The U.S. Court of Appeals for the Fifth Circuit ruled on March 21, 2024, on a petition filed by Inhance Technologies LLC (Inhance) against the U.S. Environmental Protection Agency (EPA) in Inhance Technologies, L.L.C. v. U.S. Environmental Protection Agency, 2024 WL 1208967. The Fifth Circuit decided that "EPA exceeded its statutory authority" under Section 5 of the Toxic Substances Control Act, as amended (TSCA), 15 U.S.C. § 2604, when the agency unilaterally issued Inhance two orders (Orders) that sought to prevent the company from manufacturing or processing, through a fluorination process unchanged since 1983, certain per- and polyfluoroalkyl substances (PFAS).
In July 2020, citing TSCA Section 5 as authorization for its action and omitting any mention of the fluorination industry while listing industries its action would affect, EPA promulgated a significant new use rule (SNUR) that prohibits the manufacturing and processing of long-chain perfluoroalkyl carboxylates (LCPFACs, a kind of PFAS) without EPA's approval. EPA subsequently learned that certain LCPFACs were created by Inhance's fluorination process. EPA then claimed that Inhance's fluorination violated the 2020 SNUR and in March 2022 issued a notice of violation (NOV) to Inhance. Inhance refused either to change its fluorination process to eliminate from it any further LCPFAC or to temporarily halt any fluorination that created any LCPFACs – the two options offered by EPA. On Dec. 1, 2023, also citing TSCA Section 5, EPA issued the Orders and thereby gave Inhance until Feb. 28, 2024, to revise its fluorination process or cease operations. Inhance petitioned the Fifth Circuit for review of the Orders.
Noting that TSCA does not define either the word 'new' or the term "significant new use," the Fifth Circuit reviewed different dictionary meanings of the word 'new' urged by Inhance and EPA and examined TSCA Sections 5 and 6 as the two ways EPA may regulate chemical processes under TSCA. The court then held that Inhance's interpretation of TSCA Section 5 was more persuasive than EPA's because "[a] forty-year-old manufacturing process is not 'new' in any pertinent sense of the word." EPA's attempt to use the SNUR to regulate Inhance's fluorination raised "serious constitutional concerns" because EPA had not offered Inhance any prior notice of the company's subjection to the rule. Issuance of the Orders under TSCA Section 5 was an unlawful attempt to circumvent the cost-benefit analysis that TSCA Section 6 requires before EPA may regulate an ongoing use such as Inhance's fluorination process. The Fifth Circuit accordingly vacated the Orders. The decision now leaves EPA to consider its options in a different federal court – the U.S. District Court for the Eastern District of Pennsylvania, where, before it issued the now-vacated Orders, EPA had sued to enforce the NOV.
Holland & Knight will continue to report on future developments. For additional background on this case, see Holland & Knight's previous alert, "EPA Takes Action Against Inhance Technologies LLC on Fluorinated HDPE Containers," Jan. 11, 2024.
