The Costs of TSCA Reform for Manufacturers and Distributors of Pesticide Product Inert Ingredients
For companies producing, selling, or buying “inert ingredients” and other raw materials used in pesticide products, the passage of the Lautenberg Act has the potential to usher in a period of higher costs from federal regulation. Some of these chemicals already have been subject to regulatory scrutiny, but many have been at the margins of regulation for the past 40 years. The Lautenberg Act promises to bring them into the center.
I. Resetting the Clock for Risk Assessment of Existing Inert Ingredients
Inert ingredients used in pesticide products are those that are not present to directly control pests. They include fragrances, dyes, emulsifiers, solvents, aerosol propellants, or other ingredients that serve purposes.
Two events from the 1970s have framed the regulation of inert ingredients:
- After TSCA was enacted in 1976, EPA decided to focus primarily on new chemicals. Inert chemicals already in use as of 1976 were “grandfathered” into the TSCA Inventory of approved chemicals without substantial analysis; and
- In 1977, EPA determined that inert chemicals were regulated under TSCA and not the federal pesticide law, the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) until the point when they were incorporated into a pesticide product.1
Because many inert chemicals that are still used already existed in 1976, they largely avoided scrutiny under TSCA, and fall outside the regulatory focus of FIFRA.
But the Lautenberg Act could change this. The biggest change likely will result from amendments to Section 6 of TSCA to “reset” the Inventory. This reset will require chemical manufacturers and “processors”—those companies that combine chemicals into other mixtures or pesticides—to identify which chemicals are still actively used. Then, EPA will prioritize the chemicals to undergo a new risk evaluation. EPA will define the process for prioritization in the soon-to-be-released “Inventory Reset” rule (EPA plans to publish a proposed rule in December 2016, and the final rule a few months later).2 Within six months of the issuance of the final rule, manufacturers must identify those chemicals manufactured or “active” in the past 10 years.
After identifying active chemicals, EPA must establish a risk-based screening process via a second rulemaking to identify high-priority and low-priority chemical substances. A high-priority substance is one that EPA concludes, “without consideration of costs or other nonrisk factors, may present an unreasonable risk of injury to health or the environment.” In making this determination, EPA also must evaluate risk to any “potentially exposed or susceptible subpopulation.” The screening process must consider chemical hazards, potential exposure pathways, and the “conditions of use” under which the “chemical substance is intended, known, or reasonably foreseen to be manufactured, processed, distributed in commerce, used, or disposed of.”
This new risk-based screening might have far-reaching implications for manufacturers of inert chemicals used in pesticide products. Widely-used inerts can be used in broad, even nationwide, geographic areas, and in a range of indoor and outdoor settings for varying crop and pest-control use patterns.
If EPA defines a very broad risk assessment process, it could undercut EPA’s longstanding “bright line” rule—in place since 1977—that limits the extent to which inert chemicals are subject to dual regulatory obligations under TSCA or FIFRA. And if the “conditions of use” includes the full range of conditions under which pesticide products formulated with the inert ingredients are used, it could substantially increase data requirements and the costs of developing such data. The burden for manufacturers will depend on how EPA defines the relationship between FIFRA and TSCA and whether it provides testing guidance for chemicals that have been incorporated into pesticide products.
Based on its risk assessment for existing chemicals, EPA may determine that a chemical presents no unreasonable risk, and conclude that no new restrictions are required. But if EPA determines that the chemical poses an unreasonable risk, it must initiate a rulemaking to examine restrictions to place on the chemical. EPA has authority to impose a wide range of restrictions, from a total ban to simple labeling changes, worker protection requirements, or use and volume restrictions. Many of these restrictions may impact inert-chemical processors directly. For example, EPA may require warnings and labeling on articles and mixtures containing chemical substances. EPA also may require the processor to keep chemical use records and to conduct tests to ensure compliance with any restrictions that are imposed.
Manufacturers may seek to lessen restrictions by submitting relevant technical and economic information that a restriction is not feasible. Gathering such evidence often requires substantial investment, however, and companies will need to weigh the costs of such investment against the benefits of fewer restrictions.
Inert chemicals will be among the early test cases for EPA’s new TSCA risk assessment. Within the first six months of the Act, EPA must begin risk assessments for 10 chemical substances drawn from the 2014 update of the TSCA Work Plan for Chemical Assessment, and for another 20 high-priority chemicals within three-and-half years of enactment.3 This 2014 work plan includes 38 chemicals that are listed as inert ingredients used in active pesticide registrations in EPA’s inert database.
Thus, it is nearly certain that some of the early risk assessments will analyze inert chemicals and impose some costs for companies handling inert ingredients. The extent of those costs will turn in part on the rules EPA proposes—and eventually promulgates—about chemical prioritization and the rigor and data requirements of the risk assessment. Keeping a close eye on these rules, and discouraging provisions that impose high costs on industry, will be a vital task in the coming months.
II. Expanded Data Obligations
Manufacturers and sellers of inert ingredients also face new data and testing. Amendments to TSCA Section 4 authorize EPA to impose new requirements via orders rather than rulemaking, which simplifies the Agency’s burdens considerably. Sharing of the cost of this testing may be required of both chemical manufacturers and on processors who simply combine the chemicals into other mixtures.
Testing obligations apply to existing chemicals that undergo risk assessment as part of the Inventory Reset spelled out in TSCA Section 6 and to new chemicals and new uses governed under TSCA Section 5.
The costs of expanded testing are not covered by FIFRA data compensation and arbitration schemes but by TSCA’s separate arbitration scheme. Unlike FIFRA, TSCA generally allocates costs from studies among manufacturers according to the production volume of individual companies as a share of the total production volume. Just how costs should be shared or assessed against processors remains unclear. Moreover, the costs of new TSCA-mandated studies are unlikely to be addressed in existing FIFRA settlements or pesticide-related task force agreements. While some such agreements address cost-sharing of future FIFRA studies mandated by EPA and some also cover future defense or product stewardship costs, typical agreement language does not cover TSCA cost sharing. Going forward, these new costs should be considered and addressed during contract negotiations.
III. Approval of New Chemicals
While the most dramatic impact of the TSCA amendments may be felt by users of existing chemicals, the amendments affect new chemicals. For the first time, the amendments require EPA to make an affirmative finding of acceptability when reviewing premanufacture and significant new use notices. If EPA does not make the finding within 180 days, it must refund the manufacturer’s application fee. But this may provide little solace to the company involved, especially if the source of the delay is a lack of Agency resources.
The Act creates three categories of risk findings. First, EPA may determine that the chemical presents “no unreasonable risk.” In that case, no restrictions are applied. Second, EPA may determine that the chemical presents “an unreasonable risk.” In that case, EPA can issue an order restricting the manufacture, distribution, and use of the chemical. Finally, EPA may make a middle-of-the-road determination that it has insufficient information, would require additional information before it could evaluate risk, or would need to issue an order to manage the risks from use and exposure. Under this intermediate path, EPA then would decide what additional information or mitigation steps are required. EPA has the authority under TSCA Section 4 to require additional testing to make a final risk determination.
IV. Looking Ahead
Inert manufacturers can take practical steps to plan ahead and protect themselves as EPA implements its new TSCA authorities. These should include:
- Evaluating which priority chemicals they manufacture or use in their production processes. Discuss the future regulation of these chemicals with suppliers and consider submitting information on “active” chemicals for the Inventory reset.
- As EPA rolls out proposed rulemakings for the prioritization and risk evaluation processes, submitting comments and otherwise lawfully seeking to influence regulations, chemical prioritization, and agency guidance. Communicate with suppliers, provide information as necessary, and keep track of EPA determinations of whether and why a chemical poses an “unreasonable risk.” These activities should help prepare corporate regulatory or litigation departments to challenge any faulty determinations and protect important uses of chemicals that may be under threat by an EPA risk-management determination.
- Considering potential business risks and litigation from upcoming EPA rulemakings, chemical prioritization, and risk evaluations. Companies should carefully consider wasy to avoid or mitigate the effect of proposed EPA restrictions on chemical use in the development and sale of existing or new pesticide products.
1 EPA offered this interpretation in 42 Fed. Reg. 64,586 (Dec. 23, 1977).
2 EPA provided its first-year schedule on June 29, available at https://www.epa.gov/sites/production/files/2016-06/documents/tsca21_implementation_plan_6_28.pdf.
3 The 2014 updated work plan is available at https://www.epa.gov/sites/production/files/2015-01/documents/tsca_work_plan_chemicals_2014_update-final.pdf.