Confidential Business Information: EPA Seeks Rule Change, Riles Industry • Agency tries to simplify dealings with confidential business information, but chemical industry is wary of revealing too much

Linda Ross Raber, C&EN Washington

The Environmental Protection Agency decision to seek changes in confidential business informa­

tion (CBI) protection provisions of a number of environmental statutes has resulted in controversy that has been simmering on the back burner for more than a year. A lack of common ground, exacerbated by an antiregulation politi­cal climate, thus far has thwarted at­tempts to reach consensus.

Both sides agree that the changes, which were formally proposed by EPA in late November 1994, were preceded by a novel level of formal and informal discussion between the agency and the regulated community. There is dis­agreement, however, about the extent to which the proposed rule reflects these discussions. There's no denying that when the proposal was printed in the Federal Register, industry response was negative. This was clearly not the regulatory reform the chemical indus­try was looking forward to after the November 1994 elections.

The proposed rule aims to reduce the amount of information that is held confidential by requiring more active industrial participation in securing and protecting CBI claims.

Decreasing those claims would be good for EPA because it would lessen the agency's information management burden, particularly when dealing with requests made under the Freedom of Information Act (FOLA). But that bur­den has to reside somewhere, and im­plementation of new rules could force CBI claimants to increase the time

spent protecting trade secrets or to be more selective about what information they actually need to protect.

Although EPA argues that there is less to these changes than meets the eye and that the changes will actually decrease regulatory burden, industry won't budge. It is resisting nearly every aspect of the proposed rule—particularly those that affect implementation of the Toxic Substances Control Act (TSCA).

TSCA gives EPA broad authority to collect information on chemicals from chemical manufacturers, processors, and importers. Chemical companies jealous­ly protect their trade secrets from disclo­sure. Such trade secrets may involve the nature of research programs, the specific formulations of their products, or the de­tails of their process steps.

The proposed amendments to TSCA include allowing the agency to report aggregate statistics on information cov­ered by CBI claims, requiring up-front substantiation for TSCA CBI claims for some chemicals, instituting procedures to require reassertion of claims, and permitting disclosure of some CBI to foreign governments.

The amount of TSCA data claimed

Sherlock: reduction in EPA's burden

and held as CBI is tremendous. It in­cludes more than 90% of all premanu-facture notices for new chemicals, more than 95% of all polymer exemption submissions, more than 25% of all sub­stantial risk notifications (80% of those submissions with claims make such claims for chemical identity), and more than 20% of all reported health and safety studies.

Scott M. Sherlock, attorney adviser at EPA, says the single biggest objective in formulating these amendments was to relieve EPA's burden when dealing with FOLA requests.

Currently, he explains, "if someone asks for 'all the information on chemi­cal X,' we are required to first identify all the information on chemical X both nonconfidential and confidential, and then begin the substantive and burden­some task of reviewing the information claimed as CBI, contacting the submit­ter, challenging the CBI claim, making an initial determination, and eventually sending it off to the office of general counsel for what is termed a 'final' CBI determination. This is a miserably time-consuming activity.

"Under the proposal, as an agency, if we get an FOIA [request] and the re­quest includes both nonconfidential and confidential business information, we will assume the requestor is only seeking nonconfidential information," Sherlock says. "This amendment, if successful, will constitute a dramatic reduction in agency burden."

EPA also believes that an up-front substantiation requirement would en­courage submitters to be more selective in their claims. The agency's theory is that companies would only claim CBI protection for specific information that truly needs to be protected.

Paul A. Wright, senior attorney at Dow Chemical, Midland, Mich., says, "This [up-front substantiation require­ment] is not authorized. The statute is very clear. All one needs to do is desig­nate the information one wishes to claim

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as CBI. To require more than that goes beyond [EPA's] authority."

"A submitter has an absolute right to make CBI claims," says Sherlock. '̂ How­ever, it is not an unfettered right, it is limited by statute." He explains: 'To claim CBI, you have to know that the in­formation is not publicly available, that the claim is intended to protect informa­tion, that no statute requires disclosure of the information, that the information is not voluntarily submitted, and that disclosure would be likely to cause sub­stantial injury to the competitive posi­tion of that company.

'To my mind," he says, "it seems that each time a CBI claim is made, you have to be running through each of these ele­ments to make sure that it is proper to make the CBI claim. You can't get around this whether there is an up-front substantiation requirement or not. We are not asking submitters to do anything that they shouldn't already be doing."

EPA also proposes to modify the CBI provisions of TSCA "to clarify that a submitter's consent is not required for disclosure of sanitized or aggregated data." EPA claims that it has long dis­closed aggregated data submitted without the consent of the submitter and has done so in accordance with published protocols—that this is sim­ply a clarification of current practice.

Donald A. Sadowsky, an attorney adviser at EPA, says the proposed rule, in effect, offers CBI claimants more protection because there is currently no required method for sanitization and aggregation of data. "Now, at least the legal office will be contacted."

"This would allow any of 400 law­yers at EPA to decide whether chemi­cal information is sufficiently aggregat­ed. That is the wrong set of people with the wrong backgrounds to make such an important decision," says James T. O'Reilly, corporation counsel at Procter & Gamble.

The Chemical Manufacturers Associa­tion (CMA) is one of several groups that questions the ability of data aggregation techniques to adequately protect CBI when only a limited number of sub­missions have been received. Charles E. Walton, CMA's manager of product stewardship, says, "In many instanc­es, only a small number of companies make the majority of certain chemi­cals. If the company's name is claimed confidential, but its information is ag­gregated and disclosed, it's like giving

Walton: proposal won't protect CBI the information away. It doesn't take a rocket scientist to tell who is making what."

Also controversial is EPA's proposal to establish a framework within which it may require, after a given amount of time, that a confidentiality claim be reas­serted or lost. Examples of hypothetical "sunset" periods are five years after sub­mission of the information or within 90 days of obtaining a U.S. patent.

"Sunset is a concept that doesn't hold true in reality," Walton says. "The concept is that trade secrets, confiden­tial formulas, and the like, have a value that disappears with time." He offers two counterexamples that, he believes, disprove that concept: Coca-Cola has managed to protect its formula since the 1880s, and Procter & Gamble has protected a number of formulas that have been in use for many years.

"Certainly, if a company is no longer going to use that claim or that chemical and at no time in the future of the world will they ever need that claim, then sun­set is fine. But once the cat is out of the bag, if s out of the bag. ... What is CBI today may not have a market tomorrow, but the next day it could well have a market again," says Walton.

Perhaps the most controversial part of the proposed TSCA amendments in­volves allowing EPA, under some cir­cumstances, to disclose information claimed as CBI to foreign governments and international organizations. The proposed rule says: "EPA works in conjunction with other governments and international law enforcement agencies, such as Interpol, in an in­creasing number of transboundary en­vironmental investigations."

"Foreign government requests should be the subject of notice to the company

so that that company can point out, in an appropriate case, that the foreign gov­ernment is itself the primary competi­tor," says O'Reilly. "In nations that have nationalized chemical industries, the na­tional chemical-making authority is the equivalent of a competitive exporter."

If s true that the regulation governing disclosures of CBI does not, in general, allow disclosure to foreign governments or international organizations. However, "some international agreements may give authority to disclose confidential in­formation where otherwise there might not have been such," says Sadowsky.

According to Wright: "The driving force [behind the proposed changes] is not the usefulness of the information, because the only people who want to use the information are foreign com­petitors and [those involved in] indus­trial espionage. Nobody is using the in­formation submitted under TSCA for some kind of toxicological review of chemicals. The activist groups are not interested in doing that. They can get the information in much better ways."

Making an invited presentation at a recent Chemical Specialties Manufactur­ers Association conference, Sherlock at­tempted to reach out to a testy audience: "When we don't speak to each other, we tend to oversimplify each other's posi­tions. We sometimes don't hear from you and we mischaracterize your com­ments. The issue of CBI is of critical im­portance to you. I urge you, when you have a concern about our policy or our direction, to just call us up. When we start talking directly to each other and start addressing each other's needs di­rectly, we can get beyond some of these structural problems and maybe make a movement that is positive for the agency and for industry."

The next step in the process may be a trip to a mediator to get EPA and mem­bers of the regulated community to reach some kind of meeting of the minds. Sadowsky is considering con­ducting this regulatory negotiation with a mediation firm in Washington, D.C Some people involved are not too hope­ful. "We're not sure that this specific subject matter lends itself well to a regu­latory negotiation," Wright tells C&EN, "because [regulatory negotiation] in the ory will work well if you have an under­standing of what the issues are and some inkling that there is some common ground on the issues. I'm not sure that we have either one of those." Π

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