The Nickel Report

Environmental and public-health groups have taken issue with the EPA’s rule establishing procedures for chemical risk evaluations under the revised Toxic Substances Control Act (TSCA), which allows the EPA to exclude certain conditions of use when assessing whether a chemical presents unreasonable risks. These groups fear the exclusions could provide a “loophole” allowing some chemical risks to go unaddressed. But putting those concerns aside, should companies affected by the rule actually want to take advantage of these exclusions? Are they really beneficial to regulated industries? Or do they risk undermining one of the primary goals that companies sought to gain by supporting TSCA reform—federal preemption of overlapping state restrictions?

In a rare act of bipartisan lawmaking, Congress overhauled TSCA in June 2016—the first major reform of an environmental statute in decades. Part of that bipartisan agreement stemmed from the broad consensus that TSCA, in its previous iteration, was not up to the task of effectively regulating even the most commonly recognized chemicals of concern. But another key to the success of TSCA reform was its vocal support from members of the regulated industries. Manufacturers and distributors of chemical substances offered many reasons for backing Congress’s reform efforts, but one of the most frequently cited was their desire for a system of uniform, predictable requirements for their products in place of a patchwork of inconsistent and confusing state regulations. Companies were willing to accept an expansion in the EPA’s authority to regulate chemicals in exchange for greater regulatory certainty.

To that end, the 2016 TSCA reform law includes robust provisions for federal preemption of state laws or regulations. Section 18 of the new law forbids states and localities from establishing or enforcing requirements restricting the manufacture, processing or distribution of a substance for which the EPA has made a finding of no unreasonable risk or has issued regulations mitigating such a risk under Section 6. See TSCA § 18(a)(1)(B). Notably, this preemption is limited to the “hazards, exposures, risks, and uses or conditions of use” that the EPA has considered. Further, while a risk evaluation is pending for a chemical substance under Section 6, states are prohibited from adopting new restrictions on uses of that chemical that are within the scope of that evaluation. See TSCA § 18(b)(1). These preemption provisions give regulated industries some protection from future state restrictions on chemicals that the EPA has already considered and addressed. But, importantly, they leave the field open for states to act on chemicals (or specific uses of chemicals) that the EPA has not.

Thus, the scope of preemption under TSCA is closely tied to the scope of any risk evaluation the EPA performs for the chemical. In June 2017, the EPA promulgated a set of framework rules establishing how the agency will conduct risk evaluations. 82 Fed. Reg. 33,726 (July 20, 2017) (“Framework Rule”). Notably, this Framework Rule states that the “conditions of use” to be considered will generally not include so-called “legacy uses” (i.e., uses that are not “ongoing or prospective”) or “associated disposal” related to those uses. Id. at 33,729.  Further, the EPA concluded that it has the discretion to exclude other types of uses from the scope of risk evaluations, such as uses that are de minimis, that reflect unintentional inclusion of the chemical in another product as an impurity, or that have already been adequately addressed by other regulatory regimes. Id. at 33,730. For example, the solvent carbon tetrachloride was phased out for certain uses by the Montreal Protocol, and consumer products containing more than trace residues have been banned since 1970. Under the Framework Rule, a risk evaluation for carbon tetrachloride could exclude from its scope exposures associated with products containing trace amounts of the chemical or with disposal of products manufactured before the ban.

These exclusions undoubtedly offer potential benefits for those companies that can take advantage of them. If a condition of use is excluded from the risk evaluation, it avoids the possibility that the EPA might find the use presents unreasonable risks, eliminating any possibility that it will be subject to federal restrictions. But that avoidance comes at a price. If the EPA does not consider a chemical’s condition of use in a risk evaluation and either find no unreasonable risk or issue a rule mitigating the risk, then TSCA will not preempt any state or local restrictions on that use. By availing themselves of these exclusions, companies will lose one of the primary benefits that they bargained for in supporting TSCA reform: uniform and definitive federal action that takes the place of inefficient and inconsistent state-by-state restrictions.

Environmental and public health groups have challenged the Framework Rule in the Fourth Circuit, and they have indicated they will dispute the EPA’s authority to exclude any conditions of use from risk evaluations. Alliance of Nurses for Healthy Environments v. EPA, No. 17-1926. If those groups prevail, this issue could become moot. But assuming the rule is upheld, what, then, is a company to do when faced with the choice between pursuing an exclusion for its use of a chemical and pursuing preemption of future state restrictions? The Framework Rule suggests that the EPA retains discretion to apply these exclusions or not, meaning that companies have room to argue that a particular condition of use of a chemical should be evaluated even if it might normally be excluded as a “legacy use” or for some other reason. See id. Companies that can marshal strong evidence that a chemical’s otherwise excludable condition of use presents no unreasonable risk may want to consider encouraging the EPA to include it in the scope and make such a finding, thus preempting future state action, rather than taking advantage of the Framework Rule’s exclusions. In such cases, the benefits of participating in the risk evaluation process might outweigh those of sitting on the sideline, where an industry cannot enjoy the hard-fought benefits of TSCA reform.