Category: Environmental Law

EPA Proposes TSCA Reporting and Recordkeeping Requirements for Asbestos

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

Action EPA Is Taking

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

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

Chemical Substances that Would Be Reportable under the Rule

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

Asbestos Forms

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

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

Asbestos as an Impurity

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

Articles Containing Asbestos

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

Asbestos that Is a Component of a Mixture

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

Reporting Requirements for Small Businesses

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

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

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

The Proposed Reporting Standard

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

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

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

Timing of Reporting

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

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

Reporting of Information

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

Request for Comments

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

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

Commentary

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

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

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

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

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

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

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

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

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

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

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

©2022 Roetzel & Andress
For more articles about court cases, visit the NLR Litigation section.

ARPA-E: Biden’s Proposed FY 2023 Budget Boosts Investment in Clean Energy Technologies

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

What Is ARPA-E?

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

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

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

The Impact of ARPA-E

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

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

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

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

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

Endnotes

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

Article By Kaoru C. Suzuki of Mintz

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

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

Litigation Minute: Defending Consumer Class Action Claims Involving PFAS

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

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

What Are PFAS?

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

How Do PFAS Relate to Consumer Class Actions?

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

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

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

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

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

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

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

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

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

Takeaway

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

FOOTNOTES

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

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

CEQ Reverses First Set of Trump-Era NEPA Regulatory Reforms

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

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

Purpose & Need/Alternatives

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

Individual Agency NEPA Regulations

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

Effects

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

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

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

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

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

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

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

Wisconsin Judge Rules that the WDNR Lacks Authority to Regulate PFAS

On April 12, 2022, a Wisconsin judge ruled in the case of Wisconsin Manufacturers & Commerce, Inc. and Leather Rich, Inc. v. WDNR, (Waukesha County Case 2021CV000342) that the WDNR lacks the authority to regulate PFAS chemicals because the Wisconsin Legislature has not established regulatory standards for them. According to the lawsuit, Leather Rich, Inc. entered into a voluntary WDNR environmental cleanup program in 2019, and the following year WDNR indicated that the businesses enrolled in the program were required to test for emerging contaminants, including PFAS. The plaintiffs in the case argued that because the WDNR had created a list of emerging contaminants without any legislative oversight or opportunity for public comment, and had not adopted regulatory standards through administrative rulemaking, the WDNR lacked the authority to require such testing. The judge’s ruling would require the WDNR to wait until legislators have established standards for PFAS through adoption of regulatory limits in state law or through administrative rules. It is estimated that the adoption of standards for PFAS could require 1-2 years. An attorney for the WDNR indicated that the WDNR plans to appeal the decision and file a motion to place the judge’s order on hold.

The WDNR has historically taken the position that the agency has authority under Wisconsin’s “Hazardous Substance Spill Act” (“Spill Act” – Wis. Stats. 292.11) to regulate PFAS even in the absence of established standards, as the Spill Act gives the WDNR broad authority to require testing and remediation of such chemicals. In late February, the WDNR’s Natural Resources Board (NRB)—the entity that sets policy for the WDNR—took steps toward the adoption of statewide standards for two of the most common PFAS compounds, which included an approval to adopt a drinking water standard of 70 parts per trillion (ppt) for two of the most common PFAS compounds; perfluorooctanoic acid (PFOA) and polyfluorooctane sulfonate (PFOS).

PFAS is an acronym for per- and polyfluorolalkyl substances, which are chemicals that were widely used from the 1960s to the early 2000s in the manufacture of a variety of consumer products, such as stain resistant carpets, non-stick cookware (e.g., Teflon), firefighting foam, food packaging (e.g., microwave popcorn bags/pizza boxes), water resistant clothing (e.g., pre-2000 GoreTex), water resistant repellent (e.g., Scotchgard) and dental floss. While the use of PFAS compounds has largely been phased out in the U.S., these compounds are still used in the manufacturing of many products worldwide. These substances, known as “forever chemicals,” have received considerable attention by federal and state environmental regulatory agencies because of their resistance to chemical breakdown due to the chemical bond between carbon and fluorine atoms in the PFAS compounds, which is one of the strongest in nature. Because of this, humans can still be exposed to PFAS long after the chemicals were released into the environment.

The WDNR has identified approximately 90 sites throughout Wisconsin with PFAS contamination, including municipalities such as Madison, Marinette, Peshtigo and Wausau with PFAS-contaminated groundwater.

©2022 von Briesen & Roper, s.c
For more articles about state lawsuits, visit the NLR Litigation section.

L’Oreal PFAS Lawsuit Again Shows ESG Risks of Marketing

In less than six months, L’Oreal has now found itself to be the target of PFAS lawsuits related to its mascara products. The latest L’Oreal PFAS lawsuit was filed in the New Jersey federal court on April 8, 2022. Cosmetics and PFAS is a topic that saw increased scrutiny from the scientific community, legislature, and the media in 2021. As we predicted in early 2021, the increased attention on the industry presented significant risks to the cosmetics industry, and our prediction was that the developments made the cosmetics industry the number two target for future PFAS lawsuits. In less than three months, four industry giants – Shiseido, CoverGirl, L’Oreal and Burt’s Bees – were hit with lawsuits related to their cosmetics and PFAS content in some of the companies’ products.  The industry, insurers, and investment companies interested in the consumer goods vertical with niche interest in cosmetics companies must pay careful attention to the cosmetics lawsuits and the increasing trend of lawsuits targeting the industry.

PFAS and Cosmetics: the 2021 Foundation

On June 15, 2021, a scientific study in the Journal of Environmental Science and Technology Letters published conclusions regarding testing of a variety of cosmetics products from the United States and Canada for PFAS content, and found PFAS present in over half of the products. On the same day that the study was published, the No PFAS In Cosmetics Act 2021 was introduced in the Senate by U.S. Senators Susan Collins (R-ME), Richard Blumenthal (D-CT), Dianne Feinstein (D-CA), Maggie Hassan (D-NH), Jeanne Shaheen (D-NH), Kirsten Gillibrand (D-NY), and Angus King (I-ME). The bill sought to ban PFAS in cosmetics.

These two developments led us to conclude “with these developments, our prediction that cosmetics is the number two target for PFAS litigation issues behind water rings true.”

Why PFAS In Cosmetics Is A Concern

PFAS content in cosmetics raises concerns for human health in scientific communities due to the fact that PFAS are capable of entering the bloodstream in ways other than direct oral ingestion, and one of these ways includes dermal absorption. Concerns have also been raised regarding absorption of PFAS into the bloodstream by way of tear ducts. The absorption issue is one that is being studied fairly extensively through various pending scientific studies. At the end of 2021, the federal Agency for Toxic Substances and Disease Registry (ATSDR) went so far as to recommend that citizens in Southern New Hampshire reduce their risk of further PFAS exposure by avoiding the use of certain consumer goods, including cosmetics.

L’Oreal PFAS Lawsuit

On April 8, 2022, plaintiff Rebecca Vega filed a lawsuit in the New Jersey federal court seeking a proposed class action lawsuit against LOreal. The L’Oreal PFAS lawsuit alleges that the company does not disclose to consumers that its mascara and other products contain PFAS. Instead, the lawsuit states, the products were fraudulently and misleadingly marketed as safe for consumers and environmentally friendly, in violation of federal and state consumer laws. The Complaint details several examples of L’Oreal marketing indicating the safe nature of the products.

The plaintiff seeks certification of the class action lawsuit, injunctive relief, damages, fees, costs and a jury trial. The proposed class is any consumer in the United States, or in the subclass of New Jersey, who purchased the relevant L’Oreal products.

Just the Beginning For Cosmetics Industry

With studies underway, legislation pending that targets cosmetics, and increasing media reporting on cosmetics concerns to human health, the cosmetics industry has a target on its back with respect to PFAS that will have impacts on the industry’s involvement in litigation. Twelve months ago, we made this prediction: “Personal injury / products liability cases, false advertising, and failure to disclose theories of liability are some of the more prominent allegations that cosmetics companies are likely to face. Further, the cosmetics industry is concerned about federal and state level regulatory enforcement action for environmental pollution remediation costs stemming from placing PFAS waste into the environment as a by-product of the manufacturing process.”

The first part of our prediction is becoming reality, as four significant cosmetics industry players now find themselves embroiled in litigation focused on false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as a test case for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Each cosmetics company faces the stark possibility of needing to defend lawsuits involving plaintiffs in all fifty states for products that contain PFAS.

It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from cosmetics products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.

Conclusion

It is of the utmost importance that businesses along the whole supply chain in the cosmetics industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the cosmetics industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.

©2022 CMBG3 Law, LLC. All rights reserved.
Article By John Gardella with CMBG3 Law.
For more articles on ESG lawsuits, visit the NLR Environmental, Energy & Resources section.

EPA Will Propose to Ban Ongoing Uses of Asbestos

The U.S. Environmental Protection (EPA) announced on April 5, 2022, that it will propose to prohibit ongoing uses of chrysotile asbestos, the only known form of asbestos currently imported into the United States. EPA notes that the proposed rule will be “the first-ever risk management rule issued under the new process for evaluating and addressing the safety of existing chemicals under the Toxic Substances Control Act (TSCA) that was enacted in 2016.” EPA will propose to prohibit manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos for all ongoing uses of chrysotile asbestos. EPA will also propose targeted disposal and recordkeeping requirements in line with industry standards, Occupational Safety and Health Administration (OSHA) requirements, and the Asbestos National Emission Standards for Hazardous Air Pollutants (NESHAP). EPA has posted a pre-publication version of the proposed rule. Publication of the proposed rule in the Federal Register will begin a 60-day comment period.

Background

As reported in our January 4, 2021, memorandum, EPA released on December 30, 2020, the final risk evaluation for asbestos, part 1: chrysotile asbestos (Asbestos RE Part 1). Of the six use categories evaluated (chlor-alkali diaphragms, sheet gaskets, other gaskets, oilfield brake blocks, aftermarket automotive brakes/linings, and other vehicle friction products), EPA found that there is unreasonable risk to workers, occupational non-users (ONU), consumers, and/or bystanders within each of the six chrysotile asbestos use categories. EPA found no unreasonable risk to the environment. According to the final risk evaluation, chrysotile is the prevailing form of asbestos currently mined worldwide, and “so it is assumed that a majority of commercially available products fabricated overseas that contain asbestos are made with chrysotile. Any asbestos being imported into the U.S. in articles is believed to be chrysotile.” The other five forms of asbestos are now subject to a significant new use rule (SNUR), as reported in our April 18, 2019, memorandum, “EPA Announces Final SNUR for Asbestos Will ‘Close Loophole and Protect Consumers.’”

Proposed Rule

EPA will propose a rule under TSCA Section 6(a) to prohibit manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos in bulk or as part of chrysotile asbestos diaphragms used in the chlor-alkali industry and chrysotile asbestos-containing sheet gaskets used in chemical production. EPA will propose that these prohibitions take effect two years after the effective date of the final rule.

EPA will also propose pursuant to TSCA Section 6(a) to prohibit manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos-containing brake blocks used in the oil industry, aftermarket automotive chrysotile asbestos-containing brakes/linings, other chrysotile asbestos-containing vehicle friction products (not including the National Aeronautics and Space Administration (NASA) Super Guppy Turbine aircraft use), and other chrysotile asbestos-containing gaskets. EPA will propose that these prohibitions take effect 180 days after the effective date of the final rule.

EPA will further propose pursuant to TSCA Section 6(a) to prohibit manufacture (including import), processing, and distribution in commerce of: aftermarket automotive chrysotile asbestos-containing brakes/linings for consumer use, and commercial use of other chrysotile asbestos-containing gaskets for consumer use. EPA will propose that these prohibitions take effect 180 days after the effective date of the final rule.

EPA will also propose disposal and recordkeeping requirements under which regulated parties would document compliance with certain proposed prohibitions. EPA states that it does not intend the proposed prohibitions on processing or distribution in commerce to prohibit any processing or distribution in commerce incidental to disposal of the chrysotile asbestos waste in accordance with the proposed requirements.

According to EPA, because a determination has been made that chrysotile asbestos presents an unreasonable risk to health within the United States or to the environment of the United States, pursuant to TSCA Section 12(a)(2), the proposed rule would apply to chrysotile asbestos even if being manufactured, processed, or distributed in commerce solely for export from the United States.

Commentary

Bergeson & Campbell, P.C. (B&C®) commends EPA on this historical achievement. Unsurprisingly, there are aspects of this precedent-setting proposed rule that invite discussion and warrant comment from affected parties. Key among these issues is a potential significant legal vulnerability in the underlying risk evaluation (i.e., Asbestos RE Part 1) for the proposed rule, an issue that may overshadow this historic achievement in a manner reminiscent of EPA’s failed ban of asbestos in 1991 (Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th Cir., 1991)).

EPA proposed that the prohibition on specific conditions of use (e.g., chrysotile asbestos diaphragms used in the chlor-alkali industry) would take effect two years after the effective date of the final rule. EPA stated that it “believes an aggressive transition away from chrysotile asbestos will spur adoption of superior technology [e.g., membrane cells with increased concentrations of per- and polyfluoroalkyl substances (PFAS)].” The clear need to consider EPA’s intended action on asbestos in the context of its ongoing actions on PFAS is of course not lost on the Agency. EPA acknowledged that “the transition away from asbestos-containing diaphragms could result in greater usage and release of PFAS.”

B&C notes that innovative new technologies, such as alternative membrane cells, may be available in the future, but those technologies must be proven to be economically and technically viable. Once proven effective, the underlying chemical substances must be reviewed as new chemicals if so classified under TSCA. The development, review, and approval are all on indeterminate timelines, so it is speculative when novel, non-PFAS-based technologies will be commercially available and, of course, whether that time will be prior to the effective date of EPA’s proposed ban on asbestos.

EPA requested comment on specific aspects of the proposed rule that B&C encourages potentially impacted parties to consider. For example, EPA discussed its authority under TSCA Section 6(g) to grant a time-limited exemption for a specific condition of use, such as the chlor-alkali industry, where EPA finds “that compliance with the proposed requirement would significantly disrupt the national economy, national security, or critical infrastructure.”

EPA also requested comment on a primary alternative regulatory option that EPA discussed for the chlor-alkali diaphragm and sheet gasket categories that would allow a prohibition to take effect five years after the effective date of the final rule. As part of this option, EPA would include establishment of a risk-based performance standard known as an existing chemical exposure limit (ECEL). EPA developed an eight-hour time-weighted average (8-hr TWA) ECEL of 0.005 fibers/cubic centimeter (f/cc) for inhalation exposures to chrysotile asbestos as an eight-hr TWA ECEL-action level of 0.0025 f/cc, with associated requirements for initial and periodic monitoring and respirator usage/type if exceedances are found.

As part of the monitoring requirements, EPA stated that it would “require use of appropriate sampling and analytical methods to determine asbestos exposure, including: … Compliance with the Good Laboratory Practice Standards at 40 CFR Part 792,” despite the fact that EPA acknowledges that other standards, such as Industrial Hygiene Laboratory Accreditation Program (IHLAP), are more appropriate for industrial hygiene monitoring. EPA’s TSCA Section 5(e) order template states the following under Section III.D:

Compliance with TSCA GLPS, however, is not required under this New Chemical Exposure Limit Section where the analytical method is verified by a laboratory accredited by either: the American Industrial Hygiene Association (“AIHA”) Industrial Hygiene Laboratory Accreditation Program (“IHLAP”) or another comparable program approved in advance in writing by EPA.

EPA devoted one paragraph in the proposed rule to “TSCA section 26(h) considerations.” EPA stated, in part, that its unreasonable risk determination “was based on a risk evaluation, which was subject to peer review and public comment, was developed in a manner consistent with the best available science and based on the weight of the scientific evidence as required by TSCA sections 26(h) [and 26(i)] and 40 CFR 702.43 and 702.45.”

B&C notes that EPA stated in the Asbestos RE Part 1 the following:

TSCA § 26(h) and (i) require EPA, when conducting Risk Evaluations, to use scientific information, technical procedures, measures, methods, protocols, methodologies and models consistent with the best available science and base its decisions on the weight of the scientific evidence. To meet these TSCA § 26 science standards, EPA used the TSCA systematic review process described in the [2018] Application of Systematic Review in TSCA Risk Evaluations document [citation omitted] [2018 SR Document].

Prior to completing Asbestos RE Part 1, EPA requested the National Academies of Science, Engineering, and Medicine (NASEM) to review the 2018 SR Document. In February 2021, NASEM released its consensus study report on EPA’s 2018 SR Document and concluded that it did not meet the criteria of “comprehensive, workable, objective, and transparent” and that “The OPPT approach to systematic review does not adequately meet the state-of-practice.”

NASEM recommended that “With regard to hazard assessment for human and ecological receptors, OPPT should step back from the approach that it has taken and consider components of the OHAT, IRIS, and Navigation Guide methods that could be incorporated directly and specifically into hazard assessment.”

In response to the NASEM review, EPA revised its systematic review method. On December 20, 2021, EPA released the “Draft Systematic Review Protocol Supporting TSCA Risk Evaluations for Chemical Substances” (2021 Draft Protocol) for public comment. EPA acknowledged in the 2021 Draft Protocol that:

Previously [in the 2018 SR Document], EPA did not have a complete clear and documented TSCA systematic review (SR) Protocol. EPA is addressing this lack of a priori protocol by releasing [the 2021 Draft Protocol].

EPA further stated that the:

[2021 Draft Protocol] is significantly different [from the 2018 SR Document] in that it includes descrition [sic] of the Evidence Integration process…, which was not previously included in the [2018 SR Document].

B&C recognizes that the scientific methods used to inform systematic review are not static and that updates will be required as the science evolves. In this instance, however, many of the documents cited as supporting information for updating the 2021 Draft Protocol (e.g., Office of Health Assessment and Translation (OHAT), 2015) were available prior to EPA issuing the 2018 SR Document. Rather than utilizing these documents at the time, EPA developed the 2018 SR Document de novo. In other words, EPA chose to develop its own methodology in 2018 rather than incorporating and adapting existing methodologies that represented the best available science at the time.

These issues raise interesting procedural questions and issues around whether EPA demonstrated that Asbestos RE Part 1 was based on the best available science and weight of scientific evidence, as required under TSCA Sections 26(h) and 26(i) and the implementing regulation under 40 C.F.R. Part 702.

B&C encourages stakeholders to review EPA’s proposed risk management rule on chrysotile asbestos, even for entities that do not manufacture, process, distribute, or use this substance. We urge this review because of the precedential nature of EPA’s decisions. B&C also encourages interested parties to provide public comments on the proposed rule, given that risk management decisions in the proposed rule will likely serve as a basis from which EPA regulates other chemical substances EPA is evaluating under TSCA Section 6.

Article By: the Government Regulation practice at Bergeson & Campbell, P.C.

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©2022 Bergeson & Campbell, P.C.

The SEC’s Proposed Rules on Climate-Related Disclosures – What to Do Now: A Guide for In-House Counsel Facing the Proposed Rules

The U.S. Securities and Exchange Commission’s recently proposed rules governing climate-related disclosures, if adopted as proposed, would represent a sea change to the existing public-company disclosure regime.  The rules would require that public companies include the following, among other disclosures, in reports and registration statements filed with the SEC:

  • disclosure of greenhouse gas (GHG) emissions data covering Scope 1 and Scope 2 emissions for all companies and Scope 3 emissions for companies1 (other than those that qualify as “smaller reporting companies”) for which Scope 3 emissions are material or that have set emissions reduction targets that include Scope 3 emissions, with third-party attestation being required for Scope 1 and Scope 2 data for companies that qualify as “large accelerated filers” or “accelerated filers”;
  • extensive and detailed disclosures regarding climate-related risks, including physical risks and transition-related risks, to a company’s financial statements, business operations or value chain (i.e., upstream and downstream activities of third parties related to the company’s operations);
  • disclosure in the notes to audited financial statements of quantitative and qualitative information regarding financial impacts of climate-related risk, including disaggregated quantitative information with respect to impacts of physical risks or transition activities on specific financial statement line items if the impact is 1% or more of the line item;
  • extensive and detailed disclosures regarding climate-related governance, strategy and risk management; and
  • to the extent relevant to a particular company, disclosures regarding the company’s transition plan, climate-related targets or goals, use of scenario analyses or other analytical tools in evaluating climate-related risk and use of an internal carbon price.

For many companies, the rules would require enterprise-wide changes to how the company collects, assesses and reports climate-related data and other information, as well as changes to their governance structures and systems of controls.  Changes may be driven both by the need to comply with the disclosure requirements and by a company’s view of how its disclosures will be received by investors or the public generally.

The tasks of understanding the implications of the proposed rules for a particular company and preparing for eventually complying with the rules are monumental, and, unfortunately, public companies currently find themselves in the difficult position of possibly needing to act with some urgency in order to be prepared to comply with rules of uncertain substance on an uncertain timeline.  At this point, the proposed rules are just that – proposed and not final.  The period for public comment on the proposed rules will run until May 20 at the earliest and could be extended by the SEC, and public comments are likely to reflect the controversial nature of the proposed rules and strong opinions by both supporters and detractors.  After the comment period, whether and when the SEC releases final rules, and the extent to which any final rules largely follow or reflect significant changes from the proposed rules, will remain to be seen.  Like the proposed rules, any final rules should provide for phase-in periods for compliance.  Further, any final rules are almost certain to face legal challenges that could delay implementation of the rules even if such challenges ultimately are unsuccessful.  It is therefore very difficult to predict when companies will need to comply with new rules and precisely what information they will be required to disclose under new rules.

Despite that uncertainty, it appears very likely that the SEC will adopt final climate-related disclosure rules in the not-too-distant future and that those rules will include in some form most, if not all, of the big buckets of disclosure requirements reflected in the proposed rules.  Because of the significant effort and degree of organizational change that compliance with the rules likely will require, companies may not be able to wait until final rules are released to begin assessing the impacts of the proposed rules on their organizations.  And, if the SEC were to adopt final rules later this year in the proposed form, companies that are large accelerated filers with a calendar fiscal year would be required to include information for 2023, including Scope 1 and 2 emissions data, in their annual reports filed in early 2024, meaning that they would need to have the systems in place to track and record the relevant information by the end of this year.

Assessing the potential impact of the proposed rules on a company and preparing the company for eventually complying with the rules will require participation from many different parts of the organization, but we expect that, at many companies, the task of setting the company on a course to do those things will fall on the general counsel and other in-house counsel with responsibility for relevant substantive areas.  With that in mind, we have prepared the following guide for in-house counsel with respect to near-term actions their companies should be taking or should consider taking, depending on their circumstances.  Bracewell will expand on a number of the topics noted below in future alerts, webinars or other similar communications.

1.   Engage senior management, the board of directors and relevant board committees and begin assessing governance, oversight and management of climate-related risks.

In-house counsel likely will be hearing from their CEOs and board members, if they haven’t already, asking what the proposed rules mean for their company.  In any case, in-house counsel should ensure that top-level management and board members understand the potential challenges and changes their companies may face with the proposed rules and encourage the level of board and senior management oversight and engagement that is appropriate for their situation.  The proposed rules would require companies to provide detailed disclosures concerning their boards’ oversight of climate-related risks and management’s role in assessing and managing those risks. Although many companies already have robust board oversight of ESG matters and include related disclosures in their SEC filings, the proposed rules are far more granular in dictating the type of information that would need to be disclosed.

In that regard, in-house counsel may be asked what changes, if any, should be made to board or committee composition and structure in light of the proposed new disclosure requirements.  Among other matters, consideration should be given to whether the creation of a new ESG committee – or a purely climate-focused committee – is appropriate or whether responsibility reasonably can be shouldered by an existing committee, such as the audit committee.

2.   Establish organizational responsibility for assessing the implications of the proposed rules for your company.

As noted above, this is a huge task that will require input from a multidisciplinary team, including legal, accounting, operations and possibly other personnel.  Identifying the right team and setting clear responsibilities and timelines are critical near-term tasks.

3.   Understand the potential timeline for compliance with the proposed rules as it relates to your organization.

As noted above, there is considerable uncertainty regarding, among other matters, whether final rules will require compliance on the timelines contemplated in the proposed rules, which would have the compliance requirements phased in over several years based on a company’s status as a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  This fact sheet on the proposed rules published by the SEC provides helpful tables (on page 3) detailing the phase-in periods contemplated by the proposed rules for companies with a calendar fiscal year, assuming the proposed rules were adopted as final with an effective date in December 2022.

Despite the uncertainty, it is certainly possible that the SEC could adopt final rules later this year with compliance dates as contemplated by the proposed rules, and companies therefore would be ill-advised to assume that they will have a longer ramp-up period than they would under the proposed rules and the assumption of a December 2022 effective date.

4.   Understand the proposed rules and the disclosures they will require for your company based on its specific circumstances, including with regard to differences between what the company is disclosing now and what would be required by the proposed rules.

The proposed rules are highly prescriptive and are intended to produce consistent and comparable disclosures across the public-company spectrum.  With limited exceptions (e.g., that smaller reporting companies would be exempted from the requirement to disclose Scope 3 emissions), all public companies will need to assess required disclosure under all provisions of the rules.  That assessment, however, will need to be made in light of the company’s specific circumstances, and there will be categories of required disclosures that are very relevant to some industries or companies but of no or limited relevance to other industries or companies.  Additionally, many companies have been voluntarily disclosing information that is similar to some of the information that may be required to be provided under the proposes rules, but there may be gaps between or differences in required disclosures and a company’s current practices.

As companies begin to digest the proposed rules, it will make sense for them to drill down on the specific types of disclosures they would need to make if the proposed rules were adopted as proposed.  Questions that companies might ask themselves include the following:

  • Will we need to disclose Scope 3 emissions data based on materiality or having set targets or goals including Scope 3 emissions?
  • What, if anything, have we done with respect to the following topics such that disclosure regarding those topics would be required?
    • Adoption of a transition plan
    • Setting of climate-related goals or targets
    • Use of carbon offsets or renewable energy credits in setting goals or targets
    • Use of scenario analyses or other analytical tools in evaluating climate risk
    • Use of an internal carbon price
      • Note that, with respect to goals or targets, the proposed rules refer to a company’s having “set” such goals or targets and not to its having publicly disclosed them.  Similarly, with respect to all of these topics, it is not clear that the related disclosure would be triggered only by some level of formality or organizational scope in the adoption, setting or use of the applicable item.  Companies therefore should assess the relevance of these topics broadly, including informal use or discussion within the organization.
  • What information that we are not currently disclosing would the proposed rules require us to disclose?
  • For information that we are currently disclosing, would the proposed rules require that information to be established, assembled or disclosed differently, or disclosed more expansively or granularly, from how we are doing it now?  If so, how?
  • Which required disclosures might be particularly challenging for our company, such that they might merit special or prioritized focus?

5.   Begin to evaluate existing systems and resources related to climate-related information and identify changes that will need to be made.

Companies in some industries, such as energy or manufacturing, likely already have systems in place to collect much of the data called for by the proposed rules, and many public companies have been publishing voluntary disclosures in the form of ESG reports for years.  However, smaller companies in such industries may not currently have the resources necessary to devote to compliance with the new rules.  Likewise, companies in non-GHG intensive industries, such as financial services, previously may not have had the need, or a more limited need, for such systems.  And even those companies that are experienced in collecting and disclosing climate-related data and other information likely would, under the proposed rules, need to expand their systems to cover a much broader universe of information and ensure that controls and procedures meet standards for disclosures in SEC-filed documents and are appropriate for enhanced scrutiny and potential liability that will come with including such disclosures in SEC-filed documents.  Companies may need to invest significantly in new personnel with appropriate expertise and in new technology, and they will need to expand their disclosure controls and procedures and internal control over financial reporting to cover new sets of information that are wide-ranging, voluminous and highly detailed.  Accordingly, public companies should begin to assess their existing capabilities and identify the changes they would need to make to comply with proposed rules to ensure that the changes can be effected in time to comply with new rules.

Additionally, the climate-related risk disclosures contemplated by the proposed rules may require that companies devote significant resources to expanding the process by which they identify and assess climate-related risk.  Further, the need for companies to evaluate climate-related risks to upstream and downstream – value chain – activities, and potentially to disclose Scope 3 emissions associated with those activities, may pose significant challenges and likely will require many companies to develop new processes to address disclosure requirements that relate to matters that are largely outside of the company’s control and access.  These are areas that companies may want to focus on in the near term.

6.   Evaluate needs and strategy for retaining third parties to assist with disclosures, including for attestation of GHG emissions data.

As noted above, for large accelerated filers and accelerated filers, the proposed rules would require attestation regarding Scope 1 and Scope 2 GHG emissions data by an independent third party meeting certain minimum qualifications, which may be a public accounting firm if it meets the minimum qualifications but need not be an accounting firm.  The market for providing these attestation services is evolving and will continue to evolve as accounting firms and others develop their ability to provide these services.  Some observers have raised concerns that the supply of emission-attestation services may not initially meet the demand for such services that the proposed rules would create.  Companies may wish to begin thinking about their options for third-parties to handle the attestation, particularly large accelerated filers who could be subject to the attestation requirements as soon as in their 2024 annual reports filed in early 2025. Additionally, it is important for companies to have conversations around attestation ahead of their information gathering efforts to ensure that the disclosure information being developed and gathered will be sufficient for attestors to provide the required assurance.

In addition to attestation services, companies should consider their potential need for and access to other third-party advisors with the necessary expertise and experience, including attorneys, accountants/auditors and firms providing consulting and other services to assist companies with climate-related disclosures.

7.   Consider whether the disclosures contemplated by the proposed rules warrant any changes to your current, planned or contemplated climate-related activities, such as setting or disclosing of climate-related goals or targets.

As noted above, the proposed rules contemplate detailed disclosures regarding several matters that may or may not be relevant to a particular company depending on things that the company may or may not have done in advance of the initial compliance date for the proposed rules.  These include whether a company has:

  • adopted a climate transition plan,
  • set climate-related goals or targets,
  • included Scope 3 emissions in its goals or targets,
  • used carbon offsets or renewable energy credits in setting its goals or targets,
  • used scenario analyses or other analytical tools in assessing climate-related risk, or
  • used an internal carbon price.

Companies may wish to reassess their existing, planned or contemplated activities in these areas in view of the proposed rules.  It may be the case that a company would want to modify its activities in one or more of these areas when viewed through the lens of what the company’s disclosures regarding such activities would look like under the proposed rules.  For example, if your company is planning to set or announce new GHG emissions goals, should the company modify the goals as they relate to Scope 3 emissions or otherwise before doing so, or would it be preferable for the company to delay any such setting or announcement of goals until there is clarity on the content of final rules?

8.   Determine whether to submit comments on the proposed rules.

The proposed rule release includes over 200 requests for comment.  Comments are due by the later of 30 days after the date the proposing release is published in the Federal Register (which had not happened as of the date of this update) or May 20, 2022.  (As noted above, it is possible that the comment period could be extended beyond that date, but, unless and until the SEC actually does that, parties desiring to submit comments should proceed with the expectation that they will need to submit them by the applicable current deadline.)  Although the SEC will not agree with all comments received and may adopt final rules despite strong and widely-held opposing views reflected in the comments, the SEC and its staff will consider the comments received in adopting final rules and likely will make at least some changes to the proposed rules based on comments.  If your company would like to have its voice heard on the proposed rules, you may consider doing so by submitting comments directly or through an industry association or similar group.

9.   Monitor developments.

As noted above, we are in the early stages of the process through which the proposed rules could, in their current form or with changes, become final rules with which public companies actually would need to comply.  In-house lawyers should continue to monitor developments and advise others in their organizations of such developments as appropriate so that preparations for compliance with new climate-related disclosure rules can be adjusted as necessary.

10. Don’t forget that climate-related disclosures may be required under existing SEC rules and interpretations.

With the anticipation of a massive new disclosure regime for climate-related matters and preparation for compliance with that regime, it might be easy to overlook that fact the existing SEC rules and interpretations may require climate-related disclosures in SEC filings, and the SEC staff may issue comments on climate-related disclosures, or the absence thereof, in a company’s SEC filings, as they did for a number companies in the fall of 2021 with respect to the companies’ 2020 annual reports on Form 10-K.  Pending the adoption and implementation of final new rules, companies should continue to assess their disclosures in view of the SEC’s 2010 guidance on climate-related disclosures.

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1. Scope 1 emissions are direct GHG emissions from operations that are owned or controlled by a company.  Scope 2 emissions are indirect GHG emissions from the generation of purchased or acquired energy that is consumed by a company’s operations.  Scope 3 emissions are all indirect GHG emissions not otherwise included in a company’s Scope 2 emissions, which occur in the upstream and downstream activities of a company’s value chain.

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