Orrick State Attorneys General Newsletter – February 2022

February.24.2022

  1. Drew Wrigley Appointed North Dakota Attorney General
  2. State AGs Prevail in Lawsuit Challenging President Biden’s “Social Cost of Carbon” Executive Order
  3. State AGs Submit Comment Letter Seeking Support for Rule Revising Definition of “Waters of the United States”
  4. U.S. Supreme Court to Hear State AGs’ Challenge to Clean Power Plan
  5. State Attorneys General and SEC Reach Settlement with Cryptocurrency Lending Company
  6. California Attorney General Issues Warning to Businesses with Loyalty Programs under CCPA
  7. Texas Attorney General Paxton Sues Meta Over Alleged Unauthorized Biometric Data
  8. 2022 State Attorney General Election Preview

1. Drew Wrigley Appointed North Dakota Attorney General 

North Dakota Governor Doug Burgum appointed Drew Wrigley to be the new Attorney General. Wrigley replaces former Attorney General Wayne Stenehjem who passed away unexpectedly last month. General Stenehjem had announced his intention to retire at the end of his term in 2022.

Attorney General Wrigley previously served as U.S. Attorney for North Dakota from 2001 through 2009 and then again from 2019 through 2021 before returning to the private sector as general counsel for his family’s businesses. Wrigley served as Lieutenant Governor for North Dakota from 2010-2016. He is married with three children. He will serve out the remainder of the term, which ends in 2022. Currently, Attorney General Wrigley is the only announced candidate for the 2022 election.

2. State AGs Prevail in Lawsuit Challenging President Biden’s “Social Cost of Carbon” Executive Order 

A federal court issued a preliminary injunction against a provision of President Biden’s Executive Order 13990, which imposes a “social cost” on carbon dioxide, methane, and nitrous oxide. Under the Executive Order, the President established a working group of federal appointees to establish a value, or “social cost,” based on global environmental damages from climate change.

Led by Louisiana and nine other states, the complaint alleged that the Biden administration used an inflated cost to impose more onerous regulations and energy efficiency standards. The states argued that the Biden administration bypassed the Administrative Procedure Act’s notice and comment requirement and ignored long-standing administrative practice that regulators must consider only domestic social costs and use a 7 percent rate to discount them. These discount rates are used to adjust estimated benefits and costs, with lower rates yielding bigger cost estimates. The previous administration estimated the social costs of CO2 at $1 per ton, while the Biden administration increased that amount by using a 3 percent discount rate and calculating the global social impact, not just impact to the United States.  

The federal court issued a decision ruling that the social cost of carbon estimates were promulgated without complying with the APA’s notice and comment requirement. Additionally, the court held the President lacks “power to promulgate fundamentally transformative legislative rules in vast areas of political, social, and economic importance” and thus the Executive Order violated the major questions doctrine.

3. State AGs Submit Comment Letter Seeking Support for Rule Revising Definition of “Waters of the United States” 

Democratic Attorneys General from 14 states submitted a comment letter to the U.S. Environmental Protection Agency and U.S. Army Corps of Engineers in support of the agencies’ initial rulemaking proposal to formally replace the previous administration’s definition of the “waters of the United States.”  

The proposed rule will reinstate the definition under the Clean Water Act that was adopted under the Obama administration. If adopted, the new definition of “waters of the United States” would not include navigability, thus greatly expanding federal jurisdiction over more inland waters under the Clean Water Act.

4. U.S. Supreme Court to Hear State AGs’ Challenge to Clean Power Plan 

The U.S. Supreme Court will hear oral arguments later this month on a case that could significantly impact the authority of the U.S. Environmental Protection Agency to regulate greenhouse gases for certain stationary sources.

The case originated six years ago when Attorneys General, led by West Virginia Attorney General Patrick Morrisey, challenged the Environmental Protection Agency’s Clean Power Plan rule that was issued by former President Obama. In February 2016, the U.S. Supreme Court issued an order preventing the EPA from enforcing the rule.

The Trump administration issued rulemaking to repeal the Clean Power Plan and replaced it with a new rule—the Affordable Clean Energy (ACE) rule—that reduced the EPA’s authority to regulate greenhouse gases for power plants. That rule was challenged by numerous Democratic state AGs, and the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating the new ACE rule and the repeal of the Clean Power Plan.

The Republican state AGs appealed the D.C. Circuit Court’s decision, and the U.S. Supreme Court accepted the case. The issue before the Supreme Court centers around what authority the EPA has under the Clean Air Act to regulate CO2 emissions produced by power plants.

5. State Attorneys General and SEC Reach Settlement with Cryptocurrency Lending Company 

The U.S. Securities and Exchange Commission and attorneys general from 32 states entered a settlement agreement with BlockFi, a cryptocurrency lending company. The federal and state regulators alleged that the company made false and misleading statements about its collateral practices. Specifically, the regulators alleged BlockFi raised $14.7 billion through the sale of unregistered securities and used those funds to finance its cryptocurrency lending operations and proprietary trading. BlockFi entered into the agreement without admitting or denying the findings of fact and conclusions of law contained therein.

Under the settlement, BlockFi will stop offering its BlockFi Interest Accounts to the public. In addition, the company intends to file with state and federal regulators to offer and sell a new product called BlockFi Yield. The settlement further allows BlockFi to continue to deploy digital assets for existing BlockFi Interest Account investors and to continue to pay interest. BlockFi also is to pay $100 million to the federal and state governments.

6. California Attorney General Issues Warning to Businesses with Loyalty Programs under CCPA 

California Attorney General Rob Bonta announced that his office has initiated an investigation into businesses operating loyalty programs in California for potential violations of the California Consumer Privacy Act (CCPA).  

Under the CCPA, businesses that offer financial incentives, such as discounts, free items, or other rewards, in exchange for personal information must provide consumers with a notice of financial incentive. The notice must clearly describe the material terms of the financial incentive program to the consumers before they opt in to the program.

Attorney General Bonta announced that his office sent letters to numerous businesses found not in compliance with the CCPA and gave those companies 30 days to cure the alleged violation.

7. Texas Attorney General Paxton Sues Meta Over Alleged Unauthorized Biometric Data 

Texas Attorney General Ken Paxton filed another lawsuit against a Big Tech company, this time against Meta (previously known as Facebook) for allegedly capturing and using the biometric data of Texas citizens without properly obtaining their informed consent.

The complaint alleges that Meta has been storing millions of biometric identifiers (retina or iris scan, fingerprint, voiceprint, or record of hand or face geometry). By capturing and obtaining biometric identifiers without consent, the complaint alleges Meta violated Texas’ Capture or Use of Biometric Identifier Act and the Deceptive Trade Practices Act.

8. 2022 State Attorney General Election Preview 

It will be a busy election year in 2022 for state Attorneys General (AGs) with races in 31 of the 43 states with elected AGs, including the District of Columbia (which we count among the states in this report). The Orrick State Attorney General team’s election preview provides a snapshot of the races in 2022, including the current slate of candidates.

Currently, there are 27 Republican AGs and 24 Democratic AGs. In 2022, elections will be held in 14 states with Republican AGs and 16 states with Democratic AGs. The following states will likely be “in play” (toss-up, lean Democratic, or lean Republican): Arizona, Georgia, Iowa, Michigan, Minnesota, Nevada, Texas, and Wisconsin. In those states, there are presently 5 Democratic AGs and 3 Republicans.

The Orrick State AG team will provide timely election updates, including reports on key primary elections throughout the spring and summer. In the fall, we’ll provide a final pre-election update, and after the November election, we’ll provide a post-election report and analysis.