Richard Denison, Ph.D., is a Senior Scientist.
I noted in an earlier post that the American Chemistry Council (ACC) is seeking major delays in the implementation of enhanced chemical information reporting requirements that EPA has proposed under its TSCA Inventory Update Rule (IUR). But ACC isn’t content with just delaying the enhanced reporting. It’s also seeking an exemption so large that it literally threatens to swallow much of the rule.
The proposed exemption is called for in a footnote on page 2 of the comments ACC filed on the proposed rule: “Exemptions should be provided for any company engaged in an acquisition or divestiture during the years since the last reporting cycle.”
Just how large an exemption would that be?
The chemical industry is considered highly fragmented and diverse compared with many other industrial sectors. It has a correspondingly high rate of “dealmaking,” aka acquisitions and divestitures, one that at times borders on “recklessness,” according to some observers.
Price Waterhouse Coopers (PWC), which tracks the number of deals made in the global chemicals industry, reports an annual average of about 1,000 acquisitions and divestitures in the chemicals sector over the past decade; see the chart on page 7 of this 2010 PWC report. About 700 of those deals each year exceeded $50 million in value (subscription required). And while there was a recent downturn tied to the overall global economic slump, a rebound is taking place this year.
Now, not nearly all of those deals involved US-based companies and hence these numbers may well overstate the deals relevant to IUR reporting. But remember that the IUR applies to chemical importers as well as US-based producers, so ACC’s proposed exemption would apply to any company that imports to the US and is “engaged” in a deal.
Over the course of a four- or five-year reporting cycle, then, hundreds or even thousands of companies could well be “engaged in an acquisition or divestiture during the years since the last reporting cycle.” If ACC gets its way, any such company otherwise subject to IUR reporting would be exempted from reporting.
To put that number of companies into perspective, a total of about 1,500 companies reported information to EPA in the 2006 cycle of the IUR. So there is every reason to expect that ACC’s exemption proposal, if implemented, would take away a huge chunk of the information that would otherwise be reported.
In fairness, later in its comments there are hints that ACC itself seems a bit abashed by, and maybe even confused about, the enormous scope of its own exemption proposal, as it offers several renditions of it.
On page 21, ACC states: “The final rule should make clear that a company does not need to report for a given chemical substance if they no longer produce or import it in the principal year due to divestiture, business discontinuance, etc.”
So, any such activity occurring in, say, the last year of a given cycle would let the company off the hook for reporting information on the chemical for all years of the cycle!
Perhaps ACC was feeling sheepish about the broad scope of its proposal, however, because on page 23 it states “ACC believes that in the event a company is engaged in an acquisition or divestiture during the years since the last reporting cycle, it should only be obligated to report for the time period in which it actually owned the business.”
This final version is far more common-sense: The obligation to report information about a chemical in a given year obviously should reside with – and transfer to – the company that actually produces or imports it in that year.
Will the real exemption ACC proposes please stand up?
Whatever happened to due diligence?
What is motivating ACC in seeking this wholesale exemption seems to me to be a glaring failure in the industry’s own systems for exercising due diligence, which is supposed to be a core element of its much-touted Responsible Care program. Here’s the description of what that program is supposed to do:
“Responsible Care® is the chemical industry’s global voluntary initiative under which companies, through their national associations, work together to continuously improve their health, safety and environmental performance, and to communicate with stakeholders about their products and processes.”
IUR reporting would seem to be a key means by which companies in the industry could and would “communicate with stakeholders about their products and processes.” Within the process of due diligence associated with acquisitions and divestitures, I would have thought that transfer of basic information about chemical production volumes and processes and practices would be routine, and certainly insisted upon by “responsible” companies.
Yet, in ACC’s comments explaining why it views a requirement for companies engaged in acquisitions or divestitures to report under the IUR to be overly burdensome, ACC reveals the actual extent of the industry’s responsible care in this arena:
“Historical data are not typically uploaded into systems upon merger/acquisition integration, forcing companies to compile this information manually. And in some instances, acquiring companies do not even receive the historical data from the divesting company.” (page 6)
Wow. So it is routine in this industry for one company to buy another without knowledge of even the most basic information about the chemicals the acquired company produces. That’s some due diligence.
It should also be noted that the IUR – since its inception in 1986 – has never exempted companies engaged in acquisition or divestiture. So this is a brand new effort by ACC to scale back the IUR.
One would think, given ACC’s acknowledgment that EPA needs authority to obtain more, not less, chemical information from industry, that it would not constantly look for ways to undermine the only routine reporting system EPA has for obtaining such information. One would be wrong.