Administrative Law

Will the Vaping Industry Go Up in Smoke?

Stephen Wood, MJLST Staffer

It’s no secret that vaping has become increasingly popular. The number of users has increased from 7 million in 2011 to 41 million as of 2018. The total market is now worth an estimated $19.3 billion. Less clear is the future of industry regulation in light of the recent respiratory illnesses linked to vaping. On September 24, 2019, the Centers for Disease Control and Prevention reported that vaping was attributed to 805 illnesses and 12 deaths. Pressure is building on the industry’s major players. In the last week, we have seen the cancellation of a merger between two of the largest tobacco companies, Altria and Philip Morris, and the release of the CEO of Juul, Kevin Burns.

However, the respiratory illnesses associated with vaping haven’t been linked to a specific product, and it is unclear what the long-term effects of vaping are. Because of this uncertainty, some states have implemented blanket restrictions on the sale of vaping products, President Trump has proposed new regulations, and the CDC has issued warnings regarding their safety. This is blindsiding the industry, which has been free from regulation by the FDA until recently.

Vaping devices, also known as electronic nicotine delivery systems (ENDS), became subject to the FDA’s regulatory scheme for all tobacco products on August 8, 2016. The Deeming Rule placed ENDS in the same category of products as cigarettes and other traditional tobacco products, which have been regulated under the Family Smoking Prevention and Tobacco Control Act since 2009. For this reason, the minimum age for purchasing ENDS is 18 years old, and the marketing, manufacturing, and distribution of ENDS is heavily regulated.

Juul, in particular, has come under fire for its marketing strategies. Among other claims, many lawsuits allege that the company specifically targeted minors through its use of social media and distribution of enticing flavors. These practices have also been the focal point of the recent surge of state regulations, which “are filling what many see as a regulatory void caused by federal inaction.” For example, in Michigan, Governor Gretchen Whitmer implemented an emergency ban, limiting the sale of vaping products to those which are tobacco flavored. New York did the same but exempted menthol from the ban. Massachusetts, notably, implemented a four-month emergency ban on all products. President Trump’s proposed ban, on the other hand, would be limited to flavored products.

If President Trump’s proposal is adopted, the industry would see an estimated 80% loss in sales. It will be interesting to see what the regulatory landscape looks like once the smoke clears.

 


New Year, New Chinese Intellectual Property System

Sherrie Holdman, MJLST Staffer 

Since the beginning of the new year, China has implemented various new Intellectual Property (“IP”) changes. Three major changes are particularly critical for promoting an enhanced IP system in China.

The first change is the establishment of a new IP appellate court. On October 26, 2018, China’s National People’s Congress (NPC) Standing Committee issued the Decision on Several Issues Concerning the Litigation Procedures in Patent and Other Intellectual Property Cases. On December 3, 2018, in a plenary session of the Judicial Committee of the Supreme Court chaired by Chief Justice Zhou Qiang, the Committee passed the Supreme Court Guidance Re Intellectual Property Tribunal. The official IP court was finally launched in January 2019. The new body is expected to hear appeals from both civil and administrative matters. According to Chief Justice Zhou Qiang, handing civil and administrative patent appeals to the new IP court will help unify adjudications related to patent validity and infringement, improve the efficiency and quality of court proceedings, and thus improve judicial protection of IP rights. The protection of IP rights has been a key issue of the trade war between the United States and China. China has been criticized for its lax IP protection for many years. The new IP court seems to come as a trade negotiation of the two countries.

Another change is China’s new policy on IP enforcement. On December 4, 2018, the National Development and Reform Commission, along with 37 government departments, released a Chinese interagency Cooperation Memorandum of Understanding. The goal of the Memorandum was to punish entities who seriously violate the patent law, including acts such as repeated patent infringement, non-compliance with the patent law, and serious illegal patent agency conduct. Like the new IP court, this policy seems to be another negotiation between the United States and China. Indeed, the policy was released days after the meeting of United States President Donald Trump and Chinese leader Xi Jinping at a summit in Argentina. The policy took a further step to enhance the IP protection in China.

The third change is the Fourth Amendment of the Chinese Patent Law. On December 5, 2018, the latest Draft of the Chinese Patent Law was presented to China’s State Council in a meeting chaired by Premier Li Keqiang. The new Amendment aimed to strengthen the protection of patent rights holder’s legitimate rights and interests, stimulate innovations, and promulgate legislations to effectively protect patent rights. Specifically, the Draft aimed to increase the penalties for IP infringement, to increase the amount of compensation and fines for willful infringement and counterfeiting patents, and thus increase the infringement cost in order to deter illegal acts. Particularly, the Draft proposed to raise the minimum fine to 100,000 RMB and the maximum fine to 5 million RMB. The Draft also stated that an infringer shall be cooperative in an infringement lawsuit. The Draft further set forth that network service providers shall bear joint liability for not stopping infringement in a timely manner. The Draft provided an incentive mechanism for employee inventors so that they could equitably share profits from inventions invented by the employees in the course of their employment.. Further, the Draft introduced a patent term extension system for innovative drugs, strengthened public information systems, and proposed to make basic patent data available in the China National Intellectual Property Administration (“CNIPA”) website. In order to foster patent dissemination and utilization, the Draft provided national and local authorities to increase public patent services and introduced an open patent license system. In addition, the Draft introduced a domestic priority of six months for design applications, extended patent term for design patents to fifteen years, and extended the time period for priority document submission for patents/utility models applications. The Draft Amendments were released for public comment from January 4, 2019 to February 3, 2019. The final rule is expected to come out soon this year.

It remains to be seen how these changes would improve China’s IP system. Nevertheless, the impact of these changes should not be underestimated. China is known as a big market for technology and business. However, foreign investors have been hesitate to invest in China due to China’s lax patent protection. With these changes aiming to establish an enhanced IP system, China is expected to build a friendly commercial environment to foreign inventors and investors, continue to improve domestic innovations, and encourage collaborations between foreign corporations with local companies. For instance, it has been said that these changes would attract global pharmaceuticals and tech companies to China because an enhanced IP system would enable foreign companies to uphold their IP in specialist courts, which is a great reassurance for foreign investors and inventors.


Health Supplements: The “Wild West” of FDA Regulations

Gabe Branco, MJLST Staffer 

At some point, we all have taken a multivitamin and/or some type of dietary supplement. They are hard to miss in most stores such as Target or Wal-Mart.  The bright colored packaging and unfulfilling promises of “losing weight quickly” without dieting or “building muscle” without working out catches everybody’s attention. Most people assume that these products, ironically labeled “health” or “dietary” supplements, must be safe to ingest due to placing them in the same category as a “drug,” or because they deem the supplement to be “natural.” However, the reason people are mistaken is because the Food and Drug Administration (“FDA”) chooses to differentiate “health” products from “drugs.”

Under the FDA’s current regulatory scheme, “health” supplements are treated more like special foods than drugs. Drugs are considered unsafe until proven safe through clinical trials. These trials must be done on all drugs, even those that are sold without a required prescription. The trials must show that the drug is both safe and effective for the specified use. Once the drug is approved, manufacturers are subject to carefully monitored conditions and packaging requirements. The packaging requirement includes conditions the drug has been proven to treat, known side effects, contraindications, and unsafe interactions with other drugs. After the drug has been manufactured and released to the public for consumption, the FDA follows up on any adverse effects consumers and their doctors report, along with any adverse effects reported by the manufacturer.

“Dietary” supplements, on the other hand, are seen as safe until proven unsafe, a stark contrast to their drug counterpart. The Dietary Supplement Health and Education Act (DSHEA) defines “dietary” supplements as a category of food. As such, “dietary” supplements do not undergo the rigorous pre-manufacturing and post-manufacturing approval and monitoring process that drugs do. DSHEA prohibits supplements from containing anything that may have “a significant or unreasonable risk of illness or injury” when the supplement is used as directed on the label, or with regular use if there are no directions. While the regulation makes clear these supplements should not significantly or unreasonably expose the public to increased risk of harm, DSHEA fails to enforce the regulation with any preventative measures.

DSHEA effectively allows manufacturers to print any statement they wish on “dietary” supplement labels, so long as it is followed by the phrase “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. This practice is troublesome because the statement may suggest or claim outright that the “dietary” supplement treats symptoms or results in an outlandish outcome if taken. Even with the FDA warning, consumers would have little to no reason to assume that supplements placed on shelves everywhere could contain none of the listed ingredients or unknown ingredients that can cause adverse health effects.

The FDA has the authority to stop any production of “dietary” supplement if it is shown there is an increased risk of harm to the public. However, this only occurs after the release of the supplement and subsequent adverse effects impact consumers. Due to the lack of pre-manufacturing testing requirements, many “dietary” supplements contain germs, pesticides, or toxic heavy metals that may adversely impact consumers. In addition, many “dietary” supplements either do not contain what is listed on the label, contain more or less of what is listed on the label, or even contain ingredients not listed on the label. This issue could also stem from parties other than the manufacturers and sellers. Without any regulations pre-manufacturing, many suppliers of ingredients may mix or substitute the ingredients sold to manufacturers with less expensive or tainted filler ingredients.

These issues become problematic when an ingredient the FDA would deem a “drug” finds its way into a “dietary supplement.” Many male enhancers or muscle building “dietary” supplements have been found to contain substances much like Viagra or Cialis, which are regulated as “drugs.” In addition, certain weight loss supplements have been found to contain sibutraimine, which has been banned in the United States. All of these supplements were recalled by the FDA in a reactionary manner. However, in most instances a “dietary” supplement may contain a drug that has little to no known effects. Having little to no known effects makes it more difficult to detect if a “dietary” supplement indeed contains a drug, and if it then must undergo the more rigorous FDA drug requirements. By providing manufacturers and sellers a pathway to produce categorical “drugs” and distribute them to the public without undergoing the rigorous FDA drug testing processes, DSHEA potentially does more deregulation than regulation.

FDA regulations concerning “dietary” supplements should be as stringent as regulations governing drugs. The simplest solution would be to implement the same pre-manufacturing and post-manufacturing procedures that are required of “drug” manufacturers into the “dietary” supplement realm. Doing so would fulfill DSHEA’s requirement that the “dietary” supplements do not cause a significant or unreasonable increase in risk of injury or illness. Additionally, this would allow the FDA to regulate “drugs” to its fullest potential.


FDA’s Nutrition Innovation Strategy: The Right to Remain Silent on Added Sugars

Christina Petsoulis, MJLST Staffer 

As of 2017, obesity rates in the United States reached 38.9%.  It is without a doubt that poor diet is a major contributing factor to obesity prevalence. More specifically, diets consisting of convenience foods containing high amounts of added sugar serve as significant exposures leading to obesity and other comorbidities. A recent study reported that sugar was added to 66% of packaged foods.

While the sugar industry is quick to blame lack of physical activity for America’s obesity rates, research is clear that diets high in refined sugar increase the risk of obesity, cardiovascular disease, diabetes, fatty liver disease, cognitive decline and some cancers.

Though the linkages between food and obesity have been well established in scientific literature for some time, it is not until now that the Food and Drug Administration (FDA) has seriously recognized the importance of diet quality in chronic disease prevention.

On March 29, 2018, FDA commissioner, Dr. Scott Gotlieb, announced the Nutrition Innovation Strategy (NIS). Some of the key elements highlighted in the NIS include: modernizing claims, modernizing ingredient labels, modernizing standards of identity, implementing the nutrition facts label and menu labeling, and reducing sodium. The agency stated that it would be “committed to finding new ways to reduce the burden of chronic disease through improved nutrition.”

Gotlieb’s press release introducing the initiative seems to take a different perspective despite the agency’s intended goal.

In Gotlieb’s statement, he started by explaining the critical importance of a healthy diet in human health. He first introduced the importance of informed consumer choice as it relates to transparent labeling, then dove into the issue of “standards of identity.” Using milk as a key example, he explained that plant-based alternatives to cow’s milk, such as soy and almond-based beverages, labeled as “milk” create major public health concerns, including cases of kwashiorkor (protein deficiency disorder), and rickets (vitamin D deficiency disorder). He then went on to cite a case where a child was diagnosed with rickets as a result of parents assuming a soy-based beverage they fed their child contained the same nutritional qualities as cow’s milk. While the issue of standards of identity is relevant to public health nutrition in the context of protein deficiency and other forms of malnutrition, these issues have little relevance to obesity, or any other chronic disease for that matter.

It is surprising to see that Gotlieb’s press release does not highlight any of the important factors contributing to obesity in light of the initiative’s supposed goals.  The worry, of course, is that the FDA is tip-toeing around food-industry players and, namely, the sugar industry in efforts to avoid conflict. The sugar industry is known for its aggressive efforts to shift blame for obesity on poor diet to lack of physical activity and poor consumer choice. For example, it was recently discovered that the sugar industry paid Harvard scientists to produce favorable results in their nutrition research on sugar’s role in heart disease.

While FDA has addressed the issue of sugar content through “added sugars” labeling requirements finalized in May 2016, little has been done to address sugar content in packaged foods. Serious efforts need to be taken to reduce sugar content in foods on the market to address the obesity epidemic


MJLST for Kids: How the ESSA Promotes K-12 Edtech

Nolan Hudalla, MJLST Staffer

The Minnesota Journal of Law, Science, and Technology is frequently at the forefront of current technological advances. The journal’s publications often address the emerging systems and devices that are changing society, as well as the legal constructs that can be employed to optimize technology’s use. But the next generation is not yet old enough to read MJLST and understand its implications. So how are today’s young students empowered to learn about and keep pace with technology that is advancing so quickly? Additionally, how is such cutting-edge technology being provided to teachers to help them maximize student potential?

Federal funding for K-12 education is largely provided by the Every Student Succeeds Act (“ESSA”). The ESSA is a major education reform bill that was passed with bipartisan support in December 2015. It is the immediate successor to the highly controversial No Child Left Behind Act (“NCLB”), and there is great anticipation for the ESSA to finally take full effect in the 2017-2018 school year. In fact, Lamar Alexander, chairman of the Senate Health, Education, Labor and Pensions Committee, recently remarked that the new law “will unleash a flood of innovation and student achievement across America.” One specific way that the ESSA is trying to “unleash innovation” is through educational technology (“edtech”).

There are two primary ESSA-provided mechanisms that will impact K-12 edtech. First, Title IV of the ESSA authorizes the Student Support and Academic Enrichment Grant program. The program empowers states and districts to pursue their own edtech initiatives. Second, Title I – the nation’s largest source of federal funding to K-12 education – now makes it easier for schools to use existing funds for edtech than it was under the NCLB.

The Title IV grant program authorizes $1.65 billion dollars for states to dedicate to local priorities. Such priorities could include, for example, counseling, Advanced Placement classes, and edtech. Nearly $900 million of the grant program is permitted to go toward innovative edtech strategies, demonstrating Congress’s commitment to advancing technology in schools. In fact, this authorization is approximately 4 percent of the ESSA’s total funding provision.

Title I of the ESSA gives states and localities greater flexibility and control over the benchmarks that must be met to receive the Title’s funding. The NCLB was heavily criticized because it set rigorous federally-determined standards, with harsh penalties for districts and schools that could not meet those standards. The ESSA allows school districts to now have a say in what they must do to meet the Title I requirements. For example, a state could demonstrate that they are making satisfactory progress in their school districts, and thus qualify for Title I funding, in part by providing a district-chosen level of edtech programs each year.

In addition, Title I now permits states to reserve certain Title I funding for specific learning activities such as edtech. In particular, 3 percent of their Title I funds can go toward “Direct Student Services,” which could include individualized edtech curriculum in districts that particularly require improvement. The ESSA also provides funds for an Education Innovation and Research program that can be similarly leveraged.

Through the ESSA, the federal government has provided the opportunities and tools to significantly advance edtech. The bill authorizes a lot of money for the states to put toward advancing education initiatives through both grants and Title I funding provisions. However, it remains up to the states and localities to implement the necessary tools to fully take advantage of the new opportunities created by Congress.


A New Option for Investors Warry of High Frequency Trading

Spencer Caldwell-McMillan, MJLST Staffer

In his recent paper, The Law and Ethics of High Frequency Trading, which was published in the Minnesota Journal of Law, Science, and Technology Issue 17, Volume 1, Steven McNamara examined the cost and benefits of a high frequency trading (HFT) on stock exchanges. He observed that problematic practices such as flash orders and colocation can provide HFT firms with asymmetrical information compared to retail or even sophisticated institutional investors.

In June, a new type of exchange was approved by the Securities and Exchange Commission (SEC). IEX Group Inc. was granted exchange status from the SEC. Before this designation the firm was handling less than 2% of all equity trades, with this new designation the exchange is likely to see volume increase as orders are routed to the exchange. IEX uses 38 miles of looped fiber optic cable to combat some of the information asymmetry that HFT firms exploit. IEX uses this coil to slow incoming orders down by about 350 microseconds. This is roughly half the time a baseball makes contact with a baseball bat. While this may seem like an insignificant amount of time, the proposal proved extremely controversial. The SEC asked for five revisions to IEX application and released the decision at 8 PM on a Friday.

This speed bump serves two purposes: to stop HFT firms from taking advantage of stale prices found on IEX orders and to prevent them from removing liquidity on other exchanges so that IEX’s customer are unable to fill their orders. Critics of this system claim that the speed bump violates rules that requires exchanges to fulfill orders at the best price. However, IEX pushes back on these points to arrangements like colocation that allows firms to pay for faster access to markets by buying space on the servers of the stock exchanges. These policies allow HFT firms to get information faster than even the most sophisticated investors because of their proximity to the data. IEX began operations as an exchange in August and time will tell whether it can generate profits without compromising their pro-investor stance.

This debate is likely to continue long after public attention has faded from HFT. Institutional investors are the most likely beneficiaries of these changes, in fact, in a letter to the SEC the Teacher Retirement System of Texas, claimed that using IEX to process trades could save the fund millions of dollars a year. More recently, Chicago Stock Exchange has submitted a proposal to include a similar speed bump on its exchange. Taken together these two exchanges would represent a small fraction of the order volume being processed by U.S. exchanges but these changes could have a lasting impact if they drive institutional investors to change their trading behavior.


EPA Revises Agricultural Worker Protection Standard, to the Disappointment of Agriculture Industry Groups

Jody Ferris, MJLST Staffer

An important development on the regulatory front has some agriculture industry groups shaking their heads. The U.S. Environmental Protection Agency has released finalized revisions to the 1992 Agricultural Worker Protection Standard on Sept. 28, 2015 (40 CFR 170). These regulations apply to millions of agricultural workers in fields, forests, orchards, and greenhouses across the country. The regulations are meant to enforce the observation of good safety practices in the use of pesticides by agricultural workers.

The changes to the current requirements include:

-a new minimum age requirement that prohibits children under the age of 18 from handling pesticides.

-mandatory posting of no-entry signs on fields that have been recently treated with highly dangerous pesticides.

-whistleblower protections to protect employees who alert authorities to illegal practices.

-increased frequency of employer provided safety training (now required annually, up from the previous requirement of every five years).

-recordkeeping requirements (records of training must be kept for two years, previous requirements did not require any record keeping).

-increased requirements for use of safety equipment, including fit testing and employee training on use of safety equipment. Recordkeeping of completion of safety equipment training and fit testing is also required. The previous requirements did not require any training, formal fit testing, or record keeping.

Agricultural industry groups are unhappy with many of the revisions to the regulations. A coalition including the National Association of Wheat Growers, the National Council of Farmer Cooperatives, the American Farm Bureau Federation, and the American Seed Trade Association submitted a 14-page comment letter during the public comment period and claim that their comments were not taken under proper consideration in the final revision of the rule. The coalition argued that since the original regulations were introduced in 1992, there have been significant improvements in worker safety and that acute poisoning events have been greatly reduced, thereby eliminating the need for more stringent regulations. In addition, they argue that the EPA has severely underestimated the financial costs that the new requirements place on agricultural producers. Criticism from the Agricultural Retailers Association includes the concern that the new rules will put employers at risk for increased liability without significantly increasing worker safety.

It is currently unclear whether any regulated parties will seek to challenge the revised regulations in court. It also remains unclear precisely how great a burden the new requirements will place on agricultural producers or how much they will improve the safety of workers until they are followed in practice for some time. It remains to be hoped that the new requirements will indeed significantly improve the safety of agricultural workers on the job and justify any increased burden on employers.


The FDA’s Role in Innovative Change

Paul Overbee, Articles Editor

In Volume Six, Issue Two of the Minnesota Journal of Law, Science and Technology, Susan B. Foote and Robert Berlin penned a piece titled “Can Regulation be as Innovative as Science and Technology? The FDA’s Regulation of Combination Products.” Published in 2005, this piece set out to explore whether an agency as slow as the FDA could keep pace with ongoing technological innovations and respond in an appropriate and timely manner. Ultimately the authors concluded that the FDA is an agency that progresses in an iterative and incremental manner, and that both politics and administrative law were likely to prevent the FDA from being a force for innovation. The authors tried to justify the potential block to innovation by arguing that innovators and manufacturers benefit from the predictability and certainty and that a slow regulatory is the essential cost of these benefits. As such, the authors offered that regulation would come after innovations occurred rather than predicting upcoming innovation and issuing preliminary regulation.

Since the time of the author’s predictions, they have been proven correct in many ways. For instance, nanotechnology is an emerging technology with many predicting how it will be implemented in the future, and it has already has appeared in products such as sunscreens and spray paints. Despite its current presence in society, the FDA has failed to issue a formal definition of what nanotechnology is and what it is not. As such the predictability and certainty that is desired by innovators is lacking. One of the most recent developments that continue to show that the FDA is ill-equipped to deal with fast paced innovation is their recent draft guidance on combination products. A full 10 years after Foote and Berlin criticized the FDA’s ability to act swiftly, the FDA has finally issued a draft guidance to clarify and explain the current good manufacturing practices for combination products. This guidance has been made available by the FDA

The FDA defines a combination product as any combination of a drug, device, or biological products, taken individually as constituent parts of the combination product. Additionally, a combination may be two or more separate products that have been packaged together in a single package such as pre-filled syringes. The new FDA guidance gives multiple options for combination products to meet current good manufacturing practices. First, the producer may demonstrate compliance under the current drug manufacturing practices or by meeting qualify system regulations; this option is available where the combination is both a drug and device. The other option is that the manufacturer may demonstrate compliance will all good manufacturing practices that are applicable to each constituent part that makes up the whole combination product.

Both Berlin and Foote justified the slow moving nature of the FDA by stating that it may provide the type of predictability and certainty that is desired by innovators. Since that date, actions by the FDA have put that predictability and certainty in question. Instead of having a clear practice in place, the FDA may leave manufacturers guessing for years before the agency comments on their appropriateness. Berlin and Foote both agreed that perhaps the FDA wasn’t properly tooled to deal with ongoing innovation, but ongoing developments continue to drive that point home.


State Agency Deference Under PURPA

Doug Kincaid, MJLST Staff Member

Recently, in Exelon Wind L.L.C. v. Nelson, 766 F.3d 380 (5th Cir. 2014), the Fifth Circuit Court of Appeals (Fifth Circuit) held that state agencies are entitled to deference under the Public Utilities Regulatory Policies Act of 1978 (PURPA) – a cooperative federalism regulatory scheme. The case revolved concerned the Texas Public Utilities Commission (PUC), which claimed that under state law a wind farm generating intermittent power (“non-firm”) power could not enter into a legally enforceable obligation (LEO) under Texas law, and that such an obligation was not required under PURPA. Unable to enter into a fixed price agreement, the generator was subject to highly variable market prices, increasing the financial risk of the project dramatically.

The Federal Energy Regulatory Committee (FERC) responded by declaring that federal law required all qualifying facilities under PURPA have the option to enter into a LEO. The Fifth Circuit, faced with competing state and federal interpretations, upheld the state interpretation despite the fact that FERC authored the relevant statutes. Because wind and solar energy, by nature, cause scheduling difficulties and extra costs to state agencies overseeing regional energy grids, an incentive may exist for other state agencies to follow the PUC’s lead. The Fifth Circuit’s holding in Exelon frustrates renewable energy development by refusing renewable generators the option to enter into LEOs and expands the deference state agencies are entitled to in a cooperative federalism regulatory scheme.

To the extent federal and state agencies disagree on the interpretation of a cooperative federalism statute, district courts are fragmented and little scholarship exists regarding how to resolve these conflicts. In determining whether to defer to a state agency’s interpretation of federal law, five out of six federal circuits which have considered the issue elected to give state agencies no deference. The underlying basis for federal deference in these cases was a sentiment favoring federal supremacy. The Fourth Circuit, an outlier, granted deference to state agencies citing state agency expertise in tailoring federal regulations to local conditions. Here, the Fifth Circuit in Exelon v. Nelson created a novel line of reasoning on this issue.

In relevant part, PURPA states that “Each qualifying facility shall have the option either: (1) To provide energy. . . based on the purchasing utility’s avoided costs calculated at the time of delivery; or (2) To provide energy or capacity pursuant to a legally enforceable obligation.” The plain meaning of this language, under traditional principles of statutory interpretation, creates a mandatory choice vested in the qualifying facility. The Fifth Circuit, however, read the statute as a bare-bones framework on which state agencies can project any regulation not expressly denied by the statutory language. Because PURPA contains no specific language addressing the obligation of firm or non-firm generators to form LEOs, the PUC regulation presents no facial conflict with PURPA.

The creative judicial interpretation employed to circumvent the mandatory choice interpretation reveals that the Fifth Circuit treated state sovereignty as a controlling concern in the examination of conflicting state and federal agency interpretations. A previous holding in F.E.R.C. v. Mississippi, 456 U.S. 742 (1982), held that PURPA subtly circumvents the anti-commandeering doctrine by allowing states to “comply with the statutory requirements by issuing regulations, by resolving disputes on a case-by-case basis, or by taking any other action reasonably designed to give effect to FERC’s rules.” Perceiving a potential Tenth Amendment conflict caused by forcing state governments to implement FERC’s PURPA regulations, the court hesitated to “wade unnecessarily into such murky waters” and instead elected to defer to the PUC. Exelon v. Nelson may remain an outlier, but considering the importance of state and federal agency cooperation in the energy sector, granting deference to state agency interpretations on constitutional grounds could have a significant effect on energy law. Nonetheless, in terms of implementation of PURPA, the court’s ruling is a setback for renewable energy and may require legislative action to clarify the intent of the law.

PURPA serves to promote renewable generation by creating a mandatory purchase provision for small generation facilities, an increasingly important function considering the massive carbon footprint of the power sector. The holding in Exelon v. Nelson reduces FERC’s power to promote renewable power. A simple legislative fix would preserve state implementation authority under PURPA while eliminating the state’s ability to frustrate renewable energy development through state regulations dictated by purchasing utilities.

Congress sets forth in PURPA’s text three express purposes: “to encourage (1) conservation of energy supplied by electric utilities; (2) the optimization of the efficiency of use of facilities and resources by electric utilities; and (3) equitable rates to electric consumers.” Congress should enact a fourth purpose for PURPA: “to encourage” renewable resources and long-term reduction of carbon emissions. Pursuant to this change, the purpose of PURPA would in fact change very little as renewable energy is already a key component of the statute. State regulations singling out renewable generators would be necessarily rejected in federal or state court pursuant to the express will of Congress. The amendment would honor the structure of cooperative federalism inherent to PURPA by balancing the state role of implementation with the federal role of enforcement, while strengthening the benefits derived by renewable generators from the mandatory purchase requirement.

In sum, Exelon v. Nelson presents a new and potentially significant holding on cooperative federalism – a staple legislative tool in today’s agency intensive power sector. It remains to be seen whether this case will bear significantly on future agency deference or remain an outlier, but the holding certainly calls into question the ability of renewable energy generators to enter into LEOs under PURPA. To counteract this negative effect, Congress should make “encouraging renewable resources and long-term reduction of carbon emissions” an express goal of PURPA, cementing the purpose that the statute already serves.


Uh-Oh Oreo? The Food and Drug Administration Takes Aim at Trans Fats

by Paul Overbee, UMN Law Student, MJLST Staff

In the near future, food currently part of your everyday diet may undergo some fundamental changes. From cakes and cookies to french-fries and bread, a recent action by the Food and Drug Administration puts these types of products in the spotlight. On November 8th, 2013 the FDA filed a notice requesting comments and scientific data on partially hydrogenated oils. The notice states that partially hydrogenated oils, most commonly found in trans fats, are no longer considered to be generally recognized as safe by the Food and Drug Administration.

Some partially hydrogenated oils are created during a stage of food processing in order to make vegetable oil more solid. The effects of this process contribute to a more pleasing texture, greater shelf life, and stronger flavor stability. Additionally, some trans fat is naturally occurring in some animal-based foods, including some milks and meats. The FDA’s proposal is meant to only to restrict the use of artificial partially hydrogenated oils. According to the findings of the FDA, exposure to partially hydrogenated oils raises bad cholesterol levels. This raised cholesterol level has been attributed to a higher risk of coronary heart disease.

Some companies have positioned their products so that they should not have to react to these new changes. The FDA incentivized companies in 2006 by putting rules in place to promote trans fat awareness. The new regulations allowed companies to label their products as trans fat free if they lowered the level of hydrogenated oils to near zero. Kraft Foods decided to change the recipe of its then 94-year-old product, the Oreo. It took 2 ½ years for Kraft Foods to reformulate the Oreo, and once that period was over, the trans fat free Oreo was introduced to the market. The Washington Post invited two pastry chefs to taste test the new trans fat free Oreo against the original product. Their conclusion was that the two products were virtually the same. This fact should act as a form of reassurance for consumers that are worried that their favorite snacks will be pulled off the shelves.

Returning to the FDA’s guidance, there are a few items worth highlighting. At this stage, the FDA is still in the process of formulating its opinion on how to regulate these partially hydrogenated oils. Actual implementation may take years. Once the rule comes into effect, products seeking to continue to use partially hydrogenated oils will still be able to seek approval on a case by case basis from the FDA. The FDA is seeking advice on the following issues: the correctness of its determination that partially hydrogenated oils are no longer considered safe, ways to approach a limited use of partially hydrogenated oils, and any other sanctions that have existed for the use of partially hydrogenated oils.

People interested in participating with the FDA in determining the next steps taken against partially hydrogenated oils can submit comments to http://www.regulations.gov.