Lindsay McCormick, Program Manager and Richard Denison, Ph.D., Lead Senior Scientist
When Congress reformed the Toxic Substances Control Act (TSCA) in 2016, it authorized EPA to require companies to pay fees to help defray the agency’s costs of administering this extensive new law. EPA finalized the first “fee rule” in 2018 to establish the payment framework. Under TSCA, EPA is to adjust the fees every three years both to account for inflation and to ensure it is recouping the authorized portion of agency costs to implement the law.
Therefore, developing an accurate estimate of the agency’s costs to implement TSCA is critical. Not only does this provide the baseline by which to establish industry fees (as EPA is to set the fees so as to recoup 25% of its program costs), but it should serve as a north star to identify the true resource needs to lawfully implement TSCA.
Recent reports by the Government Accountability Office and EPA’s Office of Inspector General found that EPA’s ability to assess and manage chemicals regressed over recent years due to lack of workforce or workload planning to ensure the agency can carry out its duties. Both reports recognize the greatly increased scope of work under amended TSCA, and EPA’s failure to translate that into additional staff and resource needs. Establishing a robust, accurate budget for administering TSCA is the first step to rectifying this problem.
Despite the alarm bells rung by these two watchdogs, the Trump EPA’s proposed revised fee rule seems to have lost sight of Congress’ purpose in expanding EPA’s fee authority. The proposed rule invokes a new purpose entirely divorced from TSCA: to reduce asserted burdens on industry – without regard to the impacts that will have on EPA’s ability to implement the law or on ensuring health and environmental protection from chemical exposures. As a result, EPA underestimated its costs and proposed fees such that, if finalized, would push an undue portion of its costs onto the taxpayer.
Below we summarize the major concerns about the fee rule proposal that we detailed in our comments submitted to the agency late last month.
Summary of Major Concerns
Underestimated costs and insufficient fees
EPA significantly underestimated the baseline costs to the agency of carrying out TSCA as it is required to do under the law. For example:
- TSCA Section 4: EPA has significantly underestimated the amount of testing EPA needs to conduct robust risk evaluations and instead still intends to over-rely on voluntary information submissions.
- TSCA Section 5: EPA estimates its costs for new chemicals based on an illegal review approach limited to intended uses and fails to adequately address costs of developing consent orders and Significant New Use Rules.
- TSCA Section 6: EPA fails to include any explicit estimate or cost breakdown for several core section 6 activities and needs, including: identifying potential candidates for prioritization and prioritization itself, risk management, and scientific assistance provided by EPA’s Office of Research and Development.
- TSCA Section 8: EPA has ignored the costs associated with developing reporting rules under this section, which are vital to inform section 4 testing actions and section 6 prioritization, risk evaluation, and risk management activities.
- TSCA Section 14: EPA’s estimate for activities under this section has dropped by more than half relative to that in its Final 2018 Feel Rule – a clear indication that EPA continues to grossly underestimate the true costs of carrying out its duties under TSCA to review confidential business information.
As a result of these underestimates and omissions, the Trump EPA proposed to set the fees below the levels required by TSCA section 26(b)(4)(B), and would not recoup the portion of its costs allowed under TSCA.
Critically, while Congress set an initial annual fee cap at $25 million for the first fee rule, revised fee rules are not subject to this cap. This is because Congress understood that costs to administer TSCA would appropriately and necessarily increase over time. In revising the fee rule, EPA is required to adjust fees so they recoup 25% of program costs – meaning that if EPA’s costs for administering TSCA exceed $100 million, then the fees it recoups should exceed the initial cap of $25 million.
Widespread exemptions and lenient fee schedule
The Trump EPA proposed to exempt many manufacturers from TSCA’s obligation that companies making a chemical substance undergoing a risk evaluation under section 6(b) be subject to fees. The activities EPA proposed to exempt are: 1) importing the chemical in an article; 2) producing the chemical as a byproduct; 3) producing or importing the chemical as an impurity; 4) producing, importing or processing chemicals for research and development activities; 5) manufacturing less than 2,500 lbs. annually of the chemical; and 6) manufacturing a chemical as a non-isolated intermediate. As we blogged about previously, these exemptions originated from industry demands starting in January 2020 that landed on the receptive ears of Trump EPA political appointees.
Yet neither TSCA nor EPA’s Final 2018 Fee Rule provides any basis for such exemptions. In fact, all of these activities constitute forms of manufacturing under TSCA and are required to be included in the scope of a risk evaluation. Hence, EPA will necessarily incur costs in evaluating those activities.
EPA also proposed to delay and spread out fee payments for risk evaluations over nearly the entire period during which they are to be conducted. Yet it failed to acknowledge, let alone assess, the impact of this fee schedule on EPA’s ability to conduct timely and robust risk evaluations. EPA’s ability to hire staff and engage contractors to do the necessary work requires stability in its budget and advanced planning, both of which will be adversely affected if EPA does not receive timely fees.
First 10 chemicals and risk management fee
In its Final 2018 Fee Rule, EPA declined to collect fees for the first 10 risk evaluations. But EPA continues to incur costs arising from these evaluations, as it identified unreasonable risks and must now develop 10 comprehensive risk management rules for the first time. This is a major undertaking that is largely ignored in the fee rule proposal. Not only did EPA fail to estimate its costs for undertaking risk management, it again passed up the opportunity to charge a fee for makers of chemicals found to present unreasonable risks for which risk management is mandated under TSCA.
Future fee rules
By law, EPA is to revise the fee rule every three years. However, the current and proposed rules include a provision that could significantly hinder public participation in future iterations. Specifically, this provision states that if EPA proposes to revise the rule only to adjust fees for inflation, it will circumvent the public comment process. This provision unacceptably precludes the public from weighing in with arguments for why fees should be adjusted beyond just inflation.
For more details, see EDF’s full comments. We urge the Biden EPA to revisit this proposal and finalize an update to the fee rule that reflects its true costs for implementing TSCA.