The Five Most Important Things To Do Now to Prepare for TSCA Amendments

Behind the scenes negotiations continue on Capitol Hill in last-ditch efforts to reconcile separate bills passed in the House and Senate during 2015 in order to harmonize  amendments to the nation’s principal legislation regulating chemical substances -- the nearly 40-year old Toxic Substances Control Act (TSCA). TSCA provides the Environmental Protection Agency (EPA or the Agency) broad authority to regulate importers, manufacturers, and processors of chemical substances, including the products into which their substances are blended, such as commercial and consumer products. Recent successes in the Senate and the House reflect significant progress and reveal the seriousness with which legislators in both chambers have been engaged on TSCA in an effort to demonstrate their ability to legislate in a bipartisan manner on issues of chemical safety.¹ Informal reconciliation discussions concerning the two differing bills have been time consuming because agreement has not yet been reached on the fundamental question of whether to work off of the Senate or the House bill as a point of departure. The Senate’s version of amendments encompasses more than 200 pages of text and would modify or replace virtually every section of the existing law. The House bill takes a more modest approach, making amendments to only a few of the more historically troubling provisions of TSCA.

Although it remains unclear what the specific terms and scope of a reconciled set of amendments will be, there are five important things that importers, manufacturers, and processors of chemical substances should be doing now to protect and enhance their positions in the market and secure their product lines. The list of actions set forth in this Advisory take into consideration the status of negotiations, the key provisions of TSCA most likely to be affected by a reconciled bill, and the agreed-upon objectives shared by both chambers and the Obama administration.

1. Systematically review your product lines now, identify carefully the chemical substances (and products) that you produce or process that are of greatest value to your enterprise, and determine those that are likely to become “high priority” targets for detailed risk assessments and EPA regulatory action. Both bills are intended to enable EPA to more effectively and efficiently recognize and prioritize chemical substances that deserve greater scrutiny, undertake more thorough (and very public) risk assessments of the uses of such substances, and take regulatory actions to prohibit or limit activities associated with the substances to mitigate or eliminate unreasonable risks to human health and the environment. There is language in both bills requiring EPA to focus primarily on the nearly 100 chemical substances already called-out by the Agency and listed as so-called “Work Plan” chemicals. The Senate and House bills both require EPA to take special notice of substances that exhibit characteristics of persistence, bioaccumulation, and toxicity (PBT) based on methodology EPA used when sorting chemicals for its original Work Plan lists. Because each bill would require EPA to take certain actions with respect to PBT substances in accordance with specified deadlines, it will be important for producers of chemical substances and products to note which of its substances and product combinations can be at risk of being tagged as containing PBTs, and anticipate that customers might begin “de-selecting” such products even before a regulation, if any, is issued by EPA. Moreover, language common to both the House and Senate bills makes it likely any final bill will require the Agency, when taking regulatory actions on PBT substances, to impose restrictions on uses of PBTs to reduce potential exposures to the “extent practicable”.² 

A more subtle consideration that could have equally important consequences to importers, manufacturers, and processors alike is the opportunity presented by language in the Senate bill for EPA to reestablish for the first time since TSCA was enacted, the Agency’s “Inventory” of chemical substances that are considered to be in US commerce. Given the House’s apparent resistance to such an initiative, it remains unclear whether a final set of TSCA amendments to be agreed upon by both chambers will retain these provisions. The TSCA Inventory is the dividing line between “existing” and “new” chemicals. New chemical substances must undergo EPA review before they may enter commerce in the US. The possibility that the lines could be redrawn nearly 40 years later, potentially without continuity with the methods used to identify and define chemical substances at the time they were originally listed on the Inventory makes it important for importers, manufacturers, and processors of chemical substances to take a close and careful look now at what they make and use and how they describe their chemical substances. A lack of awareness of EPA’s chemical-nomenclature policies, and a lack of discipline and consistency in the use of chemical nomenclature both here and abroad in product descriptions (e.g., marketing materials, technical bulletins, Safety Data Sheets), can mean the difference between whether a chemical substance is considered by EPA to be “existing” or to be “new” (and therefore unlawful to import, manufacture, or process in the US unless a new chemical notification has been submitted). (See also the discussion in item 4, below.) These distinctions can create significant problems which have both regulatory and commercial implications for entities subject to TSCA, including their down-stream customers. The Agency’s expanded TSCA Chemical Data Reporting (CDR) rule deadlines are just around the corner.³ The CDR provides an opportunity for regulated entities to review their products and their use of nomenclature, and ensure their practices are accurate and up-to-date.

2. Start now to keep a close watch on state actions being taken on chemical substances -- they are not going away. Chemical importers, manufacturers, and processors became enthusiastic and supportive of the notion of amending TSCA when they believed providing more regulatory authority to EPA would be accompanied by new language being added to TSCA establishing strong federal preemption of state legislative efforts to regulate and restrict chemical substances. Whether the final amendments reflect either the Senate or the House bill’s language amending TSCA’s current preemption provisions, it is clear that existing state chemical-control laws (e.g., California’s Proposition 65, and its “Green Chemistry” statutes) are going to remain in place because both the Senate and the House bills amending TSCA specifically will not preempt state statutes on the books before August 2015, and provide only limited preemption for new laws coming into force (i.e., only after EPA has taken affirmative steps concerning a particular chemical substance and use combinations subject to EPA actions under TSCA). Moreover, both bills will provide numerous opportunities for activist states to seek exemptions to federal preemption under TSCA, or simply to initiate new actions under other legislative authorities which are not considered to be preempted (e.g., state water or air pollution laws and state waste management authorities). State enthusiasm for taking legislative action on certain chemicals is only likely to be further encouraged by provisions in both the Senate and House bills that will enable EPA to share with state regulatory agencies confidential business information provided to EPA by entities subject to the Agency’s TSCA regulations. (See further discussion in item 3 below.) In addition, amendments contemplated in both the House and Senate bills anticipate that states requirements are not preempted if the state enacts a chemical control requirement that is identical to an EPA requirement. (See the discussion of “co-enforcement” in item 5, below.) For several years Arnold & Porter has been keeping track of such state actions and has maintained and provided public access to our portal which contains a list and the status of such legislative activities in the states.⁴

3. Reappraise now any existing claims of confidentiality for commercially sensitive information in EPA’s possession and the need, and methods used, for asserting such claims. For years, EPA has been pushing back on companies that have asserted confidential business information (CBI) claims, especially when such claims have related to information contained in health and safety studies submitted to the Agency. The environmental interest group community has sought legislative changes designed to limit CBI claims, and negotiators on Capitol Hill are aware of EPA’s goals for increasing “transparency” -- including disclosing more previously-confidential information about chemicals substances to state governments and the general public. Thus, both the Senate and the House bills would place a ten-year time limitation on any new CBI claims asserted by an information submitter. In a January 2016 letter, EPA’s Administrator submitted to key legislators in both chambers, the Agency stated its preference for terms reflected only in the Senate bill which would require that the specific identity of any chemical substance which appears in a health and safety study be made public, subject to very narrow exceptions. EPA also drew attention to language in the Senate bill that would require regulated entities to re-substantiate confidentiality claims previously asserted to EPA.⁵ In light of this, companies that have made CBI claims concerning information and data previously submitted to EPA will be well served to review those claims and ensure they are capable of re-substantiating the claims if required to do so in the near term. It also might be the right time to commence new in-house practices when engaging in research involving the use of outside laboratories to be certain to avoid the use of commercially-sensitive specific chemical identities and formulae in documents engaging laboratory services and in the reports those laboratories generate concerning the results of their research on chemicals.

4. Submit new chemical and new use notifications now because the new law is likely to raise the bar for market entry and new fees will be authorized that will make it much more expensive to do so. The Senate and the House TSCA amendments will both provide EPA with expanded authority to collect more and higher fees from producers of chemical substances to offset the Agency’s costs of reviewing new and existing substances and determining whether to take regulatory actions. The current fee of US$2,500 to submit a new chemical notification will no doubt start to include more zeros in the not-too-distant future. Fees for other submissions under an amended TSCA also will be authorized.  Perhaps more troubling to innovators in the industry who already struggle getting their new chemical notifications timely reviewed by EPA’s already depleted TSCA staff, is language that appears only in the Senate bill which could substantially raise the bar for new chemical substances to enter the US market. Language in the Senate amendments to TSCA, curiously favored by an already resource-strapped EPA, will require the Agency to make a specific finding of safety before a new chemical can clear EPA review and enter commerce. This can become even more complex if the final bill includes an Inventory “reset” provision, as noted in item 1, above. Due to the speed with which the Agency’s new chemicals program must operate, and the general lack of public scrutiny of new chemicals undergoing review, EPA has never had to wrestle with making decisions on new chemical substances and articulating a judgement about a new chemical’s “safety” under significant scrutiny. The adjustments that might be necessary if language in the Senate bill gets enacted are likely to require a significant shake down period. More concerning might be the opportunities for legal challenges if a public interest group or another entity wants to bring a “test case” challenging an EPA determination on a new chemical as soon as the first substance that is not completely “risk-free” clears the pipeline under the new law. Thus, entities that have new substances in R&D should begin  swiftly moving them off the “drawing board” and into TSCA pre-manufacture notifications (PMNs). Consider the currently-modest US$2,500 per substance fee for PMN submissions to be a worth-while investment to ensure important innovations are in the queue for EPA review, well before the new standard for market entry is imposed.

5. Buckle up: here comes state and EPA “co-enforcement” -- now might be a very good time for an internal self-audit of chemical-compliance practices. Importers, manufacturers, and processors of chemical substances may soon have the chance to learn more about TSCA compliance than they ever wanted to know. In the run-up to developing the TSCA amendments that have been passed in both the Senate and the House, a new concept emerged in which it became contemplated that the states could somehow actively engage in “co-enforcing” TSCA, and independently assess penalties. TSCA already enables EPA to impose some of the highest civil penalties of any environmental statute (US$37,500 per day per violation), and includes a provision whereby third parties can bring a civil action in federal court alleging violations of certain provisions of TSCA (after providing notice to EPA). Potential penalties in the EPA-enforcement context can become staggering even when only the slightest paper work errors are detected. Both the House and the Senate bills provide that state legislative actions to regulate chemicals will not be preempted if the state chemical control requirement is identical to an EPA-issued requirement. It follows that a state legislature could enact a law which adopts by cross-reference, subject an amended TSCA’s preemption provisions, numerous requirements already in place under the Agency’s current TSCA regulations. Thereafter, state inspectors seeking to identify violations of the state’s chemical control law (that cross-reference EPA’s TSCA regulations) could be interpreted to be simply “co-enforcing” fundamentally equivalent requirements. Depending on how such a state chemical-control requirement is crafted, and the terms enacted concerning penalties under the state law, this potentially provides an opportunity for considerably more scrutiny of chemical production facilities and operations, including reviews of files at multiple production plants and administrative headquarters by state officials who may never have received training from federal TSCA enforcement personnel concerning EPA’s sometimes nuanced interpretations of the statute and the implementing regulations. Given the size and scope of potential penalties under TSCA, the budget-strapped situation in which many states find themselves, and the new provisions in both bills concerning information sharing between EPA and the states, the opportunities for an enforcement nightmare are frightening. As discussed in item 1, above, TSCA compliance can be difficult, especially when interacting (both in the US and abroad) with multiple production facilities, numerous sources of supply, and a wide variety of customers. Companies that need to take a hard look at their chemicals-regulatory management systems and internal practices for achieving compliance might want to ask themselves if undertaking a voluntary self-audit of their compliance practices might provide a reasonable and manageable mechanism for getting everything firmly back on track before new and potentially multi-layered requirements can slip into place.⁶