Inside the Beltway Update

The top story in Washington this week is the inauguration of President-elect Donald Trump on Monday, January 20. Preparations for the Trump Administration are already underway in the Senate. This week, the Senate held confirmation hearings for 13 Trump Administration cabinet nominees, including Secretary of Energy nominee Chris Wright, Secretary of Transportation nominee Scott Duffy, Secretary of Interior nominee Doug Burgum, and Environmental Protection Agency Administrator nominee Lee Zeldin. Before the Senate Energy & Natural Resources Committee, Wright stressed the importance of energy affordability, noting that Americans struggle to pay to fill their car with gas or heat their home. In response to a question from Sen. Ed Markey (D-MA) on reducing dependence on fossil fuels, Zeldin noted that he supports all-of-the-above energy, while expressing interest in utilizing the cleanest greenest energy sourced possible. The Senate is expected to quickly confirm several of President Trump’s key cabinet nominees during the first week of the Trump Administration.

House and Senate Republicans continue to meet with their respective conferences on strategy to enact sweeping tax, energy, and immigration legislation through budget reconciliation procedures. This week, Speaker Mike Johnson (R-LA) presented a proposed timeline to enact a budget resolution – the first step in the budget reconciliation process – to House Republicans. The timeline proposes House Committee consideration of a budget resolution the week of February 3 with House floor consideration of the resolution the week of February 17. Meanwhile, House Republican leadership has urged the incoming Trump Administration to delay several executive orders rescinding Biden-era policies, including policies on electric vehicle incentives and fuel economy standards, to preserve opportunities for cost-saving provisions in forthcoming tax and spending legislation.

California Withdraws Electric Truck Waiver Request

This week, the State of California withdrew its remaining requests to the U.S. Environmental Protection Agency for federal waivers under the Clean Air Act to limit greenhouse gas emissions from semi-trucks and diesel-powered trains. The California Air Resources Board’s (CARB) decision to withdraw the requests came less than a week before President Biden leaves office and in anticipation of opposition from the incoming Trump administration.

California submitted its Advanced Clean Fleets (ACF) waiver request to EPA in November 2023, which would have required trucking fleets in the State to transition to zero-emission vehicles beginning in 2024, and that all fleets be fully zero-emissions between 2035 and 2042, depending on several factors. ACF also mandated that all new heavy-duty trucks sold in California to be zero-emissions by 2036.

The ACF rule was intended by CARB, in part, to incentivize fleet purchases of zero-emission vehicles. Its counterpart, California’s Advanced Clean Trucks (ACT) rule, was granted a federal waiver by EPA in March 2023. The ACT rule regulates the types of truck OEMs can sell into the California market. EMA is one of the petitioners challenging the ACT waiver in federal court.

The other waiver requests pulled this week by California included a 2023 regulation that would have phased out the sale of new diesel-powered semi-trucks and buses by 2036. Another rule, which CARB also promulgated in 2023, would have banned locomotive engines more than 23 years old by 2030, and would have increased the use of zero-emission technology to transport freight from ports and in rail yards in California.

“CARB’s abandonment of its ACF rule waiver request is welcome news to energy marketers and consumers across the country,” said EMA President Rob Underwood. “This mandate was unachievable since day one.” “We look forward to working with the Trump administration on common-sense approaches for nationwide emissions standards that are achievable and deliver the promised environmental benefits, including reversing the unworkable waiver EPA granted last month to California for its Advanced Clean Car II (ACC II) rule,” Underwood added.

The ACC II rule is a set of requirements for model years 2026 through 2035 for on-road light- and medium-duty engines and vehicles. The ACC II rule includes revisions to both California’s Low Emission Vehicle and Zero Emission Vehicle (ZEV) regulations. The ACC II ZEV provisions specify future zero emission vehicle requirements in California as a percent of annual new vehicle sales. This requirement increases from 35% in model year 2026 to 100% in model year 2035. The Trump administration likely is going to start regulatory efforts to rescind the Biden EPA’s ACC II waiver, while Congress may entertain disapproving it under the Congressional Review Act.

California’s withdrawal of its EPA waiver request for the ACF rule will resonate beyond California, because states can adopt CARB’s EPA-approved vehicle emission rules. CARB’s action does not affect the antitrust lawsuit recently brought by EMA, the State of Nebraska, and others against California and the truck OEMs for their Clean Truck Partnership.

For more information, please contact EMA Regulatory Counsel: Jeff Leiter and Jorge Roman

FDA Issues PMTA Authorization for Zyn Nicotine Pouches

The FDA issued the first PMTA authorizations for nicotine pouches when it issued Marketing Granted Orders (MGO) for 20 Zyn pouch products. The FDA cited that Zyn’s PMTA applications demonstrated substantially lower amounts of harmful constituents than cigarettes and most smokeless tobacco products and provided evidence from a study showing that a substantial proportion of adults who use cigarette and/or smokeless tobacco products completely switched to the newly authorized nicotine pouch products.

The products for which the FDA issued MGOs are the following, each with two nicotine strengths (3 milligram and 6 milligram): ZYN Chill, ZYN Cinnamon, ZYN Citrus, ZYN Coffee, ZYN Cool Mint, ZYN Menthol, ZYN Peppermint, ZYN Smooth, ZYN Spearmint and ZYN Wintergreen (note: these MGOs are specific to these Zyn products only).

FDA Publishes Very Low Nicotine Cigarette Content Proposed Rule
Next Step: Public Comment Period on Proposed Rule

In the remaining days of the Biden Administration, the FDA has published a proposed rule that would establish a maximum nicotine level. The product standard will set a maximum nicotine level of 0.7mg nicotine/gram and will apply to cigarettes (other than non-combusted cigarettes, such as heated tobacco products), cigarette tobacco, roll-your-own tobacco, cigars (other than premium cigars), and pipe tobacco (other than waterpipe tobacco). This proposal would have a devastating impact on tobacco retailers.

To propose a new regulation such as this one, a federal agency is required to follow a multi-year, nine-step process that involves identifying the need for a new regulation, drafting the regulation, having the White House Office of Management and Budget review the proposed regulation under applicable executive orders, publishing the proposed regulation for public comment, reviewing all public comments, making any changes deemed necessary to the regulation, obtaining final White House Office of Management and Budget approval, and publishing the final regulation with an effective date. With the publication of the proposed rule, the FDA is currently on the fifth step of this nine-step process.

The next step in the regulatory process is the public comment period, which will be open for 240 days. EMA encourages all members to file comments on the negative economic impact and unintended consequences of this proposal and will have a template to use soon.

The National Association of Tobacco Outlets (NATO) intends to file comments to the federal docket and highlight findings from a study NATO commissioned and was compiled by Chmura Economics and Analytics that shows the significant negative economic impact of the proposed FDA rule limiting nicotine content of cigarettes and other combusted tobacco products. The study measures the substantial economic impact on retail sales (tobacco products and ancillary sales), federal excise tax, state and local excise tax and sales tax revenue, jobs, and Master Settlement Agreement payments to the states. The report also details how every single state will be negatively impacted by the proposed FDA rule. The economic impact report can be found on NATO’s website at the following link: NATO: Legislative - Cigarette Nicotine Limits Economic Impact Study.

Treasury and IRS Outline Regulations to Implement the 45Z Biofuel Production Tax Credit

On Monday, the U.S. Department of the Treasury and the Internal Revenue Service issued long-awaited guidance regarding the implementation of the Section 45Z Clean Fuel Production Tax Credit pursuant to the Inflation Reduction Act. Effective since January 1, 2025, the 45Z regime provides a credit of up to:

• $1.00 per gallon for the production of over-the-road biofuels (e.g., biodiesel, renewable diesel)
• $1.75 for the production of sustainable aviation fuel.

Important for EMA marketers, the new tax regime shifts the incentives from blending to production and calculates the credits based on the carbon reduction attributes of the fuel. The production tax credit is available for each gallon of fuel produced domestically after December 31, 2024, and sold before January 1, 2028.

The guidance delineates forthcoming implementing regulations, including definitions applicable under the framework, the filing process, and general rules to clarify credit calculation, such as how to measure fuel and emission rates. For instance, proposed regulations will specify that the volume of a liquid fuel would be measured based on gallons adjusted to ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit. The guidance also provides the methodology for calculating the life cycle greenhouse gas emissions of fuels for purposes of obtaining tax credits.

Renewable heating fuels may possibly qualify for the credit, although the proposed regulatory language is ambiguous. In short, heating fuels would have to be “suitable for use” in a highway vehicle or aircraft. While the fuels do not have to be used in such applications, “possible” or “rare” uses, standing alone, are not enough to demonstrate practical and commercial fitness for use as a fuel in a highway vehicle. If another “step” is necessary to make it suitable, such as the type of additization normally found in diesel fuels, it may not qualify. EMA will seek further clarification on this issue and will continue to push for an inclusive framework.

EMA is carefully reviewing the guidance and will continue to monitor developments, as the Trump administration is likely to revise this regulatory matter. For now, comments on the guidance are due by April 10, 2025.

EMA opposes a “production” as opposed to a “blender” credit because producer credits are unlikely to be passed through to blenders and consumers downstream. EMA continues to advocate on Capitol Hill for an extension of the Biodiesel Blenders’ Tax Credit to prevent supply chain disruptions, sustain carbon reduction benefits, and maintain lower prices at the pump.

“The 45Z tax regime is rife with deficiencies and uncertainty. Ultimately, EMA advocates for a strategic biofuel tax policy that promotes regulatory certainty, energy security, environmental benefits, and affordability at the pump. A long-term Blender framework is the right policy approach. We will continue to make this case to the incoming administration,” said Rob Underwood.

Important: The Section 40A Biodiesel Tax Credit, which accrued to fuel blenders, expired on December 31, 2024.

For more information, please contact EMA Regulatory Counsel: Jeff Leiter and Jorge Roman

Supreme Court Rejects Hawaii Climate Lawsuit

This week, the Supreme Court said that it will not get involved at this time with the heated legal fights over whether the oil industry is responsible to pay state, county, and local governments for their claimed costs in responding to climate change impacts.

The Court declined to review a 2023 Hawaii Supreme Court ruling that allows Honolulu officials to advance claims in State courts that fossil fuel producers knowingly misled the public about the danger of their products and that the appropriate relief should be money damages based on emissions caused by burning the fossil fuels.

The Court’s decision not to hear the Hawaii case will allow nearly 40 cases across the country to continue against the major oil companies and other parties. These climate liability cases largely emulate successful fights against tobacco and opioid manufacturers and have been tied up for years with procedural delays.

“From EMA’s standpoint, the state law climate litigation clashes with basic constitutional principles and is not good energy policy,” said EMA President Rob Underwood. “We expect the justices to step back into the climate liability fray when it has a better case to come before the Court.”

Republican attorneys general from 18 states have a case pending before the Supreme Court to quash the climate liability lawsuits. Their request invokes the Court’s exclusive jurisdiction in litigation between states.

Justice Samuel Alito, who has consistently recused himself in the climate liability cases, did not take part in deliberations on the Hawaiian case.

Weekend Reads

Canada Drafts a $105 Billion Response to Trump Tariffs

FDA OKs sales of Zyn nicotine pouches, citing health benefits for adult smokers

DOT announces $635M in EV charging, other clean transportation grants

Colonial Pipeline's main US gasoline artery likely shut until Friday

House GOP puts Medicaid, ACA, climate measures on chopping block | POLITICO

Major legal brawl may decide what types of cars Americans can buy | Louisiana Illuminator

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