On April 5, 2017, the Trump Administration issued guidance on Executive Order (EO) 13771, “Reducing Regulation and Controlling Regulatory Costs.” The guidance, published by the Office of Information and Regulatory Affairs (OIRA), provides details on the policy established by the January 30, 2017 executive order that requires agencies to repeal two existing regulations for each new regulation they promulgate. This guidance supersedes the previous interim guidance published in February, and it reflects OIRA’s consideration of the comments received in response to the interim guidance.
EO 13771 mandates that for every new regulation issued, at least two prior regulations should be eliminated. For fiscal year (FY) 2017 and moving forward, the heads of all agencies are directed that the total incremental cost of all new regulations, including the cost savings associated with eliminating the two prior regulations, must be no greater than zero—unless otherwise required by law or consistent with written advice of the director of the Office of Management and Budget (OMB). The term ”total incremental cost” means the sum of all costs from EO 13771 regulatory actions minus the cost savings from EO 13771 deregulatory actions.
It appears that the EO is based solely on “cost.” In the interim guidance, the administration dictated that “costs” are to be measured as the “opportunity cost to society” and referenced OMB Circular A-4 to define this concept. In the April guidance, the administration dictated that “opportunity cost” would equal the sum of consumer and producer surplus, minus any fixed costs, and also referenced OMB Circular A-4. OMB Circular A-4, issued Sept. 17, 2003, does not actually define “opportunity cost to society.” Instead, it provides guidance for conducting a cost-and-benefit analysis as required by Executive Order 12866 issued by President Clinton in 1993, which applies to rulemakings that establish new rules as well as those that rescind or modify existing rules. OMB Circular A-4’s only reference to “opportunity cost” describes the concept in terms of “willingness-to-pay,” or the measure of “what individuals are willing to forego to enjoy a particular benefit,” as well as the amount of compensation individuals are “willing to accept” to forego the benefit. The OMB Circular A-4 may well be unhelpful in making a “zero-cost” analysis, as EO 13771’s focus is on monetary costs, and “opportunity costs” are difficult to estimate. Indeed, it is difficult to imagine a situation for implementing a regulation or even deregulating in which the cost is “zero.”
The April guidance notes that, in general, agencies can comply with the requirements of the EO by issuing two “deregulatory actions” for each new “regulatory action.” Beginning with FY 2018 and moving forward, the EO requires OMB to identify for each agency the total amount of incremental costs for all deregulatory and regulatory actions finalized during the fiscal year, based on the information that was submitted to OMB by each agency. The guidance defines “EO 13771 regulatory actions” as either: 1) a “significant regulatory action” (i.e., has an annual effect on the economy of $100 million or more, among other things. See EO 12866 3(f)) that has already been finalized and that imposes total costs greater than zero, or 2) a “significant guidance document” with costs above zero that has been finalized. The guidance further defines a “significant guidance document” as one that is reasonably anticipated to have a major impact on the economy, create inconsistency with an action taken or planned by another agency, materially alter the budgetary impact or entitlements, grants, user fees, or loan programs or the rights and obligations of the recipients thereof, or raise novel legal or policy issues.
The guidance defines a “deregulatory action” as an action that has been finalized and has total costs less than zero. It is unclear from the EO and guidance what “total costs less than zero” means. A “deregulatory action” qualifies as both: (1) one of the actions used to satisfy the provision to repeal or revise at least two existing regulations for each regulation issued, and (2) a cost savings for purposes of the total incremental cost allowance. “Deregulatory actions” can be issued in multiple forms, including rulemaking, guidance or interpretive documents, certain actions related to international regulatory cooperation, and information-collection requests that repeal or streamline recordkeeping, reporting, or disclosure requirements.
EO 13771 applies to each “executive department or agency,” but leaves a number of government regulatory functions outside of its scope. These include agencies involved in military, national security, and foreign affairs functions, as well as any government organization arising from the Legislative or Judicial branches. Also exempt are regulations that are legislative rules that qualify for a “good cause” exemption or for which compliance with the terms of EO 13771 would be impracticable or contrary to the public interest. Importantly, the guidance does not indicate which entity is ultimately responsible for making such determinations. Some other exemptions include expressly exempt actions, emergency actions, statutorily or judicially required actions, and de minimis actions.
On its face, EO 13771 could have a significant impact on the pace of federal rulemaking during the Trump Administration, however it remains to be seen what the practical impact of the EO will be. Further, it appears based on the EO itself and the guidance published thus far, it will be difficult for agencies to determine “cost” of implementing and eliminating regulations.
Note: There will be more guidance forthcoming relating to other aspects of the EO, such as Section 3, which concerns the “Annual Regulatory Cost Submissions to the Office of Management and Budget.” Hopefully the forthcoming guidance will shed more light into the EO and its requirements.
Trump Administration Issues Guidance on the Executive Order, “Reducing Regulation and Controlling Regulatory Costs”
/in NewsOn April 5, 2017, the Trump Administration issued guidance on Executive Order (EO) 13771, “Reducing Regulation and Controlling Regulatory Costs.” The guidance, published by the Office of Information and Regulatory Affairs (OIRA), provides details on the policy established by the January 30, 2017 executive order that requires agencies to repeal two existing regulations for each new regulation they promulgate. This guidance supersedes the previous interim guidance published in February, and it reflects OIRA’s consideration of the comments received in response to the interim guidance.
EO 13771 mandates that for every new regulation issued, at least two prior regulations should be eliminated. For fiscal year (FY) 2017 and moving forward, the heads of all agencies are directed that the total incremental cost of all new regulations, including the cost savings associated with eliminating the two prior regulations, must be no greater than zero—unless otherwise required by law or consistent with written advice of the director of the Office of Management and Budget (OMB). The term ”total incremental cost” means the sum of all costs from EO 13771 regulatory actions minus the cost savings from EO 13771 deregulatory actions.
It appears that the EO is based solely on “cost.” In the interim guidance, the administration dictated that “costs” are to be measured as the “opportunity cost to society” and referenced OMB Circular A-4 to define this concept. In the April guidance, the administration dictated that “opportunity cost” would equal the sum of consumer and producer surplus, minus any fixed costs, and also referenced OMB Circular A-4. OMB Circular A-4, issued Sept. 17, 2003, does not actually define “opportunity cost to society.” Instead, it provides guidance for conducting a cost-and-benefit analysis as required by Executive Order 12866 issued by President Clinton in 1993, which applies to rulemakings that establish new rules as well as those that rescind or modify existing rules. OMB Circular A-4’s only reference to “opportunity cost” describes the concept in terms of “willingness-to-pay,” or the measure of “what individuals are willing to forego to enjoy a particular benefit,” as well as the amount of compensation individuals are “willing to accept” to forego the benefit. The OMB Circular A-4 may well be unhelpful in making a “zero-cost” analysis, as EO 13771’s focus is on monetary costs, and “opportunity costs” are difficult to estimate. Indeed, it is difficult to imagine a situation for implementing a regulation or even deregulating in which the cost is “zero.”
The April guidance notes that, in general, agencies can comply with the requirements of the EO by issuing two “deregulatory actions” for each new “regulatory action.” Beginning with FY 2018 and moving forward, the EO requires OMB to identify for each agency the total amount of incremental costs for all deregulatory and regulatory actions finalized during the fiscal year, based on the information that was submitted to OMB by each agency. The guidance defines “EO 13771 regulatory actions” as either: 1) a “significant regulatory action” (i.e., has an annual effect on the economy of $100 million or more, among other things. See EO 12866 3(f)) that has already been finalized and that imposes total costs greater than zero, or 2) a “significant guidance document” with costs above zero that has been finalized. The guidance further defines a “significant guidance document” as one that is reasonably anticipated to have a major impact on the economy, create inconsistency with an action taken or planned by another agency, materially alter the budgetary impact or entitlements, grants, user fees, or loan programs or the rights and obligations of the recipients thereof, or raise novel legal or policy issues.
The guidance defines a “deregulatory action” as an action that has been finalized and has total costs less than zero. It is unclear from the EO and guidance what “total costs less than zero” means. A “deregulatory action” qualifies as both: (1) one of the actions used to satisfy the provision to repeal or revise at least two existing regulations for each regulation issued, and (2) a cost savings for purposes of the total incremental cost allowance. “Deregulatory actions” can be issued in multiple forms, including rulemaking, guidance or interpretive documents, certain actions related to international regulatory cooperation, and information-collection requests that repeal or streamline recordkeeping, reporting, or disclosure requirements.
EO 13771 applies to each “executive department or agency,” but leaves a number of government regulatory functions outside of its scope. These include agencies involved in military, national security, and foreign affairs functions, as well as any government organization arising from the Legislative or Judicial branches. Also exempt are regulations that are legislative rules that qualify for a “good cause” exemption or for which compliance with the terms of EO 13771 would be impracticable or contrary to the public interest. Importantly, the guidance does not indicate which entity is ultimately responsible for making such determinations. Some other exemptions include expressly exempt actions, emergency actions, statutorily or judicially required actions, and de minimis actions.
On its face, EO 13771 could have a significant impact on the pace of federal rulemaking during the Trump Administration, however it remains to be seen what the practical impact of the EO will be. Further, it appears based on the EO itself and the guidance published thus far, it will be difficult for agencies to determine “cost” of implementing and eliminating regulations.
Note: There will be more guidance forthcoming relating to other aspects of the EO, such as Section 3, which concerns the “Annual Regulatory Cost Submissions to the Office of Management and Budget.” Hopefully the forthcoming guidance will shed more light into the EO and its requirements.
Irene Hantman to present at American Chemical Society 253rd National Meeting in San Francisco April 4
/in TSCA ReformThe symposium is titled, “Recent Developments in TSCA Regulation — New Requirements for Chemicals in Commerce.” Ms. Hantman will be presenting with:
The symposium will include an overview of TSCA and the Lautenberg Amendments, discuss regulatory updates from EPA including changes to how the Agency evaluates new chemicals, and discuss implications for chemicals in commerce such as changes to CBI protections and the Nanomaterials Reporting Rule. The program abstract is provided below.
The June 22, 2016 enactment of the Frank R. Lautenberg Chemical Safety for the 21st Century Act effectuated a sea change in U.S. chemicals regulatory policy and imposed many new requirements on EPA and the manufacturers, importers, and processors of chemical substances. Some requirements took effect the moment President Obama signed the Act; other changes will be implemented over the next few years. Lautenberg mandates that the Agency issue a number of new rules by June 2017. To meet this schedule, EPA will be taking and responding to comments on its proposals during the spring of 2017. Proposed rules will affect the identification of chemicals currently in commerce through a TSCA “Inventory Reset,” and how EPA assesses the risks presented by these chemicals. The Inventory Reset process could have significant impacts on a company’s ability to continue routine manufacturing activities (for example, substances classified as inactive will not be allowed in commerce, or there may be questions about the actual identity of compounds now in commerce). Importantly, the final rules implementing the Prioritization and Risk Assessment processes will determine the processes and criteria that EPA will use to identify high priority chemicals for risk evaluation, how it will evaluate the risks presented by these chemicals and the amount of flexibility that EPA will allow in these processes. In addition, the Agency will revisit the Confidential Business Information (CBI) claims on chemicals presently in commerce, including claims that withhold the actual identity of chemicals. Submitters will be required to substantiate past claims to continue receiving CBI protections.
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For a copy of the presentations contact Ms. Hantman at ihantman@verdantlaw.com.
Processors and Downstream Users Comment on the Inventory Reset Proposed Rule, Asking for Clarity
/in TSCAOn January 13, 2017, the EPA published a proposed rule to reset the TSCA Inventory into separate lists of “active” and “inactive” substances (i.e., inventory reset). The proposal details notification requirements and establishes exemptions and procedures for handling confidentiality claims. Properly notified substances would be designated by EPA as “active,” whereas substances without a valid notification would be designated as “inactive.”
Once designated, “inactive” substances could not properly be manufactured, imported, or processed for a non-exempt commercial purpose under TSCA. For inactive substances, EPA proposed “forward-looking” procedures for notifying inactive substances if and when non-exempt manufacture, import, or processing would resume in the future. Properly notified substances would be converted by EPA to “active” substances.
Many comments to the proposed rule were received from interested parties, including coalitions and trade associations – examples are provided below.
A downstream user coalition has questioned the proposed requirement under the TSCA inventory reset proposed rule that a processor of an inactive substance submit notification to the EPA prior to its use. The Chemical User Coalition (CUC), a cross-industry group of nine major companies, including Intel, Boeing, Honda and Procter & Gamble, said in its comments that the inventory reset provisions should only be relevant to reporting, and a failure to adhere to the notification deadline should constitute a reporting violation, not affect a company’s ability to process substances on the inventory.
IPC, the Association Connecting Electronics Industries, in its comments requested clarification of the term “processors” stating that the definition currently in place is “overly simple and prone to misinterpretation.” Specifically, IPC requested that EPA clarify that processing does not include assembling parts into articles, when it does not involve the preparation of a chemical substance or mixture.
Others pointed out that because processors are not required to report pre-manufacture notices or under the Chemical Data Reporting rule, that many would be wholly unfamiliar with the EPA’s CDX reporting system.
The comment period on the inventory rest proposed rule ended March 14, 2017.
CPSC Settles with NRDC Regarding the Restriction of Phthalates in Children’s Toys
/in CPSCThe U.S. Consumer Product Safety Commission (CPSC) and the Natural Resources Defense Council (NRDC) have reached an agreement in principle for the federal agency to issue a rule banning five chemicals, known as phthalates, that may cause reproductive harm from their exposure in children’s products. Those five phthalates are: diisobutyl phthalate (DIBP), di-n-pentyl phthalate (DnPP), di-n-hexyl phthalate (DnHP), dicyclohexyl phthalate (DCHP); and diisononyl phthalate (DINP). While the CPSC reached a tentative agreement with the NRDC on the timetable for issuing a rule, the contents of the final rule will be made by a vote of the CPSC Commission.
Phthalates are a class of chemicals used to soften plastics and are commonly found in children’s toys. Three phthalates, di-(2-ethylhexly) phthalate (DEHP), dibutyl phthalate (DBP), and benzyl butyl phthalate (BBP), were banned from use in toys and other children’s products in concentrations above 0.1 percent in 2009 under the Consumer Product Safety Improvement Act, and three more were banned on an interim basis based on the same concentration limit the same day. The 2009 interim banned substances include diisononyl phthalate (DINP), diisodecyl phthalate (DIDP), and di-n-octyl phthalate (DnOP).
The CPSC published a proposed rule in December 2014 and was supposed to issue a final order within 180 days to continue an interim ban on the five phthalates, DIBP, DnPP, DnHP, DCHP, and DINP, within children’s toys, however, the 180-day period stretched to 950 days as of last week.
The NRDC, along with the Environmental Justice Health Alliance for Chemical Policy Reform and the Breast Cancer Fund, filed a complaint in December of 2016 seeking injunctive and declaratory relief to force the CPSC to regulate the five phthalates in children’s products.
A consent decree is expected to be finalized within the month.
The case is Natural Resources Defense Council et al. v. U.S. Consumer Product Safety Commission, case number 1:16-cv-09401, filed in the U.S. District Court for the Southern District of New York.
Court to Allow California to List Glyphosate as Possible Cancer Threat under Prop. 65
/in Prop. 65In September 2015 the California Environmental Protection Agency’s Office of Environmental Health Hazard Assessment (OEHHA) announced plans to list the pesticide glyphosate as a possible cancer threat under Proposition 65. OEHHA made the decision to list glyphosate following the International Agency for Research on Cancer March 2015 finding that glyphosate is “probably carcinogenic to humans.” Monsanto sued OEHAA in January 2016, in an effort to block the listing. Global sales of glyphosate were about $7.8 billion in 2014, as a carcinogen under Proposition 65. It is the main ingredient in Monsanto’s Roundup.
A tentative ruling by California Superior Court Judge Kristi Culver Kapetan states that the court intends to dismiss Monsanto’s lawsuit. In the lawsuit, Monsanto claimed that the listing was unconstitutional because OEHHA delegated law-making authority “to an unelected and non-transparent foreign body that is not under the oversight or control of any federal or state government entity,” and because the labor code process violated the due process clauses of the California and U.S. constitutions. In its motion to dismiss the lawsuit, California argued that IARC’s scientific determinations are “the gold standard in carcinogen identification.” The court found that Monsanto’s petition failed to state facts sufficient to constitute a cause of action.
Judge Kapetan will be issuing a formal decision soon.
Implementing the 2016 TSCA Amendments – Progress & Prognosis
/in News & Events, TSCA, TSCA ReformVerdant Attorney Irene Hantman will speak on Wednesday, February 22 at a panel discussion among experts on implementing the Frank R. Lautenberg Chemical Safety for the 21st Century Act, which amends the Toxic Substances Control Act (TSCA). The program includes a panel of legal experts, current and former EPA officials, and representatives from environmental NGOs and trade groups. The panel will discuss topics including:
The program includes an informal brown bag lunch for in-person participants in Washington, D.C., as well as dial-in participation. If attending in person, please RSVP to Gina Dean at gina.dean@apks.com; teleconference information is forthcoming. This event is sponsored by the Pesticide, Chemical Regulation, and Right-to-Know Committee of the ABA Section of Environment, Energy, and Resources (SEER), with co-sponsorship by the Environmental Law Institute and SEER’s Special Committee on Congressional Relations, and hosted by Arnold & Porter Kaye Scholer LLP.
Please see the announcement [PDF] for more details.
GENERAL INFORMATION:
Location: Arnold & Porter LLP, 601 Massachusetts Avenue, NW, Washington, DC 20001
Arrival Time: 11:45 am; plan to arrive in advance to check in and pass through security; the dialogue will begin promptly at noon and will conclude at 2:00 pm.
Moderator: Larry Culleen, Partner, Arnold & Porter Kaye Scholer LLP
Panelists:
The Trump Administration’s regulatory freeze and its effects on TSCA.
/in TSCAOn January 20, the new White House Chief of Staff Reince Priebus released a memorandum to agency and department heads announcing a freeze on new or pending regulations. The agencies and departments are asked to not send any regulation to the Office of the Federal Register until a Presidential appointee/designate reviews and approves it. The Office of Management and Budget (OMB) Director can make exceptions to the freeze for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.” The freeze is similar to one put in place by President Obama upon his inauguration in 2009.
In addition, the White House requested the withdrawal of submissions to the Federal Register that have not yet been published. The memo also asks for the temporary postponement of rules that have already been published but have not yet taken effect. The effective date of those rules would be postponed “for 60 days from the date of this memorandum …for the purpose of reviewing questions of fact, law, and policy they raise.” Both the withdrawn and postponed rules would be subject to the same exceptions for emergencies and urgent circumstances as for new rules. Agency and department heads are instructed to consider proposing for notice and comment further delays beyond the 60-day period, or further notice-and-comment rulemaking.
The memo specifically excludes “any regulations subject to statutory or judicial deadlines,” and asks that such exclusions be identified to the OMB Director. Agency and department heads are also asked to notify the OMB Director of any regulations that should be excluded from the freeze because they “affect critical health, safety, financial, or national security matters, or for some other reason.”
As we have discussed on this blog, the Frank R. Lautenberg Chemical Safety for the 21st Century Act, which modernizes the Toxic Substances Control Act (TSCA), requires that EPA promulgate a variety of implementing regulations. EPA has already proposed and finalized several of these implementing rules in recent months. Most of these actions should be excluded from the announced regulatory freeze, as they are subject to deadlines specified in the Lautenberg Act. However, while EPA had planned to develop a proposed rule on new fees by mid-December, that rule has yet to be released and is not subject to a statutory deadline. EPA had set finalizing the fees rule as a goal for mid-June 2017, but the final rule is also not required by statute, although the agency’s First Year Implementation Plan notes that
“authority to require fees will be needed ASAP.”
The regulatory freeze seems likely to affect the nanoscale reporting and recordkeeping rule which was finalized earlier this month. Although that rule’s effective date is not until May 12, 2017, EPA may consider delaying the effective date or re-opening the rulemaking process to review questions of fact, law, or policy.
EPA Issues Proposed Rule on TSCA Inventory “Reset”
/in TSCAAccording to the EPA, there are currently over 85,000 chemicals on EPA’s Toxic Substances Control Act (TSCA) Chemical Substance Inventory (Inventory), many of which are no longer actively produced. On January 13, 2017, the EPA published a proposed rule to reset the TSCA Inventory into separate lists of “active” and “inactive” substances (i.e., inventory reset). EPA is proposing to require use of the Agency’s electronic reporting portal, Central Data Exchange (CDX), for notification under this rule. The proposal details notification requirements and establishes exemptions and procedures for handling confidentiality claims.
The notification, to be entered into CDX no later than 180 days after the final rule is published, is retrospective in nature and is required for substances listed on the Inventory and that were manufactured or imported into the U.S. for non-exempt commercial purposes in the last ten years (between June 21, 2006 and June 21, 2016). Notifications for substances that were “processed” during this period would not be required, however, the proposal allows processors to report no later than 360 days after the final rule is published.
Properly notified substances would be designated by EPA as “active,” whereas substances without a valid notification would be designated as “inactive.”
Once designated, “inactive” substances could not properly be manufactured, imported, or processed for a non-exempt commercial purpose under TSCA. Thus, EPA also is proposing “forward-looking” procedures for notifying inactive substances if and when non-exempt manufacture, import, or processing would resume in the future. Properly notified substances would be converted by EPA to “active” substances.
TSCA Section 8 requires EPA to compile an “interim list” of active substances before promulgation of the final rule. The proposed rule would not require manufacturers to report chemical substances that are on the “interim list.” Indeed, in the proposal, manufacturers and processors of chemical substances on the non-confidential portion of the Inventory would be exempt from reporting if the manufacture of that chemical substance was already reported (by any party) in response to 2012 or 2016 Chemical Data Reporting (CDR).
Comments on the proposal must be received by March 14, 2017.
EPA Publishes Final TSCA Reporting and Recordkeeping Rule for Nanoscale Materials
/in TSCAOn January 12, 2017, EPA published a final rule under Section 8(a) of the Toxic Substances Control Act (TSCA) establishing reporting and recordkeeping requirements for certain chemical substances that are manufactured or processed at the nanoscale. Manufacturers and processors, or persons who intend to manufacture or process new discrete forms of certain existing chemical nanoscale materials not previously reported to EPA, must also report certain information to EPA prior to manufacture or processing. The information to be reported includes the specific chemical identity, production volume, methods of manufacture and processing, exposure and release information, and existing information concerning environmental and health effects. There is no independent requirement to test materials to find this information, but manufacturers and processors must use information that is known to or reasonably ascertainable by them when reporting.
Persons who manufacture or process a discrete form of a reportable chemical substance at any time during the three years prior to the effective date of the final rule must report to EPA one year after the effective date of the final rule. There is also a standing one-time reporting requirement for persons who intend to manufacture or process a new discrete form of a reportable existing chemical substance on or after the effective date of the rule. These persons are required to report to EPA at least 135 days before manufacture or processing of that discrete form with certain exceptions. The final rule will be effective on May 12, 2017.
EPA Proposes to Limit the Use of Two Toxic Chemicals in Paint Removers
/in TSCAThe EPA is proposing to place limits on the use of two common chemicals in paint removers in order to protect consumers and workers from serious health risks associated with this use. The chemicals are methylene chloride and N-methylpyrrolidone (NMP).
In a 2014 assessment, EPA concluded that methylene chloride can cause a range of adverse health effects, including harm to the central nervous system, liver toxicity, and cancer. EPA is now proposing to prohibit manufacture (including import), processing, and distribution in commerce of methylene chloride when used as a paint remover, except for commercial furniture refinishing which the Agency will address in a separate proposal. EPA is also proposing to require manufacturers, processors, and distributors to notify retailers and others in their supply chains of the prohibitions.
EPA assessed NMP in 2015 and identified risks to people, particularly pregnant women and women of childbearing age, who have high exposure to NMP through paint or coating removal. EPA is inviting comments on two approaches to address the risks from NMP. One approach would prohibit manufacture (including import), processing, and distribution in commerce of NMP when used as a paint remover, as well as require various notification measures on the restrictions to downstream processors and users. The other approach would put in place a combination of requirements to address unreasonable risks, including limiting the amount of NMP in paint remover products, providing warning labels for consumers, and requiring workers to wear specialized gloves and other equipment. EPA is seeking comment on both approaches. In addition, EPA is proposing to exempt certain national security uses of methylene chloride and NMP from the requirements of this rule.
Comments on the proposed rule must be received 90 days after date of publication in the Federal Register.
Read the pre-published proposed rule here.