Amid historic and massive increases in inflation[1] and unprecedented supply chain challenges, the Environmental Protection Agency (EPA or Agency) raised its Toxic Substances and Control Act (TSCA) fees by 18.9%. These fees will apply to companies subject to EPA’s TSCA risk evaluations, new chemical reviews, and testing requirements.
EPA presented the new TSCA Fees Table (released on November 23, 2021) as a routine, mandatory increase based on an inflation-adjustment formula consistent with TSCA and the approach finalized in the Agency’s 2018 TSCA fees rule.
TSCA section 26(b) enables EPA to collect fees from manufacturers (including importers) and, in some cases, processors, to defray a portion of the Agency’s costs related to activities under TSCA sections 4, 5, 6, and 14. The EPA can establish fees to collect the lower of either:
1) 25% of the Agency’s costs to carry out work on those sections of the Act, or
2) $25,000,000 (adjustable by inflation).
The 2016 TSCA amendments require the Administrator, beginning with the fiscal year that is 3 years after enactment of the 2016 TSCA amendments, and every 3 years thereafter, to increase or decrease the fees “as necessary” to adjust for inflation.
Through a notice and comment rulemaking, EPA created the approach for implementing this section of TSCA. EPA’s regulations in 40 CFR 700.45(d)(1) state that fees for 2022 and later years will be adjusted on a three-year cycle using the producer price index (PPI) for chemicals and allied products. EPA calculated the inflation rate for the November 23rd increase by dividing the PPI for September 2021 (348.8) by the PPI for January 2019 (293.4).
As we all know, timing can be everything.
Had this adjustment been made at the beginning of 2021, there would have been no need to increase fees for inflation. The timing of this adjustment falls amidst several national crises, including historic rises in costs for consumer goods, the ongoing global COVID pandemic, and significant supply chain shortages. The news over the last few weeks seems anything but routine:
Three weeks before EPA’s announcement, the Federal Reserve issued a press release stating that “Inflation is elevated, largely reflecting factors that are expected to be transitory[2]”… words the Chairman is now clarifying.
The increase fell on the heels of announcements that consumer prices rose 6.2% over the last twelve months – the largest increase since 1990.
On the same day EPA announced the inflation increase, the Marine Exchange of Southern California reported numerous container ships were parked at sea waiting to dock and unload.
Most recently, the President announced he intends to tame the rate of inflation stating that “inflation hurts (American’s) pocketbooks.”
The announcement of another new COVID variant - “omicron” – underscores the continued workforce challenges confronting the chemical manufacturing base.
Irrespective of the transient nature of the current inflation period, TSCA fees will increase by 18.9% for inflation on January 1, 2022. For example, PMN submission fees will rise from $16,000 to $19,020. Low Volume Exemption submission fees will rise to $5,590. Section 6 fees will rise to $1,605,000 for EPA-initiated risk evaluations and a $1,490,000 up front payment for manufacturer-sponsored risk evaluations, in addition to a final payment of total 50% of the actual costs of the activity.
Is there anything you can do about this increase? Yes.
Companies impacted by TSCA fees should provide comments to the EPA. The statute directs EPA to make inflation adjustments only “as necessary” and after consultation with parties potentially subject to the fees.
The November 23rd announcement highlights significant shortcomings in EPA’s inflation adjustment approach – that the Agency can capture and capitalize on a sudden and possibly transient inflation change. It is also questionable whether the inflation rate for chemicals and allied products is appropriate for determining the amount of inflation adjustment necessary for EPA to conduct its work.
In 2022, companies will have an opportunity to comment again on the Agency’s TSCA fees rule.
When announcing the 18.9% fee increase, the Agency also announced their intent to issue a supplemental TSCA fees proposal in 2022, which would inevitably modify EPA’s January 11, 2021 proposal. The January 2021 proposal, issued by the last Administration, would have increased fees, added new fee categories, and added significant exemptions for certain entities subject to certain fee triggering activities but not others. The announcement of a supplemental TSCA fee proposal is a signal that this Administration likely has a different vision for TSCA fees.
Supplemental proposals are only legally necessary in circumstances where a desired change in a final rule is so different from what was proposed it cannot be considered a “logical outgrowth” of either the proposal or public comment. To comply with the notice and comment requirements of the Administrative Procedures Act, significant changes to a regulatory proposal by an Agency usually require a supplemental opportunity to comment. Therefore, companies should expect a very different proposal for TSCA fees in 2022. This supplemental proposal, however, will provide companies with an opportunity to comment on the formula being used by the EPA to adjust for inflation.
[1] Measured by the Producer Price Index for Chemicals and Allied Products
[2] https://www.federalreserve.gov/newsevents/pressreleases/monetary20211103a.htm
