7/7/2015

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FEDERAL REGULATIONS UPDATE

Wisconsin Agri-Business Association

Safety Day

July 15, 2015

Attorney David A. Crass

Michael Best & Friedrich LLP

(608) 283-2267

dacrass@michaelbest.com

www.michaelbest.com

Attorney Seth A. Mailhot

Michael Best & Friedrich LLP

(202) 747-9566

samailhot@michaelbest.com

www.michaelbest.com

Overview

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FDA and the Food Safety Modernization Act

EPA Enforcement Process

Applicable Environmental Regulations

EPA Enforcement Trends

FDA Key Definitions

“Food” means:

1. articles used for food or drink for man or other animals,

2. chewing gum, and

3. articles used for components of any such article.

“Food additive” means any substance where the

intended use results in its becoming a component or

otherwise affecting the characteristics of any food, if

such substance is not GRAS

“Pesticide chemical” means any substance that is a

pesticide within the meaning of the Federal Insecticide,

Fungicide, and Rodenticide Act, except when applied

to food during the preparing, packing, or holding of the

food for commercial purposes 3

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FDA Key Definitions (cont.)

“Raw agricultural commodity” means any food in its

raw or natural state, including all fruits that are washed,

colored, or otherwise treated in their unpeeled natural

form prior to marketing

Note that pesticide chemicals are not food additives,

unless they are applied to food during the preparing,

packing, or holding of the food for commercial

purposes, but not when used on raw agricultural

commodities

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The FDA Food Safety Modernization Act (FSMA)

Signed into law by President Obama on January 4,

2011

Makes changes to the Federal Food, Drug and

Cosmetic Act with respect to FDA’s authority over food

Intended to strengthen FDA to ensure the safety of the

U.S. food supply by:

Improving capacity to prevent food safety problems,

Improving capacity to detect and respond to food safety

problems, and

Improving the safety of imported food

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Food Facility Registration: Who Must Register

Domestic and foreign facilities that manufacture,

process, pack, or hold food for human or animal

consumption in the United States are required to

register with FDA

Farms, restaurants, and retail food establishments are

not required to register, unless they engage in a

“mixed-use”

Farm is a facility in one general physical location

devoted to the growing and harvesting of crops, the

raising of animals (including seafood), or both.

Washing, trimming of outer leaves of, and cooling

produce are considered part of harvesting. 6

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Food Facility Registration: Suspension

Under FSMA, FDA can now order suspension of a food

facility’s registration when:

1. FDA determines that food manufactured, processed, packed,

received, or held by a registered facility has a reasonable

probability of causing serious adverse health consequences or

death to humans or animals (SAHCODHA); and

2. That facility:

a. Created, caused, or was otherwise responsible for that

reasonable probability of SAHCODHA; or

b. Knew of, or had reason to know of, the reasonable

probability of SAHCODHA, and packed, received, or held

such food (section 415(b) of the FD&C Act).

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FSMA Mandated Inspection Frequency

High-risk domestic: Once in the first 5 years following

FSMA enactment and then once every 3 years

Non-high-risk domestic: Once in the first 7 years and

then every 5 years

Foreign: Inspect at least 600 facilities within one year

of FSMA enactment, and then double every year for

five years

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Outstanding FSMA Rules

Rule for Preventive Controls for Human Food (Hazard

Analysis and Risk-based Preventative Controls, or HARPC)

science-based minimum standards for conducting a hazard analysis,

documenting hazards, implementing preventive controls, and

documenting the implementation of preventive controls for human food

Produce Safety Rule

science-based minimum standards for the safe production and

harvesting of raw agricultural commodities to minimize the risk of

serious adverse health consequences or death

Foreign Supplier Verification Programs (FSVPs)

requires importers to perform risk-based foreign supplier verification

activities

Accreditation of Third-Party Auditors/Certification Bodies

program for accreditation of third-party auditors to conduct food safety

audits and issue certifications of foreign facilities 9

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Outstanding FSMA Rules (cont.)

Preventive Controls for Animal Food

science-based minimum standards for conducting a hazard analysis,

documenting hazards, implementing preventive controls, and

documenting the implementation of preventive controls for animal food

Sanitary Transport of Food and Feed

regulations governing the transport of food and feed originally required

under the Sanitary Food Transportation Act of 2005

Intentional Contamination

protect against the intentional adulteration of food (Food Defense)

appropriate science-based mitigation strategies or measures to prepare

and protect the food supply chain from intentional adulteration at

specific vulnerable points, among other requirements

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Changes to FDA’s Food Inspections Operations

Memo released last year announced FDA will shift from

the current region-based inspection and compliance

system to a product-based system

Investigators and compliance officers will specialize

according to commodity

One subset is for “food and feeds”

FDA will also “de-layer” its management and review levels

associated with inspections & enforcement to shorten review

time

FDA laboratories will also become more specialized with

management becoming more centralized. Labs under Office of

Regulatory Affairs (now managed by geographic location) will

report to a central senior executive level scientist within ORA.

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EPA Enforcement Process: Summary

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Typically a stepped enforcement process

May start with informal conversations, a site inspection

or more frequently an information request (e.g., a

Section 114, 308 inquiry)

Can end with a referral to the state or federal

Department of Justice for prosecution in court

Settlement with an administrative order is almost

always an option throughout the process

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The Stepped Enforcement Process

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Informal Contacts/ Inspection/

Information Request Start Regular Stepped

Enforcement

Notice of Noncompliance

Notice of Violation or

Finding of Violation Start Fast Track

Enforcement

Direct Action

-ORDER-

Enforcement Conference

Administrative Order Referral to DOJ for

Prosecution

Direct Action

-REFERRAL-

Initiate Court Proceeding

Preliminary Enforcement

Primary Enforcement

Enforcement Process: Section 114 Requests 308

CWA Counterpart)

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The Clean Air Act broadly authorizes EPA to:

Seek information from anyone who:

Owns or operates an emission source;

Who manufactures emission control or process equipment;

or

Any other person the agency believes can assist in

achieving its regulatory or enforcement objectives

Request documents and data, including Confidential Business

Information (CBI)

Respondents may indicate CBI content and have an

expectation that such information will remain private

Require testing or installation of monitoring equipment

Enforcement Process: Enforcement Tools

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Civil Administrative Actions

Non-judicial enforcement actions taken by the EPA or state

agency under its own authority

Civil Judicial Actions

Formal lawsuits filed in court against persons (or entities) that

have failed to:

Comply with statutory or regulatory requirements

Comply with administrative action orders

Criminal Actions

Typically reserved for the most egregious violations in the

sense that violations were committed willfully and/or knowingly

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Enforcement Process: Civil Enforcement Results

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Settlements

Consent Agreements and Final Orders (CA/FO)

Administrative Orders on Consent (AOC)

Penalties and Forfeitures

$10 to $37,500 per day of violation

Injunctive Relief

e.g., install pollution control equipment or continuous emissions

monitoring; install runoff controls or spill prevention equipment

Mitigation projects

i.e., Supplemental Environmental Projects (SEP)

Not dollar for dollar credit

Not something company would otherwise do

Quantify environmental benefit

Enforcement Process: High Priority Violator (“HPV”)

Policy

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Gives enforcement priority to the most environmentally

sensitive cases

Virtually every permit violation qualifies as an HPV

Stringent schedule for resolution:

60 days to issue an NOV

270 days to achieve compliance or refer for prosecution

Expectation of penalty

Enforcement Process: How are Targets Chosen?

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Advance an EPA enforcement goal:

Fossil fuel combustion

Hazardous air pollutants

Risk Management Plans

Change in emission factors

Comparing number of permits, number of sources and

general industry growth

Compilation and extrapolation of inspection data

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Enforcement Process: Calculating Penalties

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Penalties calculated using the CAA Stationary Source

Penalty Policy (October 25, 1991)* (CWA Companion

Penalty Policies)

Economic Benefit Component

Delayed costs

Avoided costs

Gravity Component

Actual or potential harm

Importance of regulatory scheme

Size of company

Adjustments for willfulness, negligence, degree of cooperation,

history of non-compliance, environmental damage

Voluntary disclosure may mitigate gravity component

*http://www2.epa.gov/sites/production/files/documents/penpol.pdf

Enforcement Process: Role of Citizen Suits

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Citizens can prosecute their own enforcement cases

Can recover attorney and expert witness fees

Increasingly common in many industry sectors

Can proceed simultaneously with state or EPA

enforcement

Notice Requirements specific to citizen suits

Cannot pursue if state or EPA are diligently

prosecuting the same allegations

Enforcement Trends: EPA Priorities List

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Declared every three years

Focuses on most serious pollution problems

Target industry areas or pollution types

Decided by reaching out to regional offices, state, and

tribal governments for input

Initiatives for 2014-2016 same as previous three years

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Enforcement Trends: EPA Priorities List

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EPA has six sector-based enforcement priorities

through 2016:

Reducing air emissions from the largest sources;

Reducing discharges of untreated sewage and storm water;

Preventing waste from concentrated animal feeding operations;

Reducing air toxics emissions through leak detection and

repair, reducing flared emissions, and targeting pollution

emitted during times of startup, shut down and equipment

malfunction;

Ensuring that hydraulic fracturing and other energy extraction

processes comply with air and water laws; and

Reducing pollution from mineral processing operations

Enforcement Trends: Increased Attention to Opacity

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EPA’s “Visual Determination of Opacity of Emissions”

Opacity refers to the density of visible emissions

i.e., how much light can come through a plume of emissions

from a smokestack

Observers are trained to accurately assign opacity values

Current NSPS prohibits grain elevators from

discharging fugitive emissions that exhibit greater than

20% opacity

Proposed NSPS adds opacity limitations for non-

fugitive emissions (chimneys, smokestacks) released

through any wire screen column dryer (prohibiting

opacity greater than 10%)

Enforcement Trends: Clean Air Act § 112 Violations

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Failure to Implement or Renew Risk Management Plans

Facility Year Penalty/Compliance

Costs

Tate & Lyle Ingredients

Americas LLC (Ill.)

2011 $79,100

Family Tree Farms (Cal.) 2012 $3,200

Farmers Cooperative

Company (Iowa)

2013 $11,500

Crossroads AG LLC

(Wis.)

2013 $4,400

Dixon Elevator Co.

(Neb.)

2015 $38,350

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Regulations Applicable to Grain Storage Facilities

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Clean Air Act (CAA)

Construction/Modification

Permits

Operating Permits and

Operating Standards

Spill Prevention, Control, and

Countermeasure Plans

(SPCC)

Emergency Planning and

Community Right-to-Know

Act (EPCRA)

Applicable Regulation: Clean Air Act

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U.S. EPA identifies air pollutants, determines what

concentrations are safe, and codifies allowable

thresholds

Primary responsibility for

assuring air quality is

delegated to the states

State Implementation Plan

(SIP); upon approval, SIPs

are federally enforced law

Prevention of Significant

Deterioration of Air Quality

(PSD) program

Applicable Regulation: Clean Air Act

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Facilities that emit air contaminants above the EPA

thresholds must be in compliance with SIPs

Stationary Sources

Major Sources

Wisconsin Department of Natural Resources requires:

Construction/Modification Permits

Operating Permits and Standards of Performance

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Applicable Regulation:

CAA: Construction Permit Exemptions

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Grain storage facilities (elevators) that receive less

than 5,500 tons of grain per month, on average*; and

Grain processing facilities (feed mills) that receive less

than 4,500 tons of grain per month, on average*.

The vast majority of grain storage facilities will require

a permit.

*Includes facilities with column dryers or rack dryers

Applicable Regulation:

CAA: Operating Permit Exemptions

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A facility may be exempt from an operation permit if it:

Has less than 1 million bushels of permanent grain storage;

AND

Is a grain storage facility (elevator) that receives less than

5,500 tons of grain per month (on average); OR

Is a grain processing facility (feed mill) that receives less than

4,500 tons of grain per month (on average).

Applicable Regulation: CAA: Permit Exemptions

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Even if a company thinks its

facility is exempt from a

construction and/or operation

permit, it must document data to

prove the facility qualifies.

See NR 407.03(4)(a)

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Applicable Statute: CAA: Aggregation

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When calculating if an exemption applies,

WDNR may aggregate the grain storage and

processing capacity of geographically dispersed

facilities

However, common ownership should not

increase the likelihood of aggregation being

appropriate, so if WDNR suggests or requires

aggregation, it is best to seek legal counsel to

discuss options

Applicable Regulation: CAA: Construction Permitting

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Unless exempt, a construction air permit must be

obtained prior to commencing any construction

Starting construction before receiving a permit is a

commonly enforced violation

The maximum penalty for such a violation is $37,500 per day,

although actual fines tend to be less.

Construction permits are required for modifications

and/or additions to existing facilities

Important Considerations Prior to Construction

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Timing

Compliance Costs

Modeling of Air Emissions

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Applicable Regulation: CAA: Operation Permits

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Permits have wide latitude to require compliance in a

wide range of operational areas

Contaminant reducing product usage

Records

Inspections

Maintenance

Repairs

Contingency plans

e.g., plans to reduce the likelihood of filter failure

Hours of operation

Other

Applicable Regulation: CAA: New Source

Performance Standards (NSPS)

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Includes grain storage or grain terminal elevators

Sets thresholds for particulate matter that may be

released from facilities

Determines testing methods for proving compliance

Approximately 900 grain elevators in the U.S. are

subject to current NSPS emission controls

Current standards were set in 1978 and had minor

clarifying revisions in 1984

Applicable Regulation: Amended NSPS Standards

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Proposed New Source Performance (NSPS) for Grain

Elevators

Comments period closed December 22, 2014; however, new

standards have not been issued yet.

The proposed new section would include:

New emission limits for certain grain elevators (specifically,

opacity standards);

Additional testing, monitoring, recordkeeping, and reporting

requirements;

Different compliance requirements for periods of start up,

shutdown, and malfunction procedures.

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Applicable Regulation: Amended NSPS Standards

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Potential Impact of Amended Standards

Clarify definition of “temporary” vs. “permanent” storage

Proposal includes formula for counting “temporary” storage

space as 1/3 its capacity adding to “permanent” storage

capacity

Reducing storage capacity may relieve some facilities from

NSPS obligations

Increase operation costs associated with new monitoring,

record keeping, and reporting requirements

Applicable Regulation: Spill Prevention, Control, and

Countermeasure (SPCC)

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Proximity to water affects

requirement

Above ground storage tanks

may trigger other requirements

Goal to ensure oil is prevented from reaching navigable

waters and enjoining shorelines

Gasoline or hydraulic oil stored on site may trigger the

requirement

Applicable Regulation: Emergency Planning and

Community Right-to-Know Act (EPCRA)

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Over 600 “Extremely Hazardous Substances” (EHS)

and other chemicals listed

Facilities must report any of these chemicals stored on

site

Facilities must have emergency plans in place in the

event of a spill

Must report spills of chemicals

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Questions?

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Seth Mailhot is a partner and lead of the FDA Regulatory Practice Group in Michael Best & Friedrich’s Washington D.C. office. His 14 years working in the U.S. Food and Drug Administration (FDA) has provided him a unique perspective when counseling clients on a broad range of matters involving the FDA. Seth’s practice includes representation of the medical device, pharmaceutical, dietary supplement, tobacco and food industries, and covers both premarket and post-market issues. His practice is focused on development of premarket submission strategies, and FDA enforcement of good manufacturing practices, both domestically and abroad.

Admissions

District of Columbia Massachusetts

U.S. Patent and Trademark Office

Education

New England School of Law, J.D., Valedictorian, summa cum laude

University of Massachusetts, B.S., Chemical Engineering

Seth A. Mailhot

601 Pennsylvania Avenue, N.W.

Suite 700 South

Washington, D.C. 20004-2601

Phone: (202) 747-9566

Cell: (617) 842-0484

Fax: (202) 347-1819

samailhot@michaelbest.com

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David Crass is a member of the Firm’s Management Committee, Co-Chair of the Firm's Agribusiness, Food and Beverage Industry Group, and a leader in the Firm's Energy practice, focusing on environmental, regulatory, legislative and project development in the energy, agricultural and food processing space. He focuses his practice primarily in the areas of environmental and energy law, enforcement defense, compliance counseling, environmental cleanups, including vapor intrusion cases, agricultural and food industries and renewable energy project development. Mr. Crass has also secured and negotiated federal, state and local permits and approvals for numerous industrial facilities, renewable energy plants and livestock operations.

David A. Crass

1 South Pinckney Street, Suite 700

Madison, WI 53703

Phone: (608) 283-2267

Fax: (608) 283-2275

dacrass@michaelbest.com

Admissions

Wisconsin U.S. District Court, Eastern District

of Wisconsin U.S. District Court, Western District

of Wisconsin

Education

University of Wisconsin Law School, J.D., Valedictorian, cum laude

University of Wisconsin-Madison, B.S., with honors