The Nickel Report

Last year Congress directed the US Environmental Protection Agency (EPA) to review new chemicals by a new process. A major question for manufacturers and consumers is whether EPA can do this within a reasonable time period without unnecessarily getting in the way of innovation.

Since enactment of the Lautenberg Act amending the Toxic Substances Control Act (TSCA) in June 2016, the pace of EPA’s review of new chemicals has slowed dramatically. While EPA’s pre-enactment new chemicals program handled around 1,000 premanufacture notifications (PMNs) annually, EPA estimates that a backlog of about 600 new chemicals had built up by January 2017, which created a substantial concern in the regulated community.

The delay can be attributed to a variety of factors, including provisions in the Lautenberg Act requiring EPA to make affirmative risk determinations respecting new chemicals and document the basis for those decisions, a process that consumes more time and resources on the part of EPA. It is also attributable to how EPA executes its responsibilities under the new TSCA Section 5 requirements.

Pre-enactment, EPA’s review of a new chemical was generally limited to the conditions of use described in the PMN, which in almost every case would comprise those uses that would be “reasonably anticipated.” Given that the new chemical was almost always proprietary to the submitter, it was reasonable to expect that for some reasonable period of time, the submitter would be the only entrant in the market and its identified uses would be the only ones “reasonably anticipated.”

In 1995, EPA adopted the efficient practice of promulgating a Significant New Use Rule (SNUR) to address the situation where the uses described in a submitter’s PMN did not pose an unreasonable risk but where other uses might potentially pose an unreasonable risk. By doing so, EPA could avoid the time and resources it might otherwise be required to expend entering into a consent order with a submitter under TSCA Section 5(e). Likewise, promulgating such a “non-Section 5(e) SNUR” would position EPA to mitigate later the risks associated with any use other than that described in the submitter’s PMN. But for reasons that EPA has not articulated, EPA is no longer using its “non-Section 5(e) SNUR” authority to address such potential risks and is requiring a Section 5 consent order in every case where it cannot find there is no unreasonable risk across all conditions of use.

Based on information recently published on EPA’s website respecting disposition of Section 5 matters, EPA is making negative unreasonable risk determinations in only a small minority of the PMNs filed and is otherwise requiring Section 5(e) consent orders with submitters. Earlier last month, EPA began making available on its website status information on notices received by EPA pursuant to Section 5 for which EPA has had a Focus meeting (EPA notes on its website that a Focus meeting respecting a notice is “typically held at day 15-20 of the review period.” EPA’s website indicated that as of June 2, 2017, there were a total of 630 PMNs filed subject to the amended statute for which there had been a Focus meeting. Of those EPA had made negative “unreasonable risk” recommendations on 50 substances, with negative determinations in 48; determined that 41 were invalid (PMNs that are declared incomplete, PMNs for chemical substances already on the TSCA Chemical Inventory, and PMNs for chemical substances not subject to Section 5); and had determined that a 5(e) consent order was required in 172 matters, having recommended that a 5(e) consent order was required in 191 PMNs with no determination. There were 101 matters pending standard review with no determination, and 75 PMNs that had been withdrawn by their submitters.

I note that of the 171 determinations as of June 2, 2017, for which a 5(e) consent order was required, the vast majority have just been made (during April and May 2017). Presumably some of these consent orders will not be consummated because of the parties’ inability to come to terms. Of the 75 PMN withdrawals described above, 32 were withdrawn after a recommendation from EPA at the Focus meeting for a 5(e) consent order, many citing “insufficient information.” This strongly suggests that in many cases EPA is requiring submitters to provide testing data on uses or manufacturing processes not contemplated by such submitter.

In my experience, chemical manufacturers take into consideration the likely cost of new chemical review before making the decision to spend the time and resources associated with the process. That determination is necessarily based on the manufacturer’s assessment of the reasonably likely uses of its chemical and the associated market potential. Such a manufacturer may be unwilling to spend the associated time and resources associated with evaluating the risk of uses it determined to have no market potential, and the cost of such evaluation would not have been considered in the commercialization decision. Where the cost of market approval is not justified by the market potential, the submitter will be forced by market considerations to withdraw its PMN.

In other words, what we are getting so far from the EPA in new chemical approval under the reformed TSCA is a significant impediment to innovation without a corresponding benefit to the public.

In early June, EPA published on its website statistics for its New Chemicals Review Program under TSCA. It is clear that EPA has been working very hard at reducing its backlog. EPA indicates on its website that as of May 30, 2017, it had 443 new chemical cases under review. This number includes not only PMNs, but also other new chemical submissions, e.g., Significant New Use Notices (SNUNs), which reflects a substantial level of effort by EPA. EPA stated that it has added temporary new staffing to reduce the backlog and expects to reduce the backlog back to historical levels, about 300 cases under review at any given time, by the end of July 2017.

Public statements from EPA and other government officials indicate that the New Chemicals Review Program is a priority. A big question going forward is whether EPA can maintain staff and other resources to carry out its responsibilities for the New Chemicals Review Program under the Lautenberg Act. Assuming that the heightened level of resources recently dedicated to the program continues, the remaining question is whether EPA will reduce the increased burden on innovation through the use of non-5(e) SNURs.