New York (November 9, 2016, 12:56 PM EST) -- The U.S. Environmental Protection Agency is moving swiftly forward with what could be the first federal environmental regulation to impose reporting requirements specifically for nanoscale materials. The regulation – to be issued using the EPA's authority under Section 8(a) of the Toxic Substances Control Act – is expected to create reporting and recordkeeping requirements for both current and future manufacturers and processors of existing and new chemical substances produced at the nanoscale.

The proposed rule was issued in April 2015 and the EPA extended the public comment period in July 2015. Interest in the proposed rule was considerable. By the August 2015 close of the comment period, the EPA had received nearly 70 public comments addressing the terms of the proposal. Numerous intragovernmental comments also were received by the agency. Since then, significant changes to the TSCA were enacted. Nevertheless, in October, the EPA sent its version of the final rule to the Office of Management and Budget for review. If the OMB completes its review within 90 days, it is possible the final rule could be issued before the change in administration.

Scope of the Rulemaking

Although the terms of the final rule will not be made public until the final rule is published in the Federal Register, the final version of the TSCA Section 8(a) rule is likely to require manufacturers (including importers) and processors to submit a one-time only report to the EPA concerning their current production of nanoscale versions of substances already listed on the TSCA Inventory and to provide notice to the agency in advance of commencing manufacture of a new nanoscale substance (i.e., a substance not yet listed on the TSCA inventory). Reporting entities are likely to be required by the final rule to maintain certain records concerning their production and processing activities.

How the EPA will articulate which substances are subject to reporting remains to be seen. Given that there are differing regulatory definitions for nanoscale materials around the globe (and even within North America) the manner in which the EPA defines the scope of the substances subject to reporting in the final rule will be closely watched. The proposal targeted "discrete forms" of substances containing primary particles, aggregates or agglomerates with at least one dimension between 1 and 100 nanometers (or between one billionth of a meter and one ten-millionth of a meter) and exhibiting "unique and novel characteristics or properties because of their size." If no significant changes are made in the final rule, manufacturers and processers of such nanoscale forms of chemical substances will have both reporting and recordkeeping obligations; however, small businesses and those who manufacture or process small quantities of nanomaterials solely for research and development purposes will be exempt.

The agency originally proposed that current manufacturers and processors of nanoscale materials must submit reports within six months after the final rule becomes effective whereas manufacturers and processors of new nanoscale materials would be expected to notify the EPA at least 135 days before beginning manufacture or processing. Records to be maintained would include copies of the required submissions and information supporting the data contained in the Section 8(a) reports. Unless significantly reduced in scope by the EPA during the course of considering public comments, the final rule is likely to require persons submitting notices to the EPA to provide the same level of detail generally requested in the EPA's TSCA Section 5 premanufacture notification requirements including the specific chemical identity of the substance, the methods of manufacture, the quantity produced (including estimates of future production), the uses of the substances, and any existing health and safety data.

Topics of Greatest Interest to Commenters

Commenters addressed a wide array of subjects about which the EPA has solicited comments, and other topics for which comments were not specifically requested. The proposed rule received broad support from a number of environmental interest groups who encouraged the EPA to move toward issuing the final rule without delay and to make the information the EPA receives pursuant to the final rule available to the general public using electronic tools and portals available on the EPA's website.

A considerable number of comments were received from commercially and research-oriented interest groups around the world. Among the topics receiving the greatest attention by trade associations and members of regulated community were the definition the EPA proposed for what substances would be "reportable" and the complexities that could arise in attempting to identify and report on each "discrete form" of a nanoscale substance as defined in the proposed regulation. The EPA was encouraged to harmonize its approach more specifically with the approach being taken by the Canadian government, which has chosen to simply list the substances and categories of chemicals about which reporting is required if produced on a nanoscale.

Commenters also suggested that using TSCA 8(a) to require reporting on "new" substances was inappropriate given the agency's existing authority under Section 5 of the TSCA. The list of substances to be exempt from reporting was insufficiently limited according to many commenters. The agency's assessment of the potential economic impacts of the regulation drew much criticism as did the EPA's proposal to redefine for purposes of the nano-reporting rule the threshold used for defining which small businesses would be exempted from a final nano-reporting rule. Numerous "industry" commenters suggested the EPA should simply withdraw the proposal outright and begin again.

Issues to Prepare for In Advance of the Final Rule

The proposed rulemaking raised several important concerns and questions which have importance to stakeholders,

including:

1. Will the information being collected under a final Section 8(a) rule expose a submitter to potential regulatory or enforcement consequences?

The EPA considers nanoscale forms of chemical substances not already listed in the TSCA inventory to be new chemical substances subject to the reporting requirements of TSCA Section 5. Given the often nuanced nature of the EPA's chemical nomenclature interpretations, there is a potential risk that a business submitting a report required under the final Section 8(a) rule for what the entity believes to be a substance already listed on the Inventory might learn that the EPA considers the substance reported to be a "new" chemical substance rather than simply a nanoscale "form" of an existing substance listed on the TSCA inventory.

This risk might be especially true for processors who may have relied for years on a supplier's representations concerning the proper identity and nomenclature (and inventory status) of a substance about which the processor is obliged to report to the EPA under a final Section 8(a) rule for the very first time. The consequences of TSCA Section 5 violations can be significantly disruptive to ongoing business relationships and be financially devastating for businesses.

2. What will EPA do with the information it collects?

EPA has stated that it intends to use the information it gathers under this rulemaking to determine if any further regulatory action on nanoscale materials is required. Thus, submitters of reports can expect the information they report will be used to help the Agency determine whether "unreasonable risks" will be presented by a nanoscale substance and how those risks may be managed, as well as to help the EPA weigh the costs and benefits of future regulatory actions related to nanoscale materials. It is worth noting that the EPA has assessed nearly 200 "new"; nanoscale substances under the Section 5 program and has undertaken risks assessment in that context. In a significant percentage of those instances, the EPA has imposed some level of regulatory restrictions on the nanoscale chemicals it has reviewed and often has required additional test data to be generated for these substances.

The recent amendments to TSCA greatly increase the likelihood that a report received by the EPA under a Section 8(a) rule could trigger an administrative order issued pursuant to the amended Section 4 of the TSCA compelling the production and submission of additional health and environmental effects data. The recent amendments to Section 14 of the TSCA also enable the EPA to share with state regulators certain confidential information the agency receives under the statute. That an eager state government in receipt of information received by the EPA under the nano-substances reporting rule might seek to issue a regulatory restriction independent of the EPA action would certainly be in keeping with recent trends.

3. What other actions will EPA take on nanoscale materials?

The EPA's TSCA Section 8(a) rulemaking on nanoscale materials is one of several notable actions and public positions the agency has taken on nanoscale substances within the past few years. In March 2015, the EPA reiterated its position that makers and marketers of products that contain nanoscale silver are subject to Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) registration requirements if the products are sold with antimicrobial (pesticidal) claims. This action came after years of what environmental groups considered to be EPA inaction on nanoscale materials, and may be viewed as a sign of the agency's renewed focus on regulating nanoscale substances under a variety of statutory authorities.

Impact of June 2016 TSCA Amendments

Comprehensive amendments to the TSCA – signed into law by President Barack Obama in June 2016 – will impact many aspects of chemical substance manufacturing, processing and disposal, including the agency's processes under the amended statute for prioritizing and evaluating chemical substances.

The amendments notably did not impact of the provisions of TSCA Section 8 most pertinent to the nanoscale substances reporting rule. However the TSCA amendments do create certain new concerns for businesses that were noted above concerning how the EPA (and certain states) might make use of and issue follow-on requirements based on information received and made public under a final Section 8(a) rule.

Perhaps less significant, but equally worth noting, new confidential business information (CBI) certification requirements for information submitted to the EPA by processors and manufacturers of chemical substances will impact stakeholders' Section 8(a) reporting and recordkeeping requirements.

The new CBI certification requirement in TSCA Section 14 requires manufacturers and processors who assert confidentiality claims for information submitted to the EPA to certify that the statement asserting the claim and the substantiation for the claim are true and correct. Moreover, the EPA is obliged under the amended Section 14(g) of the TSCA to review all claims seeking CBI treatment of chemical identity information submitted to the EPA and 25 percent of all other CBI claims submitted. The EPA also proposed that persons reporting under the nano-substances rule maintain records for a period of three years demonstrating their compliance and the basis for the reports submitted pursuant to the rule.

The burden of the CBI certification and substantiation requirements may be seemingly minimal. Nevertheless, stakeholders affected by Section 8(a) rulemakings will have to take additional care to ensure that the information they are submitting – and now certifying to the EPA – is correct and carefully substantiated. The certification requirements and the EPA's new obligations under Section 14(g) did not exist when the EPA issued its initial Federal Register notice announcing the proposed rulemaking in April 2015, and thus these burdens were not addressed in the proposed rulemaking (or the economic impacts assessment performed at that time). If the final Section 8(a) rule retains the complexities of the definitions and reporting triggers that appeared in the proposed version of the nano-substances reporting rule, this new certification obligation and the enhanced CBI substantiation requirements could create additional challenges.

What's Next for Nanoscale Materials?

Under Executive Order 12866 (1993), the OMB is empowered to review regulations to ensure that they (1) are consistent with applicable law; (2) are consistent with the president's priorities; and (3) do not conflict with actions taken or planned by other agencies. The OMB also makes suggestions that the agency may include in its final rulemaking. The rulemaking record makes clear that the OMB made significant comments and that the EPA considerably edited and ultimately modified the proposed rule as a result of its consultations with the OMB.

A number of groups have already sought meetings with the OMB to express concerns about a final Section 8(a) rule concerning nanoscale substances. Given the urgency the administration is feeling to complete the rulemaking before Inauguration Day, it is not clear how heavy a hand the OMB will exert during this review of the final rule. Recent OMB reviews of EPA rulemakings have taken as little as one month and as many as five months. Assuming a timely review and clearance by the OMB, the EPA currently plans to publish its final rulemaking in the Federal Register in January 2017. Stakeholders should pay attention to the status of this rulemaking and consider whether to provide their input to the OMB before the final rulemaking is published.

Lawrence Culleen is a partner in Arnold & Porter's Washington, D.C., office where he represents clients on administrative, regulatory and enforcement matters involving federal agencies such as the EPA, the U.S. Department of Agriculture, the U.S. Food and Drug Administration and the Consumer Product Safety Commission. He previously held positions at the EPA serving as a manager in various risk-management programs which oversee pesticides, chemical substances and biotechnology products.

This article was originally published in Law360.co