks on issues like methane emissions and other constraints on the expansion of the fossil fuel production

Repeal Of "Clean Power Plan"

EPA issued a Notice of Proposed Rulemaking (“NPRM”) to repeal the Clean Power Plan, which would regulate carbon pollution

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“The Obama administration pushed the bounds of their authority so far with the CPP that the Supreme Court issued a historic stay of the rule, preventing its devastating effects to be imposed on the American people while the rule is being challenged in court.”

“We are committed to righting the wrongs of the Obama administration by cleaning the regulatory slate. Any replacement rule will be done carefully, properly, and with humility, by listening to all those affected by the rule.

- EPA Administrator Scott Pruitt (October 10, 2017)

GHG EFFICIENCY STANDARDS FOR MOTOR VEHICLES

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Trump Announces Review of Obama-Era Fuel Economy Standards in Detroit March 2017

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Midterm Evaluation of Greenhouse Gas (GHG) Standards for Model Year 2022-2025

EPA opened a public comment period on the reconsideration of the Final Determination for GHG emission standards for light-duty vehicles

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“We are moving forward with an open and robust review of emissions standards, consistent with the timeframe provided in our regulations,”

“We encourage the public to submit the best-available and most up-to-date information, so that we can get back on track with what the regulation actually requires of the Agency. Finally, we are working with DOT to ensure that our standards are ultimately aligned.”

- EPA Administrator Scott Pruitt (August 10, 2017)

New York State Lawsuit To Protect Fuel Efficiency Standards

Lawsuit against the Trump Administration for delays encouraging automakers to produce vehicle fleets that fail to meet federal fuel efficiency standards

Penalty should be imposed on automakers who do not meet minimum fuel efficiency standards

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“Fuel efficiency standards are common sense, protecting Americans' pocketbooks and reducing the emissions that undermine public health and drive climate change. Yet again and again, the Trump administration sides against New Yorkers and our environment. State Attorneys General have made clear: we won't hesitate to act when those we serve are put at risk.”

- Attorney General Schneiderman (September, 11 2017)

LEGISLATION AND LEGISLATIVE OVERSIGHT

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Energy & Environment Legislation In both chambers, expect continued interest in EPA’s implementation of

last year’s historic chemicals (TSCA) reform bill. In August, EPA announced it will evaluate new chemicals based solely on the "intended uses" that the

manufacturer identifies in its initial notice to the agency. If the agency decides that intended use is safe, the chemical could go on the market, even if EPA has concerns about other potential uses. Those concerns would be addressed through a later rulemaking.

House Natural Resources Chairman Bishop (R-UT) continues to work on the following priorities: Restoring access to federal lands (review of Antiquities Act); promoting sound management of federal

lands; making the Federal Government a good neighbor to local communities; and creating jobs in rural communities (with a focus on domestic energy production).

The committee is considering legislation to “update and improve” the Endangered Species Act (“ESA”) and to review the effectiveness of the National Environmental Policy Act (“NEPA”).

Examination of Lacey Act restrictions is also a priority Lacey Act: prohibits trade in timber that has been illegally taken

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White House Tells EPA to Back off Biofuel Rollback Under intense pressure from corn-state lawmakers, the White House has instructed EPA

to back off both its plans to reduce advanced biofuel volumes and to allow credits for exported ethanol.

Neither the proposed biodiesel cuts nor the credits for exported fuel will be in the final EPA rule setting blending requirements for 2018 and 2019.

Sen. Joni Ernst, who had withheld her support for EPA Air Chief Nominee Bill Wehrum, indicated she was pleased with the move, saying "we're closer to reassurances, and once we have those, we can move forward."

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COMPLIANCE WITH EPA AND CARB FORMALDEHYDE RULE

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New EPA Formaldehyde Standards Establishes limits for formaldehyde emissions from composite wood

products:o hardwood;

o plywood;

o medium-density fiberboard; and

o particleboard

Small Entity Compliance Guide for Importers, Distributors and Retailers

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Compliance Related Concerns with the Regulations Address:

• Chain of custody requirements and recordkeeping and labeling• Documenting that importer-assembler undertook “reasonable prudent

precautions” • Sell-through provisions (including prohibition on stockpiling• Third-party testing and certification • Auditing of and report for third-party certifiers and suppliers• Laminated Products• Composite wood products be tested and certified by EPA-recognized

third-party certifier (“TPC”)

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Compliance Requirements for Importers, Retailers and Distributors Obligation to purchase and sell compliant composite wood products (“CWP”),

component parts, and finished goods.

To demonstrate compliance:

Bills of lading, invoices, or comparable documents bearing a statement of TSCA Title VI compliance must be obtained and maintained for 3 years.

Importers: records identifying the panel producer, the date the products were produced, the supplier (if different) and the date the products were purchased.

Must make available to EPA within 30 days of request.

Labels: Not responsible for labeling goods, but must ensure labels stay intact or on file if purchase by the bundle and sell separately.

System sufficient to identify the supplier of the panel and link the information on the label to the products.

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Specify TSCA Title VI compliant products when ordering or purchasing from suppliers

Maintain records identifying: CWP producer or producer of CWP panels

Consider verifying panel producers on EPA's "certified mill list" Date produced

Supplier

Date purchased

Bills of lading, invoices, or comparable documents bearing a statement of TSCA Title VI compliance

Import Certification Statement (after March 22, 2019) must appear on the entry document or invoice for each imported CWP shipment For each imported CWP shipment sign the certification under TSCA section 13

Reasonable Prudent Precaution

CARB based $2.5 million penalty against Lumber Liquidators for failure to take “Reasonable Prudent Precautions”

CARB and EPA will be working together and sharing information on compliance scrutiny of imported components subject to the harmonized formaldehyde regulations

CARB’s deconstructive testing of finished goods (which produces widely variable results) can legally only be used as a screening tool to determine if further testing may be required

However, when CARB determines there is a compliance issue based in part on its deconstructive tests then EPA and U.S. Customs will likely scrutinize the same suspect component

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EPA and CARB

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With the assistance of Customs jurisdiction and oversight and its related resources as a result of the EPA formaldehyde rule, CARB will also have substantially greater enforcement powers.

"CBP’s looking to step up its game by more proactive enforcement of rules and regulations for EPA and other government agencies that protect American consumers. They’ll do this through enhanced targeting of products from countries that present a risk. Top of that list? Pretty much anything from China that’s regulated.“

– Christian MarshExecutive Director of Georgetown Economic Services, LLCFormer Deputy Assistant Secretary of the U.S. Department of Commerce’s Antidumping and Countervailing Duty Operations

Customs Scrutiny at the Ports

Customs Inspection and Compliance

How will EPA/Customs assess formaldehyde compliance of furniture goods imported through U.S. Ports

US customs working with US EPA has incredible discretion to seize for extended periods i.e. over six months at the ports, suspect goods during the period they are being evaluated

Customs imposes inordinately high storage fees during seizures and compliance scrutiny

Customs imposes overlapping penalties on top of EPA penalties for the import of noncompliant products

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Best Management Practices for ImportsIntegrate substance inclusions/standards into quality or business management system

Standardize contract terms Data Traceability Documentation Control

o Scheduled updates Data Calculation Data Reporting Apply REACH type controls

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Best Management Practices for Imports cont. Score supplier risk, audit appropriately, commission testing

Score cardo Data qualityo Risk assessment (material and supplier)o Due Diligence

Interview Inspection Independent testing

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CONTACTW I L L I A M GU ER R Y Partner Environmental Law(202) 342-8858wguerry@kelleydrye.com

L A U R A VA N DER M EER Partner EU Government Affairs +(32)(2) 899-2931lvandermeer@kelleydrye.com

THANK YOU!