navigating the newly-overhauled toxic substances...
TRANSCRIPT
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Presenting a live 90-minute webinar with interactive Q&A
Navigating the Newly-Overhauled
Toxic Substances Control Act Preparing for TSCA Implementation: Understanding the New Requirements,
Deadlines, and the Amendments’ Impact on State Regulatory Programs
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
WEDNESDAY, AUGUST 3, 2016
Lawrence E. Culleen, Partner, Arnold & Porter, Washington, D.C.
Charles L. Franklin, Senior Counsel, Akin Gump Strauss Hauer & Feld, Washington, D.C.
Sara Beth Watson, Of Counsel, Steptoe & Johnson, Washington, D.C.
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Navigating the Newly-Overhauled Toxic Substances Control Act
TSCA Amendments of 2016
Frank R. Lautenberg Chemical Safety for the 21st Century Act
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Welcome & Introductions
Lawrence E. Culleen, Partner Arnold & Porter, Washington, D.C.
Charles L. Franklin, Senior Counsel Akin Gump Strauss Hauer & Feld, Washington, D.C
Sara Beth Watson, Of Counsel Steptoe & Johnson, Washington, D.C.
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Agenda
• Background & basic provisions of TSCA
• Review of significant changes
• Assessing who will be impacted, & how
• Strategies to prepare for implementation
• Discussion and Q&A
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Background: Title I of TSCA
• Core chemical regulatory law passed in 1976
• Intended to fill gaps in federal environmental framework
• Basic Provisions:
― Sec. 3 – Definitions
― Sec. 4 – Testing
― Sec. 5 – New Chemicals / New Uses
― Sec. 6 – Regulation of Existing Chemicals
― Sec. 8 – Inventory and Reporting
― Sec. 12/13 – Imports/Exports
― Sec. 14 – Confidentiality
― Sec. 15/16 – Enforcement
― Sec. 18 – State Preemption
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Background: Road to Reform
• Reform debated for years amid partisan gridlock
• Surprise bipartisan bill in 2013 sparked meaningful talks
• House and Senate passed divergent bills in 2015
• Compromise bill negotiated in early 2016
― May 24, 2016: House passed TSCA Modernization Act bill by 403 – 12
vote.
― June 7, 2016: Senate passed The Frank R. Lautenberg Chemical
Safety for the 21st Century Act bill by unanimous consent
― June 22, 2016: President Obama signs the Frank R. Lautenberg
Chemical Safety for the 21st Century Act into law
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Sections With Most Significant Amendments
• Section 4 – Testing
• Section 5 – Manufacturing and New Uses
• Section 6 – Prioritization, Risk Evaluation/Management
• Section 8 – Inventory
• Section 14 – Confidentiality
• Section 18 – State – Federal Relationship (Preemption)
• Section 26 – Administration, Fees, Policies & Guidance
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§ 4. Testing
• Expands EPA authority to require development of information
― Authorizes administrative orders and consent agreements in addition to
rule making
― Permits EPA to require testing needed for prioritization
― New authority does not require EPA findings
― May not be used to establish “a minimum information requirement of
broader applicability”
• New Section 4(h) concerns vertebrate animal testing and requires EPA to:
― Reduce and replace such testing to extent practicable, scientifically
justified, and consistent with policies of diminished animal testing
― Develop, within 2 years of enactment, and implement a strategic plan to
promote alternative test methods
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§ 5. New Chemicals/Significant New Uses
• EPA receives ~1000 premanufacture notices per year
• New law retains basic premarket notice requirements
― 90-day review period, extensions permitted
• Requires EPA risk determination on all Notices
• Alternative determinations:
― Not likely to present unreasonable risk
― Presents an unreasonable risk
― Available information is insufficient
― May present unreasonable risk/Substantial production and exposure
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§ 5. New Chemicals/Significant New Uses (cont’d)
• EPA must issue an Order when finding that a substance “presents” or
“may present” unreasonable risk (considering sufficiency of
information and potential human exposure). EPA may:
― Require additional testing/data collection
― Impose use restrictions or other risk management steps
― Limit or prohibit manufacture
• Orders apply to the Notice submitter only
• EPA generally must issue a Significant New Use Rule applying same
restrictions to future market entrants or “make public” a statement
explaining why not and EPA’s findings
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§ 6. Prioritization, Risk Evaluation, & Risk Management
• Major Changes
― Eliminates “least burdensome alternative” language
― Adds prioritization process for 60,000+ existing chemicals
― Includes timelines for rulemaking and chemical reviews
• Specifies minimum number of reviews per year
• Applies risk-based screening for high/low-priorities
― High-priority: May present an unreasonable risk because of a
potential hazard and a potential exposure
― Low-priority: Does not trigger this standard
• Where information is insufficient to support low-priority, default
decision is high-priority
• Law specifies certain high-priority categories
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§ 6. Prioritization, Risk Evaluation, & Risk Management (cont’d)
• Establishes Risk Evaluation process to determine whether chemical
presents an unreasonable risk
― No consideration of cost at this stage
• Establishes separate risk management process to address
unreasonable risks
― Timely risk management action required
― EPA does consider costs and benefits at this stage
― EPA must consider availability of technically and economically
feasible alternatives before prohibiting uses
• Allows for exemptions if certain requirements can be met
• EPA can refer risks to another agency but must act if other agency
fails to take timely action
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§ 6. Prioritization, Risk Evaluation, & Risk Management (cont’d)
• Low-priority and “no unreasonable risk” determinations are subject
to judicial challenge
• Final §6 rules and associated risk evaluations can be subject to
judicial challenge
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§ 8. Reporting And Retention Of Information
• Requires continued use of certain nomenclatures
• Requires EPA to update TSCA substance inventory
― Manufacturers, processers, importers must notify EPA of
substances in US commerce during the preceding 10 years.
― Notified chemical substances deemed “active.”
― If no notice received, substances deemed “inactive.”
― Active/inactive status can be changed by notice to EPA
― Notice of change of status required before import/manufacture
• EPA to review and approve/deny CBI claims made for chemical
identity
• EPA to maintain confidential and non-confidential portions of
Inventory
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§ 14. Confidential Business Information
Revises and replaces TSCA Section 14
• New section addresses information not protected from disclosure,
including information concerning:
― Banned or phased-out chemicals, with certain limitations
― Health and safety studies
“does not authorize the disclosure of any information, including
formulas (including molecular structures) of a chemical…, that
discloses processes used…or, in the case of a mixture,… the portion
of the mixture comprised by any of the chemical substances in the
mixture”
• 10 year limitation on CBI protection, subject to renewals
• Requires assertion/substantiation of most CBI claims
• Identifies exceptions to disclosure protections
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§ 26. Administration and Fees
• Expands EPA’s authority to collect fees to defray costs subject to
certain limitations
― Applies to manufacturers and processors
― Fee rule developed in consultation with industry
― Fund and accountability provisions
• Requires EPA to:
― Use the best available science and weight of evidence
― Develop needed policies, procedures, and guidance (PP&G)
― Establish Science Advisory Committee on Chemicals (SACC)
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§ 18. State-Federal Relationship
• Preemption was one of the most debated aspects of TSCA reform.
• Grandfathered programs:
― States & local chemical restrictions in place before April 22nd, 2016
― State laws in place before August 31st, 2003 (e.g. Proposition 65)
• States are prohibited from establishing or continuing to enforce
statutes, regulations, etc., that:
― Prohibit or restrict a chemical after EPA has determined that a
chemical does not present an unreasonable risk or issued a final
§6(a) rule, or
― Subject a chemical to the same notification of use already
established in §5 Significant New Use Rule.
• States can seek waiver with health-based justification
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§ 18. State-Federal Relationship
• Two Types of Preemption:
― Permanent – occurs once EPA determines that a chemical does not
pose an unreasonable risk, or issues a rule.
― Pause – temporary and occurs when EPA is in midst of conducting risk
evaluation.
• Two Types of Corresponding Waivers:
― “Discretionary exemptions” from permanent preemption.
― “Required exemptions” from pause preemption.
• Preemption does not affect state or federal common law rights and
private remedies (e.g. tort actions).
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§ 18. State-Federal Relationship
• Exceptions: Past and future actions are not preempted when the
state action:
― Implements a “reporting, monitoring, disclosure, or other
information” obligation
― Is adopted under the authority of another federal law.
― Under certain circumstances, is adopted under a state law related to
water quality, air quality, or waste management.
― Is identical to a requirement prescribed by EPA
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EPA Issued First Year Implementation Plan
• EPA has summarily “re-set” all new chemical/new use notification review periods
• Several “framework” rules and near terms items must be issued within the next 12
months
― First 10 substances identified for risk evaluation
― Prioritization Process Rule
― Risk Evaluation Process Rule
― User Fees Rule
― Inventory “Re-Set” Procedures Rule
― Initial Report to Congress
• Other Actions (Most Within Next Two Years)
― CBI Claims Review and Procedures
― Generic Names Guidance
― Alternative Test Methods (non-animal/non-mammalian testing)
― Mercury Use/Reporting Rule
• See full plan: https://www.epa.gov/sites/production/files/2016-
06/documents/tsca21_implementation_plan_6_28.pdf.
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Panel Discussion
• Who is most likely to be affected by the amendments and why?
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Who is most likely to be affected by the amendments and why?
• Chemical manufacturers, processors, and importers (all sectors)
• Chemical/product innovators
• Entities engaged in mergers, acquisitions, and restructurings
• Investors in chemical, manufacturing, and retail sector
• Product/articles importers (all sectors)
• Corporate entities subject to SEC risk disclosures
25
Chemical Manufacturers, Processors, and Importers
• Tighter scrutiny of both new and existing chemicals
― Obligation to identify substances in active commerce
― Quotas and deadlines on existing chemical reviews
― Affirmative safety determinations for new chemicals
― Likelihood of more/different testing demands from EPA
― Expect regulatory and market pressure for safer chemistry
• Greater scrutiny and substantiation of CBI claims
• Need to prevent data disclosure and appropriation
• Active/Inactive designation affects use/import
• Increased fees for new/existing chemical reviews
• Companies remain vulnerable to state actions and tort liability
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Chemical/Product Innovators
• Changes to pre-manufacture notice and review process could delay
commercialization
― No approval by EPA inaction – safety finding needed
― EPA could use to negotiate for more time and risk mitigation
• Less emphasis on animal data could reduce costs
• But EPA may expect/demand more/different data
• EPA likely to favor “greener” alternatives
27
Commercial/Consumer Product Manufacturers Retailers
• Understand makeup of products, including articles
― Which products and inputs create regulatory/market risks?
― Most articles exempted but EPA can regulate “significant potential”
exposure. How will EPA interpret this authority?
― Many substances on EPA’s priority list are common in commercial
and industrial products
― Consider lead-time needed for formulation/design changes
• Possibility that some will face restrictions.
• Mere initiation of regulatory action can trigger NGO/market push for
deselection
• Ensure all product components are added to “active” list.
• Communication with supply chain imperative!
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Entities Engaged in Mergers, Acquisitions, and Restructurings
• Historically, TSCA often has played a limited role in environmental
diligence and valuation efforts.
― Little to no regulation of most grandfathered substances
― Most new chemicals enter market without major restrictions
― Perception of TSCA as a reporting statute
• Now more risk of EPA action (or Company inaction) leading to
material change in asset/liability value
― Potential for supply chain disruptions
― Uncertainty of long-term access to critical inputs
― Interference with access to critical markets and uses
― Potential for “Zombie” products and business lines
― Risk of disclosure of trade secrets or waiver of data claims
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Investors in Chemical, Manufacturing, and Retail Sectors
• Greater need to assess target’s regulatory status and vulnerability to
changes in EPA policy
― Risk of supply chain disruptions
― Increased supply chain costs
• Potential for TSCA implementation to hasten transition to lower-risk
sustainable technologies.
• Need to assess how regulatory policy and market response will
influence value of target as a going concern as well as value of
assets.
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All Affected Industry Stakeholders
• Assess whether and how the updated law changes corporate
disclosure obligations:
― SEC mandated disclosure of risk factors in quarterly and annual
reports
― Communications with shareholders/board
• Leverage opportunities to engage in formal and informal public
participation processes
― Implementation will produce revised regulations and new guidance
― Early engagement during the development process ensure that EPA
understands your business.
― Develop relationships with key policymakers
― Public involvement necessary to preserve litigation rights
31
Panel Discussion
• How does EPA’s authority impact approval of new chemicals and
continued use of existing substances?
• What are the implications for compliance and corporate disclosure
under the new law?
• What legal issues are anticipated?
• How can counsel and their clients ensure EPA takes their interests
into consideration during implementation phase?
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Strategies to Prepare for Implementation
• Develop inventory of substances that are likely to be considered by
EPA to be “high priority” and which are critical to business
• Know where your interests may align with or diverge from others
• Develop justifications for existing and expected CBI claims, take
inventory of proprietary data and data sharing agreements
• Communicate with supply chain and downstream users when
substances/products might be subject to scrutiny
• Identify which “framework” rulemakings have material implications
for business and develop a participation strategy for relevant
rulemakings
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Background Resources of Interest
• EPA home page for amendments:
https://www.epa.gov/assessing-and-managing-chemicals-under-
tsca/frank-r-lautenberg-chemical-safety-21st-century-act.
• EPA summary of amendments:
https://www.epa.gov/assessing-and-managing-chemicals-under-
tsca/highlights-key-provisions-frank-r-lautenberg-chemical
• EPA implementation plan:
https://www.epa.gov/sites/production/files/2016-
06/documents/tsca21_implementation_plan_6_28.pdf
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