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By Pat Rizzuto
Chemical manufacturers’ trade secret claims will face the most systematic scrutiny ever from the EPA as the agency proposes to update its inventory of commercial chemicals.
Of the approximately 85,000 chemicals on the Environmental Protection Agency’s chemicals inventory, about 17,000—or 20 percent—are on the confidential portion of that inventory, Steve Owens, an attorney with Squire Patton Boggs’ Phoenix, Ariz., office told Bloomberg BNA.
Chemical manufacturers cannot patent their molecules, making the secrecy of their chemicals’ identity critical to safeguarding their intellectual property. Congress’s 2016 overhaul of the Toxic Substances Control Act requires that companies back up many claims they make that information must be kept from the public—especially competitors—and it requires the EPA to review those claims, something it has rarely done.
“This will be the most comprehensive review of the confidential inventory that’s ever been done,” said Owens, who previously served as assistant administrator for the Environmental Protection Agency’s chemical and pesticide offices under President Barack Obama.
The 2016 amendments to TSCA require the EPA to propose the rule, which it published Jan. 13 (RIN:2070-AK24; 82 Fed. Reg. 4255). The proposed rule is designed to achieve two goals.
First, it would help the agency know what chemicals have been in commerce over the last 10 years.
Second, it would require the agency to review companies’ claims that certain information be kept confidential to protect trade secrets.
For example, companies that want to maintain a chemical’s identity as confidential would have to assert that claim when they notify the EPA that they make, import or process a chemical that already has a confidential identity.
Being on the confidential inventory means the EPA knows the chemicals’ identities, but is not allowed to release that information to the general public.
Environmental advocates argue that the EPA’s proposal could lead to more chemicals being declared confidential. Richard Denison, lead senior scientist for the Environmental Defense Fund, told Bloomberg BNA the EPA’s proposed rule goes beyond what the 2016 TSCA amendments intended.
The agency has proposed to let companies make new claims, not just reassert their own prior claims that chemicals on the confidential inventory need to remain there, he said. The defense fund was the only environmental organization to comment on the inventory update rule.
The EPA’s proposed rule would allow any chemical manufacturer or processor, which notifies the agency that it makes, imports or processes a chemical with an existing CBI claim, to ask the agency to maintain the confidential identity of that chemical.
The company can make that claim regardless of whether it “asserted the original claim that caused the specific chemical identity to be treated as confidential,” the EPA said in its proposal.
“A number of manufacturers and processors may legitimately benefit from the confidential status of a specific chemical identity, and the initial claimant may no longer exist,” the agency said.
The Society of Chemical Manufacturers & Affiliates, which represents specialty chemical manufacturers, and the American Petroleum Institute were among the industry organizations to support the EPA’s proposal in comments they filed about the rule. Comments were due March 14.
Any company claiming the need to protect information including chemical identity is required to substantiate that claim, Judah Prero, an attorney with Sidley Austin LLP who formerly worked at the American Chemistry Council, told Bloomberg BNA.
For example, the company must have taken reasonable measures to protect the confidentiality of a chemical’s identity; that identity must not be disclosed or otherwise made available to the public under any other federal law; and there must be a reasonable basis to conclude that disclosure would likely cause substantial harm, he said.
Jessie Kneeland, an environmental chemist with the environmental and risk sciences consulting firm Gradient, told Bloomberg BNA any company that makes or imports a chemical on the EPA’s confidential inventory should make sure it asserts a claim to maintain the confidential identity of that chemical.
Denison, however, said the amended law allows only the original company that asserted the need to keep a chemical’s identity confidential to seek to maintain its confidential status.
“CBI claims are company-specific and can’t be ‘borrowed’ by other companies,” he wrote in a recent blog.
“One company may be able to justify a trade secret claim for chemical identity, while another company can’t,” Denison told Bloomberg BNA.
Companies that wish to assert a new claim can do so, but must follow procedures detailed in a separate section of amended TSCA (Section 14) —not Section 8, which requires the EPA to update the inventory, Denison said.
Owens said the EPA’s proposed approach makes sense at this stage of the process since the proposal rule would not immediately require companies to substantiate claims to maintain the confidential identity of a chemical.
The EPA’s review of confidential business information claims will occur in two stages because there are two types of claims the proposed rule addresses.
Chemical manufacturers, importers or processors that seek to maintain a chemical’s confidential status on the TSCA inventory would click a box on a notification form the EPA’s proposed rule provides and let the EPA know the chemical’s identity should be kept confidential.
After the EPA determines which chemicals are active in commerce, it will propose another rule detailing the process it would use to review CBI claims for chemical identity.
The agency must complete its review of these confidentiality claims within five years of issuing that active substances list.
Owens said there are companies other than the original claimant that may rely on the fact that a chemical is currently on the confidential portion of the TSCA Inventory. It’s reasonable to allow any company that manufactures, imports or processes a confidential chemical to assert the CBI claim for purposes of the inventory reset to avoid business disruptions and other issues that could arise, he said.
Allowing additional companies to maintain an existing CBI claim—pending later substantiation and review—would eliminate uncertainty for any company that may rely on the CBI claim and that may be unsure whether some other party is going to assert the claim, Owens said.
“EPA can make a determination later about whether the CBI claim should be allowed to continue, when it requires substantiation of the claim,” he told Bloomberg BNA.
There are other benefits to allowing parties other than the original claimant to assert CBI for chemical identity during the inventory update, Owens said.
In the short run, the agency would not have to spend time, resources and effort double-checking confidential business information claims to determine whether the company seeking to maintain the existing claim is in fact the original claimant, he said.
The other types of information that companies may claim as confidential during the notification process include a company’s identity and whether that company makes a chemical, imports it or processes it. The EPA’s proposed rule would require those types of claims to be substantiated as they are made.
The proposed rule said the EPA would review a subset of these claims.
Denison said the EPA’s proposed rule also is too lenient when it comes to reviewing CBI claims for information other than chemical identity.
The EPA’s proposed rule would presume that any non-confidential chemical for which it received production information in 2012 or 2016 as chemical manufacturers complied with the Chemical Data Reporting rule would be in commerce.
Companies would not have to notify the agency again that they make those particular non-confidential chemicals. The consequence of that, Denison said, is that confidentiality claims for information other than chemical identity that had companies asserted when they filed their Chemical Data Reporting submissions would remain.
Those CBI claims would not necessarily be reviewed by the EPA to ensure they are warranted, he said.
The inventory update rule is the first of three fundamental regulations the amended chemicals law required the EPA to issue as final by June.
Looking ahead Owens and Prero said the agency faces a tremendous workload.
Speaking only about the inventory update rule, Prero said, EPA has never had a time when it would have gotten the amount of information at once as it would receive to update the inventory.
“This will be a trial by fire as the EPA gets information and has to start reviewing it,” he said.
Owens said reviewing CBI claims is “a very resource intensive exercise.”
The EPA will have a hard time completing this task and other TSCA implementation tasks under the budget cuts the Trump administration has proposed, he said.
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