Category: Environmental Law

Relief Arrives for Renewable Energy Industry – Inflation Reduction Act of 2022

On August 12, 2022, Congress passed the Inflation Reduction Act of 2022 (“Act” or “IRA”), a $400 billion legislative package containing significant tax and other governmental incentives for the energy industry, in particular the renewable energy industry. The bill will have an immediate impact on the wind and solar industries, along with other clean energy projects and businesses.

SUMMARY

The IRA is a slimmed down substitute for the Build Back Better bill resulting from a compromise with Senator Joe Manchin (D-WV), whose support was necessary for the bill to pass the Senate.

The IRA comes as welcome news to the renewable energy industry as important tax incentives for wind, solar and other renewable energy resources are set to expire or wind down. Existing law also did not provide any federal tax incentives for the rapidly growing stand-alone energy storage and clean hydrogen industries.

The IRA fixes that, and more. The Act extends the investment tax credit (ITC) for solar, geothermal, biogas, fuel cells, waste energy recovery, combined heat and power, small wind property, and microturbine and microgrid property for projects beginning construction before January 1, 2025. It also extends the production tax credit (PTC) for wind, biomass, geothermal, solar (which previously expired at the end of 2005), landfill gas, municipal solid waste, qualified hydropower, and marine and hydrokinetic resources for projects beginning construction before January 1, 2025. The IRA also allows taxpayers to include their interconnection costs as part of their eligible basis for the ITC.

The Act now allows the ITC to be taken for stand-alone energy storage (previously storage was only allowed an ITC if it was part of another project, e.g., solar). Other technologies are also benefitted from the IRA, including carbon capture and sequestration (CCS) (tax credit extended and modified), clean hydrogen (a new credit of up to $3.00 per kilogram of clean hydrogen produced), nuclear power (a new credit of up to 1.5c/kWh) and biofuel (existing credit extended).

The ITC and PTC now come with strings attached. To qualify for the restored 30% ITC and the 2.6c/kWh PTC (adjusted for inflation), projects must pay prevailing wages during construction and the first five years (in the case of the ITC) and 10 years (in the case of the PTC) of operation, while also meeting registered apprenticeship requirements. Projects that fail to satisfy the prevailing wage and apprenticeship requirements will only receive an ITC of 6% or a PTC of .3c/kWh (adjusted for inflation). The prevailing wage and apprenticeship requirements apply to employees of contractors and subcontractors as well as the company. These requirements are effective for projects that begin construction 60 days after the IRS issues additional guidance on this issue. Certain exceptions apply, including for certain small (less than 1 MW) facilities.

On the flip side, the Act includes enhancements that, in the case of the ITC, can increase the credit percentage if a project satisfies certain additional criteria. Bonuses are available for projects that (1) satisfy certain U.S. domestic content requirements (10%) or (2) are located in an “energy community” (10%) or an “environmental justice” area (10% or 20%). An “energy community” is defined as a brownfield site, an area which has or had significant employment related to oil, gas, or coal activities, or a census tract or any adjoining tract in which a coal mine closed after December 31, 1999, or in which a coal-fired electric power plant was retired after December 31, 2009. An “environmental justice” area is a low-income community or Native American land (defined in the Energy Policy Act of 1992) (10%) or a low-income residential building or qualified low-income economic benefit project (20%).

The Act also creates two new methods for monetizing the ITC, PTC, and certain other credits. Tax-exempt organizations will be permitted to elect a “direct pay” option in lieu of a tax credit. In a dramatic change that may have substantial impacts on renewable project finance, the Act permits most taxpayers to transfer the ITC, PTC, and certain other tax credits for cash.

For the first time, the Act includes a tax credit, known as the Advanced Manufacturing Production Credit, for companies manufacturing clean energy equipment in the U.S. such as PV cells, PV wafers, solar grade polysilicon, solar modules, wind energy components, torque tubes, structural fasteners, electrode active materials, battery cells, battery modules, and critical minerals.

The Act also contains major tax incentives, in the form of credits and enhanced deductions to spur electric and hydrogen-fueled vehicles, alternative fuel refueling stations, nuclear power, energy efficiency, biofuels, carbon sequestration and clean hydrogen. Additional grants are available for interregional and offshore wind and electricity transmission projects, including for interconnecting offshore wind farms to the transmission grid.

Additional detail regarding these provisions follow below.

KEY ENERGY PROVISIONS OF THE INFLATION REDUCTION ACT OF 2022

Investment Tax Credit (ITC)

The ITC is extended for projects beginning construction prior to January 1, 2025. The ITC starts at a base rate of 6%. The ITC increases to 30% if a project (1) pays prevailing wages during the construction phase and for the first five years of operation and (2) meets registered apprenticeship requirements. The ITC applies to solar, fuel cells, waste energy recovery, geothermal, combined heat and power, and small wind property, and is now expanded to include stand-alone energy storage projects (including thermal energy storage), qualified biogas projects such as landfill gas, electrochromic glass, and microgrid controllers. For microturbine property the base rate is 2%, which increases to 10% if the prevailing wage and apprenticeship requirements are met.

Projects under one megawatt (AC) and projects that begin construction prior to 60 days after the Secretary of the Treasury publishes guidance on the wage and registered apprenticeship requirements do not have to meet the prevailing wage and apprenticeship requirements to qualify for the 30% ITC.

PREVAILING WAGE REQUIREMENT

The new prevailing wage requirement is intended to ensure that laborers and mechanics employed by the project company and its contractors and subcontractors for the construction, alteration or repair of qualifying projects are paid no less than prevailing rates for similar work in the locality where the facility is located. The prevailing rate will be determined by the most recent rates published by the U. S. Secretary of Labor. Prevailing wages for the area must be paid during construction and for the first five years of operation for repairs or alterations once the project is placed in service. Failure to satisfy the standard will result in a significant penalty, including an 80% reduction in the ITC (i.e., an ITC of 6%), remittance of the wage shortfall to the underpaid employee(s) and a $5,000 penalty per failure. For intentional disregard of the requirement the penalty increases to three times the wage shortfall and $10,000 penalty per employee.

The prevailing wage requirement takes effect for projects that begin construction after December 31, 2022, but not before 60 days after the Secretary publishes its guidance. Projects under 1 MW (AC) are exempt from the requirement.

APPRENTICESHIP REQUIREMENT

For projects with four or more employees, work on the project by contractors and subcontractors must be performed by qualified apprentices for the “applicable percentage” of the total number of labor hours. A qualified apprentice is an employee who participates in an apprenticeship program under the National Apprenticeship Act. The applicable percentage of labor hours phases in and is equal to 10% of the total labor hours for projects that begin construction in 2022, 12.5% for projects beginning construction in 2023, and 15% thereafter. Similar penalties to the prevailing wage penalties apply for failure to satisfy the apprenticeship requirement. A “good faith” exception applies where an employer attempts but cannot find apprentices in the project’s locality.

The apprenticeship requirement takes effect for projects that begin construction after December 31, 2022, but not before 60 days after the Secretary publishes its relevant guidance. Projects under 1 MW (AC) are exempt from the requirement.

Credit Enhancements

Domestic Content. Assuming a project meets the prevailing wage and apprenticeship requirements, a qualifying project can earn a 10% ITC bonus (i.e., bringing the ITC to 40%), if it satisfies the domestic content requirement. To satisfy the domestic content requirement a project must use 100% U.S. steel and iron, and an “adjusted percentage” of the total costs of its manufactured components with products that are mined, produced or manufactured in the U.S. The applicable percentage for projects other than for offshore wind facilities initially is set at 40%, increasing to 45% in 2025, 50% in 2026, and 55% in 2027. For offshore wind facilities the adjusted percentage initially is 20%, and phases up to 27.5% in 2025, 35% in 2026, 45% in 2027, and 55% in 2028 and after. The initial domestic content bonus for projects failing to meet the prevailing wage and apprenticeship requirement is 2%, which percentage similarly phases up.

Two exceptions exist to the domestic content requirement: (1) if the facility is less than 1 MW (AC) and (2) if satisfying the requirement will increase the overall cost of construction by more than 25 percent, or if the relevant products are not produced in the U.S. in sufficient and reasonably available quantities or quality. Under these circumstances, the unavailability of the product is counted 100% against the adjusted percentage, that is, the adjusted percentage is calculated as if 100% U.S. content was supplied for the unavailable items.

The domestic content bonus is only available for projects placed in service after December 31, 2022.

Energy Community Bonus. A project can earn an additional 10% ITC bonus if it is built in an energy community. An energy community is defined as (a) a brownfield site (as defined under CERCLA), (b) an area that has or had significant employment related to the coal, oil, or gas industry and has an unemployment rate at or above the national average, or (c) a census tract or adjoining tract in which a coal mine closed after December 31, 1999 or a coal-fired electric power plant was retired after December 31, 2009.

The Energy Community Bonus is only available for projects placed in service after January 1, 2023.

Environmental Justice. An additional 10% and, in some cases, 20% ITC bonus, is available for solar and wind projects of 5 MW AC or less where the project is located in, or services, a low-income community. The environmental justice bonus is limited to a maximum of 1.8 gigawatts of solar and wind capacity in each of calendar years 2023 and 2024, for which a project must receive an allocation from the U.S. Treasury Secretary. The 10% bonus is for projects located in a low-income community or on Native American land (defined in the Energy Policy Act of 1992). The 20% bonus is available for projects that are part of a qualified low-income residential building project or a qualified low-income economic benefit project. A qualified low-income residential project is a residential rental building that participates in a housing program such as those covered under the Violence Against Women Act of 1994, a housing assistance program administered by the Department of Agriculture under the Housing Act of 1949, a housing program administered under the Native American Housing Assistance and Self-Determination Act of 1996, or similar affordable housing programs. A qualified low-income economic benefit project is one where at least 50% of the households have income at less than 200% of the poverty line or at less than 80% of the area’s median gross income.

Storage projects installed in connection with a solar project also qualify for the environmental justice bonus, but not stand-alone storage projects. A project receiving an allocation for the environmental justice credit must be placed in service within four years of the date it receives the allocation.

Stand-Alone Storage. The Act now provides a tax credit for stand-alone energy storage projects. To qualify, the storage project must be capable of receiving, storing and delivering electrical energy and have a nameplate capacity of at least 5 kWh. Thermal storage projects and hydrogen storage projects qualify under the new provision. Like the ITC for other technologies, the base ITC for stand-alone storage is 6%, and increases to 30% for projects that satisfy the prevailing wage and apprenticeship requirements or if they are placed into service prior to 60 days after the Treasury Secretary issues guidance on prevailing wage and apprenticeship standards.

Interconnection Equipment. Qualifying projects under 5 MW (AC) now may claim an ITC on their interconnection costs. The credit applies even if the interconnection facilities are owned by the interconnecting utility, so long as they were paid for by the taxpayer. This is not a stand-alone tax credit, but rather an additional cost added to a project’s basis eligible for the ITC.

Production Tax Credit (PTC)

The Act extends the production tax credit (PTC) for projects beginning construction before January 1, 2025. The PTC is set at an initial Base Rate of .3c/kwh. Like the ITC, the credit increases to 1.5c/kwh for projects satisfying the prevailing wage and apprenticeship requirements. The 1.5 c/kWh, with the inflationary adjustment provided for the PTC, brings the PTC up to 2.6c/kWh in 2022. In addition to wind projects, the PTC is available to solar, closed-loop and open-loop biomass, geothermal, landfill gas, municipal solid waste, qualifying hydropower, and marine and hydrokinetic facilities. Thus, solar projects may now choose either the PTC or the ITC. They cannot receive both.

CREDIT ENHANCEMENTS

Like the ITC, a project can receive an enhanced PTC similar in degree to those under the ITC for satisfying the domestic content, energy community and/or environmental justice requirements. For projects meeting the prevailing wage and apprenticeship requirements the increase for each applicable bonus is generally 10% of the underlying credit and, for projects failing to satisfy those requirements, 2%.

Clean Electricity Investment Tax Credit

The Act creates a new clean electricity tax credit (ITC and PTC) that replaces the existing ITC and PTC once they phase out at the end of 2024. The successor ITC/PTC is technology neutral. Any project producing electricity can qualify for the tax credit if its greenhouse gas emissions rate is not greater than zero. The successor ITC is 30% and the PTC is 1.5c/kWh, escalated annually with inflation. The Clean Energy ITC/PTC will phase out the later of 2032 or when emission targets are achieved (i.e., the electric power sector emits 75% less carbon than 2022 levels). Once the target is reached, facilities will be able to claim a credit at 100% value in the first year, then 75%, then 50%, and then 0%.

Clean Hydrogen Production Credit

This Act for the first time provides a tax credit for qualifying clean hydrogen projects. The credit is available for clean hydrogen produced at a qualifying facility during the facility’s first 10 years of operation. The base credit amount is $0.60 per kilogram (kg) times the “applicable percentage,” adjusted annually for inflation. For projects meeting the prevailing wage and apprenticeship requirements the credit amount is five times that base amount, or $3.00/kg times the applicable percentage, adjusted annually for inflation.

The applicable percentage for hydrogen projects achieving a lifecycle greenhouse gas emissions rate of less than 0.45 kilograms of carbon dioxide equivalent (CO2e) per kg is 100%. The applicable percentage falls to 33.4% for hydrogen projects with an emissions rate between .45kg and 1.5kg, and to 25% for hydrogen projects with an emissions rate between 1.5 kg and 2.5 kg. For hydrogen projects with a lifecycle greenhouse gas emissions rate between 4 kg and 2.5 kg of CO2e per kg, the applicable percentage is 20%.

To qualify for the credit, the facility must begin construction before January 1, 2033. Facilities existing before January 1, 2023 can qualify for a credit based on the date that modifications to their facility required to produce clean hydrogen are placed into service. Taxpayers may also claim the PTC for electricity produced from renewable resources by the taxpayer if the electricity is used at a clean hydrogen facility to produce qualified clean hydrogen. The Direct Pay option, discussed below, is available for clean hydrogen projects.

Taxpayers can elect to claim the ITC in lieu of the clean hydrogen production credit. However, taxpayers claiming the clean hydrogen credit cannot also claim a tax credit for carbon capture under Section 45Q, and vice versa.

Carbon Capture and Sequestration (CCS) Credit

Under prior law, industrial carbon capture or direct air capture (DAC) facilities that began construction by December 31, 2025, could qualify for the Section 45Q tax credit for carbon oxide sequestration. This credit could be claimed for carbon oxide captured during the 12-year period following the facility being placed in service. The per metric ton tax credit for geologically sequestered carbon oxide was set to increase to $50 per ton by 2026 ($35 per ton for carbon oxide that is reused, such as for enhanced oil recovery) and adjusted for inflation thereafter.

The Act extends the deadline for construction to January 1, 2033 and increases the credit amount. The base credit amount for CCS is $17 per metric ton for carbon oxide that is captured and geologically sequestered, and $12 per metric ton for carbon oxide that is reused. For facilities that meet the prevailing wage and apprenticeship requirements during construction and for the first 12 years of operation, the credit amounts are $85 per ton and $60 per ton, respectively.

The credit amount for carbon oxide captured using DAC and geologically sequestered is also increased under the Act to a base rate of $36 per metric ton, and to $180 per metric ton for projects that meet prevailing wage and apprenticeship requirements. The rates are indexed for inflation beginning in 2026.

The Act reduces the minimum plant size required to qualify for the credit:  from 100,000 to 1,000 tons per year for DAC; from 500,000 to 18,750 metric tons per year for electric generating facilities paired with qualifying CCS equipment, and from 25,000 to 12,500 metric tons per year for any other facility. A CCS project paired with an electric generating unit will be required to capture at least 75% of unit (not facility) CO2 production.

Advanced Energy Project Credit

The Act provides a 30% credit for investments in projects that re-equip, expend, or establish certain domestic manufacturing or industrial facilities to support the production or recycling of renewable energy property. Examples of such facilities include those producing or recycling components for:

  • Energy storage systems and components;
  • Grid modernization equipment or components;
  • Equipment designed to remove, use, or sequester carbon oxide emissions;
  • Equipment designed to refine, electrolyze, or blend any fuel, chemical, or product which is renewable or low-carbon and low-emission;
  • Property designed to produce energy conservation technologies (residential, commercial and industrial);
  • Electric or fuel-cell vehicles, including for charging and refueling infrastructure;
  • Hybrid vehicles weighing less than 14,000 pounds and associated technologies, components, or materials;
  • Re-equipping industrial and manufacturing facilities to reduce their greenhouse gas emissions by at least 20%;
  • Re-equipping, expanding, or establishing an industrial facility for the processing, refining or recycling of critical materials.

Projects not satisfying the prevailing wage and apprenticeship requirements will only receive the base ITC credit of 6%.

The Act makes $10 billion available for qualifying advanced energy projects. Of that amount, at least $4 billion must be allocated to projects located in energy communities. The Treasury Secretary will establish a program to award credits to qualifying advanced energy projects. Applicants awarded credits will have two years to place the property in service. The provision goes into effect on January 1, 2023.

Advanced Manufacturing Production

The Act creates a new production tax credit that can be claimed for the domestic production and sale of qualifying solar and wind components, such as inverters, battery components and critical minerals needed to produce these components.

Credits for solar components include:

  • for thin film photovoltaic cell or crystalline photovoltaic cell, 4 cents per DC watt of capacity;
  • for photovoltaic wafers, $12 per square meter;
  • for solar grade polysilicon, $3 per kilogram;
  • for polymeric backsheet, 40 cents per square meter; and
  • for solar modules, 7 cents per DC watt of capacity.

For wind energy components, if the component is an offshore wind vessel, the credit is equal to 10% of the sales price of the vessel. Otherwise, the credits for various wind components vary as set forth below, which amount is multiplied by the total rated capacity of the completed wind turbine on a per watt basis for which the component is designed.

The applicable amounts for wind energy components are:

  • 2 cents for blades
  • 5 cents for nacelles
  • 3 cents for towers
  • 2 cents for fixed platform offshore wind foundations
  • 4 cents for floating platform offshore wind foundations
  • for torque tubes and longitudinal purlin, $0.87 per kg
  • for structural fasteners, $2.28 per kg
  • for inverters, the credit is an amount multiplied by the inverter’s AC capacity, with different types of inverters eligible for specified credit amounts ranging from 1.5 cents to 11 cents per watt
  • for electrode active materials, the credit is 10% of the production cost
  • for battery cells the credit is $35 per kilowatt hour of battery cell capacity. Battery modules qualify for a credit of $10 per kilowatt hour of capacity (or $45 in the case of a battery module which does not use battery cells).

A 10% credit is also available for the production of critical minerals. Critical minerals include aluminum, antimony, barite, beryllium, cerium, cesium, chromium, cobalt, dysprosium, europium, fluorspar, gadolinium, germanium, graphite, indium, lithium, manganese, neodymium, nickel, niobium, tellurium, tin, tungsten, vanadium and yttrium.

For purposes of the credits for battery cells and modules, to qualify the capacity-to-power ratio cannot exceed 100:1. The term ‘capacity-to-power ratio’ means the ratio of the capacity of the cell or module to the maximum discharge amount of the cell or module.

The advanced manufacturing credit phases out for components sold after December 31, 2029. Components sold in 2030 are eligible for 75% of the full credit amount. Components sold in 2031 and 2032 are eligible for 50% and 25% of the full credit amount, respectively. No credit is available for components sold after December 31, 2032. The phase-out does not apply to the production of critical minerals.

DIRECT PAY

The Act contains a valuable cash payment option that allows certain organizations to treat certain tax credit amounts including, among others, the ITC, PTC, clean hydrogen, and carbon capture credits, as payments of tax and then receive a refund for that tax that is deemed paid. Under the so-called “direct pay” option, in lieu of receiving a tax credit, an eligible entity will be treated as if it had paid taxes in the amount of the credit, for which it can then receive a cash refund. Entities eligible for the direct pay option include tax-exempt organizations, state and local governments, Indian tribes (as defined in the Act), the Tennessee Valley Authority, and any Alaska Native Corporation. The direct pay option is subject to an annual election and must be claimed by a partnership or S corporation rather than its partners or S corporation shareholders. Refunds under the direct pay provisions are treated the same as tax credits for purposes of basis reduction, depreciation rules, and recapture.

For qualifying facilities electing direct pay that do not meet the domestic content requirements, a reduction applies for projects beginning construction in 2024 (90%) and 2025 (85%). Thereafter, the direct pay option will not be available for projects that do not satisfy the domestic content requirement.

TRANSFERRABLE CREDITS

The IRA allows eligible taxpayers that do not elect the direct pay option to transfer certain credits to unrelated taxpayers including, among others, the ITC, PTC, clean hydrogen, and carbon capture credits. The transferred credit must be exchanged for cash. Credits may only be transferred once. Carryforwards or carrybacks are not transferable. Payments made to the transferor of the credit are not taxable to the transferor, nor is the payment by the transferee to the transferor deductible to the transferee.

The credit period for transferred credits is 23 years (including three years for carrybacks). The credit must be used in earliest possible year of transferee. A 20% penalty may apply for both direct payments and transfers where excessive payments have occurred.

Zero Emission Nuclear Power Production Credit

The Act includes a new PTC for the production of electricity from an existing nuclear facility that was placed in service before the date of enactment of the Act. To qualify, the electricity from the facility must be produced and sold to an unrelated person after December 31, 2023. The credit terminates on December 31, 2032. The base PTC amount is 3 cents per kWh, but is increased five times if wage and apprenticeship requirements are met (to 1.5 cents per kWh), in each case adjusted annually for inflation and reduced by a reduction amount to the extent electricity from the plant is sold at a price over $0.025/kWh.

Electric Vehicles and Hydrogen-Fueled Cars

The Act includes a $7,500 credit for taxpayers purchasing new electric vehicles and a $4,500 tax credit for used ones. The Act eliminates the previous “per-manufacturer” limits that applied to the new vehicle credit, but imposes new domestic content and assembly requirements, as well as caps on the retail price of new vehicles, and the income of the taxpayers purchasing the vehicle.

The Act also sets aside financing and credits to promote electric vehicle manufacturing. It calls for $2 billion in grants to help convert existing auto manufacturing factories into ones that make electric vehicles and $20 billion of loans for new clean vehicle manufacturing facilities. The Act extends the credits to hydrogen-fueled cars in addition to EVs.

Alternative Fuel Refueling Property Credit

The Act revives the expired credit for alternative fuel refueling property (i.e., electric vehicle chargers), allowing it for property placed in service before December 31, 2032. The base credit is 6% of the cost of property, and is increased to 30% if wage and apprenticeship requirements are met. The previous $30,000 cap is also increased to $100,000.

OFFSHORE WIND

The IRA puts in place a 10-year window in which a lease for offshore wind development cannot be issued unless an oil and gas lease sale has also been held in the year prior and is not less than 60 million acres. The Act also withdraws the Trump administration’s moratorium on offshore wind leasing in the southeastern U.S. and eastern Gulf of Mexico.

GREEN BANK

The Act includes $27 billion toward a clean energy technology accelerator to support deployment of emission-reduction technologies, especially in disadvantaged communities. The EPA Administrator would be permitted to disburse $20 billion to “eligible recipients,” which are defined as non-profit green banks that “provide capital, including by leveraging private capital, and other forms of financial assistance for the rapid deployment of low- and zero-emission products, technologies, and services.

Clean Fuel Production Credit

The Act creates a new tax credit for domestic clean fuel production starting in 2025 and expires for transportation fuels sold after December 31, 2027. The tax credit is calculated as the applicable amount multiplied by the emissions factor of the fuel. The base credit is $0.20 per gallon of transportation fuel produced at a qualified facility and sold, which increases to $1.00 if prevailing wage requirements are met. The base credit is $0.35/gallon for sustainable aviation fuel, $1.75 if labor and wage requirements are satisfied. The emissions factor of the fuel may reduce the credit amount. The credits are adjusted for inflation. The credit cannot be claimed if other clean fuel credits are claimed, including clean hydrogen production.

Article By Kris J. Eimicke and Merrill Kramer of Pierce Atwood LLP

For more energy and environmental legal news, click here to visit the National Law Review.

©2022 Pierce Atwood LLP. All rights reserved.

EPA Updates Safer Chemical Ingredients List, Adding 22 Chemicals and Changing the Status of One Chemical

The U.S. Environmental Protection Agency (EPA) announced on August 11, 2022, that it updated the Safer Chemical Ingredients List (SCIL), “a living list of chemicals by functional-use class that EPA’s Safer Choice program has evaluated and determined meet the Safer Choice Standard.” EPA added 22 chemicals to the SCIL. EPA states that to expand the number of chemicals and functional-use categories on the SCIL, it encourages manufacturers to submit their safer chemicals for review and listing on the SCIL. In support of the Biden Administration’s goals, the addition of chemicals to the SCIL “incentivizes further innovation in safer chemistry, which can promote environmental justice, bolster resilience to the impacts of climate change, and improve water quality.” According to EPA, chemicals on the SCIL “are among the safest for their functional use.”

EPA also changed the status for one chemical on the SCIL and will remove the chemical from the list in one year “because of a growing understanding of the potential health and environmental effects.” According to EPA, the chemical was originally listed on the SCIL based on data from a closely related substance that EPA marked with a grey square earlier this year. EPA’s process for removing a chemical from the SCIL is first to mark the chemical with a grey square on the SCIL web page to provide notice to chemical and product manufacturers that the chemical may no longer be acceptable for use in Safer Choice-certified products. A grey square notation on the SCIL means that the chemical may not be allowed for use in products that are candidates for the Safer Choice label, and any current Safer Choice-certified products that contain this chemical must be reformulated unless relevant health and safety data are provided to justify continuing to list the chemical on the SCIL. EPA states that the data required are determined on a case-by-case basis. In general, data useful for making such a determination provide evidence of low concern for human health and environmental impacts. Unless information provided to EPA adequately justifies continued listing, EPA then removes the chemical from the SCIL 12 months after the grey square designation.

According to EPA, after this update is made, there will be 1,055 chemicals listed on the SCIL. EPA is committed to updating the SCIL with safer chemicals on a regular basis. EPA states that the SCIL is a resource that can help many different stakeholders:

  • Product manufacturers use the SCIL to help make high-functioning products that contain safer ingredients;
  • Chemical manufacturers use the SCIL to promote the safer chemicals they manufacture;
  • Retailers use the SCIL to help shape their sustainability programs; and
  • Environmental and health advocates use the SCIL to support their work with industry to encourage the use of the safest possible chemistry.

EPA’s Safer Choice program certifies products containing ingredients that have met the program’s rigorous human health and environmental safety criteria. The Safer Choice program allows companies to use its label on products that meet the Safer Choice Standard. The EPA website contains a complete list of Safer Choice-certified products.

Article By Lynn L. Bergeson and Carla N. Hutton of Bergeson & Campbell, P.C.

For more environmental legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

GAO Publishes Report on Technologies for PFAS Assessment, Detection, and Treatment

The U.S. Government Accountability Office (GAO) published a report on July 28, 2022, entitled Persistent Chemicals: Technologies for PFAS Assessment, Detection, and Treatment. GAO was asked to conduct a technology assessment on per- and polyfluoroalkyl substances (PFAS) assessment, detection, and treatment. The report examines the technologies for more efficient assessments of the adverse health effects of PFAS and alternative substances; the benefits and challenges of current and emerging technologies for PFAS detection and treatment; and policy options that could help enhance benefits and mitigate challenges associated with these technologies. GAO assessed relevant technologies; surveyed PFAS subject matter experts; interviewed stakeholder groups, including government, non-governmental organizations (NGO), industry, and academia; and reviewed key reports. GAO identified three challenges associated with PFAS assessment, detection, and treatment technologies:

  • PFAS chemical structures are diverse and difficult to analyze for health risks, and machine learning requires extensive training data that may not be available;
  • Researchers lack analytical standards for many PFAS, limiting the development of effective detection methods; and
  • The effectiveness and availability of disposal and destruction options for PFAS are uncertain because of a lack of data, monitoring, and guidance.

GAO developed the following three policy options that could help mitigate these challenges:

  • Promote research: Policymakers could support development of technologies and methods to more efficiently research PFAS health risks. This policy option could help address the challenge of limited information on the large number and diversity of PFAS, as well as a lack of standardized data sets for machine learning;
  • Expand method development: Policymakers could collaborate to improve access to standard reference samples of PFAS and increase the pace of method and reference sample development for PFAS detection. This policy option could help address the challenges of a lack of validated methods in media other than water, lack of analytical standards, and cost, which all affect researchers’ ability to develop new detection technologies; and
  • Support full-scale treatment: Policymakers could encourage the development and evaluation of full-scale technologies and methods to dispose of or destroy PFAS. This policy option could help address the challenges of cost and efficiency of disposal and destruction technologies and a lack of guidance from regulators.

GAO notes that these policy options involve possible actions by policymakers, which may include Congress, federal agencies, state and local governments, academia, and industry.

Article By Lynn L. Bergeson and Carla N. Hutton of Bergeson & Campbell, P.C.

For more environmental legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

PFAS Health Advisories Under Legal Attack…Again

On June 15, 2022, the EPA issued Health Advisories (HAs) for five specific PFAS, including PFOA and PFOS. On July 29, 2022, the American Chemistry Council filed a petition in the Court of Appeals for the District of Columbia challenging the validity of the EPA’s PFOA and PFOS HAs. The group alleges that the EPA did not follow proper procedure in setting the HAs and that the EPA’s determinations were scientifically flawed. The petition follows closely on the heels of a similar challenge to the EPA’s HA for GenX PFAS. Industries that will be impacted by upcoming EPA PFAS regulations will closely follow the petition as it makes its way through court, as it may provide predictive indicators of arguments that will unfold as the EPA’s PFAS regulations increase.

PFAS Health Advisories

In October 2021, the EPA released its PFAS Roadmap, which stated explicit goals and deadlines for over twenty action items specific to PFAS. As part of the Roadmap, the EPA pledged to re-assess the existing Health Advisories (HAs) for PFOA and PFOS, as well as establish HAs for PFBS and GenX chemicals. In June 2022, the EPA fulfilled its promise on all fronts when it set HAs for PFOA (interim), PFOS (interim), PFBS (final) and GenX (final). While not enforceable levels for PFAS in drinking water, the EPA’s PFAS Health Advisories are nevertheless incredibly significant for a variety of reasons, including influence on future federal and state drinking water limits, as well as potential impacts on future PFAS litigation.

The levels set by the EPA’s PFAS Health Advisories were as follows:

PFOA

.004 ppt

PFOS

.02 ppt

GenX

10 ppt

PFBS

2,000 ppt

Legal Challenge To PFAS Health Advisories

On July 13, 2022, The Chemours Company filed a petition challenging the validity of the EPA’s GenX HA. On July 29, 2022, the American Chemistry Council (ACC) followed suit and petitioned to have the EPA’s HAs for PFOA and PFOS vacated. In the petition, the ACC argues that the EPA circumvented procedural requirements in the Safe Drinking Water Act by setting interim HAs for PFOA and PFOS and that the EPA is improperly attempting to create enforcement standards for drinking water that are unattainable. While the HAs themselves are not enforceable, the ACC argues that the HAs are relied upon by states when they set their own drinking water standards and signal an EPA intent to set unachievably low levels of enforceable PFAS standards at the federal level. The ACC points to recent findings by the Science Advisory Board (SAB) that criticized the EPA’s reliance on the same studies and scientific articles upon which the HAs were based.

Conclusion

Now more than ever, the EPA is clearly on a path to regulate PFAS contamination in the country’s water, land and air. The EPA has also for the first time publicly stated when they expect such regulations to be enacted. These regulations will require states to act, as well (and some states may still enact stronger regulations than the EPA). Both the federal and the state level regulations will impact businesses and industries of many kinds, even if their contribution to drinking water contamination issues may seem on the surface to be de minimus. In states that already have PFAS drinking water standards enacted, businesses and property owners have already seen local environmental agencies scrutinize possible sources of PFAS pollution much more closely than ever before, which has resulted in unexpected costs. Beyond drinking water, though, the EPA PFAS Roadmap shows the EPA’s desire to take regulatory action well beyond just drinking water, and companies absolutely must begin preparing now for regulatory actions that will have significant financial impacts down the road.

Article By John Gardella of CMBG3 Law

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©2022 CMBG3 Law, LLC. All rights reserved.

After EPA Rule Changes, Which ASTM Phase I ESA Standard Should You Use?

On November 1, 2021, ASTM International released its revised standard for Phase I Environmental Site Assessments. On March 14, 2022, the U.S. Environmental Protection Agency (the “EPA”) published a Direct Final Rule that confirmed the new ASTM standard, ASTM E1527-21, could be used to satisfy the EPA’s All Appropriate Inquiry (“AAI”) regulations. That, in turn, would mean that satisfying the ASTM E1527-21 standard could help a potential buyer of contaminated property satisfy some of the EPA’s requirements to qualify as a Bona Fide Prospective Purchaser, which may lead to being protected from liability under the federal Superfund statute.

However, on May 2, 2022, EPA withdrew the Final Rule it had published on March 14, 2022, and indicated it would address the comments it received concerning the previously Final Rule in a subsequent final action.

Why the change and, more importantly, which ASTM standard should a potential purchaser of contaminated property use when having a Phase I Site Assessment prepared?

EPA withdrew its Direct Final Rule in response to the negative comments it received concerning that rule. EPA had planned to allow both the November 2021 ASTM standard and its predecessor from 2013 (the ASTM E1527-13 standard) to be used to satisfy certain AAI requirements. Those commenting said that approach would lead to confusion in the marketplace, and would allow reports that did not meet the ASTM E1527-21 standard to be considered adequate, even though the 2021 ASTM standard represented what the real estate and environmental community had determined to be good commercial and customary practice. In other words, because the 2021 standard required a more rigorous approach to the relevant environmental due diligence work needed to prepare a Phase I Environmental Site Assessment, EPA’s approach would have meant that less thorough reports could have been deemed sufficient.  As noted in the comment letter submitted to the EPA by the Environmental Bankers Association, “ASTM E1527-21 includes important updates that will reduce the risk of Users [of the ESA report] failing to identify conditions indicative of hazardous substance releases, potentially jeopardizing landowner [and prospective purchaser] liability protections to [potential] CERCLA [liability].” All of that makes sense: the better the environmental due diligence, the less risk of unpleasant surprises later.

But, where does that leave potential purchasers of contaminated real estate? Should they have their consultants prepare their Phase I Site Assessment reports based on the 2021 ASTM standard, or its 2013 predecessor, or both?

Contaminated real estate buyers, and any other parties involved in the transaction, such as lenders and equity investors, should require their environmental consultants to prepare their Phase I Environmental Site Assessment in conformance with the ASTM E1527-13 standard, because that is the ASTM standard that is currently referenced in EPA’s AAI regulations. It is necessary to do so, at least for now, in order to be able to qualify for Bona Fide Prospective Purchaser protection from CERCLA liability.

Those parties should also consider having their environmental consultants prepare the same Phase I Environmental Site Assessment in conformance with the updated ATSM E1527-21 standard. While some additional cost may be involved, nonetheless it may be worthwhile in order to meet what ASTM sees as the current standard of practice regarding these reports.

Another important consideration in the preparation of these reports is whether additional issues that are not formally included in the scope of either the ASTM E1527-13 or the ASTM E1527-21 standard should be addressed. For example, as noted in an appendix to the E1527-21 standard, petroleum products are within the scope of the practice “because they are of concern with respect to commercial real estate, and current custom and usage is to include an inquiry into the [past or present] presence of petroleum products when doing an environmental site assessment of commercial real estate.” That is so even though petroleum products generally do not lead to liability under CERCLA.

The non-scope issues appendix to the ASTM E1527-21 standard also addresses “substances not defined as hazardous substances” and does a good job addressing why a user of an ASTM-compliant report should at least consider whether to include certain emerging contaminants such as per- and polyfluoroalkyl substances, also known as PFAS, within its scope. The point is to think about whether to evaluate potential environmental liability for PFAS on a case-by-case basis in light of state law considerations, even though PFAS compounds have not yet been designated “hazardous substances” under CERCLA.

EPA’s recent rule-making activities have not provided clear guidance for potential purchasers of contaminated property regarding which ASTM standard should be used in preparing environmental site assessment reports that comply with EPA’s AAI regulations. At the moment, what seems to make the most sense is to have these reports prepared so that they comply with the ASTM E1527-13 standard and to consider whether to comply with the E1527-21 standard in addition. The user should also carefully evaluate whether certain considerations, such as potential PFAS contamination, should be included within the scope of the report.

Article By Ned Abelson and Justin Rheingold of Goulston & Storrs

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2022 Goulston & Storrs PC.

Supreme Court Signals Move Away from Judicial Deference to Administrative Agencies

KEY TAKEAWAYS

In a unanimous decision on June 15, 2022, the Court in American Hospital Association v. Becerra[2] examined a Medicare reimbursement formula reduction that affected certain hospitals. While rejecting the DHHS agency interpretation of the reimbursement statute, the Court made no mention of Chevron deference even though the parties extensively briefed this doctrine. Instead, the Court focused solely on the relevant language of the statute. In particular, the Court held that the “text and structure” of the statute demonstrated that the Medicare reimbursement cut was not consistent with the statute.

In a 5-4 decision a few weeks later, the Court in Becerra v. Empire Health Foundation[3] again made no mention of Chevron deference even though the majority noted that the underlying statute’s “ordinary meaning … [did] not exactly leap off the page.” Despite its initial conclusion that the ordinary meaning of the statutory language was unclear, the Court continued its recent pattern of (a) choosing to not apply Chevron deference directly and (b) instead performing textural and structural analysis of its own. Based on this statutory analysis, the Court in Empire Health concluded that the statute was “surprisingly clear” if read as technical provisions for specialists and that the language of the statute supported the agency’s implementing regulation.

Finally, in West Virginia v. EPA,[4] the Supreme Court in a 6-3 decision again refused to give any deference to the EPA’s interpretation of a Clean Air Act provision which the EPA claimed as the statutory basis to regulate greenhouse gas emissions by power plants. The Court concluded that the EPA had violated the “Major Questions” Doctrine when the EPA used this provision to regulate carbon emissions. Under the “Major Questions” Doctrine, an agency cannot make decisions of vast economic and political significance without Congress expressly giving the agency the power to do so. Since the EPA’s effort to regulate greenhouse gases by making industry-wide changes was a decision of “vast economic and political significance,” the Court concluded that the EPA lacked the authority to do so in light of the overall nature and structure of the statute. Thus, even though there was some textual support for the EPA’s position, the Court again refused to defer to the agency and its interpretation of a statute.

Read together, these three decisions show an increased skepticism by the Court of agency interpretations of statutes and signal that going forward, the federal courts will more closely scrutinize administrative agency decisions in general. Businesses that have, to date, relied on an administrative agency interpretation may need to reassess their reliance if the interpretation relies on a broad or strained reading of a statute. Conversely, businesses currently restrained by agency interpretations which were shown deference by courts may now have an opening to challenge those interpretations.

FOOTNOTES

[1] Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[2] Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896 (2022).

[3] Becerra v. Empire Health Found., for Valley Hosp. Med. Ctr., 142 S. Ct. 2354 (2022).

[4] W. Virginia v. Env’t Prot. Agency, 142 S. Ct. 2587 (2022).

Article By Andrew T. Blum, Matthew J. Greenberg, and Larry J. Saylor of Miller Canfield

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© 2022 Miller, Canfield, Paddock and Stone PLC

What Public Comments on the SEC’s Proposed Climate-Related Rules Reveal—and the Impact They May Have on the Proposed Rules

On March 21, 2022, the Securities and Exchange Commission (“SEC”) published for comment its much-anticipated proposed rules on climate disclosures, entitled “The Enhancement and Standardization of Climate-Related Disclosures for Investors.”[1]  The SEC invited public comments on these rules, and the response was overwhelming—nearly 15,000 comments were published on the SEC’s website over the course of three months, from individuals and organizations representing all aspects of modern American society.  Few, if any, of the SEC’s rule proposals have ever received such voluminous, significant, and diverse comments.  And the comments themselves range from brief statements to complex legal arguments either in support or in opposition, as well as detailed proposals for further changes to the proposed climate disclosures.  The comment period closed on June 17, 2022, and further action by the SEC to finalize the proposed rule is anticipated this fall.

This article provides a brief summary of the comments, and analyzes and summaries the key points the comments conveyed.

Statistical Analysis of Form and Individualized Submissions

Since the beginning of the public comment period, the SEC has received 14,645 comments on the proposed climate disclosure rules.[2]  To provide some context for how massive that figure is, the SEC has only received 144 comments on its proposed cybersecurity risk management rules, which were announced two weeks before the proposed climate disclosures and have also been the subject of extensive commentary in the press.  Yet despite the prominence of the SEC’s cybersecurity proposal, it has received fewer than 1% of the comments offered on the climate disclosure rule.

Of the 14,645 comments, approximately 12,304, or 84% of the total, are form letters.  This includes 10,589 comments that the SEC itself identified as form letters, and another 1,715 apparently individualized comments that were actually form letters.  However, even when removing these form letters from consideration, fully 2,341 individualized comment letters remain—a substantial number, and a significant percentage (16%) of the volume.[3]

The form letters are worth exploring in more detail.  Of the 12,304 comments, fully 10,861 (88%) broadly express support for the proposed climate disclosure rule, and only 1,443 (12%) are in opposition.  This disparity in the level of support for the two positions is best conveyed by the chart below.

Positions for and against the new SEC Disclosures

Notably, it has been possible to identify some, although not all, of the organizations that sponsored the form letter writing campaign.  In particular, form letters proposed by the Union of Concerned Scientists in support of the proposed climate disclosures were submitted 6886 times—more than 55% of the total volume of form letters.  Additionally, the form letters proposed by the Climate Action Campaign and the National Wildlife Federation in support of the SEC’s proposed disclosures were also quite voluminous among the submissions—1208 and 956 comment letters, respectively.  The most frequent form letters submitted in opposition to the proposed climate disclosure rules—e.g., those proposed by FreedomWorks (348 letters) and the Club for Growth (172 letters)—did not achieve nearly the same volume of submissions.

But the apparent overwhelming majority in favor of the proposed SEC climate disclosure rules, as conveyed by the form letters, is belied by the individualized submissions, which were far more closely divided.  Of the 2341 individualized comment letters submitted, approximately 53% (1238 comment letters) expressed support, about 43% (1015 comment letters) were opposed, and a handful—around 4% (88 comment letters)[4]—did not express a position.  The below chart demonstrates the levels of support expressed by the individualized submissions:

Individual submissions supporting, opposing, and neutral to the new SEC Disclosures

Besides the mere volume of submissions, however, the most noteworthy aspect of the individualized submissions are the substantive arguments—both factual and legal—that these comment letters articulate, whether in support or opposition to the proposed rules, as well as the identity of those making these submissions.

Arguments in Support of the Proposed SEC Climate Disclosure Rules

The organizations and individuals that chose to offer support for the SEC’s proposed climate disclosures represent a wide swathe of society.  Broadly speaking, these proposed climate disclosures attracted support from, among others: Democratic politicians, civil society organizations (such as environmental NGOs), individual corporations, professional services organizations, and academics. While the rationales offered by these different groups varied considerably, in part due to their varying perspectives (e.g., environmental NGOs were more concerned with the impact on the transition to a clean-energy environment, while corporations often focused on the consequences of particular aspects of the rules), the individualized comments in support of the proposed disclosures nonetheless shared some common features.

Specifically, there are a number of common arguments that are frequently featured among the 1239 individualized submissions in support of the SEC’s proposed climate disclosures.  Six arguments appear in over 10% of the submissions.  In order of prevalence, these are:

  1. Environmental Protection (347 submissions, 28%): that the proposed rules will help protect the environment
  2. Investor Choice (280 submissions, 23%): that the proposed rules will enable investors to make more informed choices
  3. Investor Protection (263 submissions, 21%): that the proposed rules will enable investors to protect themselves and their investments from climate-related risk
  4. Standardization of Climate Disclosures (259 submissions, 21%): that the proposed rules will enable the standardization of climate disclosures, making data comparable
  5. Increased Transparency (171 submissions, 14%): that the proposed rules will increase transparency and hold companies accountable for their emissions
  6. Alignment with International and Foreign Regulatory Frameworks (169 submissions, 14%): that the proposed rules will bring the United States into alignment with both international frameworks and other countries (e.g., the EU)

No other argument appeared in more than 6% of the individualized submissions in support of the SEC’s proposed climate disclosures.

Notably, the most common arguments in favor of the proposed climate disclosures share a common feature: these are all policy arguments, focusing on the benefits to investors and the broader economy from the adoption of the SEC’s proposed disclosures.  Only a single argument among the top ten most frequent arguments in support was a legal argument—namely that the proposed rules fall within the SEC’s statutory authority—and that argument appeared in only around 3% of the submissions (41 submissions).[5]  This focus on policy benefits among supporters of the SEC’s proposed climate disclosures is unsurprising, as these public policy rationales were a key factor in encouraging the Biden Administration to pursue this regulatory agenda.  However, the reluctance to engage with critics of the proposed climate disclosures on a legal basis may signal the difficulties that the SEC’s proposed climate disclosures may encounter in future court challenges.

Arguments in Opposition to the Proposed SEC Climate Disclosure Rules

Those entities and individuals that submitted individualized comment letters opposing the SEC’s proposed climate disclosures also represent a broad range of American society, albeit with a somewhat different focus.  Generally, individualized letters in opposition to the SEC’s proposed climate disclosures tended to be submitted by, among others: Republican politicians, individual corporations, trade industry groups, and NGOs. (Unsurprisingly, the fossil fuel industry and extractive industries were particularly well-represented among the commenters.)  These individualized submissions—frequently lengthy and extensively analyzing the SEC’s regulatory practices and authority—shared a number of common themes.

In particular, there are a number of common arguments that featured frequently among the 1014 individualized submissions to the SEC in opposition to these proposed climate disclosures.  Three (3) arguments appeared in more than ten (10) percent of these submissions:

  1. Ultra vires (322 submissions, 32% ): that the SEC lacks the ability to issue these disclosures as the proposed rule is beyond the scope of the SEC’s legal authority
  2. Compliance Costs (218 submissions, 21% ): that compliance with the proposed rule will impose unreasonable and extensive costs on businesses
  3. Climate Science Skepticism (123 submissions, 12%): that the science concerning climate change is unsettled and therefore the proposed rule is inappropriate

Although no other common argument appeared in more than 7% of the individualized letters in opposition, it should still be noted that there were a large number of letters that objected to the increased burdens placed on particular types of businesses, whether farmers (53 submissions, 5%), fossil fuel companies (49 submissions, 5%), or small businesses (36 submissions, 4%).

Overall, it is striking that around a third of the comments submitted in opposition stated that the SEC had acted beyond its authority (ultra vires) in proposing this new rule.  While this critique is hardly novel—it has been a frequent refrain of the Republican SEC Commissioners ever since this topic was first broached—the prevalence of this argument among the individualized comments suggests that both the public and sophisticated market actors perceive this issue as a key vulnerability in the SEC’s proposal, and that this legal argument will likely be emphasized in the inevitable legal challenge to this SEC rule.  And, based on recent decisions by the Supreme Court, it is altogether likely that this line of attack may find a sympathetic audience in the courts.

Potential Changes to the SEC Climate Disclosure Rules Resulting from Public Comments

Despite the differences between the advocates and opponents of the SEC’s proposed climate disclosures, both sides submitted proposals to the SEC to change or adjust the proposed rules.  Although there was often substantial disagreement about the content of these proposed changes, there were also significant areas of convergence.

Some of the changes to the SEC’s proposed climate disclosures frequently submitted by supporters of the rule included:

  1. ISSB: that the SEC should further align its proposal with the ISSB and help create a global standard (76 comments);
  2. Extended Phase-In Period: to extend the phase-in period for these new disclosure requirements (72 comments);
  3. Alignment with International and Foreign Standards: that the SEC should further align its proposal with international and foreign standards, such as the EU or TCFD (66 comments);
  4. Enhance Scope 3 GHG Emissions: to eliminate exemptions so that all companies must disclose Scope 3 GHG emissions (55 comments);
  5. Principles-Based Approach to Materiality: to adopt a principles-based approach to materiality rather than bright-line rules (53) comments;
  6. Remove Scope 3 GHG Emissions: to remove the requirement that Scope 3 GHG emissions be disclosed (36 comments);
  7. Furnish, Not File: that the disclosures be provided in a document that is “furnished” to the SEC, rather than filed (which impacts potential liability) (26 comments).

Although certain proposed changes by proponents of the SEC’s proposed climate disclosure rule are undeniably expected (e.g., removing exemptions for disclosure of Scope 3 GHG emissions), there are others that seem somewhat surprising on initial review (e.g., extending the phase-in period or removing Scope 3 GHG emissions entirely).  This can most easily be explained by the fact that supporters of the SEC’s proposed rule include corporations and other business interests, which will resist certain burdensome regulations even if generally offering support for the overall thrust of the proposal.  There are also academics and others who continue to express skepticism concerning the utility of disclosing Scope 3 emissions, or even whether it can be adequately measured.

It should be emphasized that these changes proffered by supporters of the SEC’s proposed rule, many of which are designed to render the proposed rule less onerous, may indicate that the support for the proposed rule—or at least the most stringent aspects of it—is relatively weak (or at least among the corporate interests nominally aligned with the SEC).

The most frequent changes suggested by opponents of the rule included:

  1. Remove Scope 3 GHG Emissions: to remove the requirement that Scope 3 GHG emissions be disclosed (69 comments);
  2. Principles-Based Approach to Materiality: to adopt a principles-based approach to materiality rather than bright-line rules (35 comments);
  3. Extended Phase-In Period: to extend the phase-in period for these new disclosure requirements (25 comments);
  4. Furnish, Not File: that the disclosures be provided in a document that is “furnished” to the SEC, rather than filed (which impacts potential liability) (18 comments).

These proposed changes (and others) advanced by opponents of the SEC’s proposed rule are generally designed to make the rules less stringent and also to reduce costs and potential legal liability.

As can be seen by comparing the above lists, there are certain areas where suggested changes to the proposed rule converged.  In particular, there are issues where both opponents of the SEC’s proposed rule and some of its supporters would try to render it less intrusive or impactful, particularly with respect to the elimination of the requirement to report Scope 3 GHG emissions and to extend the phase-in period further.  (Although, as noted, this apparent convergence between opponents and supporters of the SEC’s proposed rule may be due to divergent interests among the supporters of the SEC’s proposed rule with respect to its implementation.)

But, regardless of the specific content of the particular proposed changes, what is undoubtedly significant is that these proposed changes have highlighted the aspects of the SEC’s proposed climate disclosure rule that are likely most sensitive to regulated corporations.  Such an insight reveals not only the areas where active lobbying is most likely to take place, but also previews probable priorities for corporate compliance departments.  In effect, focusing on the aspects of the proposed rule where changes were proposed is a means to identify the key issues from the perspective of the regulated entities and the public at large.

Conclusion

The level of engagement with the SEC’s proposed climate disclosures, as demonstrated by the number and detail of the public comments offered, is extraordinary. This degree of attention indicates the significant impact that is expect to result from the ultimate promulgation of these rules (or a revised version thereof).

Of course, the key question here is what changes, if any, are likely to be made to the SEC’s proposed rule based upon the public comments submitted to the SEC.  In this context, it is noteworthy that a handful of key issues have been identified by both proponents and opponents of the proposed disclosures as especially ripe for potential revision.  As noted above, these include, among others, the length of the phase-in period and the disclosure of Scope 3 GHG emissions.  If any changes are to be made to the SEC’s proposed climate disclosure rule, it is likely that such changes will be related to these issues.

However, given the relative lack of forward momentum with respect to other aspects of the Biden Administration’s climate agenda, there may well be political pressure not to weaken or otherwise rollback the SEC’s proposed rule, as this is one of the few areas where significant—and publicly-recognized—progress has been made with regulations designed to address the issue of climate change.  Further, the Biden Administration’s SEC has certainly recognized the inevitability of a legal challenge to these proposed climate disclosures, and, since no degree of alteration would suffice to preempt such a lawsuit, the SEC may conclude that it is better to seek to implement all aspects of the proposed regulation for the political benefit that can be achieved in the short term, since the substantive aspects of the proposed disclosure may not ultimately survive judicial scrutiny.  The SEC may also prefer to send a strong signal to the market by maintaining its original proposed rule.  Recognizing these pressures, it seems unlikely that the public comments submitted to the SEC will have a significant impact on the final rule promulgated in the coming months—and improbable that the SEC will make the proposed disclosures less robust.

FOO​TNOTES

[1] These proposed rules are discussed more fully in our prior publication:  https://www.mintz.com/insights-center/viewpoints/2451/2022-03-30-brief-summary-secs-proposed-climate-related-rules

[2] Although the total number of comments, when including both form letters and individualized letters, is 14,739, there are 94 comment letters on the SEC website that are duplicates, and have thus been removed from the calculation.

[3] For comparison, the proposed SEC rule on disclosing compensation ratios drew about 300,000 form letters and around 1500 individualized comment letters.  In this case, the individualized comment letters represented only about 0.5% of the total volume.  https://www.sec.gov/comments/s7-07-13/s70713.shtml

[4] The eighty-eight comment letters that did not adopt an express position on the proposed climate disclosure rules instead conveyed a number of different points, including proposing narrow changes to the proposed rule without taking a stance on the rule as a whole, or offering further context for the SEC’s actions (e.g., comparing the SEC to other regulators, whether domestic or international).  This category also includes a number of early comments that simply requested that the SEC extend the deadline for submitting comments.

[5] There are public comments in support of the proposed rule that focus on the legal issues.  In particular, the submission of Prof. John Coates of Harvard Law School, a former SEC official, is devoted exclusively to defending the legal authority of the SEC to issue the proposed climate disclosure rule. https://www.sec.gov/comments/s7-10-22/s71022-20130026-296547.pdf

Article By Jacob H. Hupart, Megan N. Gates, William F. Weld, Douglas P. Baumstein, Jennifer B. Rubin, and Courtney O. Taylor of Mintz. Luke Haubenstock also contributed to this article.

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©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

PFAS GenX Health Advisories Challenged In Court

On June 15, 2022, the EPA issued Health Advisories (HAs) for five specific PFAS, including GenX PFAS chemicals. The PFAS GenX health advisories set levels at 10ppt for this chemical group. On July 13, 2022, The Chemours Co. filed a petition in the Third Circuit challenging the validity of the EPA’s GenX HA. The company alleges that the EPA acted outside of its bounds of authority, as well as arbitrarily and capriciously, among other arguments. Other industries that will be impacted by upcoming EPA PFAS regulations will closely follow the lawsuit as it makes its way through court, as it may provide predictive indicators of arguments that will unfold as the EPA’s PFAS regulations increase.

PFAS GenX Health Advisories

In October 2021, the EPA released its PFAS Roadmap, which stated explicit goals and deadlines for over twenty action items specific to PFAS. As part of the Roadmap, the EPA pledged to re-assess the existing Health Advisories (HAs) for PFOA and PFOS, as well as establish HAs for PFBS and GenX chemicals. In June 2022, the EPA fulfilled its promise on all fronts when it set HAs for PFOA (interim), PFOS (interim), PFBS (final) and GenX (final). While not enforceable levels for PFAS in drinking water, the EPA’s PFAS Health Advisories are nevertheless incredibly significant for a variety of reasons, including influence on future federal and state drinking water limits, as well as potential impacts on future PFAS litigation.

The levels set by the EPA’s PFAS Health Advisories were as follows:

PFOA .004 ppt
PFOS .02 ppt
GenX 10 ppt
PFBS 2,000 ppt

Chemours Challenge To GenX Health Advisories

Chemours is challenging the EPA’s PFAS GenX Health Advisories primarily on the grounds that the HAs are “arbitrary and capricious.” The company alleges that the HAs are arbitrary and capricious because (1) they incorporated toxicity assumptions that deviate from the EPA’s own standard methods; and (2) “EPA incorporated grossly incorrect and overstated exposure assumptions―in essence, EPA used the wrong chemical when making its exposure assumptions, thereby resulting in a significantly less tolerant health advisory for [GenX] than is warranted by the data. In addition, Chemours argues that the EPA failed to go through the necessary public comment period before issuing its final GenX HA, and that in creating the GenX HA, the EPA exceeded its authority under the Safe Drinking Water Act.

Conclusion

Now more than ever, the EPA is clearly on a path to regulate PFAS contamination in the country’s water, land and air. The EPA has also for the first time publicly stated when they expect such regulations to be enacted. These regulations will require states to act, as well (and some states may still enact stronger regulations than the EPA). Both the federal and the state level regulations will impact businesses and industries of many kinds, even if their contribution to drinking water contamination issues may seem on the surface to be de minimus. In states that already have PFAS drinking water standards enacted, businesses and property owners have already seen local environmental agencies scrutinize possible sources of PFAS pollution much more closely than ever before, which has resulted in unexpected costs. Beyond drinking water, though, the EPA PFAS Roadmap shows the EPA’s desire to take regulatory action well beyond just drinking water, and companies absolutely must begin preparing now for regulatory actions that will have significant financial impacts down the road.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.

EPA’s Spring 2022 Unified Agenda Includes Proposed and Final TSCA and TRI Rules

The U.S. Environmental Protection Agency’s (EPA) spring 2022 Unified Agenda, published on June 21, 2022, includes the following rulemakings under the Toxic Substances Control Act (TSCA) or the Toxics Release Inventory (TRI).

Proposed Rule Stage

  • Tiered Data Reporting to Inform Prioritization, Risk Evaluation, and Risk Management under TSCA (2070-AK62): EPA is developing a rulemaking under TSCA Sections 8(a) and (d) to establish reporting requirements based upon a chemical’s status in the Risk Evaluation/Risk Management (RE/RM) Lifecycle and update the reporting requirements under the 40 C.F.R. Part 711 Chemical Data Reporting (CDR) regulation. Specifically, EPA is seeking occupational, environmental, and consumer exposure information. EPA is developing this rule to obtain information about potential hazards and exposure pathways related to certain chemicals, particularly occupational, environmental, and consumer exposure information. According to the Unified Agenda item, EPA needs this information to inform prioritization, risk evaluation, and risk management of chemical substances under TSCA Section 6. EPA intends to issue a notice of proposed rulemaking (NPRM) in May 2023 and a final rule in September 2024. More information on EPA’s July 27, 2021, webinar on development of the proposed rule is available in our July 29, 2021, memorandum.
  • Revisions to the TSCA Fees Rule (2070-AK64): In January 2021, EPA proposed updates and adjustments to the 2018 TSCA fees rule. EPA proposed modifications to the TSCA fees and fee categories for fiscal years (FY) 2022, 2023, and 2024 and explained the methodology by which the proposed TSCA fees were determined. EPA proposed to add three new fee categories: A Bona Fide Intent to Manufacture or Import Notice, a Notice of Commencement of Manufacture or Import, and an additional fee associated with test orders. In addition, EPA proposed exemptions for entities subject to certain fee-triggering activities, including an exemption for research and development (R&D) activities; an exemption for entities manufacturing less than 2,500 pounds of a chemical subject to an EPA-initiated risk evaluation fee; an exemption for manufacturers of chemical substances produced as a non-isolated intermediate; and exemptions for manufacturers of a chemical substance subject to an EPA-initiated risk evaluation if the chemical substance is imported in an article, produced as a byproduct, or produced or imported as an impurity. EPA updated its cost estimates for administering TSCA, relevant information management activities, and individual fee calculation methodologies. EPA proposed a volume-based fee allocation for EPA-initiated risk evaluation fees in any scenario where a consortium is not formed and is proposing to require export-only manufacturers to pay fees for EPA-initiated risk evaluations. EPA also proposed various changes to the timing of certain activities required throughout the fee payment process. In light of public comments, EPA states that it has decided to issue a supplemental NPRM in October 2022 and seek additional public comment on changes to the January 2021 proposal. More information on the proposed rule is available in our December 30, 2020, memorandum.
  • New Chemicals Procedural Regulations to Reflect the 2016 Amendments to TSCA (2070-AK65): On June 22, 2016, the Frank R. Lautenberg Chemical Safety for the 21st Century Act (Lautenberg Act) was signed into law, amending TSCA and impacting how EPA reviews and makes determinations on new chemical notices under TSCA Section 5. EPA states that as a result of these increased responsibilities, it has become more challenging to complete reviews within 90 days. This rulemaking seeks to revise the new chemicals procedural regulations in 40 C.F.R. Part 720 to improve the efficiency of EPA’s review process and to align its processes and procedures with the new statutory requirements. This rulemaking seeks to increase the quality of information initially submitted in new chemicals notices and improve EPA’s processes to reduce unnecessary rework in the risk assessment and, ultimately, the length of time that new chemicals are under review. EPA intends to publish an NPRM in February 2023.
  • Confidential Business Information (CBI) Claims under TSCA (2070-AK68): EPA is considering proposing new and amended rules concerning the assertion and maintenance of claims of CBI under TSCA. Amendments to TSCA in 2016 included several new provisions concerning the assertion and EPA review and treatment of confidentiality claims. EPA states that it is considering procedures for submitting and supporting such claims in TSCA submissions, including substantiation requirements, exemptions, electronic reporting enhancements, and maintenance or withdrawal of confidentiality claims. EPA is also considering whether the proposed rule should also elaborate on EPA’s procedures for reviewing and communicating with TSCA submitters about confidentiality claims. EPA expects the proposed rule to include new provisions, as well as revisions to existing rules on asserting confidentiality claims to conform to the 2016 amendments to TSCA. As reported in our May 17 and May 18, 2022, memoranda, EPA issued a proposed rule on May 12, 2022. EPA intends to issue a final rule in May 2023.
  • Chemical-Specific Rulemakings under TSCA Section 6(a): TSCA Section 6 requires EPA to address unreasonable risks of injury to health or the environment that the Administrator has determined are presented by a chemical substance under the conditions of use. Following risk evaluations for the following chemicals carried out under the authority of TSCA Section 6, EPA initiated rulemakings to address unreasonable risks of injury to health identified in the final risk evaluations:
    • Methylene Chloride (2070-AK70): EPA’s risk evaluation for methylene chloride, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0437, with additional information in docket EPA-HQ-OPPT-2016-0742. EPA intends to issue an NPRM in February 2023 and a final rule in August 2024. More information on EPA’s draft revision to its risk determination for methylene chloride will be available in a forthcoming memorandum;
    • 1-Bromopropane (2070-AK73): EPA’s risk evaluation for 1-bromopropane, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0235, with additional information in docket EPA-HQ-OPPT-2016-0741. EPA intends to publish an NPRM in May 2023 and a final rule in August 2024;
    • Carbon Tetrachloride (2070-AK82): EPA’s risk evaluation, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0499, with additional information in docket EPA-HQ-OPPT-2016-0733. EPA intends to publish an NPRM in April 2023 and a final rule in August 2024;
    • Trichloroethylene (TCE) (2070-AK83): EPA’s risk evaluation for TCE, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0500, with additional information in docket EPA-HQ-OPPT-2016-0737. EPA intends to publish an NPRM in March 2023 and a final rule in August 2024. More information on EPA’s draft revision to its risk determination for TCE will be available in a forthcoming memorandum;
    • Perchloroethylene (PCE) (2070-AK84): EPA’s risk evaluation for PCE, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0502, with additional information in docket EPA-HQ-OPPT-2016-0732. EPA intends to publish an NPRM in February 2023 and a final rule in August 2024. More information on EPA’s draft revision to its risk determination for PCE will be available in a forthcoming memorandum;
    • N-Methylpyrrolidone (NMP) (2070-AK85): EPA’s risk evaluation for NMP, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0236, with additional information in docket EPA-HQ-OPPT-2016-0743. EPA intends to publish an NPRM in May 2023 and a final rule in August 2024. More information on EPA’s draft revision to its risk determination for NMP will be available in a forthcoming memorandum; and
    • Asbestos (Part 1: Chrysotile Asbestos) (2070-AK86): EPA’s risk evaluation for chrysotile asbestos, describing the conditions of use and presenting EPA’s determinations of unreasonable risk, is in docket EPA-HQ-OPPT-2019-0501, with additional information in docket EPA-HQ-OPPT-2016-0736. More information on EPA’s proposed rule to prohibit ongoing uses of chrysotile asbestos is available in our April 7, 2022, memorandum. EPA intends to publish a final rule in November 2023.
  • Procedures for Chemical Risk Evaluation under TSCA (2070-AK90): As required under TSCA Section 6(b)(4), EPA published a final rule on July 20, 2017, that established a process for conducting risk evaluations to determine whether a chemical substance presents an unreasonable risk of injury to health or the environment, without consideration of costs or other non-risk factors, including an unreasonable risk to a potentially exposed or susceptible subpopulation, under the conditions of use. This process incorporates the science requirements of the amended statute, including best available science and weight of the scientific evidence. The final rule established the steps of a risk evaluation process, including: scope, hazard assessment, exposure assessment, risk characterization, and risk determination. EPA states that it is now considering revisions to that final rule and will solicit public comment through an NPRM. EPA intends to publish the NPRM in September 2022. More information on EPA’s 2017 rule is available in our June 26, 2017, memorandum.
  • Asbestos; Reporting and Recordkeeping Requirements under TSCA (2070-AK99): This rulemaking, under the authority of TSCA Section 8(a), would require certain persons that manufactured (including imported) or processed asbestos and asbestos-containing articles (including as an impurity) to report certain exposure-related information, including quantities of asbestos and asbestos-containing articles manufactured (including imported) or processed, types of asbestos used, and employee data. Reported information would be used by EPA and other federal agencies in considering the regulation of asbestos. EPA notes that this rulemaking is the result of a settlement agreement stemming from litigation pursuant to TSCA Section 21. See Asbestos Disease Awareness Organization v. EPA, No. 19-CV-00871; State of California et al. v. EPA, No. 19-CV-03807. More information on EPA’s proposed reporting and recordkeeping requirements is available in our May 6, 2022, memorandum. EPA intends to publish a final rule in November 2022.
  • Other Chemical Substances Undergoing TSCA Section 6 Risk Evaluation; Significant New Use Rule (SNUR) for Certain Non-Ongoing Uses (2070-AL05): EPA is developing TSCA Section 5(a)(2) SNURs on conditions of use identified as not currently ongoing in the final scope documents for the high-priority substances undergoing TSCA Section 6 risk evaluations. EPA states that it will use the SNURs to require notice to EPA before chemical substances and mixtures are used in new ways that might create concerns. Persons subject to a SNUR who intend to manufacture (including import) or process the chemical substance for the significant new use must notify EPA at least 90 days prior to initiating activities via a significant new use notice (SNUN). EPA intends to publish an NPRM in December 2022 and a final rule in May 2024.
  • The Unified Agenda includes the following chemical-specific SNURs for certain non-ongoing uses:
    • Phthalates; SNUR for Certain Non-Ongoing Uses (2070-AL06): EPA intends to publish an NPRM in November 2022 and a final rule in May 2024;
    • Flame Retardants; SNUR for Certain Non-Ongoing Uses (2070-AL07): EPA intends to publish an NPRM in December 2022 and a final rule in November 2023; and
    • Certain Solvents; SNUR for Certain Non-Ongoing Uses (2070-AL08): EPA intends to publish an NPRM in December 2022 and a final rule in May 2024.
  • Inactive Inventory Per- and Polyfluoroalkyl Substances (PFAS) SNUR (2070-AL10): EPA is developing a SNUR under TSCA Section 5(a)(2) for certain uses of Inactive Inventory PFAS. Persons subject to the Inactive Inventory PFAS SNUR would be required to notify EPA at least 90 days before commencing manufacture or processing for any use that EPA has determined is a significant new use. The required notifications would initiate EPA’s evaluation of the intended use within the applicable review period. Manufacture and processing for the significant new use would be unable to commence until EPA has conducted a review of the notice, made an appropriate determination on the notice, and taken such actions as are required in association with that determination. EPA intends to publish an NPRM in September 2022 and a final rule in June 2023.
  • TRI; Response to Petition to Add Diisononyl Phthalate (DINP) to the TRI List of Toxic Chemicals (2025-AA17): According to EPA, this action arises from a petition received by EPA to add DINP to the list of toxic chemicals reportable under Section 313 of the Emergency Planning and Community Right to Know Act (EPCRA). In response to the petition, EPA initiated a rulemaking on September 5, 2000, proposing to add DINP to the TRI list. On June 14, 2005, EPA issued a notice of data availability seeking comments on EPA’s revised hazard assessment for DINP in further support of EPA’s proposal to add DINP to the TRI list. EPA states that the addition of DINP to the TRI list would make it subject to all the reporting requirements under the Toxic Chemical Release Reporting Rule. EPA intends to publish a supplemental NPRM in July 2022 and a final rule in May 2023;
  • Changes to Reporting Requirements for PFAS; Community Right-to-Know Toxic Chemical Release Reporting (2070-AK97): EPA is developing a proposal to add PFAS subject to reporting under EPCRA Section 313 and Section 6607 of the Pollution Prevention Act (PPA) to the list of Lower Thresholds for Chemicals of Special Concern (Chemicals of Special Concern). EPA states that the addition of the PFAS to the Chemicals of Special Concern list will eliminate the use of the de minimis exemption, eliminate the option to use Form A, and limit the use of range reporting. In addition, EPA is proposing to eliminate the use of the de minimis exemption under the Supplier Notification Requirements for facilities that manufacture or process all chemicals included on the Chemicals of Special Concern list. According to EPA, Chemicals of Special Concern may be found in products below de minimis levels; this is especially true for PFAS that are used at low concentrations in many products. Because of the widespread use of PFAS and their (or their degradants) persistence in the environment, however, even concentrations below de minimis levels can contribute significantly to environmental loading. The elimination of the de minimis exemption for supplier notification purposes will help facilities to identify potential sources of PFAS and other Chemicals of Special Concern. EPA believes that the elimination of the de minimis exemption under the Supplier Notification Requirements for PFAS and other Chemicals of Special Concern will result in a more complete picture of the releases and waste management quantities for these chemicals. EPA intends to publish an NPRM in September 2022 and a final rule in November 2023.
  • Addition of Certain PFAS to the TRI (2070-AL03): EPA is developing a rulemaking to add certain PFAS to the list of chemicals reportable under EPCRA Section 313. EPA states that the addition of these PFAS is in direct response to a statutory mandate under Section 7321(d) of the National Defense Authorization Act for Fiscal Year 2020 (NDAA). Under Section 7321(d), EPA was required to evaluate whether certain specific PFAS meet the EPCRA Section 313 listing criteria by December 2021 and is required to add any PFAS that EPA determines meet the listing criteria by December 2023. EPA intends to publish an NPRM in February 2023 and a final rule in November 2023.
  • Community Right-to-Know; Adopting 2022 North American Industry Classification System (NAICS) Codes for TRI Reporting (2070-AL09): EPA is developing a proposed rule to incorporate the revised 2022 North American Industry Classification System (NAICS) codes for TRI reporting purposes. According to EPA, the Office of Management and Budget (OMB) updates the NAICS codes every five years. OMB approved the 2022 NAICS codes on December 21, 2021 (86 Fed. Reg. 72277), with an effective date of January 1, 2022. EPA currently uses 2017 NAICS codes, and with this proposed rule would implement the 2022 codes for TRI Reporting Year 2022. Facilities reporting to the TRI would be required to use 2022 NAICS codes on reports that are due to EPA by July 1, 2023. This rule also proposed to update the C.F.R. to clarify the scope of facilities required to report to the TRI. According to EPA, the actual data required by a TRI form would not change as a result of this rulemaking, nor would the rule affect the universe of TRI reporting facilities that are required to submit reports to EPA under EPCRA Section 313. EPA intended to publish an NPRM in June 2022 and a final rule in November 2022.

Final Rule Stage

  • Significant New Uses of Chemical Substances; Updates to the Hazard Communication Program and Regulatory Framework; Minor Amendments to Reporting Requirements for Premanufacture Notices (PMN) (2070-AJ94): In 2016, EPA proposed changes to the existing regulations governing significant new uses of chemical substances under TSCA (40 C.F.R. Part 721, specifically “Protection in the Workplace” (40 C.F.R. Section 721.63) and “Hazard Communication Program” (40 C.F.R. Section 721.72)) to align these regulations with revisions to the Occupational Safety and Health Administration’s (OSHA) Hazard Communications Standard (HCS) (29 C.F.R. Section 1910.1200), which are proposed to be cross referenced, and with changes to the OSHA Respiratory Protection Standard and the National Institute for Occupational Safety and Health (NIOSH) respirator certification requirements pertaining to respiratory protection of workers from exposure to chemicals. EPA also proposed changes to the significant new uses of chemical substance regulations based on issues that have been identified by EPA and issues raised by public commenters for SNURs previously proposed and issued under these regulations. Additionally, EPA proposed a minor change to reporting requirements for PMNs and other TSCA Section 5 notices. EPA states that it expects these changes to have minimal impacts on the costs and burdens of complying, while updating the significant new use reporting requirements to assist in addressing any potential effects to human health and the environment. EPA is reviewing the comments received and is planning to issue a final rule. EPA intends to issue a final rule in October 2022. More information on the proposed rule is available in our July 29, 2016, memorandum.
  • Reporting and Recordkeeping for PFAS under TSCA Section 8(a)(7) (2070-AK67): EPA published a proposed rule on June 28, 2021, addressing reporting and recordkeeping requirements for PFAS under TSCA Section 8(a)(7). In accordance with obligations under TSCA Section 8(a), as amended by NDAA Section 7351, persons that manufacture (including import) or have manufactured these chemical substances in any year since January 1, 2011, would be subject to the reporting and recordkeeping requirements. In addition to fulfilling statutory obligations under TSCA, EPA states that it expects that the proposed rule would enable it to characterize better the sources and quantities of manufactured PFAS in the United States. EPA intends to publish a final rule in December 2022. More information on EPA’s proposed rule is available in our June 11, 2021, memorandum.
  • TRI; Response to Petition from the Toxics Use Reduction Institute (TURI) to Add 25 Chemicals (2070-AK26): The Toxics Use Reduction Institute (TURI) submitted a petition under EPCRA Section 313(e)(1) to add 25 chemicals to the EPCRA Section 313 list of toxic chemicals subject to reporting under the TRI. Three of the 25 chemicals were added to the EPCRA Section 313 list through actions unrelated to the petition. EPA states that it evaluated the remaining 22 chemicals to determine if they met the listing criteria of EPCRA Section 313(d)(2). EPA proposed the addition of 12 of the 22 chemicals that were determined to meet the EPCRA Section 313(d)(2) criteria and for which reports were expected to be filed. EPA is reviewing the comments received and is planning to issue a final rule. EPA intends to issue a final rule in November 2022.
  • Parent Company Definition for TRI Reporting (2070-AK42): In 2021, EPA proposed to codify the definition of “parent company” for purposes of reporting to the TRI. Although the existing regulation requires facilities reporting to the TRI to identify their parent company in annual reporting forms, no codified definition of this data element exists. Among the facilities reporting to the TRI are those with complicated corporate ownership structures. As such, effort is required each year by reporting facilities and EPA to clarify how the parent company data element should be represented on the form. According to EPA, a codified definition of parent company would allow EPA to address various corporate ownership scenarios explicitly and reduce the reporting burden caused by regulatory uncertainty. EPA states that the proposed rule would clarify existing regulations to reporting facilities and add a foreign parent company data element, if applicable, while improving EPA’s data quality. EPA is reviewing the comments received and is determining next steps. EPA intends to publish a final rule in October 2022.
  • NDAA Mandated Addition of Certain PFAS to the TRI for Reporting Year 2022 (2070-AL04): According to EPA, NDAA Section 7321 provides a framework for PFAS to be added automatically to the TRI list on January 1 of the year following certain EPA actions. In December 2021, EPA announced the statutory addition of the PFAS chemicals covered by the NDAA to the list of chemical substances subject to reporting for the TRI. This regulatory action amends the EPCRA regulations in 40 C.F.R. Part 372 to reflect this statutory addition. EPA intended to publish a final rule in June 2022.

Article By Lynn L. Bergeson and Carla N. Hutton of Bergeson & Campbell, P.C.

For more environmental law legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

Colorado PFAS Act Likely Just the Beginning of New PFAS Chemical Regulation

Key Takeaways

  • How does the recent increase in state regulation of PFAS chemicals in consumer products impact your business?
  • Potential federal regulations of PFAS chemicals
  • Need for implementation of quality control practices
  • How best to identify and correct improper use of PFAS chemicals in consumer products

Introduction

Colorado has become the most recent state to regulate the use of PFAS chemicals in consumer products. It is important that manufacturers and retailers become aware of these restrictions now to avoid future compliance issues since the state regulations of PFAS chemical use are not the same state to state. Further the compliance issues imposed by state regulations will be compounded if the federal government fulfills its promise to regulate PFAS chemicals. Multiple federal agencies have indicated that such federal regulations may be forthcoming in the near future.

Definition of PFAS

Per- and polyfluoroalyyl substances (PFASs, CnF2n+1–R) are a group of man-made chemicals that includes PFOA, PFOS and GenX chemicals.1 These chemicals are widely used, long lasting chemicals that contain components that break down very slowly over time. PFAS chemicals are used to make fluoropolymer coatings and products that resist heat, oil, stains, grease, and water. These can include clothing, furniture, adhesives, food packaging, and many other products.2 Because of their widespread use and persistence in the environment, many PFAS are found in the blood stream of people and animals all over the world and are present at low levels in a variety of food products and in the environment.

Colorado Joins a Growing List of States to Implement PFAS Regulations for Consumer Products

Colorado recently adopted into law the Perfluoroalkyl and Polyfluoroalkyl Chemcials Consumer Protection Act (the “Colorado PFAS Act”)3, which regulates the use of perfluoroalkyl and polyflupralkyl substances (“PFAS chemicals”) in certain consumer products. The Colorado General Assembly concluded that such regulation is necessary upon the determination that “PFAS chemicals pose[] a significant threat to the environment of the state and the health of its residents.”4 Accordingly, by its terms, the Colorado PFAS Act was implemented into law in order “to create a regulatory scheme that phases out the sale or distribution of certain products and product categories in the state that contain intentionally added PFAS chemicals.”5 In furtherance of this goal, the Colorado PFAS Act will phase out the sell and distribution of certain consumer products that contain “intentionally added PFAS chemicals” from January 1, 2024 through January 1, 2027.6

These phase out regulations within the Colorado PFAS Act are consistent with a national trend of states regulating the sale and distribution of consumer products containing PFAS chemicals. For example, the Colorado PFAS Act establishes that Colorado is now one of at least 8 states that will regulate the sale and distribution of “food packaging” that contains intentionally added PFAS chemicals.

Beyond the differing timeline in the above chart, it is important to note these regulations are not synonymous since the term “food packaging” is defined differently by each regulating state.

Ignorance Is No Defense

The Colorado PFAS Act also does not allow ignorance on the contents of a commercial product as prohibiting the enforcement of its regulations. It is true that the Colorado PFAS Act prohibits the sell and distribution of certain products that contain “intentionally added PFAS chemicals.”7 However, the Colorado PFAS Act defines “intentionally added PFAS chemicals” as “PFAS chemicals that a manufacturer has intentionally added to a product and that have a functional or technical effect on the product.”8 Here the “intent” element necessary to trigger the regulations of the Colorado PFAS Act is the intent to add any chemistry which includes any listed PFAS chemicals. The Colorado PFAS Act defines “product” to “include” any product components.”9 Thus, a “manufacturer” of consumer goods must understand all additive materials to its products through each stage of the supply chain.

Likely Federal regulation by the end of the year (2022)10

The EPA is expected to propose a regulation for groups of PFAS in drinking water in the Fall of 2022 before the Agency’s statutory deadline in March 2023. A final rule is anticipated in Fall 2023 after considering public comments on the proposal. In a new health advisory, EPA reduced the acceptable levels for two PFAS (perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA)) in drinking water from 70 parts per trillion down to just 0.004 parts per trillion for PFOA and 0.02 parts per trillion for PFOS.11 Issuing a health advisory is generally considered to be a preliminary step in the process of setting maximum contaminant levels.12 Some states have set their own enforceable drinking water standards for PFOA and PFOS. Vermont, Michigan, and New Jersey have all set limits ranging from 8 to 20 parts per trillion for both chemicals.13 The issuance of the health advisory by the EPA will have States reevaluating their own regulations to conform with the standards set by the Agency.14

By Winter 2022 the EPA plans to leverage federally-issued NPDES permits to reduce PFAS discharges and will propose monitoring requirements at facilities where PFAS are expected or suspected to be present in wastewater and storm water discharges, using its recently published analytical method 1633, which covers 40 unique PFAS. EPA will issue new guidance recommending that state-issued permits that do not already include monitoring requirements for PFAS use the method 1633 at facilities where PFAS is expected or suspected to be present in wastewater and storm water discharges. In addition, the new guidance will recommend the full suite of permitting approaches that EPA will use in federally-issued permits. The EPA expects to publish a multi-laboratory validation method to detect up to 40 specific PFAS compounds in eight environmental matrices with the Department of Defense online by Fall 2022.

Discussion of Proposed RCRA and CERCLA changes

a. Proposed RCRA Changes15

In recent months, EPA has set the stage for greater regulation and firm federal standards PFAS chemicals that could significantly impact cleanup requirements. In October of 2021, the EPA responded to a petition from Governor Michelle Lujan Grisham of New Mexico to tackle PFAS contamination under the Resource Conservation and Recovery Act (RCRA). EPA outlined plans to initiate rulemaking process for two new actions under the hazardous waste law. The first rulemaking effort will initiate the process to propose adding four PFAS chemicals as RCRA Hazardous Constituents under Appendix VIII, by evaluating the existing data for these chemicals and establishing a record to support a proposed rule. The four PFAS chemicals EPA will evaluate are: perfluorooctanoic acid (PFOA), perfluorooctane sulfonic acid (PFOS), perfluorobutane sulfonic acid (PFBS), and GenX. Adding these chemicals as RCRA hazardous Constituents would ensure they are subject to corrective action requirements and would be a necessary building block for future work to regulate PFAS as a listed hazardous waste. The second rulemaking effort will clarify in EPA regulations that the RCRA Corrective Action Program has the authority to require investigation and cleanup for wastes that meet the statutory definition of hazardous waste, as defined under RCRA section 1004(5). This modification would clarify that emerging contaminants such as PFAS can be cleaned up though the RCRA corrective action process.

b. Proposed CERCLA Changes16

In June 2021, EPA restarted the process to designate PFOA and PFOS as Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) hazardous substances. A proposed rule was expected in the Spring of 2022, no such rule has been proposed. According the EPA’s “PFAS Strategic Roadmap” a final rule is expected in the Summer of 2023 and EPA is currently developing a Notice of Proposed Rulemaking to designate PFOA and PFOS as CERCLA hazardous substances. Such designations would require facilities across the country to report on PFOA and PFOS releases that meet or exceed the reportable quantity assigned to these substances. The hazardous substance designations would also enhance the ability of federal, Tribal, state, and local authorities to obtain information regarding the location and extent of releases. EPA or other agencies could also seek cost recovery or contributions for costs incurred for the cleanup.

The designation PFOA and PFOS as a hazardous substance under CERCLA could substantially impact existing and new cleanup sites. Site owners and responsible parties who release PFOA or PFAS, and possibly other PFAS chemicals will be obligated to report releases, quantify the location and amounts released to stakeholders, and may be liable for partial or total cleanup. Regulatory changes may also delay cleanup and add significant analytical costs for companies who need to evaluate PFAS in various media prior to releases of any kind to waste streams. The designation of PFAS as hazardous substances has not yet been ratified at a federal level. However, several states (e.g., Washington DOE) have enacted Public Health Goals for surface and drinking waters and cleanup standards – several that incorporate federal hazardous substances lists, ensuring that the impending PFAS regulations will extend beyond federally designated cleanup sites.

The Importance of Following the Discussion Leading up to New TSCA Regulations17

The Toxics Release Inventory (TRI) helps the EPA compile data and information on releases of certain chemicals and supports decisions by companies, regulatory agencies, and the public. The EPA intends to implement a rulemaking in 2022 to categorize the PFAS on the TRI list as “Chemicals of Special Concern” and remove the de minimis eligibility from supplier notification requirements for all “Chemicals of Special Concern.” It is expected for the EPA to continue to update and add to the list of PFAS subject to the TRI. EPA’s proposed rule would require all manufacturers (including importers) of PFAS in any year since 2011 to report information related to chemical identity, categories of use, volumes manufactured and processed, byproducts, environmental and health effects, worker exposure, and disposal. There is still opportunity for public comments as the rule is not set to finalize until January of 2023.

Industries Should Take Protective Measures

Both the implementation of the Colorado PFAS Act and the recent actions of the EPA establish that the time for manufacturers and retailers to act is now. Specifically, manufacturers and retailers should implement quality control practices directed towards identifying—and where necessary altering—the chemical contents of their consumer products.

To implement such quality control practices, manufacturers and retailers should review their wastewater handling processes and insurance policies for periods of past PFAS chemicals use. These previous processes and insurance policies likely identify the specific components of PFAS chemicals that were deemed to violate state waste water regulations, as well as the internal changes implemented to eliminate the use of such chemicals. Similar practices can likely be implemented in the sale and distribution of consumer products that include PFAS chemicals. Manufacturers and retailers should implement practices now to limit exposure and costs once regulation of PFAS consumer products become both effective and more prevalent. If you have any questions regarding PFAS regulations, please contact the authors of this article.

ENDNOTES

1 Zhanyun Wang et al., A Never-Ending Story of Per- and Polyfluoroalkyl Substances (PFASs)?, 51 ENV’L SCI. TECH. 2508.

2 CTR. FOR DISEASE CONTROL AND PREVENTION, https://www.cdc.gov/biomonitoring/PFAS_FactSheet.html (last visited June 24, 2022).

3 C.R.S.A. § 25-15-601 et seq.

4 C.R.S.A. § 25-15-602(1)(a).

5 C.R.S.A. § 25-15-602(2).

6 C.R.S.A. §§ 25-15-604(1), (3)-(4).

7 C.R.S.A. § 25-15-604(1), (3), and (5).

8 C.R.S.A. § 25-15-603(12)(a).

9 C.R.S.A. § 25-15-603(20)(b).

10 All information gathered in this section coms from: ENV’L PROT. AGENCY https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf (last visited June 24, 2022).

11 Juan Carlos Rodriguez, 3 Takeaways from EPA’s Guidance on PFAS in Drinking Water, Law360 (June 22, 2022, 8:48 PM EDT).

12Id.

13Id.

14Id.

15 Information on RCRA changes comes from: EPA Press Release, responding to New Mexico Governor’s petition to tackle PFAS contamination under RCRA (Oct. 26, 2021).

16 All information gathered in this section coms from: EPA, PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024 (Oct. 2021).

17 Information comes from: EPA (last visited June 24, 2022).

 

Article By Daniella D. Landers, Michael J. Sullivan, and Brendan H. White of Womble Bond Dickinson (US) LLP. Audrey Capra, Summer Associate, also contributed to this alert.

Copyright © 2022 Womble Bond Dickinson (US) LLP All Rights Reserved.