Inhance Technologies, a Texas-based plastic and chemical transformation company, went head-to-head with the Environmental Protection Agency (EPA) before the U.S. Fifth Circuit Court of Appeals earlier this year. The Court’s ruling reversed an EPA order regarding the presence of long-chain perfluoroalkyls (PFAS) in plastic containers.1
The Case
Inhance has been fluorinating plastic containers using the same process since 1983. The fluorination process creates a barrier that keeps dangerous substances from leaching out of their containers and keeps outside substances from permeating in. The EPA began investigating Inhance after the presence of PFAS was detected in an insecticide that was stored in a container fluorinated by Inhance. After confirming that Inhance’s fluorination process resulted in the creation of PFAS, the EPA issued Inhance a Notice of Violation in March 2022.
The Notice of Violation offered Inhance two options: either change its fluorination process so it no longer manufactured PFAS or temporarily halt the fluorination of any products that resulted in the creation of PFAS. Inhance did neither and instead submitted to the EPA two Significant New Use Notices. After considering these Notices, the EPA issued two orders in December 2023 prohibiting Inhance from manufacturing or processing PFAS through their fluorination process. Inhance asserted that if the EPA’s orders are allowed to take effect, they will shut down Inhance’s fluorination process, bankrupting the company. Hence, Inhance immediately petitioned the U.S. Fifth Circuit for expedited review.
Toxic Substances Control Act
Section 5
Initially, the Court recounted the legislative and regulatory history: Congress enacted the Toxic Substances Control Act (TSCA)2 in 1976 to protect human beings and the environment from chemical substances that present an unreasonable risk of injury to health or to the environment. Under the Act, there are two ways the EPA may regulate chemical substances.
First, Section 5 allows the EPA to regulate the use of new chemical substances and any new significant use of a chemical substance. If the EPA labels the use of a chemical as a significant new use, then it proposes a rule regulating that substance, and affected entities are allowed the opportunity for notice and comment. At the end of the comment period, the EPA promulgates a final rule known as a Significant New Use Rule (SNUR).
If a company wants to manufacture or process a new chemical substance or chemical substance that has been deemed a significant new use, it must submit a Significant New Use Notice at least 90 days before such manufacture or processing. After review, the EPA must make one of three findings: (1) the chemical substance or significant new use presents an unreasonable risk of injury to health or the environment; (2) there is insufficient evidence to determine an evaluation of the health and environmental effects of the chemical substance or significant new use; or (3) the relevant chemical substance is not likely to present an unreasonable risk of injury to health or to the environment.
If the EPA finds that there is insufficient evidence to determine the effects of the substance or if the substance presents an unreasonable risk of injury, then it must issue an order prohibiting or limiting the manufacture of the substance. These are known as Section 5(e) orders and Section 5(f) orders, respectively, and they are the types of orders at issue in this case.
Section 6
Second, the EPA may regulate chemical substances under Section 6. The mandate of Section 6 is broader than Section 5 in that it applies to all chemical substances, not just new chemical substances or significant new uses of chemical substances.
However, the rulemaking process under Section 6 is also more rigorous than Section 5. It requires the EPA to conduct a cost-benefit analysis, weighing the negative effects of the chemical substance against the benefits and assessing the economic consequences of prohibiting or limiting the substance. No such analysis is required under Section 5.
SNUR Updates
In response to growing concerns about PFAS, the EPA proposed a new Significant New Use Rule in January 2015. This new rule designated as significant new use the manufacturing or processing of an identified subset of PFAS for any use that will not be ongoing after December 31, 2015, and all other PFAS for which there are currently no ongoing uses. The rule also made clear that the SNUR would apply only to “any use not ongoing as of the date on which this proposed rule is published.”
Under the SNUR section entitled “Does this action apply to me?”, the EPA included a non-exhaustive list of industries that might be affected by the 2015 SNUR. Those industries included fiber, yarn, and thread mills; carpet and rug mills; home furnishing merchant wholesalers; carpet and upholstery cleaning services; and chemical manufacturing and petroleum refineries. Notably, the fluorination industry was missing from the list, as was any industry with the same North American Industry Classification Code as the fluorination industry.
In July 2020, the EPA promulgated the final SNUR.3 Like the proposed rule, it included a list of industries that might be affected by the SNUR. That list included other industries in addition to those already stated in the proposed rule, but still did not include the fluorination history. The SNUR went into effect without any challenges.
The Court
With this understanding of Sections 5 and 6 of the TSCA and of the new SNURs, the Fifth Circuit vacated the EPA Orders in question, concluding that the EPA should have promulgated the Rule under Section 6, as opposed to Section 5.
The EPA’s December 2023 orders prohibited Inhance from manufacturing or processing PFAS through their fluorination process. These orders are known as Section 5(e) and Section 5(f) orders, respectively.
The Court asserted that the plain language of TSCA’s Section 5 could not be contorted by the EPA to “deem a forty-year-old ongoing manufacturing process a ‘significant new use’.” Therefore, the EPA could not subject the fluorination process to the “accelerated regulatory process provided by that part of the statute.” The Fifth Circuit continued that “in other contexts, ‘new’ may have nuanced meanings, but its meaning in the statute before us is plain, and plainly prohibits the EPA’s December 2023 orders aimed at Inhance.”
However, the Court hastened to add that its ruling “does not render the EPA powerless to regulate Inhance’s fluorination process.” Section 6 of the TSCA provides a broader mandate, requiring the EPA to conduct a cost-benefit analysis of ongoing uses: “The EPA is just not allowed to skirt the framework set by Congress by arbitrarily deeming Inhance’s decades-old fluorination process a ‘significant new use.’”
Future of PFAS
In Inhance Technologies v. EPA, the U.S. Fifth Circuit Court of Appeals' decision to reverse the EPA’s orders sets a standard for future regulatory action. Had the EPA’s orders come under Section 6 of the TSCA, Inhance Technologies’ production of PFAS may have been successfully terminated.
PFAS contamination lawsuits are cropping up nationwide. Recent settlements, such as the one between Dupont4, 3M5, and public water systems, highlight the significant financial consequences for companies responsible for PFAS pollution.
These legal proceedings will continue to impact regulatory policies and play a crucial role in defining liability and addressing environmental hazards like PFAS contamination.
1 Inhance Technologies v. EPA, 96 F.4th 888 (5th Cir. 2024).
2 15 U.S.C. §§ 2601 et seq.
3 https://www.regulations.gov/document/EPA-HQ-OPPT-2013-0225-0232
4 City of Camden v. E.I Dupont de Nemours & Co. (In Re Aqueous Film-Forming Foams Prods. Liab. Litig.), No.18-2873, 2024 WL 489326 (D.S.C. Feb. 8, 2024)
5 City of Camden v. 3M Co. (In re Aqueous Film-Forming Foams Prods. Liab. Litig.), No.18-2873, 2024 WL 1341122 (D.S.C. Mar. 29, 2024)
6 See, e.g., Declaration of Stephen J. Herman, Case No. 2:18-mn-2873, Rec. Doc. 4269-12 (D.S.C. Dec. 18, 2023) (and In re Aqueous Film-Forming Foams Prods. Liab. Litig., No.18-2873, 2024 WL 1739709 (D.S.C. Apr. 23, 2024 (order approving fee petition)).
