On May 1, 2020, President Trump declared a national emergency regarding ongoing threats to the U.S. bulk power system from “foreign adversaries,” and issued an executive order prohibiting certain equipment transactions and instructing the U.S. Department of Energy (“DOE”) to take various other responsive actions. Notably, the “Executive Order on Securing the United States Bulk-Power System” (“Executive Order”) empowers DOE, in consultation with other federal agencies, to (i) establish a “pre-qualified” list of venders for future bulk power system equipment transactions; (ii) develop recommendations to identify, isolate, monitor, or replace bulk power system equipment presenting a security risk from foreign adversaries; and (iii) establish a Task Force to update agency procurement requirements, develop policy recommendations, and issue reports.
In prefatory findings, the Executive Order describes increasing concerns regarding involvement in the bulk-power system by “foreign adversaries,” which are defined as any foreign government or non-government person “engaged in a long-term pattern or serious instance of conduct significantly adverse” to the United States. In particular, the Executive Order determines that “unrestricted foreign supply of bulk-power system electric equipment constitutes an unusual and extraordinary threat” to national security and the U.S. economy. Declaring such a threat to be a national emergency pursuant to the U.S. Constitution, the International Emergency Economic Powers Act, and National Emergencies Act, the Executive Order sets out various restrictions, and other related agency actions, pertaining to foreign supplies of bulk-power system equipment.
In relevant part, the Executive Order:
- Defines “bulk-power system” as items used in bulk-power system substations, control rooms, or power generating stations, including, reactors, capacitors, substation transformers, current coupling capacitors, large generators, backup generators, substation voltage regulators, shunt capacitor equipment, automatic circuit reclosers, instrument transformers, coupling capacity voltage transformers, protective relaying, metering equipment, high voltage circuit breakers, generation turbines, industrial control systems, distributed control systems, and safety instrumented systems.
- Prohibits federal agencies and U.S. persons from acquiring, importing, transferring, or installing bulk-power system equipment that poses an “undue” or “unacceptable” risk to the U.S. and in which a “foreign adversary” has an interest;
- Authorizes the DOE to take necessary steps to implement the Executive Order, including determining what particular countries or persons are considered “foreign adversaries” for purposes of prohibited transactions;
- Enables the DOE to establish criteria for recognizing particular equipment and vendors as “pre-qualified,” and to “identify, isolate, monitor, or replace” any now-prohibited equipment already in use as soon as practicable, taking overall bulk-power system risks into consideration;
- Establishes a “Task Force on Federal Energy Infrastructure Procurement Policies Related to National Security,” to be chaired by DOE, with support from other federal agencies, to recommend federal agency procurement regulation reforms; national security, energy security, and cybersecurity policy recommendations, and conduct studies and issue periodic reports to the President and Congress.
Although the impact of this recent Executive Order on the energy industry has yet to be fully determined, there appear to be at least some initial open questions regarding the immediate effects and enforceability of the provisions. For example, certain bulk-power system equipment transactions involving “foreign adversaries” that are “initiated” after the Executive Order appear to be immediately prohibited, notwithstanding that the Executive Order instructs the DOE, in consultation with other agencies, to publish implementing rules and regulations within 150 days of the order. In addition, the Executive Order is relatively silent on the extent to which it applies to any components within “bulk-power system equipment.” Critically, it also remains unclear what cost burdens the Executive Order may impose on impacted entities and agencies.
The text of the Executive Order can be found here.