Navigating The Transition: Key Chemicals Industry Issues To Watch In The Biden Administration

Vinson & Elkins LLP

While news stories and campaign rhetoric can frequently create expectations of immediate shifts after a change in administration, most changes happen slowly in the federal government, and constraints on resources means that many areas of environmental regulation and permitting policy will remain unchanged in the early years of the new administration.

EPA’s Risk Management Program (“RMP”) Regulation

RMP regulations govern safety protocols in industries using hazardous chemicals. In November 2019, the Trump administration rescinded many of the significant Obama-era amendments to the RMP, which many in the industry believed to be overly burdensome and costly. The removed provisions included requirements regarding third-party audits, incident investigation root cause analysis, and safer technology and alternatives analyses. The Trump administration’s amendments were intended to shift from rules that increase compliance costs for the entire regulated community to case-specific oversight of poorly performing facilities. The Trump administration’s RMP Rule changes are currently facing legal challenges in the D.C. Circuit. In December 2020, the D.C. Circuit granted an unopposed motion to stay this litigation until March 22, 2021, which was requested in part to allow the incoming Biden administration time to review the 2019 RMP Rule and consider its position. Courts regularly allow new administrations some limited time to undertake such reviews. However, it is unlikely that a Biden EPA would simply stop defending the rule in its existing form, or that the court would allow it to alter the rule’s current requirements without following the time-consuming process for revising a regulation.

The Biden administration has made environmental justice a focus of its environmental platform. Environmental justice is defined by EPA as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” It is likely that the Biden administration will revert to the Obama EPA model of RMP regulation as part of its environmental justice initiative, including third-party audits and incident investigation root cause analysis. Indeed, the administration indicated in a fact sheet released on January 20, 2021 that this rule is on its list of agency actions to review. Because the Trump administration’s RMP Rule revisions already have gone into effect, it will take the Biden administration time to complete the administrative rulemaking process necessary to implement a more robust RMP Rule, and the final rule will then be subject to challenge in court. As a result, it is unlikely that there will be changes to the RMP Rule in the first year of the new administration. However, as discussed further below, the enforcement of the existing RMP Rule may change under the new administration.

Environmental Enforcement in the Chemical Manufacturing Sector

For years, EPA has focused its enforcement efforts on emissions of ozone precursors and hazardous air pollutants from the chemical manufacturing sector. These efforts generally related to enforcement of leak detection and repair requirements, flare performance requirements, tank emission limitations, wastewater treatment system requirements (e.g., the benzene waste operations NESHAP and VOC emission limitations), and to a lesser extent, enforcement of MACT and NSPS emission limitations. We would expect these enforcement efforts to continue, with the following potential changes in emphasis.

Environmental justice. The effects of noncompliance on environmental justice communities has for many years been a part of the EPA’s case evaluation and enforcement processes. We expect a Biden EPA to emphasize environmental justice in enforcement by leaning in more aggressively when known noncompliance is affecting an environmental justice community, increasing its use of the EJSCREEN screening and mapping tool as an enforcement targeting method, and increasing its release reporting and risk management enforcement in areas with environmental justice communities.

Beyond compliance settlements. We expect a return to the Obama EPA’s use of extra-regulatory requirements in settlements. These could include using elements of so-called Next Generation compliance developed by the Obama EPA, and importing regulatory requirements from other federal agencies (e.g., using PHMSA requirements in pipeline spill cases) and other EPA programs (e.g., using refinery flaring regulations to reduce flaring emissions in petrochemical facility settlements).

Storage tank and wastewater treatment systems. We expect a Biden EPA to be less solicitous of state enforcement solutions to excess emissions from storage tanks and water treatment systems at petrochemical production and storage facilities. An EPA-centric enforcement approach might not achieve significantly greater reductions in VOCs from these operations, but it could result in a higher number of EPA cases and increased costs to the chemical sector, particularly if extra-regulatory requirements are included in settlements.

Section 112(r) risk management program. The Trump EPA focused on RMP cases where a company violated a plain industry standard, particularly where industrial accidents affected workers or communities. We would expect a Biden EPA to broaden somewhat the kinds of RMP cases it will be willing to bring, including cases where the applicability of an industry standard is not clear.

Per- and Polyfluoroalkyl Substances (“PFAS”)

PFAS are a family of more than 5,000 man-made chemicals manufactured and used globally, including in the United States since the 1940s, in a range of products, including stain- and water-resistant fabrics, fire-fighting foams, non-stick cookware and food packaging because they are resistant to elements like fire, water and oil. Often dubbed as “forever chemicals” because of their resistance to degradation in the environment, PFAS have been identified in soils and drinking water. People are mostly likely exposed by consuming PFAS-contaminated water or food, breathing air containing PFAS, or by using products that contain PFAS. Human health effects from exposure to low environmental levels of PFAS are uncertain but studies of laboratory animals given large amounts of PFAS have found that some PFAS may affect growth and development, reproduction, thyroid function, the immune system, and injure the liver. In 2016, EPA established drinking water health advisories of 70 parts per trillion for combined concentrations of two of the more well-known chemicals in the PFAS family — perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonic acid (“PFOS”) — that are no longer made in the United States. In 2019, the agency further indicated that it would propose a national drinking water standard for those two chemicals. In July 2020, EPA implemented a PFAS Action Plan that proposed multi-media, multi-program research of PFAS, development of drinking water standards for PFOA and PFOS, designating PFOA and PFOS as hazardous substances, and considering the addition of PFAS chemicals to the Toxics Release Inventory as well as rules to prohibit the uses of certain PFAS chemicals. To date, none of the Action Plan items have resulted in enforceable legal initiatives. Most recently, in November 2020, recommendations developed by a workgroup comprised of EPA Headquarters and Regional contacts suggested including permit requirements for phased-in monitoring and best management practices for PFAS expected to be present in point source wastewater discharges and stormwater.

Regulation of PFAS generally, and PFOA and PFOS in particular, is expected to be pursued under a Biden administration. As part of his campaign platform, President Biden has stated that he will address PFAS pollution by designating PFAS as a hazardous substance, setting enforceable limits for PFAS in the Safe Drinking Water Act, prioritizing substitutes through procurement, and accelerating toxicity studies and research on PFAS. The November 2020 recommendations of the Trump EPA advocating permit limits for PFAS in point source wastewater discharges and in stormwater could also be considered and adopted. Assuming that President Biden identifies PFAS as a priority for his administration and pursues these regulatory initiatives, there could be substantial new regulatory requirements for the chemicals industry. For example, listing of PFAS as a hazardous substance under the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) is likely to trigger clean-ups of facilities contaminated by the substances.

During the final days of the Trump administration, EPA released an Advanced Notice of Proposed Rulemaking asking for public feedback on a proposal to regulate certain PFAS chemicals under CERCLA or the Resource Conservation and Recovery Act. The Biden administration could withdraw this notice and issue one of its own, or use the responses from this notice to pursue further regulation of PFAS. Additionally, establishing an MCL for drinking water would require potable water suppliers to install filters to remove the compounds. Liability impacts for the presence of PFAS arising from historical use also will be scrutinized under applicable laws or regulatory initiatives. The extent to which PFOA, PFOS and possibly other PFAS will ultimately be subject to regulation in some form will depend on continued research and investigation into this evolving area. This is a burgeoning new area of regulation, one that is ripe for governmental enforcement and civil litigation — and undoubtedly one that will be costly for the regulated community to resolve.

Financial Assurance Requirements

In 2014, an environmental group petitioned the D.C. Circuit to require EPA to impose financial assurance rules on a number of industries pursuant to section 108(b) of CERCLA, which provides that “the President shall promulgate requirements . . . that classes of facilities establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” The group argued that EPA had, for more than 40 years, failed to develop such requirements. On January 29, 2016, the D.C. Circuit approved an EPA settlement with the environmental petitioners, which set a schedule for EPA to take final action (not necessarily adopt a final regulation) on financial assurance requirements for four separate industries — chemical manufacturers, hardrock mining, electrical utilities, and the petroleum and coal products industry. The schedule required action as to all four industries by 2024.

On December 2, 2020, EPA published its final decision not to require financial assurance for the chemical manufacturing industry. EPA determined that such requirements were not necessary because modern practices in the chemical manufacturing industry had reduced risks to the point where financial assurance requirements were not justified. Environmental groups opposed to the rule had argued that the EPA’s focus on financial risk to the Superfund was too narrow, and that its analysis improperly excluded many sites that present both financial and environmental risk. A judicial challenge to that decision is likely to be pending during the Biden administration, which can reasonably be expected not to defend this decision in a particularly vigorous manner. Thus far, the Biden administration has not indicated that it plans to review or revise the financial assurance rule for the chemical industry, and has not included this rule (although it did include hardrock mining requirements) in its first-day list of agency actions to review. However, we still recommend monitoring developments to ensure that the decision receives a vigorous defense in court and being prepared to deal with a situation in which a settlement with the Biden administration may remand this decision for reconsideration at EPA.

Recently Finalized Regulations and the Congressional Review Act (“CRA”)

There is also some chance that some of these actions by the past administration could be overturned by the new Congress. In conjunction with administrative actions taken by the Biden Administration, the new Congress may use the streamlined legislative procedures available under the CRA to disapprove a range of Trump Administration “midnight” regulations that near the end of the term. The CRA provides a streamlined procedure for Congress to enact legislation to disapprove (i.e., veto) rules issued by federal agencies. That procedure is available only for a limited time after a rule is published and formally notified to Congress — i.e., 60 legislative days (a period which is often much longer than 60 calendar days). In practice, the CRA mechanism should be available for rules published and notified to Congress after approximately June 2020. A CRA resolution is not subject to Senate filibuster, meaning that only simple majorities of the House and Senate — and signature by the President — are required to enact legislation to overturn a rule. A CRA resolution of disapproval not only invalidates a rule, but bars the agency from issuing another rule in “substantially the same form” in the future, absent specific statutory authorization. Historically, the CRA was rarely used until the beginning of the Trump Administration. In practice, the CRA is most relevant when a new Presidential administration changes political party, and the same party controls both houses of Congress. The conditions are now ripe for a Democratic Congress and President to disapprove rules finalized near the end of the Trump Administration.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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