EPA Proposes TSCA Reporting and Recordkeeping Requirements for Asbestos

On May 6, 2022, the U.S. Environmental Protection Agency (EPA) proposed reporting and recordkeeping requirements for asbestos under Section 8(a) of the Toxic Substances Control Act (TSCA). 87 Fed. Reg. 27060. EPA proposes to require certain persons that manufactured (including imported) or processed asbestos and asbestos-containing articles (including as an impurity) in the four years prior to the date of publication of the final rule to report electronically certain exposure-related information. The proposed rule would result in a one-time reporting obligation. EPA “emphasizes that this proposed requirement would include asbestos that is a component of a mixture.” According to the notice, the information sought includes quantities of asbestos (including asbestos that is a component of a mixture) and asbestos-containing articles that were manufactured (including imported) or processed, types of use, and employee data. EPA and other federal agencies will use reported information in considering potential future actions, including risk evaluation and risk management activities. EPA requests public comment on all aspects of the proposed rule and also has identified items of particular interest for public input. Comments are due July 5, 2022.

Action EPA Is Taking

EPA proposes to require asbestos manufacturers (including importers) and processors to report to EPA certain information known to or reasonably ascertainable by those entities. EPA states that for this action, the term “asbestos” includes various forms of asbestos, including Libby Amphibole asbestos. The following is a brief list of the primary data requirements being proposed:

  • Asbestos Domestic Manufacturers (Asbestos Mine and Mill): The provisions in the proposed rule would require asbestos domestic manufacturers to provide the quantity manufactured per asbestos type, use, and employee exposure information to EPA. This would include situations in which asbestos is being mined or milled as an intentional or non-intentional impurity, such as in vermiculite and talc.
  • Asbestos Importers: The provisions in the proposed rule would require importers of asbestos to provide the quantity imported per asbestos type, use, and employee exposure information. This includes importers of mixtures containing asbestos, articles containing asbestos components, and impurities (in articles, bulk materials, or mixtures, such as in talc and vermiculite).
  • Asbestos Processors: The provisions of the proposed rule would require processors of asbestos (including processors of mixtures or articles) to provide the quantity processed per asbestos type, use, and employee exposure information. This includes both primary processors and secondary processors of asbestos. This would include situations in which asbestos is appearing as an intentional or non-intentional impurity, such as in vermiculite and talc.

Chemical Substances that Would Be Reportable under the Rule

EPA proposes to require the reporting of information on specific asbestos forms, or if specific information is not known or reasonably ascertainable, reporting on “asbestos” as it is more generally listed on the TSCA Inventory. EPA also proposes to require the reporting of information related to asbestos as it is manufactured (including imported) or processed in bulk, as a component of a mixture, in an article, or as an impurity in bulk materials or products.

Asbestos Forms

EPA proposes to obtain manufacturing (including importing) and processing information associated with the following different asbestos forms, and therefore is proposing to require that reporting be completed for each of the forms, to the extent that the information is known or reasonably ascertainable. If the specific asbestos type is unknown, a submitter would provide information under the general asbestos form (Chemical Abstracts Service Registry Number (CAS RN) 1332-21-4).

Asbestos — CAS RN 1332-21-4 Amosite — CAS RN 2172-73-5
Chrysotile — CAS RN 132207-32-0 Anthophyllite — CAS RN 77536-67-5
Crocidolite — CAS RN 12001-28-4 Tremolite — CAS RN 77536-68-6
Actinolite — CAS RN 77536-66-4 Libby Amphibole Asbestos — CAS RN not applicable (mainly consisting of tremolite [CAS RN 77536-68-6], winchite [CAS RN 12425-92-2], and richterite [CAS RN 17068-76-7])

Asbestos as an Impurity

EPA states that “impurity” means a chemical substance that is unintentionally present with another chemical substance, citing 40 C.F.R. Section 704.3. According to EPA, asbestos may occur naturally as an impurity in other products such as talc, vermiculite, and potentially other substances. These products are distributed and used in commerce in the United States. If all other reporting conditions are met, these products would be subject to reporting under this rule. EPA proposes to collect data on asbestos as an impurity because EPA may lack data on the extent to which asbestos as an impurity occurs in products under TSCA jurisdiction that are currently being manufactured (including imported) or processed. EPA notes that data on asbestos as an impurity could better inform the Part 2 asbestos risk evaluation where EPA will determine and then evaluate the relevant conditions of use of asbestos in talc.

Articles Containing Asbestos

The rule would require reporting on articles containing asbestos (including as an impurity). EPA notes that an “article” is defined in 40 C.F.R. Section 704.3 as “a manufactured item (1) which is formed to a specific shape or design during manufacture, (2) which has end-use function(s) dependent in whole or in part upon its shape or design during end use, and (3) which has either no change of chemical composition during its end use or only those changes of composition which have no commercial purpose separate from that of the article, and that result from a chemical reaction that occurs upon end use of other chemical substances, mixtures, or articles; except that fluids and particles are not considered articles regardless of shape or design.” EPA proposes to collect more data on imported articles containing asbestos. According to EPA, these data could inform Part 2 of the TSCA Risk Evaluation for Asbestos where EPA will determine and then evaluate the relevant conditions of use of such articles containing asbestos. Articles included in Part 1 of the TSCA Risk Evaluation for Asbestos included brake blocks for use in the oil industry, rubber sheets for gaskets used to create a chemical-containment seal in the production of titanium dioxide, certain other types of preformed gaskets, and some vehicle friction products (Ref. 18); EPA states that it “is interested in identifying if there are other articles or if there is information about specific forms of asbestos in these articles.”

Asbestos that Is a Component of a Mixture

EPA states that under TSCA Section 3(10), the term “mixture” means “any combination of two or more chemical substances if the combination does not occur in nature and is not, in whole or in part, the result of a chemical reaction; except that such term does include any combination which occurs, in whole or in part, as a result of a chemical reaction if none of the chemical substances comprising the combination is a new chemical substance and if the combination could have been manufactured (including imported) for commercial purposes without a chemical reaction at the time the chemical substances comprising the combination were combined.” EPA proposes to collect data on asbestos in circumstances where it is a component of a mixture to inform Part 2 of the TSCA Risk Evaluation for Asbestos. In the Part 2 Evaluation, EPA will determine the relevant conditions of use of asbestos in talc; EPA will use the results to evaluate asbestos exposures and associated risks.

Reporting Requirements for Small Businesses

EPA notes that although TSCA Section 8(a)(1) provides an exemption for small manufacturers (including importers) and processors, TSCA Section 8(a)(3) enables EPA to require small manufacturers (including importers) and processors to report pursuant to TSCA Section 8(a) with respect to a chemical substance that is the subject of a rule proposed or promulgated under TSCA Section 4, 5(b)(4), or 6, an order in effect under TSCA Section 4 or 5(e), a consent agreement under TSCA Section 4, or relief that has been granted under a civil action under TSCA Section 5 or 7. According to EPA, six of the asbestos types subject to the proposed rule (chrysotile, crocidolite, amosite, anthophyllite, tremolite, and actinolite) are subject to a TSCA Section 6 rule under the Asbestos Ban and Phaseout rule of 1989, and therefore EPA is proposing that these forms of asbestos are not eligible for a small manufacturer (including importer) or processor exemption. EPA states that Libby Amphibole asbestos is not subject to an applicable proposed or promulgated rule, order, or consent agreement, and is not the subject of relief that has been granted under a civil action under TSCA Section 5 or 7. Therefore, EPA proposes that Libby Amphibole asbestos continue to be eligible for such an exemption.

EPA’s experience with the TSCA Risk Evaluation for Asbestos Part 1: Chrysotile Asbestos indicates that small businesses are associated with certain identified conditions of use associated with asbestos. Because EPA has much less information on the activities of small businesses, it is concerned that certain conditions of use for which it lacks detailed information may be conducted largely or entirely by small businesses. EPA states that it believes that exempting all small businesses from reporting may exclude most or all of the reporting for some conditions of use, severely hindering EPA’s risk evaluation or risk management activities. As a result, EPA is proposing that small businesses — small manufacturers (including importers) and processors of asbestos and asbestos mixtures (other than Libby Amphibole asbestos) — will need to maintain records and report under this action.

At the time of the proposed rule, Libby Amphibole asbestos is not the subject of any of the activities described in TSCA Section 8(a)(3) and therefore manufacturers (including importers) and processors of that substance may be eligible for a small business exemption.

The Proposed Reporting Standard

EPA proposes to use the reporting standard used for certain other TSCA Section 8(a) reporting requirements, including Chemical Data Reporting (CDR). EPA states that this standard requires that manufacturers (including importers) and processors report information to the extent that the information is known to or reasonably ascertainable by the manufacturer (including importer) or processor. “Known to or reasonably ascertainable by” includes “all information in a person’s possession or control, plus all information that a reasonable person similarly situated might be expected to possess, control, or know.” According to EPA, this reporting standard requires reporting entities to evaluate their current level of knowledge of their manufactured products (including imports) or processed products, as well as evaluate whether there is additional information that a reasonable person, similarly situated, would be expected to know, possess, or control. This standard carries with it an exercise of due diligence, and EPA notes that the information-gathering activities that may be necessary for manufacturers (including importers) and processors to achieve this reporting standard may vary from case-to-case.

Under this standard, submitters conduct a reasonable inquiry within the full scope of their organization (not just the information known to managerial or supervisory employees). This may also entail inquiries outside the organization to fill gaps in the submitter’s knowledge. According to EPA, examples of the types of information that are considered to be in a manufacturer’s (including importer’s) or processor’s possession or control, or that a reasonable person similarly situated might be expected to possess, control, or know include: files maintained by the manufacturer (including importer) or processor such as marketing studies, sales reports, or customer surveys; information contained in standard references showing use information or concentrations of chemical substances in mixtures, such as a safety data sheet (SDS) or a supplier notification; and information from CAS or from Dun & Bradstreet (D-U-N-S). It may also include knowledge gained through discussions, conferences, and technical publications.

EPA states that it “acknowledges that it is possible that a manufacturer (including importer) or processor, particularly an importer of articles containing asbestos (including as an impurity), may not have knowledge that they have imported asbestos and thus not report under this rule, even after they have conducted their due diligence under this reporting standard as described previously.” According to EPA, such an importer should document its activities to support any claims it might need to make related to due diligence. In the event that a manufacturer (including importer) or processor does not have actual data (e.g., measurements or monitoring data) to report to EPA, the manufacturer (including importer) or processor would be required to make “reasonable estimates” of such information. “Reasonable estimates” may rely, for example, on approaches such as mass balance calculations, emissions factors, or best engineering judgment.

Timing of Reporting

The proposed rule would result in a one-time reporting obligation. EPA proposes reporting for persons who have manufactured (including imported) or processed asbestos at any time during the four complete calendar years prior to the effective date of the final rule. EPA anticipates that the four calendar years would be 2019 to 2022. EPA states that these entities would report during a three-month submission period that EPA proposes would begin six months following the effective date of the final rule. Therefore, according to EPA, manufacturers (including importers) and processors would have up to nine months following the effective date of the final rule to collect and submit all required information to EPA.

EPA states that it believes that providing six months between the effective date of the rule and the start of the submission period allows sufficient time for both EPA to prepare the final reporting tool and for submitters to familiarize themselves with the rule and compile the required information. Since this TSCA Section 8(a) reporting rule would result in the collection of similar information to that collected under CDR, EPA anticipates some submitters would be familiar with the types of information requested and how to report. EPA “believes that three months would be adequate time for submissions, in addition to the six-month period between the effective date and the start of the submission period.” EPA requests public comment on the submission period start date and duration, as well as alternative compliance timelines for small businesses.

Reporting of Information

EPA proposes different reporting requirements based on a two-part knowledge-based reporting approach to obtain as complete a picture as possible of the manufacturing (including importing), processing, and use of asbestos. EPA notes that because asbestos can be included in small quantities in some products, it expects that using a threshold concentration for reporting would eliminate much of the information that may be useful to support EPA’s TSCA risk evaluation and risk management efforts. Therefore, EPA proposes that reporting would be required whenever the presence of asbestos is known or reasonably ascertainable. EPA states that it is also aware that there may be circumstances under which a manufacturer (including importer) or processor is unable to provide a reliable quantity of the asbestos in their products because the percentage of asbestos in their products is not known or reasonably ascertainable by them. For those situations, EPA proposes a short form (Form A) for attestation purposes. For other situations, submitters that can determine or estimate the quantity would provide more detailed information in the full form (Form B). EPA anticipates that most submitters would know or be able to estimate the quantity of the asbestos and would complete the full form.

Request for Comments

EPA requests comment on the content of the proposed rule and the Economic Analysis prepared in support of it. In addition, EPA provides a list of issues on which it is specifically requesting public comment. EPA encourages all interested persons to submit comments on these issues, and to identify any other relevant issues as well. EPA requests that commenters making specific recommendations include supporting documentation where appropriate. The list of issues EPA has identified include:

  • EPA solicits comment on the total number of manufactures (including importers) and processors that will be impacted by the promulgation of the rule, and on the related burden and costs for reporting. In addition, due to the lack of information on the extent to which asbestos occurs as an impurity, EPA states that it was unable to determine the number of potential manufacturers (including importers) or processors of asbestos as an impurity that would report under this rule. EPA requests comment on the number of manufacturers (including importers) and processors that may be subject to the proposed rule due to the presence of impurities in their products, and on the related burden and cost for reporting.
  • Because there is no existing small processers definition that would be applicable under TSCA Section 8(a), EPA requests comment on how best to provide guidance for small processors of Libby Amphibole asbestos.
  • EPA seeks comment on what additional guidance, if any, might be useful for helping entities, including small businesses, understand the reporting standard, as well as how the reporting standard would apply to impurities. EPA requests public comment on the submission start date and duration, including for small businesses.
  • EPA requests comment on whether there should be a threshold for reporting using Form B and, if so, whether the threshold should be concentration-based (e.g., a certain percentage) or annual volume-based. In addition, EPA requests comment on whether any submitter under the threshold should alternatively report using Form A. According to EPA, having a threshold for Form B may decrease burden on certain submitters while still allowing EPA to obtain information on all bulk materials, mixtures, and articles with known asbestos content. The substances subject to the rule can occur naturally as impurities in other products that may be handled in very large volumes, such as talc, vermiculite, and potentially other substances. EPA notes that a de minimis concentration could reduce the compliance determination and reporting burdens. Comments suggesting threshold levels should include the justification for that particular level.
  • EPA requests comment on whether there should be other end product types listed in Table 4 in proposed 40 C.F.R. Section 704.180(e)(4)(iv)(B). In addition, EPA is interested in whether the units of measure listed with the product types are appropriate.
  • EPA identifies additional data elements related to employee data, wastewater discharge and waste disposal, air emissions data, and customer sites data considered for this proposed rule and solicits public comment on whether any of the additional data elements should be included in the action. While EPA believes the proposed data elements provide sufficient information for use by EPA and other federal agencies in potential actions involving asbestos, EPA seeks comment on whether any additional data elements should be included in this action.
  • EPA seeks comment on what additional guidance, if any, might be useful.

Commentary

As EPA did in its proposed per- and polyfluoroalkyl substances (PFAS) Section 8(a) reporting rule, EPA is narrowing the exemptions available. In this case, EPA is voiding the article exemption (40 C.F.R. § 711.10(b)), the impurity exemption (40 C.F.R. § 711.10(c) by reference to 40 C.F.R. § 720.30(h)(1)), and the naturally occurring substance exemption (40 C.F.R. § 711.6(a)(3)) to CDR reporting. As proposed, the research and development (R&D) exemption would be available. As EPA argues, the existing Section 6 rule on asbestos already voids the small business exemption (40 C.F.R. § 711.9).

While seeking information on asbestos that may be present in articles or may be present as an impurity, EPA must recognize that seeking the information retrospectively will likely yield little different information than if EPA were to seek the information prospectively.

EPA oddly asserts that this rule will garner information that has not been reported previously under CDR, especially from entities that have not had to report, and that reporters will be familiar with the CDR reporting tool. Bergeson & Campbell, P.C. (B&C®) expects that there will be many potential reporters, at least hundreds, if not thousands, that have never had to report because the products they manufacture, import, or process have been exempt, because of either the article or the impurity exemption. These new reporters will not be familiar with the CDR reporting tool or the CDR policies and guidance. Stakeholders, including individual companies, trade associations, and other non-governmental organizations (NGO), and EPA will address these issues to ensure non-traditional reporters are engaged. Guidance from EPA will be critically important: What is EPA’s expectation of the level of due diligence to document that an importer (of an article or a substance) has met its obligation to determine if asbestos is present in a product or article and document that reporting is not required or if reporting is required that a particular data element is not known or reasonably ascertainable?

Stakeholders are strongly urged to comment on whether a de minimis threshold (either as a quantity or a percentage, or both) is appropriate, either for neat asbestos, asbestos as part of a mixture, or asbestos as part of an article. For example, if a company imports 100 grams of asbestos, should that be a reportable event? Or if an importer knows that asbestos is not present above 100 parts per million in, for example, talc, but does not know if asbestos is or is not present below that threshold, should that import be reported? Similarly, what extent of knowledge is expected for imported articles? Suppliers may not be willing to certify that no asbestos is present at any level, especially in complex goods. Should an importer that receives that response report the presence/absence of asbestos as not known or reasonably ascertainable or not report at all?

We do not question that EPA has a legitimate need for information related to manufacturing, import, or processing of asbestos and asbestos-containing products and articles. We hope that stakeholders comment on the balance between the burden that EPA imposes under the proposal on potential reporters and the likelihood of such burden garnering meaningful information that will actually contribute to EPA’s risk evaluation and risk management. We hear stakeholders state that “EPA needs to know what is in products.” While true, it is reasonable to take the position that potential reporters “should have known” what was in products when there was no requirement to develop and document such knowledge until EPA proposed this rule. Now EPA asks for such potential reporters to go back in time and see what information might have been available, and offers the option to report that the information was not known or reasonably ascertainable without acknowledging that the significant burden is not filling out the form, it is researching the information that might have to be included in the form. Imagine if EPA imposed this burden on individuals — that each individual would have to search records of each product purchased online in a four-year period to see if there was any information provided by the supplier whether asbestos was present or not and, if present, at what level. The search would likely turn up little that is meaningful, so there would be little to report, but it is the search that would be the greatest burden.

©2022 Bergeson & Campbell, P.C.
Article by the Government Regulation practice group with Bergeson & Campbell P.C.
For more articles about the EPA, visit the NLR Environmental & Energy.

Court of Appeals Rules That Oil and Gas Company Has Ongoing Obligation to Restore Property Despite General Release of Damages in Surface Use Agreement

On April 11, 2022, the Fourth District Court of Appeals issued a significant decision in Zimmerview Dairy Farms, LLC v. Protégé Energy III LLC establishing that a general release of damages signed in connection with a pad site surface use agreement did not release the oil and gas company from its ongoing obligations to remediate and restore damage to a landowner’s property.

In the Zimmerview case, Plaintiff Zimmerview Dairy Farms (“ZDF”) signed a surface use agreement with Defendant Protégé Energy III LLC (“Protégé”) permitting Protégé to construct and operate a pad-site for Utica Shale wells on a portion of the ZDF farm. The agreement consisted of three documents: a recorded surface use agreement (favorable to Protégé); a confidential supplemental agreement (with terms favorable to ZDF); and a damage release under which ZDF released Protégé from the anticipated damages already paid for by Protégé. This three-document structure is typical, especially for pipelines easements, and one which many oil and gas companies insist on. Often, the damage release is explained by landmen as an unimportant formality and that the company is still going to fix the land as required under the unrecorded agreement. However, what a landman says, what an agreement says and what a company does can differ dramatically.

In Zimmerview, Protégé proceeded to construct and operate its pad-site without adequately remediating, restoring and reseeding the areas disturbed during construction, including the slopes of the pad-site. Over several years, Protégé’s failure to remediate resulted in significant topsoil damage, invasive weed infestations and ongoing erosion, which rendered large portions of the ZDF farm unusable. Protégé refused to pay or fix the ZDF farm, claiming that the damage release signed by ZDF released Protégé from any obligation to remediate or pay for damages caused to the ZDF farm. When ZDF filed suit and won at trial, Protégé appealed.

On appeal, Protégé once again argued that ZDF had released Protégé from all damages resulting from construction and operation of the pad-site including damages from not remediating the ZDF farm. Despite the broad language of the release, however, the Court of Appeals rejected Protégé’s argument on the basis that the damage release, signed when the surface use agreement was executed, could not have been intended to release Protégé from damages that resulted from the ongoing obligations and requirements Protégé had just agreed to under the surface use agreement. Accordingly, the Fourth District affirmed the trial court judgment (and $800,000 verdict for damages) against Protégé. Given the common use (and abuse) of similar damage releases by both operators and pipeline companies, this decision is a welcome addition to Ohio caselaw and should assist (and hopefully encourage) Ohio landowners to insist on producers and pipeline companies meeting their construction and remediation obligations.

©2022 Roetzel & Andress
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ARPA-E: Biden’s Proposed FY 2023 Budget Boosts Investment in Clean Energy Technologies

On March 28, 2022, the Biden-Harris Administration sent the President’s Budget for Fiscal Year (FY) 2023 to the United States Congress (“Congress”). The President’s proposed $5.8 trillion budget for FY 2023 allocates billions of dollars toward combating climate change and boosting clean energy development. Biden’s budget requests $48.2 billion for the Department of Energy (“DOE”), with $700 million of those funds allocated to the DOE’s Advanced Research Projects Agency-Energy program (“ARPA-E”).[1] With these increased funds, the Biden administration plans for ARPA-E to expand its scope beyond energy technology–focused projects to include climate adaptation and resilience innovations.[2]

What Is ARPA-E?

ARPA-E is a United States federal government agency under the purview of the Department of Energy that funds and promotes the research and development of advanced energy technologies. ARPA-E was recommended to Congress in the 2005 National Academies report Rising Above the Gathering Storm: Energizing and Employing America for a Bright Economic Future, which published recommendations for federal government actions to maintain and expand U.S. competitiveness.[3] In 2007, ARPA-E was officially created after Congress implemented a number of the report’s recommendations by enacting the America COMPETES Act.[4] The 2007 Act was superseded by the America COMPETES Reauthorization Act of 2010, which incorporated much of the original language of the 2007 Act but made some modifications to ARPA-E structure.[5] In 2009, ARPA-E officially commenced operations after receiving its first appropriated funds through the American Recovery and Reinvestment Act of 2009 —$400 million to fund the establishment of ARPA-E.[6]

ARPA-E’s mission is statutorily defined as overcoming “the long-term and high-risk technology barriers in the development of energy technologies.”[7] This involves the development of energy technologies that will achieve various goals, including the reduction of fossil fuel imports, the reduction of energy-related emissions, improvements in energy efficiency, and increased resilience and security of energy infrastructure.[8] The statute directs ARPA-E to pursue these objectives through particular means:

  1. Identifying and promoting revolutionary advances in fundamental and applied sciences;
  2. Translating scientific discoveries and cutting-edge inventions into technological innovations; and
  3. Accelerating transformational technological advances in areas industry is unlikely to undertake because of technical and financial uncertainty.[9]

The Impact of ARPA-E

Since 2009, ARPA-E has provided approximately $3 billion in R&D funding for over 1,294 potentially transformational energy technology projects.[10] Publishing annual reports to analyze and catalog its influence, the agency tracks commercial impact with key early indicators, including private-sector follow-on funding, new company formation, partnership with other government agencies, publications, inventions, and patents.[11]

Many ARPA-E project teams have continued to advance their technologies: 129 new companies have been formed, 285 licenses have been issued, 268 teams have partnered with another government agency, and 185 teams have together raised over $9.87 billion in private-sector follow-on funding.[12] In addition, ARPA-E projects fostered technological innovation and advanced scientific knowledge, as evidenced by the 5,497 peer-reviewed journal articles and 829 patents issued by the U.S. Patent and Trademark Office that sprung from the ARPA-E program.[13] ARPA-E recently announced that it is starting to count exits through public listings, mergers, and acquisitions. As of January 2022, ARPA-E has 20 exits with a total reported value of $21.6 billion.[14]

How Does Biden’s FY 2023 Budget Affect ARPA-E?

Biden has requested a 56% increase for ARPA-E, to $700 million.[15] The budget also proposes expansions of ARPA-E’s purview to more fully address innovation gaps around adaptation, mitigation, and resilience to the impacts of climate change.[16] This investment in research and development of high-potential and high-impact technologies aims to help remove technological barriers to advance energy and environmental missions.[17]

The request provides that ARPA-E shall also expand its scope “to invest in climate-related innovations necessary to achieve net zero climate-inducing emissions by 2050.”[18] Given the increasing bipartisan support for alternative energy funding and ARPA-E’s continuing and rising commercial impact, it is likely that ARPA-E’s funding and support of the research and development of early-stage energy technologies will continue to pave the way for the commercialization of advanced energy technologies.


Endnotes

  1. https://www.law360.com/articles/1478133/biden-budget-provides-billions-for-clean-energy
  2. https://www.energy.gov/articles/statement-energy-secretary-granholm-president-bidens-doe-fiscal-year-2023-budget
  3. https://doi.org/10.17226/24778
  4. Id. at 22
  5. Id.
  6. Id.
  7. 42 U.S.C. § 16538(b)
  8. 42 U.S.C. § 16538(c)(1)(A)
  9. 42 U.S.C. § 16538(c)(2)
  10. https://arpa-e.energy.gov/about/our-impact
  11. Id.
  12. Id.
  13. Id.
  14. Id.
  15. https://www.science.org/content/article/biden-s-2023-budget-request-science-aims-high-again
  16. https://www.whitehouse.gov/wp-content/uploads/2022/03/budget_fy2023.pdf
  17. Id.
  18. https://www.science.org/content/article/biden-s-2023-budget-request-science-aims-high-again
©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Litigation Minute: Defending Consumer Class Action Claims Involving PFAS

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

Defending consumer class action claims alleging false and misleading product labeling based on the presence of per- and polyfluoroalkyl substances (PFAS) is similar to the defense of other food and beverage labeling class actions, but there are nuances the food and beverage industry should consider.

What Are PFAS?

As noted in last week’s edition, PFAS are per- and polyfluoroalkyl substances used for their flame-retardant and water-resistant properties. They are used in clothing, cosmetics, and food packaging. PFAS can also be found in municipal water supplies.

How Do PFAS Relate to Consumer Class Actions?

Plaintiffs’ counsel have brought consumer class actions against the makers and sellers of food and beverages alleging that the presence of PFAS in the labeled product renders the labeling false and misleading. Consumer class actions involving PFAS typically allege that the presence of PFAS renders affirmative representations on the product labeling false or misleading, or that the presence of PFAS must be disclosed on the label.

For example, both of these theories are at play in the case of Davenport v. L’Oreal USA, Inc. The complaint asserts that (1) the representations that L’Oreal’s waterproof mascaras are safe, effective, high quality, and appropriate for use on consumers’ eyelashes are false or misleading due to the presence of PFAS; and (2) L’Oreal failed to disclose to consumers that PFAS are present in detectable amounts in its waterproof mascaras.1

How is the Defense of PFAS Consumer Class Actions Similar to the Defense of Other Consumer Class Actions?

In most instances, the defense of consumer class actions involving PFAS allegations does not differ substantially from the defense of other types of consumer class actions. In the case of an alleged affirmative misrepresentation, the inquiry is the same on a pleadings challenge – whether the labeling is likely to mislead a reasonable person given the presence of PFAS in the product.

Moreover, plaintiffs typically assert a “premium price” theory, meaning the plaintiff claims he or she would not have purchased the item, or would have paid less, had the PFAS been properly disclosed. These allegations provide the defense with an opportunity to attack the damages model on class certification, similar to other types of consumer class actions.

How is the Defense of PFAS Consumer Class Actions Different From the Defense of Other Consumer Class Actions?

The defense of consumer class actions involving PFAS will differ from other consumer class actions in two key ways, depending on the allegations.

First, given the current lack of regulations governing the presence of PFAS in food and beverage products, the food and beverage industry should be aware that there is generally no duty to disclose the presence of PFAS in the absence of a relevant false or misleading statement on the product labeling. This lack of regulations provides an additional avenue for a pleadings challenge that may not otherwise succeed.

Second, scientific testing will be critical to determining whether there are any, or a uniform quantity of, PFAS present across the entire product line. PFAS variations between product exemplars may provide an additional avenue to defeat class certification.

Takeaway

Unfortunately, it appears that the food and beverage industry will see a new wave of class action litigation focused on the presence of PFAS in products. However, it also appears that many tried and true defense strategies will be applicable to such claims, and the unique nature of PFAS litigation will provide class defendants with additional strategies.

FOOTNOTES

1Davenport v. L’Oreal USA, Inc., No. 2:22-cv-01195 (C.D. Cal.).

Copyright 2022 K & L Gates
Article By Matthew G. Ball with K&L Gates.
For more articles about litigation, visit the NLR Litigation section.

CEQ Reverses First Set of Trump-Era NEPA Regulatory Reforms

On April 20, 2022, the White House Council on Environmental Quality (CEQ) published a final rule rolling back minor regulatory changes to the National Environmental Policy Act (NEPA) review process that it had promulgated in 2020. The new rule reverts to the language of CEQ’s original 1978 NEPA regulations but otherwise does not substantially alter the regulatory landscape. This is the first of an anticipated two-step process as identified in CEQ’s October proposed rule. The next regulatory proposal is expected to “more broadly revisit” the 2020 regulations and propose further changes to promote environmental justice, climate change, and other Biden administration “objectives.”

The Phase 1 final rule attracted significant public comment and media coverage, but in practice, it should not meaningfully affect NEPA reviews. The regulatory changes themselves are very confined. The final rule features three main components:

Purpose & Need/Alternatives

NEPA reviews of proposed federal agency actions begin by defining a statement of purpose and need and identifying a reasonable range of alternatives. In doing so, agencies routinely give substantial weight to the project proponent’s objectives, rather than reinventing what is proposed. The 2020 rule had codified that longstanding policy by adding language expressly directing federal agencies to consider their statutory authority and the goals of the project proponent when formulating statements of purpose and need and identifying a reasonable range of alternatives that could meet the purpose and need. The new final rule deletes reference to the applicant’s goals to avoid perceived “bias” and restore “flexibility.” Yet, the final rule does not prohibit agencies from considering the applicant’s goals, and instead recognizes they remain “important.” The final rule also retains the fundamental NEPA concept that a “reasonable” alternative must “meet the purpose and need for the proposed action.”

Individual Agency NEPA Regulations

While CEQ’s regulations apply across the federal government, individual federal departments and agencies also have their own rules and procedures for implementing NEPA specific to the particular types of actions they typically undertake. CEQ oversees these agency efforts. To promote consistency in agency NEPA reviews, including those involving multiple agencies, the 2020 rule sought to restrict agencies from adopting requirements stricter than CEQ’s rules. The new Phase I rule removes this ceiling. To be clear, this change does not allow agency-specific NEPA rules and procedures to conflict with CEQ’s regulations, but it does increase the potential for inconsistencies in the application of NEPA procedures across federal agencies. That said, many federal agencies developed their own NEPA regulations and procedures years ago, did not amend those regulations and procedures in response to the 2020 rule, and are not expected to substantially alter their procedures at least while CEQ is still developing its future Phase 2 rule.

Effects

The 2020 rule simplified the regulatory definition of “effects” or “impacts” of the proposed action and alternatives to eliminate separate terms for “direct,” “indirect,” and “cumulative” effects, and to clarify which effects are “reasonably foreseeable.” It specifically provided that a “but for” causal relationship is insufficient to attribute an effect to a proposed project, while excluding potential effects from analysis “if they are remote in time, geographically remote, or the product of a lengthy causal chain” or if they are beyond the agency’s control. But the 2020 rule did not preclude consideration of cumulative impacts or climate change and allowed for their incorporation as part of the baseline for the “no action” alternative. The new Phase 1 rule simply reverses those minor changes including restoring the separate “effects” definitions. This reversion may foster more expansive indirect and cumulative impacts analysis in NEPA documents akin to the analyses developed before the 2020 rule. However, particularly because the 2020 rule did not overrule case law overwhelmingly requiring consideration of cumulative impacts and climate change, the practical implication of these changes should be minimal.

© 2022 Beveridge & Diamond PC
For more regulatory updates, visit the NLR Administrative & Regulatory section.

EPA Will Hold Webinar in May 2022 on Reducing Vertebrate Animal Testing

The U.S. Environmental Protection Agency (EPA) announced on April 18, 2022, that it will hold a webinar on May 11, 2022, entitled “Data-Driven Solutions to Reducing Animal Use in Ecotoxicity.” Speakers will include:

  • Carlie LaLone, Ph.D., EPA Office of Research and Development (ORD), on “The Sequence Alignment to Predict Across Species Susceptibility (SeqAPASS) Tool: Extrapolating Knowledge Computationally.” EPA states that regulatory decision-making for chemical safety relies upon toxicity data generated from laboratory test species for the protection of wildlife in the environment. Typically, ecological risk assessments integrate safety factors to account for interspecies variability. According to EPA, the SeqAPASS tool is a more informed way to extrapolate knowledge from model species to other species that does not require the use of animals in toxicity testing and instead uses existing protein sequence knowledge. LaLone will describe EPA’s SeqAPASS tool and its applications for cross-species extrapolation relative to understanding conservation of biology and predicting chemical susceptibility.
  • Michael Lowit, Ph.D., EPA Office of Pesticide Programs (OPP), on “Exploring Potential Reductions in Fish Testing in a Regulatory Context.” According to EPA, as part of its commitment to reducing animal testing, OPP is conducting retrospective analyses of existing data to evaluate critically which EPA guideline studies form the basis of regulatory decisions. EPA states that the results from these analyses can inform if reductions can be made to the number of animals used without reducing the quality of ecological risk assessments. EPA is currently conducting a retrospective analysis for fish acute toxicity tests, which are used by OPP to assess potential risk to fish species from pesticides. For each pesticide, EPA typically requires in vivo testing of three different fish species. Lowit will focus on the relative sensitivity among species subjected to in vivo fish acute toxicity studies. The results of this analysis will inform whether there is a basis for reducing the number of species while providing sufficient information to support pesticide registration decisions.

The webinar is co-organized by the People for the Ethical Treatment of Animals (PETA) Science Consortium International, EPA, and the Physicians Committee for Responsible Medicine (PCRM). EPA notes that it does not necessarily endorse the views of the speakers. Registration is now open.

©2022 Bergeson & Campbell, P.C.
For more updates on the EPA, visit the NLR Environmental & Energy section.

EV Buses: Arriving Now and Here to Stay

In the words of Miss Frizzle, “Okay bus—do your stuff!”1 A favorable regulatory environment, direct subsidy, private investment, and customer demand are driving an acceleration in electric vehicle (EV) bus adoption and the lane of busiest traffic is filling with school buses. The United States has over 480,000 school buses, but currently, less than one percent are EVs. Industry watchers expect that EV buses will eventually become the leading mode for student transportation. School districts and municipalities are embracing EV buses because they are perceived as cleaner, requiring less maintenance, and predicted to operate more reliably than current fossil fuel consuming alternatives. EV bus technology has improved in recent years, with today’s models performing better in cold weather than their predecessors, with increased ranges on a single charge, and requiring very little special training for drivers.2 Moreover, EV buses can serve as components in micro-grid developments (more on that in a future post).

The Investment Incline

Even if the expected operational advantages of EV buses deliver, the upfront cost to purchase vehicles or to retrofit existing fleets remains an obstacle to expansion.  New EV buses price out significantly more than traditional diesel buses and also require accompanying new infrastructure, such as charging stations.  Retrofitting drive systems in existing buses comparatively reduces some of that cost, but also requires significant investment.3

To detour around these financial obstacles, federal, state, and local governments have made funding available to encourage the transition to EV buses.4 In addition to such policy-based subsidies, private investment from both financial and strategic quarters has increased.  Market participants who take advantage of such funding earlier than their competitors have a forward seat to position themselves as leaders.

You kids pipe down back there, I’ve got my eyes on a pile of cash up ahead!

Government funding incentives for electrification are available for new EV buses and for repowering existing vehicles.5 Notably, the Infrastructure Investment and Jobs Act committed $5 billion over five years to replace existing diesel buses with EV buses. Additionally, the Diesel Emissions Reduction Act provided $18.7 million in rebates for fiscal year 2021 through an ongoing program.

In 2021, New York City announced its commitment to transition school buses to electric by 2035.  Toward that goal, the New York Truck Voucher Incentive Program provides vouchers to eligible fleets towards electric conversions and covers up to 80% of those associated costs.6  California’s School Bus Replacement Program had already set aside over $94 million, available to districts, counties, and joint power authorities, to support replacing diesel buses with EVs, and the state’s proposed budget for 2022-23 includes a $1.5 billion grant program to support purchase of EV buses and charging stations.

While substantial growth in EV bus sales will continue in the years ahead, it will be important to keep an eye out for renewal, increase or sunset of these significant subsidies.

Market Players and Market Trends, OEMs, and Retrofitters

The U.S is a leader in EV school bus production:  two of the largest manufacturers, Blue Bird and Thomas Built (part of Daimler Truck North America), are located domestically, and Lion Electric (based in Canada) expects to begin delivering vehicles from a large facility in northern Illinois during the second half of 2022.  GM has teamed up with Lighting eMotors on a medium duty truck platform project that includes models prominent in many fleets, and Ford’s Super Duty lines of vehicles (which provide the platform for numerous vans and shuttle vehicles) pop up in its promotion of a broader electric future. Navistar’s IC Bus now features an electric version of its flagship CE series.

Additionally, companies are looking to a turn-key approach to deliver complete energy ecosystems, encompassing vehicles, charging infrastructure, financing, operations, maintenance, and energy optimization. In 2021, Highland Electric Transportation raised $253 million from Vision Ridge Partners, Fontinalis Partners (co-founded by Bill Ford) and existing investors to help accelerate its growth, premised on a turn-key fleet approach.7

Retrofitting is also on the move.  SEA Electric (SEA), a provider of electric commercial vehicles, recently partnered with Midwest Transit Equipment (MTE) to convert 10,000 existing school buses to EVs over the next five years.8 MTE will provide the frame for the school uses and SEA will provide its SEA-drive propulsion system to convert the buses to EV.9 In a major local project, Logan Bus Company announced its collaboration with AMPLY Power and Unique Electric Solutions (UES) to deploy New York City’s first Type-C (conventional) school bus.10

Industry followers should expect further collaborations, because simplifying the route to adopting an EV fleet makes it more likely EV products will reach customers.

Opportunities Going Forward

Over the long haul, EV buses should do well. Scaling up investments and competition on the production side should facilitate making fleet modernization more affordable for school districts while supporting profit margins for manufacturers. EVs aren’t leaving town, so manufacturers, fleet operators, school districts and municipalities will either get on board or risk being left at the curb.


 

1https://shop.scholastic.com/parent-ecommerce/series-and-characters/magic-school-bus.html

2https://www.busboss.com/blog/having-an-electric-school-bus-fleet-is-easier-than-many-people-think

3https://thehill.com/opinion/energy-environment/570326-electric-school-bus-investments-could-drive-us-vehicle

4https://info.burnsmcd.com/white-paper/electrifying-the-nations-mass-transit-bus-fleets

5https://stnonline.com/partner-updates/electric-repower-the-cheaper-faster-and-easier-path-to-electric-buses/

6https://www1.nyc.gov/office-of-the-mayor/news/296-21/recovery-all-us-mayor-de-blasio-commits-100-electric-school-bus-fleet-2035

7https://www.bloomberg.com/press-releases/2021-02-16/highland-electric-transportation-raises-253-million-from-vision-ridge-partners-fontinalis-partners-and-existing-investors

8https://www.electrive.com/2021/12/07/sea-electric-to-convert-10k-us-school-buses/#:~:text=SEA%20Electric%20and%20Midwest%20Transit,become%20purely%20electric%20school%20buses.

9 Id.

10https://stnonline.com/news/new-york-city-deploys-first-type-c-electric-school-bus/

© 2022 Foley & Lardner LLP

Electrification of the Fleet is on the Horizon, Preparing Now is Key

While we often hear how EVs will revolutionize the lives of the average consumer, commercial fleet owners are starting to take note of the impact these new powertrain systems will have on their own business and operations. As OEMs find creative ways to increase aerodynamics, extend battery range, and increase charging speeds, the zero emission and lower long-term cost of EVs compared to ICE (internal combustion engine) vehicles makes a compelling argument for adoption, at least on paper. What really matters is how those factors play out as the rubber hits the road, which OEMs are starting to see play out in real time. Over the past few years, there has been an explosion of commercial fleet platforms from existing and new entrants in the commercial vehicle space. From light to heavy trucking to fleet platform automobiles, EV technology is looking to capture every corner of the commercial fleet sector. Coupled with a slow reduction in the number of ICE vehicles produced in future years, the market may start pushing fleet operations towards EVs, whether they like it or not.

According to the Department of Transportation, over eight million vehicles made up commercial fleets in the US in 2020, which includes a mix of trucks and automobiles used in commercial and government operations. Even more make up commercial vehicles on the road that are not considered part of a fleet. As consumer demand drives most traditional OEMs toward EV dominated fleets, commercial fleet owners and operators need to start to prepare now for the same shift in their vehicle suppliers, or risk playing catchup once the market does turn from ICE to EV. This isn’t to say that failure to be an early adopter will be the death-knell to commercial fleet businesses; it likely won’t be. What businesses with commercial fleets should consider is their own business needs and their timeline for their own fleet replacement as EV technology and infrastructure support continues to evolve. Establishing a process and plan for upgrading existing fleets, training personnel, upgrading infrastructure, and understanding available programs for conversion will be key.

The switch from an ICE to EV fleet isn’t as simple as flipping a switch or plugging in a car – EVs bring a new powertrain and new sources of information. EVs in their current state are expensive, new vehicle supply is constantly in question, current operators are unaware of the nuances involved with operating an EV, and the infrastructure necessary to support a commercial fleet of EVs isn’t universally robust. For the average fleet operator, there also is a need to focus on route optimization, installing and maintaining new hardware capable to supporting charging on-site, revamping their maintenance and care procedures, and working with their local energy providers to understand how power demands in their local market may impact their own energy costs and needs. Additionally, although data analytics has improved existing fleet operations over the past few years, expect to see more nuanced data availability to the benefit of fleet operators.  As commercial and consumer EVs come out with ever more connectivity to the web and each other, coupled with the ability for “smart cities” to increase data available to drivers and vehicles, expect future fleet operators to get even more granular and predictive understanding of traffic patterns to optimize commercial routes. Managing these dynamics and capitalizing on new sources of information will better enable operators to adapt to the changing landscape. The ability to adapt to this new frontier will be a key trait for successful fleet operations in the Auto-2.0 operated environment.

© 2022 Foley & Lardner LLP

Fashion Sustainability and Social Accountability Act Proposed in New York

Happy New Year (are we still saying that?) from the Global Supply Chain Law Blog!  In our ever-evolving society, the fashion industry has taken new heights.  And with those heights, the industry is on pace to account for more than a quarter of the world’s carbon budget, according to the New Standard Institute.   Indeed, the group indicates that apparel and footwear are responsible for roughly 4-8.6% of global greenhouse gas emissions.  You may be wondering, “but how?”  Well after that sweater you bought last year (or even last month!) goes out of style, you may donate it.   According to CBS, some of those donations go overseas to Ghana, for example, to be sold.  The unsold clothes, however, end up as landfills creating an environmental nightmare.

As a result and in an effort to create more regulation, New York is taking action with respect to the environmental nightmare. Earlier this year, the New York legislator proposed a bill—the Fashion sustainability and social accountability act, which would amend the general business law, requiring fashion retail sellers and manufacturers to disclose environmental and social due diligence and policies.

Specifically, every fashion retail seller and fashion manufacturer doing business in the State of New York and having annual global gross revenues that exceed $100 million dollars must disclose its:

  1. environmental and social due diligence[1] policies,
  2. processes and outcomes, including significant real or potential negative environmental and social impacts, and
  3. targets for impact reductions, implementation, improvement and compliance on an annual basis.

The required disclosures would include supply chain mapping of at least 50% of suppliers (which the retail seller or manufacturer could choose) by volume across all tiers of production, a sustainability report, independently verified greenhouse gas reporting, volume of production displaced with recycled materials, and median wages of workers of suppliers compared with local minimum wage, to name a few.

All disclosures must be posted on the retail or manufacturer’s website within a year of enactment.  Enforcement of the bill would fall to the state’s attorney general, who would publish a report listing the fashion retail sellers and manufactures who are out of compliance with the act. Public shaming would not be the only punishment, however.  Retailers and manufacturers who fail to comply may be fined up to 2% of annual revenues of $450 million or more.  The money from the fines will be deposited into a community benefit fund, which will be used for environmental benefit projects that directly and verifiably benefit environmental justice communities.

In short, if the Fashion sustainability and social accountability act is enacted into law, fashion retailers and manufactures will be held accountable for environmental and social impacts stemming from their supply chain and production of apparel and shoes.  According to Vogue, “proponents say the bill will make history” as it could “shift how the fashion industry operates globally.” Thus, stay tuned as we will be tracking the legislation closely and will provide real time updates!

[1] “Due diligence” shall mean the process companies should carry  out to  identify,  prevent, mitigate and account or how they address actual and potential adverse impacts in  their  own  operations,  their  supply chain  and other Business relationships, as recommended in the Organisation for Economic Co-operation and Development Guidelines  for  Multinational  Enterprises,  the  Organisation  for Economic  Co-Operation and Development Due Diligence Guidance for Responsible Business Conduct  and United Nations Guiding Principles for Business and Human Rights.

© Copyright 2022 Squire Patton Boggs (US) LLP
For more articles on sustainability, visit the NLR Environmental, Energy & Resources type of law page.

A Hitchhiker’s Guide to What’s New in All Appropriate Inquiries

ASTM (American Society for Testing and Materials) due diligence standards have been updated to address environmental conditions not widely recognized in 2013 but EPA’s “all appropriate inquiry” regulations have yet to conform.

ASTM International (ASTM) issued its seventh version of Environmental Site Assessment (ESA) standards, E1527-21, on Nov. 1, 2021. These ASTM standards provide the leading source of guidance on minimum standards for Phase I ESAs for commercial and industrial property acquisitions. While ASTM E1527-21 improves upon the predecessor E1527-13, the US Environmental Protection Agency’s (EPA) “all appropriate inquiry” regulations (40 CFR § 312.11(b)) currently codify E1527-13 as setting the appropriate due diligence standard. As a matter of course, EPA is expected to amend its regulations to replace the reference to E1527-13 with a reference to E1527-21. However, until EPA amends its rules, buyers should recognize that the improved commercial standard for due diligence is based on E1527-21, but the regulatory safe harbor for complying with “all appropriate inquiry” standards for purposes of meeting EPA requirements remains E1527-13.

The changes in E1527-21 make it more stringent than E1527-13 and make E1527-13 insufficient for current transactions. Because rigorous ESAs provide important pre-acquisition business information, as well as statutory liability protection, we recommend, until EPA updates its Section 312 regulations, that purchasers immediately require that ESAs be performed to meet both E1527-13 and E1527-21 requirements. And following such EPA rulemaking, buyers should require ESAs meet E1527-21 requirements (presuming that is the outcome of the rulemaking).

E1527-21 identifies new requirements to be addressed in Phase I ESAs, including the following:

  • Enhanced research into the history of both the subject and adjoining properties.
  • Enhanced site recon investigation.
  • Definition changes to clarify what is or is not a recognized environmental condition (REC). For instance, a closure of an underground storage tank site may not have been remediated in the past to current regulatory standards. So there is now a requirement to look beyond, for example, a prior No Further Action letter. This is now a REC requiring further due diligence analysis.
  • Examples of RECs, such as poorly stacked drums and bulging tanks, are provided in new Appendix X.4.
  • Clarification of property use limitations and significant data gaps, which respectively may impair future site use or render an assessment’s findings of no RECs questionable.
  • Clarification on when the shelf life of a Phase I ESA commences, e.g., with an early record review component (or after a timely update) as opposed to using the final report date of the ESA.
  • Caveats about emerging issues like PFAS. See “Not So PFAS,” National Law Review (Nov. 2, 2021).
  • Clarification that the user is responsible for identifying environmental liens or land use or property use restrictions in a title search going back to 1980.

The environmental professional remains responsible for reporting to users on title search information and for finding institutional or engineering control records.

A systemic flaw in the E1527 standard is that it treats compliance issues like stepchildren, or not at all, by relying on users to add non-scope items such as wetland, air, water, and waste permit compliance. While this absence may be prudent for commercial properties and “green fields,” industrial properties require more. Compliance audits, including air, water, and waste compliance review, are needed for them. Unfortunately, the ASTM standard for those audits is only consultant process oriented (see ASTM E2107-20) and not sufficiently detailed, in our opinion.

However, the new E1527-21 standard will produce more conservative ESAs, perhaps increasing the cost of closing or raising additional cleanup concerns.

© 2022 Jones Walker LLP

Article By Robert Holden and Stanley A. Millan of Jones Walker LLP

For more articles on the ATSM, visit the NLR Environmental, Energy & Resources section.