EPA Issues SNPRM Modifying and Supplementing 2021 Proposed TSCA Fees Rule

On November 16, 2022, the U.S. Environmental Protection Agency (EPA) published a much-anticipated supplemental notice of proposed rulemaking (SNPRM) to modify and supplement its 2021 proposed rule that would amend the 2018 Toxic Substances Control Act (TSCA) fees rule. 87 Fed. Reg. 68647. EPA states that “[w]ith over five years of experience administering the TSCA amendments of 2016, EPA is publishing this document to ensure that the fees charged accurately reflect the level of effort and resources needed to implement TSCA in the manner envisioned by Congress when it reformed the law.” EPA will hold a webinar on December 6, 2022, to provide an overview to stakeholders of the SNPRM. Registration for the webinar is open. Stakeholders who wish to provide oral comments during the webinar are asked to register by December 1, 2022. Written comments are due by January 17, 2023.

What Action Is EPA Taking?

After establishing fees under TSCA Section 26(b), TSCA requires EPA to review and, if necessary, adjust the fees every three years, after consultation with parties potentially subject to fees. The SNPRM describes proposed changes to 40 C.F.R. Part 700, Subpart C as promulgated in the 2018 Fee Rule (83 Fed. Reg. 52694) and explains the methodology by which EPA determined the proposed changes to TSCA fees. The SNPRM adds to and modifies the proposed rulemaking issued on January 11, 2021 (2021 Proposal) (86 Fed. Reg. 1890). EPA proposes to narrow certain proposed exemptions for entities subject to the EPA-initiated risk evaluation fees and proposes exemptions for test rule fee activities; to modify the self-identification and reporting requirements for EPA-initiated risk evaluation and test rule fees; to institute a partial refund of fees for premanufacture notices (PMN) withdrawn at any time after the first ten business days during the assessment period of the chemical; to modify EPA’s proposed methodology for the production volume-based fee allocation for EPA-initiated risk evaluation fees in any scenario where a consortium is not formed; to expand the fee requirements to companies required to submit information for test orders; to modify the fee payment obligations to require payment by processors subject to test orders and enforceable consent agreements (ECA); to extend the timeframe for test order and test rule payments; and to change the fee amounts and the estimate of EPA’s total costs for administering TSCA Sections 4, 5, 6, and 14. More information on the 2018 Fee Rule is available in our September 28, 2018, memorandum, and more information on the 2021 Proposal is available in our December 30, 2020, memorandum.

The SNPRM includes the following summary of proposed changes to TSCA fee amounts:

Why EPA Is Taking the Action

EPA states that the fees collected under TSCA are intended to achieve the goals articulated by Congress by providing a sustainable source of funds for EPA to fulfill its legal obligations under TSCA Sections 4, 5, and 6 and with respect to information management under TSCA Section 14. According to EPA, information management includes collecting, processing, reviewing, and providing access to and protecting from disclosure as appropriate under Section 14 information on chemical substances under TSCA. In 2021, EPA proposed changes to the TSCA fee requirements established in the 2018 Fee Rule based upon TSCA fee implementation experience and proposed to adjust the fee amounts based on changes to program costs and inflation and to address certain issues related to implementation of the fee requirements. According to the SNPRM, EPA consulted and met with stakeholders that were potentially subject to fees, including several meetings with individual stakeholders and a public webinar in February 2021. EPA is hosting a December 6, 2022, webinar to hear from stakeholders on the proposed TSCA fees. This engagement and the previous stakeholder outreach will inform EPA’s final rule.

According to EPA, based on comments received in response to the 2021 Proposal, adjustments to EPA’s cost estimates, and experience implementing the 2018 Fee Rule, EPA is issuing this SNPRM and is requesting comments on the proposed provisions and primary alternative provisions described that would add to or modify the 2021 Proposal. EPA notes that TSCA allows it to collect approximately but not more than 25 percent of its costs for eligible TSCA activities via fees. EPA states that fee revenue has been roughly half of the estimated costs for eligible activities than EPA estimated in the 2018 Fee Rule, however. According to EPA, the shortfall was, in part, due to EPA’s use of cost estimates based on what it had historically spent on implementing TSCA prior to the 2016 amendments, not what it would cost to implement the Frank R. Lautenberg Chemical Safety for the 21st Century Act (Lautenberg Act). In the first four years following the 2016 Lautenberg Act’s enactment, EPA also did not conduct a comprehensive budget analysis designed to estimate the actual costs of implementing the amended law until spring 2021. In the SNPRM, EPA proposes to revise its cost estimate to account adequately for the anticipated costs of meeting its statutory mandates, which are based on the comprehensive analysis conducted in 2021. EPA states that these proposed revisions are designed to ensure fee amounts capture approximately but not more than 25 percent of the costs of administering certain TSCA activities, fees are distributed equitably among fee payers when multiple fee payers are identified by revising the fee allocation methodology for EPA-initiated risk evaluations, and fee payers are identified via a transparent process.

Estimated Incremental Impacts of the SNPRM

EPA evaluated the potential incremental economic impacts of the 2021 Proposal, as modified by this SNPRM for fiscal year (FY) 2023 through FY 2025. The SNPRM briefly summarizes EPA’s “Economic Analysis of the Supplemental Notice of Proposed Rule for Fees for the Administration of the Toxic Substances Control Act,” which will be available in the docket:

• Benefits. The principal benefit of the 2021 Proposal, as modified by this SNPRM, is to provide EPA a sustainable source of funding necessary to administer certain provisions of TSCA.
   
• Cost. The annualized fees collected from industry under the proposed cost estimate described in the SNPRM are approximately $45.47 million (at both three percent and seven percent discount rates (EPA notes that the annualized fee collection is independent of the discount rate)), excluding fees collected for manufacturer-requested risk evaluations. EPA calculated total annualized fee collection by multiplying the estimated number of fee-triggering events anticipated each year by the corresponding fees. EPA estimates that total annual fee collection for manufacturer-requested risk evaluations is $3.01 million for chemicals included in the 2014 TSCA Work Plan (based on the assumed potential for two requests over the three-year period) and approximately $2.99 million for chemicals not included in the 2014 TSCA Work Plan (based on the assumed potential for one request over the three-year period). EPA analyzed a three-year period because the statute requires EPA to reevaluate and adjust, as necessary, the fees every three years.
   
• Small entity impact. EPA estimates that 29 percent of Section 5 submissions will be from small businesses that are eligible to pay the Section 5 small business fee because they meet the definition of “small business concern.” EPA estimates that the total annualized fee collection from small businesses submitting notices under Section 5 is $666,810. For Sections 4 and 6, reduced fees paid by eligible small businesses and fees paid by non-small businesses may differ because the fee paid by each entity would be dependent on the number of entities identified per fee-triggering event and production volume of that chemical substance. EPA estimates that average annual fee collection from small businesses for fee-triggering events under Section 4 and Section 6 would be approximately $103,574 and $2,896,351, respectively. For each of the three years covered by the SNPRM, EPA estimates that total fee revenue collected from small businesses will account for about six percent of the approximately $52 million total fee collection, for an annual average total of approximately $3 million.
   
• Environmental justice. Although not directly impacting environmental justice-related concerns, EPA states that the fees will enable it to protect better human health and the environment, including in helping minority, low-income, Tribal, or indigenous populations in the United States that potentially experience disproportionate environmental harms and risks, and supporting the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation and enforcement of environmental laws, regulations, and policies involving TSCA. EPA notes that it “identifies and addresses environmental justice concerns by providing for fair treatment and meaningful involvement in the implementation of the TSCA program and addressing unreasonable risks from chemical substances.”
   
• Effects on state, local, and Tribal governments. The SNPRM would not have any significant or unique effects on small governments, or federalism or Tribal implications.

Commentary

Bergeson & Campbell, P.C. (B&C^®) has anticipated the public release of the SNPRM for some time and is not surprised by the proposed increases in fees. We recognize, however, that many readers may review these proposed fees and truly feel a sense of “sticker shock,” as Dr. Michal Freedhoff, the current Assistant Administrator of EPA’s Office of Chemical Safety and Pollution Prevention (OCSPP), cautioned regulated entities earlier this year. B&C has not evaluated the underlying budgetary analysis, so assumes that EPA’s estimate of its costs is accurate. Given that assumption and EPA’s authority to recover 25 percent of those costs, B&C focuses on other aspects of the proposal.

Taking an optimistic view, the increase may benefit regulated entities. EPA states in the SNPRM that “Collecting additional resources through TSCA fees will enable EPA to significantly improve on-time performance and quality.” The absence of these two metrics, as well as others, has mired EPA’s activities under TSCA Sections 4, 5, and 6 for years. The influx of funding, along with proper leadership, training, and management, will aid EPA with meeting its statutory deadlines under TSCA, and the transparency elements of its Scientific Integrity Policy and the scientific standards under TSCA Section 26. Below, we provide representative examples of how the fees increase will aid EPA with avoiding the repetitious shortcomings that have permeated its decision making under TSCA Sections 4, 5, and 6.

TSCA Section 4

B&C notes that EPA states the following about its intended use of its order authority under TSCA Section 4: “The Agency believes it is reasonable to assume that approximately 75 test orders per year will be initiated between FY 2023 and FY 2025. Approximately 45 of these test orders are expected to be associated with the Agency’s actions on PFAS.” In comparison, EPA has issued 20 TSCA Section 4 test orders on 11 existing chemical substances since March 2020. The issued test orders have, however, suffered from significant lapses in transparency. as well as outcomes that conflict with the scientific standards under TSCA Section 26 and the obligations under Section 4.

These concerns with transparency and EPA’s failure to meet the scientific standards under TSCA Section 26 are likely due in part to EPA’s resource and staffing limitations. Therefore, the increased cost of test orders from $11,650 to $25,000 will enable EPA to develop test orders that are focused on data needs, rather than data gaps, during its prioritization and risk evaluation activities. It will also provide EPA with the requisite funding to ensure that it responds timely to technical inquiries from test order recipients, rather than months and in some cases more than a year later.

TSCA Section 5

B&C has decades of experience reviewing EPA’s assessments on new chemical substances under TSCA Section 5. Of relevance here are our observations since TSCA was amended in 2016. Since this time, we have observed a decrease in transparency in EPA’s risk assessments on new chemical substances. For example, EPA routinely identifies analogs from which it reads across potential hazards for new chemical substances. It is not uncommon, however, for EPA to identify multiple analogs for doing so. What is common is that EPA selects an analog amongst many and does not state the scientific basis for the selected analog. This also applies to analogs identified by submitters that are often dismissed by EPA without a scientific basis for doing so. Furthermore, EPA routinely claims those analogs as confidential business information (CBI) without reviewing whether they are actually still confidential. It is important for EPA to protect legitimate CBI, but the statute also requires disclosure of information that is not actually CBI. Additional resources will allow EPA to update its databases to reflect the current state of CBI claims and to better evaluate whether old CBI claims are still justified.

We also hope that additional resources will enable EPA to rely on fewer “worst-case” shortcuts in its evaluations of PMNs. For example, EPA routinely uses the acute potential dose rate (PDR) as the exposure metric for assessing potential unreasonable risks, even when the hazard is a chronic effect. Evaluating against a PDR is a reasonable first pass calculation — if EPA does not identify risk using a PDR, no further evaluation is necessary. We do not, however, agree with EPA making unreasonable risk determinations on the screening-level assessments without further refinements — it is simply not justifiable scientifically to predict chronic risk using a PDR (as reflected in EPA’s assessments under Section 6). Performing the refined calculation requires additional effort, which the fee rule would help support.

We expect EPA will resolve the above issues with the increased funding that it intends on receiving for new chemical substance notifications (e.g., from $19,020 to $45,000 on PMNs). EPA states that the “Additional funding collected through TSCA section 5 fees will help EPA reduce the backlog of delayed reviews and support additional work for new cases.” These monies will also provide EPA the necessary budget to better justify the selection of analogs. Collectively, we hope these improvements will allow EPA’s risk assessors to exercise their inherently government function of evaluating and approving and/or modifying the contractor-generated work products as EPA-approved work products. This will provide more transparent and timely evaluations on novel chemistries notified to the Agency. This level of transparency will also ensure that EPA is satisfying its requirements under EPA’s Scientific Integrity Policy, which states “At the EPA, promoting a culture of scientific integrity is closely linked to transparency. The Agency remains committed to transparency in its interactions with all members of the public.” In doing so, EPA will additionally be providing risk assessments that clearly document its decision making and how those decisions satisfy the scientific standards under TSCA Section 26. These considerations are critical for submitters, not in the sense that they must agree with EPA’s determinations, but rather that they understand the bases for those determinations.

Unanswered questions about when the increased fees will improve the throughput of new chemicals reviews remain. Hiring and training staff takes time; EPA is currently working to fill open positions and train new staff. Submitters paying substantially higher fees would reasonably expect that EPA improve its performance or, if EPA cannot complete timely its reviews (absent suspensions by the submitter), expect that EPA would refund the submission fee.

TSCA Section 6

B&C views the fee increases for EPA’s administration of TSCA Section 6 as the most controversial, not necessarily because of the intended increased costs, which are substantial (e.g., EPA-initiated risk evaluation from two payments resulting in $2,560,000 to two payments resulting in $5,081,000), but rather because of EPA’s decision making in the risk evaluations and its incorporation of new policy directions into its revised risk determinations. EPA has stated that its revisions to the final risk evaluations on eight of the “first 10” chemical substances and accompanying revised risk determinations are “supported by science and the law.” EPA spent the last year revisiting its risk determinations, with little change other than EPA’s conclusion about the “whole chemical.” EPA has not addressed weakness in the risk evaluations identified by commenters; nor has EPA addressed the weaknesses in EPA’s systematic review process identified by the U.S. National Academies of Science, Engineering, and Medicine’s (NASEM) review of EPA’s “Application of Systematic Review in TSCA Risk Evaluations.” NASEM’s review concluded that “The OPPT approach to systematic review does not adequately meet the state-of-practice [and] OPPT should reevaluate its approach to systematic review methods, addressing the comments and recommendations in this report.” The foregoing issues are troubling and are expected to be contested by regulated entities when EPA proposes its draft risk management rules on the “first 10” chemical substances. EPA did, however, state in the SNPRM that:

Although section 6 cost estimates were informed by risk management and risk evaluation activities for the first 10 chemicals, EPA will not be recovering fees for those chemicals.

Though this may seem like a hollow victory for potentially regulated entities, given EPA’s risk determinations on these substances, the intended fees for the EPA-initiated risk evaluations at least provide a baseline of deferred costs that may be allocated for disputing scientific and legal shortcomings when EPA issues the draft and final risk management rules. Moving forward, we anticipate that EPA will use the intended increased funding from the various risk evaluation costs to ensure that the above issues are addressed in its future risk evaluations on high-priority substances.

Conclusions

B&C recognizes that its position on the proposed fees increase in the SNPRM may not be well received by regulated entities. We note that the increased fees will aid with decreasing uncertainty in EPA’s decision making and its timely completion of evaluations on new and existing chemical substances and improve transparency and documents that meet the scientific standards under TSCA Section 26. There is also no question that EPA has the statutory authority to raise fees to recover 25 percent of its costs. B&C’s view is that commenters should focus on the distribution of the fees among the categories, proposed exemptions, and other aspects of the rule, including when manufacture or import must cease to avoid paying fees, rather than focusing on the magnitude of the fee increase.

We also hope that regulated entities will welcome EPA’s use of the best available science and weight of scientific evidence in its risk evaluations. As we discussed above, these statutory requirements have not been met in the “first 10” risk evaluations. We recognize that the deadlines for risk evaluations are not necessarily the critical issue for regulated entities, rather it is EPA’s unreasonable risk determinations, which are based on risk evaluations that were developed in a manner inconsistent with TSCA Section 6 and the implementing regulations. The increased fees under TSCA Section 6 should aid with addressing these issues.

Finally, B&C is optimistic that the SNPRM will provide EPA with the requisite funding to ensure its successful oversight of activities under TSCA. Despite our optimism, we do recognize that increased funding alone will not improve EPA’s administration of TSCA. To ensure success, EPA’s leadership will have to manage and lead this program properly. These latter components are critical and if the SNPRM is promulgated as, or as close to as proposed, the expectation on this Administration to produce results will be sky high.