Implementing the 2016 TSCA Amendments – Progress & Prognosis

Verdant Attorney Irene Hantman will speak on Wednesday, February 22 at a panel discussion among experts on implementing the Frank R. Lautenberg Chemical Safety for the 21st Century Act, which amends the Toxic Substances Control Act (TSCA). The program includes a panel of legal experts, current and former EPA officials, and representatives from environmental NGOs and trade groups. The panel will discuss topics including:

  • The potential effects of the change in Administration
  • Congress’ oversight role
  • Regulatory actions already taken by EPA
  • Regulatory actions required during 2017

The program includes an informal brown bag lunch for in-person participants in Washington, D.C., as well as dial-in participation. If attending in person, please RSVP to Gina Dean at gina.dean@apks.com; teleconference information is forthcoming. This event is sponsored by the Pesticide, Chemical Regulation, and Right-to-Know Committee of the ABA Section of Environment, Energy, and Resources (SEER), with co-sponsorship by the Environmental Law Institute and SEER’s Special Committee on Congressional Relations, and hosted by Arnold & Porter Kaye Scholer LLP.

Please see the announcement [PDF] for more details.

GENERAL INFORMATION:

Location: Arnold & Porter LLP, 601 Massachusetts Avenue, NW, Washington, DC 20001

Arrival Time: 11:45 am; plan to arrive in advance to check in and pass through security; the dialogue will begin promptly at noon and will conclude at 2:00 pm.

Moderator: Larry Culleen, Partner, Arnold & Porter Kaye Scholer LLP

Panelists:

  • Jim Jones, Former Assistant Administrator, US EPA [invited]
  • Wendy Cleland-Hamnet, Office Director, Office of Pollution Prevention & Toxics, US EPA
  • Mike Walls, VP Regulatory & Technical Affairs, American Chemistry Council [invited]
  • Richard Denison, Lead Scientist, Environmental Defense Fund
  • Ernie Rosenberg, President & CEO, American Cleaning Institute
  • Lynn Bergenson, Managing Partner, Bergeson & Campbell
  • Martha Marrapese, Partner, Keller & Heckman
  • Irene Hantman; Verdant Law

 

The Trump Administration’s regulatory freeze and its effects on TSCA.

On January 20, the new White House Chief of Staff Reince Priebus released a memorandum to agency and department heads announcing a freeze on new or pending regulations. The agencies and departments are asked to not send any regulation to the Office of the Federal Register until a Presidential appointee/designate reviews and approves it. The Office of Management and Budget (OMB) Director can make exceptions to the freeze for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.” The freeze is similar to one put in place by President Obama upon his inauguration in 2009.

In addition, the White House requested the withdrawal of submissions to the Federal Register that have not yet been published. The memo also asks for the temporary postponement of rules that have already been published but have not yet taken effect. The effective date of those rules would be postponed “for 60 days from the date of this memorandum …for the purpose of reviewing questions of fact, law, and policy they raise.” Both the withdrawn and postponed rules would be subject to the same exceptions for emergencies and urgent circumstances as for new rules. Agency and department heads are instructed to consider proposing for notice and comment further delays beyond the 60-day period, or further notice-and-comment rulemaking.

The memo specifically excludes “any regulations subject to statutory or judicial deadlines,” and asks that such exclusions be identified to the OMB Director. Agency and department heads are also asked to notify the OMB Director of any regulations that should be excluded from the freeze because they “affect critical health, safety, financial, or national security matters, or for some other reason.”

As we have discussed on this blog, the Frank R. Lautenberg Chemical Safety for the 21st Century Act, which modernizes the Toxic Substances Control Act (TSCA), requires that EPA promulgate a variety of implementing regulations. EPA has already proposed and finalized several of these implementing rules in recent months. Most of these actions should be excluded from the announced regulatory freeze, as they are subject to deadlines specified in the Lautenberg Act. However, while EPA had planned to develop a proposed rule on new fees by mid-December, that rule has yet to be released and is not subject to a statutory deadline. EPA had set finalizing the fees rule as a goal for mid-June 2017, but the final rule is also not required by statute, although the agency’s First Year Implementation Plan notes that
“authority to require fees will be needed ASAP.”

The regulatory freeze seems likely to affect the nanoscale reporting and recordkeeping rule which was finalized earlier this month. Although that rule’s effective date is not until May 12, 2017, EPA may consider delaying the effective date or re-opening the rulemaking process to review questions of fact, law, or policy.

EPA Issues Proposed Rule on TSCA Inventory “Reset”

According to the EPA, there are currently over 85,000 chemicals on EPA’s Toxic Substances Control Act (TSCA) Chemical Substance Inventory (Inventory), many of which are no longer actively produced. On January 13, 2017, the EPA published a proposed rule to reset the TSCA Inventory into separate lists of “active” and “inactive” substances (i.e., inventory reset). EPA is proposing to require use of the Agency’s electronic reporting portal, Central Data Exchange (CDX), for notification under this rule. The proposal details notification requirements and establishes exemptions and procedures for handling confidentiality claims.

The notification, to be entered into CDX no later than 180 days after the final rule is published, is retrospective in nature and is required for substances listed on the Inventory and that were manufactured or imported into the U.S. for non-exempt commercial purposes in the last ten years (between June 21, 2006 and June 21, 2016). Notifications for substances that were “processed” during this period would not be required, however, the proposal allows processors to report no later than 360 days after the final rule is published.

Properly notified substances would be designated by EPA as “active,” whereas substances without a valid notification would be designated as “inactive.”

Once designated, “inactive” substances could not properly be manufactured, imported, or processed for a non-exempt commercial purpose under TSCA. Thus, EPA also is proposing “forward-looking” procedures for notifying inactive substances if and when non-exempt manufacture, import, or processing would resume in the future. Properly notified substances would be converted by EPA to “active” substances.

TSCA Section 8 requires EPA to compile an “interim list” of active substances before promulgation of the final rule. The proposed rule would not require manufacturers to report chemical substances that are on the “interim list.” Indeed, in the proposal, manufacturers and processors of chemical substances on the non-confidential portion of the Inventory would be exempt from reporting if the manufacture of that chemical substance was already reported (by any party) in response to 2012 or 2016 Chemical Data Reporting (CDR).

Comments on the proposal must be received by March 14, 2017.

EPA Publishes Final TSCA Reporting and Recordkeeping Rule for Nanoscale Materials

On January 12, 2017, EPA published a final rule under Section 8(a) of the Toxic Substances Control Act (TSCA) establishing reporting and recordkeeping requirements for certain chemical substances that are manufactured or processed at the nanoscale. Manufacturers and processors, or persons who intend to manufacture or process new discrete forms of certain existing chemical nanoscale materials not previously reported to EPA, must also report certain information to EPA prior to manufacture or processing. The information to be reported includes the specific chemical identity, production volume, methods of manufacture and processing, exposure and release information, and existing information concerning environmental and health effects. There is no independent requirement to test materials to find this information, but manufacturers and processors must use information that is known to or reasonably ascertainable by them when reporting.

Persons who manufacture or process a discrete form of a reportable chemical substance at any time during the three years prior to the effective date of the final rule must report to EPA one year after the effective date of the final rule. There is also a standing one-time reporting requirement for persons who intend to manufacture or process a new discrete form of a reportable existing chemical substance on or after the effective date of the rule. These persons are required to report to EPA at least 135 days before manufacture or processing of that discrete form with certain exceptions. The final rule will be effective on May 12, 2017.

EPA Proposes to Limit the Use of Two Toxic Chemicals in Paint Removers

The EPA is proposing to place limits on the use of two common chemicals in paint removers in order to protect consumers and workers from serious health risks associated with this use. The chemicals are methylene chloride and N-methylpyrrolidone (NMP).

In a 2014 assessment, EPA concluded that methylene chloride can cause a range of adverse health effects, including harm to the central nervous system, liver toxicity, and cancer. EPA is now proposing to prohibit manufacture (including import), processing, and distribution in commerce of methylene chloride when used as a paint remover, except for commercial furniture refinishing which the Agency will address in a separate proposal. EPA is also proposing to require manufacturers, processors, and distributors to notify retailers and others in their supply chains of the prohibitions.

EPA assessed NMP in 2015 and identified risks to people, particularly pregnant women and women of childbearing age, who have high exposure to NMP through paint or coating removal. EPA is inviting comments on two approaches to address the risks from NMP. One approach would prohibit manufacture (including import), processing, and distribution in commerce of NMP when used as a paint remover, as well as require various notification measures on the restrictions to downstream processors and users. The other approach would put in place a combination of requirements to address unreasonable risks, including limiting the amount of NMP in paint remover products, providing warning labels for consumers, and requiring workers to wear specialized gloves and other equipment. EPA is seeking comment on both approaches. In addition, EPA is proposing to exempt certain national security uses of methylene chloride and NMP from the requirements of this rule.

Comments on the proposed rule must be received 90 days after date of publication in the Federal Register.

Read the pre-published proposed rule here.

Global Supply Chain under the Paris Agreement: The Relevance of Chemical & Product Regulations

(Published in: Natural Resources & Environment, Volume 31, Number 3, Winter 2017 [Article PDF])

By Catherine K. Lin and Philip A. Moffat

Abstract

The Paris Agreement commits all parties to make “nationally determined contributions” (NDCs) via domestic laws to limit “the increase in the global average temperature to well below 2 °C above pre-industrial levels.” This article considers how this “bottom up” approach to limiting greenhouse gases (GHG) emissions can interact with the operations of global supply chains, as the latter can exert profound effect on local and national development.

Aided by the theory of Transnational Legal Process, we propose that resilient global supply chains can be had under NDCs, if the scope of certain existing chemical- and product-oriented environmental regulations that already apply to global supply chains can be expanded to cover, as appropriate, GHG emissions, energy use, water conservation, and/or use of natural resources key to mitigating climate change impacts. This could include: (a) the principles of “no data, no market,” mandated supply chain communication, and the authorization for or restriction of the placing of deleterious substances or products on the market as exemplified by the EU Regulation on Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH);(b) the restriction of certain raw materials from finished products as is under RoHS; and/or (c) the requirement that due diligence be performed to trace the source of certain problematic raw material as exemplified by Section 1502 of the Dodd-Frank Act.

If so enacted, enterprises and their suppliers may be encouraged to shore up environmental compliance up and down the supply chain, strengthening its resilience even in the absence of formal legal requirements to do so by all DNCs. As such, we would be less concerned that the bottom-up approach under the Paris Agreement could lead to a “race to the bottom” by countries seeking to implement NDCs that favor development over environmental protection or be a “free rider” by delaying their own NDC implementation while awaiting for other countries to curb GHG emissions. Instead, resilient, self-governing global supply chains could become fora for a transnational process where global norms for domestic laws on GHG reduction could emerge from the Paris Agreement.

The full publication can be viewed by signing into the ABA’s website.

EPA plans to limit TSCA CBI protections.

This summer, EPA published a proposal to modify regulations governing significant new uses of chemical substances (SNUR) under the Toxic Substances Control Act (TSCA) that could significantly impact protections for Confidential Business Information (CBI).  The proposed rule would modify the bona fide intent procedures in 40 CFR 721.11 to allow EPA to disclose the confidential significant new use designations to a manufacturer or processor who has established a bona fide intent to manufacture (including import) or process a chemical substance. Specifically, the proposed regulatory language redefines the scope of “confidential business information” to exclude new use designations. Industry groups voiced their concerns with the proposal in comments submitted to the Agency last month. Some comments urged EPA to withdraw the proposal and re-propose it in conformity with the disclosure authorized by the Lautenberg Chemical Safety for the 21st Century Act (Lautenberg Act).

Section 14 of the Lautenberg Act prohibits the disclosure of “information that is exempt from disclosure pursuant to subsection (a) of section 552 of title 5, United States Code,” the Public Information Section of the Administrative Procedure Chapter of this Title. The provision explicitly provides that this protection extends to “processes used in the manufacturing or processing of a chemical substance or mixture.” Several commenters stressed that it appears that the proposed regulation goes beyond what the statute allows.

The American Chemistry Council (ACC) noted in its comments that EPA needs only to respond to the bona fide intent requestor with a “yes” or “no” to address whether the proposed use of the SNUR substance is a new use. Therefore, the ACC stressed, the proposed amendment to 40 CFR 721.11 would disclose more confidential information than is necessary to answer the requestor’s question. Other comments, from the American Fuel & Petrochemical Manufacturers, argue that the Agency’s plans to disclose this information would create an anticompetitive environment by giving an advantage to those who submit bona fide intent notices.

In their comments, these industry groups also recommended EPA expand the SNUR CBI provision to impose additional requirements on both the Agency and chemical manufacturers. The ACC asserted that EPA should be required to inform the original PMN submitter when it discloses any confidential information to a requestor similar to the existing provision regarding the Confidential Inventory (40 CFR 720.25(b)(6)). Another set of comments, from the American Petroleum Institute, suggested that the Agency use consent order and SNUR requirements to compel manufacturers to inform downstream customers of all potentially applicable compliance requirements related to a substance.

The proposed amendments to the SNUR CBI provisions could affect EPA’s treatment of CBI under TSCA more generally. The Lautenberg Act requires manufacturers and importers to reassert CBI claims during the Inventory Reset process. The proposal for that process may also attempt to limit CBI protections.

EPA is Removing 72 Inert Ingredients Previously Approved for Use in Pesticide Products

On October 22, 2014, EPA published for comment a proposal to remove from EPA’s list of inert ingredients approved for use in pesticide products 72 chemical substances that are no longer being used as inert ingredients in pesticide products. (79 FR 63120) In response to EPA’s request for comments, no specific information regarding those 72 chemical substances or any products that may include them was provided to EPA, indicating that these chemical substances are not being used in currently approved pesticide product formulations. Therefore, as of December 14, 2016, (81 FR 90356) EPA decided to remove all 72 from the inert ingredient list. A list of the 72 inert ingredients can be found here.

Removal of a chemical substance from the approved inert ingredient listing does not, in and of itself, restrict the use of the chemical substance in a pesticide product, instead it changes the way an application is processed. Once removed, the chemical substance would be considered a “new” inert ingredient. Any inert ingredient that is not on the approved list must be approved by EPA before registration for a formulation containing that chemical substance as an inert ingredient. EPA approval can be obtained by submitting a request, along with relevant data including, among other things, studies to evaluate potential carcinogenicity, adverse reproductive effects, developmental toxicity, genotoxicity, as well as environmental effects associated with any chemical substance that is persistent or bioaccumulative. Further, adding the chemical substance to the list of approved inert ingredients would also require payment of a fee in accordance with FIFRA Section 33, 7 U.S.C. 136w-8.

Litigating the obligation to report substantial risk information and pay penalties under TSCA section 8(e).

(This post is an adaptation of an article published in the December 2016 newsletter of the Pesticides, Chemical Regulation, and Right-to-Know Committee, within the American Bar Association’s Section of Environment, Energy, and Resources. A PDF of the article is available here.)

By Irene Hantman

On December 9, 2016, four major chemical manufacturers filed a motion to dismiss [PDF] the Toxic Substances Control Act (TSCA) section 8(e) claims filed against them by the law firm Kasowitz, Benson, Torres & Friedman LLP (Kasowitz) under the False Claims Act (FCA).  Under the qui tam provision of the FCA, individuals may pursue claims against any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”  In this case, Kasowitz asserts that BASF, Bayer (Convestro), Dow, and Huntsman failed to pay penalties allegedly owed under the Environmental Protection Agency’s (EPA) TSCA section 8(e) Compliance Audit Program (CAP).  The case was originally filed in the U.S. District Court, Northern District of California in May 2015.  In November 2016 the case was transferred to U.S. District Court for the District of Columbia, and a status hearing was held December 1, 2016.

EPA’s Compliance Audit Program (CAP) and Substantial Risk Information

In the early 1990s, EPA used the CAP to encourage companies to come into compliance with TSCA section 8(e) requirements regarding the immediate reporting of “new information that reasonably supports a conclusion that a chemical substance or mixture presents a substantial risk of injury to health or the environment” (“substantial risk information”).  In the Federal Register notice announcing the program, EPA explained that section 8(e) is very important to the Agency’s ability to obtain information needed to set priorities and perform risk assessments.   More than 100 companies participated in the program.

The CAP invited companies to enter into Agreements with EPA to audit their past compliance with section 8(e).  Companies entering into CAP Agreements were assured that the Agency would pursue only limited penalties and that it would forgo late and/or nonreporting TSCA section 8(e) civil penalties.  This could represent substantial savings to companies; in its Enforcement Response Policy, EPA asserts that a section 8(e) violation is a continuing violation.  That is, the violation continues from the date when the substantial risk information should have been disclosed through every day on which it has not been disclosed.  There is no “Statute of Limitations” for continuing violations.  Although the CAP provided significant protections to participants, EPA reserved its rights to take appropriate enforcement action if the Agency later determined that a company was required to submit a study or report under the CAP but failed to do so.

Litigation

While pursuing personal injury litigation against the chemical manufacturers over exposure to certain isocyanate chemicals, Kasowitz identified information that led to filing this lawsuit. The isocyanates involved are: methylene diphenyl diisocyanate (MDI), polymeric MDI (PMDI), and toluene diisocyanate (TDI).  Isocyanates are used in the manufacture of polyurethane materials including liquid coatings, paints, and adhesives, flexible and rigid foam, and elastomers.

This complaint [PDF] alleges that the defendants withheld substantial risk information regarding respiratory injury when inhaled at levels below applicable inhalation exposure limits and from de minimis dermal contact.  According to Kasowitz, none of the substantial risk information at issue in the case was published in the scientific literature or otherwise available to EPA.

Arguing that the violations began as early as 1980 and continued up until the complaint was filed,  Kasowitz claims that the defendants owe billions in penalties under section 8(e).  In addition, penalties under the FCA can more than triple.  The qui tam provisions of the FCA grant up to 30 percent of any settlement to the private plaintiff.

Kasowitz has put forth a complex legal argument positing that, while BASF, Bayer, Dow, and Huntsman participated in CAP, they:

  • Had substantial risk information which section 8(e) obligated them to submit to EPA;
  • Were contractually obligated to submit all previously unreported substantial risk information through CAP;
  • Knowingly concealed or knowingly and improperly avoided a contractual obligation to transmit civil penalties for their failure to comply with section 8(e) reporting requirements in violation of the FCA; and
  • Made, used, or caused to be made or used, a false record or statement material to an obligation to pay or transmit money to the United States government in violation of the FCA.

In their motion to dismiss, the defendants argue that Kasowitz has failed to meet the required elements of claim under FCA.  Specifically, they explain that penalties not assessed by EPA do not comprise an “obligation to pay” under the FCA.  Kasowitz’s response to the motion is due on February 7, 2017.

Implications

The enrollment period for the CAP expired more than 20 years ago.  Today, companies interested in addressing liability for failing to timely submit substantial risk information to EPA must seek the protection of the Audit Policy, using the Agency’s new eDisclosure system.

If this case is successful, companies defending toxic tort litigation may see discovery expanded in search of similar substantial risk information.

Draft Alternatives Analysis Guide released for California’s Safer Consumer Products program.

On Monday, the California Department of Toxic Substances Control (DTSC) released a draft version of its Alternatives Analysis Guide, a document that will be critical to the implementation of the state’s Safer Consumer Products (SCP) program. Once finalized, the Guide will provide a framework and steps to help responsible entities (the manufacturers, importers, assemblers, and retailers of designated “Priority Products”) conduct an “Alternatives Analysis,” as required by the SCP regulations.

Under the SCP program, each Alternatives Analysis will look at how to best limit or prevent potential harm from the potentially hazardous “Candidate Chemical” in Priority Products. Every Alternatives Analysis must consider important impacts of the product throughout its life cycle and provide for specific actions to make the product safer.

After receiving and approving a final Alternatives Analysis report, DTSC will implement Regulatory Responses which favor the safest feasible alternatives. These actions may take the form of enforceable orders or agreements requiring further manufacturer research, additional information to DTSC or consumers, product redesign, end-of-life product stewardship, or sales restrictions or prohibition.

The draft Alternatives Analysis Guide provides information about the general process of conducting an Alternatives Analysis and is meant to be a “resource book” for people preparing Alternatives Analyses. The Guide provides methods, tools, information sources, and “best practice approaches” for conducting an Alternatives Analysis, and is expected to be updated periodically. The Guide is not a “regulatory document” or standard, nor is it meant to be used as a checklist.

In September 2015, DTSC released a Draft Stage 1 Alternatives Analysis Guide and scheduled the release of Stage 2 guidance for 2016. Stage 1 of the Alternatives Analysis process will begin with identifying product requirements and chemicals of concern, alternatives, and factors for comparing alternatives. Then, responsible entities will conduct an initial evaluation and screening of alternative replacement chemicals. Stage 1 culminates in the submission to DTSC of the Preliminary Alternatives Analysis Report, including a Work Plan.

After the preliminary report is approved, Stage 2 begins with executing the Work Plan and conducting an in-depth analysis that includes life cycle and economic effects. After an iterative evaluation and comparison process, the responsible entity will select an alternative, based on the information and conclusions generated through the comparative analysis, and recommends a regulatory response. Finally, the responsible entity must submit a Final Alternatives Analysis Report, including an implementation plan and timeline, if applicable. This final report will be available for public review and comment before DTSC makes any determination about regulatory responses.

The draft Guide released this week covers both stages of the Alternatives Analysis process. New chapters of the draft Alternative Analysis Guide, addressing the steps in Stage 2, are as follows:

  • Exposure
  • Life Cycle Impacts
  • Economic Impacts
  • Informational Needs
  • Selection of Alternatives
  • Self-Evaluation

DTSC is accepting public comments on the draft Alternatives Analysis Guide through January 20, 2017. The agency has also scheduled a public webinar to present and discuss the draft on January 10, 2017.