In the fall of 2012, we wrote about the Environmental Protection Agency’s (EPA’s) consideration of chemical disclosure requirements for hydraulic fracturing under the Toxic Substances Control Act (TSCA). 1 Recently, EPA has gone one step further in its consideration of potential chemical disclosure requirements by publishing an advance notice of proposed rulemaking (ANPRM) 2 seeking input on the potential collection of information about the composition and potential health and environmental effects of chemical substances used in hydraulic fracturing. Hydraulic fracturing (commonly known as “fracking”) remains at the forefront of debates over U.S. energy policy, and concerns about the chemicals used in fracking have been central to that debate. In the fracking process, a mixture of mostly water, a proppant (often sand used to keep fractures open), and a very small concentration of other chemicals is injected deep into the ground to force open cracks within a shale formation. These fractures allow oil or natural gas to be more easily extracted. The chemical additives serve several functions, including (1) reducing friction within the well so the proppant can travel through the formation more easily, (2) eliminating bacterial growth in the well, and (3) preventing well pipe corrosion. EPA’s ANPRM reports that the Agency has not settled on a way forward to address disclosure of fracking chemicals. The potential regulatory paths alluded to in the ANPRM range from TSCA Section 8(a) and (d) regulations for mandatory reporting to voluntary disclosure and incentive programs, or some combination of both. The ANPRM also reflects the complexities of applying TSCA to hydraulic fracturing activities. This Advisory discusses issues raised by EPA in the ANPRM. We begin by providing a history of EPA’s toe-dipping foray into regulating fracking using its authority under TSCA, including an overview of the relevant TSCA provisions. We then discuss the ANPRM itself and the possible future actions it augurs. Finally, because the ANPRM emphasizes EPA’s interest in avoiding duplication of existing programs concerning fracking chemicals reporting, we describe other activities taking place at EPA, elsewhere in the federal government, and at the state level. History of EPA’s Consideration of Fracking and TSCA Disclosure Requirements In August 2011, Earthjustice and more than one hundred other environmental groups submitted a TSCA Section 21 petition requesting that EPA initiate rulemakings for fracking chemicals under both Sections 4 and 8 of TSCA. 3 The petition asserted that TSCA regulations were necessary to fill perceived “gaps” in federal, as well as state, regulation. In November 2011, EPA partially granted the petition. TSCA Section 8. The Earthjustice petition requested that EPA adopt a rule pursuant to TSCA Section 8 to require chemical manufacturers and processors to report detailed information on all chemical substances used in oil and gas exploration and production generally. 4 In a November 23, 2011 letter, EPA indicated that it would grant only the Sections 8(a) and 8(d) portions of the request. 5 EPA also limited the scope of rulemaking to chemical substances and mixtures used in hydraulic fracturing, rather than the entire universe of exploration and production chemicals. EPA did not directly address Earthjustice’s Section 8(c) request, which would have required entities to submit records of allegations of significant adverse reactions to fracking chemicals and other substances. Under Section 8(a), EPA has authority to require reporting of the following information concerning chemical substances and mixtures: (1) the common or trade name, specific chemical identity, and molecular structure of the chemical substance or mixture; (2) the categories or proposed categories of use; (3) the total quantity or reasonable estimates of the total quantity to be manufactured or processed for such use; (4) a description of the byproducts resulting from the chemical substance manufacture, processing, and use; (5) any existing data on health and environmental effects; (6) the number of individuals exposed or estimates of individuals that will be exposed; and (7) the manner or method of disposal. 6 Under Section 8(d), EPA can require chemical substance and mixture manufacturers, processors, and distributors to submit lists and copies of all existing health and safety studies. 7 “Health and safety stud[ies]” are broadly defined in EPA regulations to include not only information contained in formal, disciplined studies, but all information relating to the effects of a particular chemical substance or mixture on health or the environment, as well as the chemical identity underlying the data. 8 TSCA Section 4. The Earthjustice petition also requested that EPA promulgate a TSCA Section 4 Testing Rule to require chemical substance manufacturers and processors to conduct toxicity tests for the chemical substances and mixtures used in all oil and gas exploration and production. To issue a TSCA Section 4 Testing Rule in response to a petition, or on its own initiative, EPA must find that either: (1) the chemical substance may present an unreasonable risk of injury to health or the environment (the “hazard” finding); or (2) the chemical substance is produced in substantial quantities and has entered or will enter the environment in substantial quantities, or there is or will be significant or substantial human exposure (the “exposure-based” findings). In either case, EPA also must find that existing data on health or environmental effects are insufficient and that testing is necessary to develop such data. 9 In a November 2011 letter, EPA denied the petition’s request to issue a Section 4 Testing Rule, stating that Earthjustice had failed to set forth sufficient facts to support the required findings. 10 EPA spent more than two years developing the ANPRM, which it sent to the Office of Management and Budget (OMB) for regulatory review in March 2014. OMB completed its review earlier this month, and the Agency promptly issued a prepublication version of the ANPRM. The official comment period on the ANPRM began on May 19, 2014, when the ANPRM was published in the Federal Register. The deadline for submitting comments is August 18, 2014. The 2014 ANPRM: What Questions Is EPA Asking? The overarching goal of the stakeholder process initiated by the ANPRM is to obtain input on “appropriate disclosure to ensure that information about the chemicals and mixtures used in hydraulic fracturing activities is provided to the public in a transparent fashion.” To that end, EPA poses questions in eight areas (A through H): A. Overall approach. EPA states that it is interested both in what information should be reported to EPA about chemical substances and mixtures used in fracking and health and safety studies, and what information should be disclosed to the public. EPA specifically requests input on the “appropriate mix” of voluntary and mandatory reporting and disclosure mechanisms. The ANPRM suggests that EPA is very interested in how information that constitutes trade secrets or confidential business information could be reported and then aggregated in a “national list” and disclosed, while still protecting the commercial interests of the disclosing companies. EPA also seeks information on how to use information that is reported to develop and promote safe and sustainable practices. B. Who should report and disclose. EPA identifies types of companies that might be subject to fracking reporting and disclosure requirements: well operators, chemical manufacturers, chemical suppliers who engage in processing chemicals, service providers who mix chemicals on site, and service providers who inject the fracking fluids. EPA asks whether different types of companies should be subject to different disclosure regimes. EPA’s authority under Section 8(a) applies only to manufacturers and processors of chemical substances and mixtures, while its Section 8(d) authority applies to manufacturers, processors, and distributors. While EPA interprets the term “processor” very expansively, it is not clear whether a mere supplier of substances or mixtures used in fracking operations can be required to report under Section 8(a), or whether some entities, such as suppliers and on-site service providers, would instead have to be encouraged to report Section 8(a) information voluntarily, but could still be required to submit Section 8(d) health and safety studies pursuant to a regulation. EPA’s questions imply that it might struggle to contend with the complexities of addressing an industry that is different in many ways from those typically subject to TSCA reporting requirements. C. Scope of reporting or disclosure. As mentioned above, EPA is interested in creating a “national list” of chemical substances and mixtures used in fracking. EPA indicates that it may conduct research on the chemical, physical, and toxicological properties of chemicals on such a list that have not been well characterized previously. In this section of the ANPRM, EPA identifies types of information that might be required to be reported (e.g., frequency of use of the chemical, number of workers exposed, “all existing data concerning the human and environmental health effects of the chemical substance or mixture”). Here, EPA again confronts the potential difficulties of regulating hydraulic fracking chemicals under TSCA. For example, how can EPA address reporting for chemical substances and mixtures that may be formed on site? D. Use of third parties. EPA poses a series of broad questions about the potential use of third-party certification in addition to or in place of a regulatory or voluntary reporting requirement. Almost certainly, EPA will be receiving comments on the performance standards and certification process established by the Center for Sustainable Shale Development (CCSD) in 2013. 11 CCSD is a collaboration of energy companies, environmental organizations, and other stakeholders in the Appalachian region. The performance standards are practices to apply to unconventional oil and gas development in the Appalachian region to protect air and water resources. These standards have been subject to some criticism that they are not stringent enough. 12 E. Reporting threshold and frequency. EPA asks for comments regarding the size of companies that should be required or encouraged to report, and particularly requests comments on what size thresholds might be appropriate for limiting reporting requirements under TSCA’s exclusion from Section 8(a) reporting requirements for “small manufacturers and processors.” EPA expresses interest in how different reporting thresholds would affect the usefulness of the information provided, and also in the costs imposed by different reporting timeframes. F. Data collection efficiency. EPA takes care throughout the ANPRM to articulate its interest in minimizing potential duplication and overlap in reporting and disclosure obligations. In posing questions about how best to do this, the ANPRM explicitly states that “EPA believes that any TSCA reporting requirements should complement existing reporting programs and data sources, such as state databases and websites like FracFocus in order to avoid duplication.” The ANPRM does not elaborate on what EPA means by “complement,” but it is a sign that EPA may want to establish a sort of cooperative federalism in this area. G. Health and safety studies.EPA asks for input on whether mandatory Section 8(d) submission of health and safety studies related to chemical substances and mixtures used in fracking is appropriate, or whether voluntary mechanisms should be used instead. One notable question posed by EPA is whether there is “an approach that more effectively encourages further health and safety studies”—indicating that EPA will be assessing the possibly deleterious effects that reporting and disclosure requirements could have on companies’ motivation to conduct studies to understand the potential impacts of the chemicals they are using. EPA also appears to be considering applying Section 8(d) reporting requirements only to a subset of chemicals or perhaps only to chemicals it identifies as not already well characterized. H. Safer chemicals and transparency. The ANPRM suggests that incentive and recognition programs could potentially be used to promote safe and sustainable practices, perhaps in conjunction with regulatory mandates. The ANPRM mentions the Green Chemistry prog r am (which includes the Presidential Green Chemistry Challenge Awards that annually recognize work on Greener Synthetic Pathways, Greener Reaction Conditions, and the Design of Greener Chemicals), 13 the Sustainable Futures program (which gives chemical developers access to the same risk-screening models used by EPA so that the developers can screen out riskier chemicals earlier in the development process), 14 and Design for the Environment (a recognition program, as well as a partnership program that shares EPA expertise and tools with participants) 15 as possible models for encouraging use of safer chemicals and increasing public understanding. The ANPRM asks for comments on whether these and other existing programs provide an effective way to develop safer fracking chemicals. Other Federal and State Activities The expansive scope of EPA’s questions in the ANPRM makes it difficult to predict the ultimate regulatory outcome. As mentioned above, however, the ANPRM repeatedly expresses EPA’s interest in avoiding duplication and overlap with other regulatory reporting and disclosure programs. EPA’s concerns reflect its awareness of TSCA Section 9, which requires that the Administrator consult and coordinate with the heads of other appropriate federal executive departments or agencies to achieve maximum enforcement of TSCA while imposing the least burden of duplicative requirements. The Administrator also is directed to coordinate actions taken under TSCA with actions taken under other federal laws administered by the EPA. TSCA Section 9, however, does not constrain EPA from moving beyond what states have been doing (though some states have far more rigorous disclosure requirements than others). Given other federal activity in the fracking area and the regulatory attention that fracking has received in states where shale plays are located, EPA has many factors that it must consider in devising an efficient and effective set of disclosure practices. The BLM Rulemaking. In the ANPRM, EPA specifically refers to the ongoing rulemaking conducted by the U.S. Bureau of Land Management (BLM), which would require public disclosure of the chemicals used in fracking operations on federal and Indian lands. According to BLM estimates, approximately 3,400 wells per year on federal and Indian lands use fracking techniques. The most recent activity in the BLM rulemaking was a supplemental notice of proposed rulemaking issued in May 2013, 16 a year after publication of BLM’s proposed rule. 17 BLM Proposed Disclosure Requirements. BLM’s proposed reporting and disclosure requirements are narrower in scope than TSCA requirements would likely be, and would require reporting only after the completion of fracking activities. Among other things, the proposed BLM rule would establish a number of disclosure and filing requirements for fracking on BLM-managed land. Specifically, within 30 days after the completion of fracking operations, operators would be required to submit to BLM information including the stimulation fluid trade name, supplier, purpose, ingredients, and Chemical Abstract Service (CAS) number, as well as the maximum ingredient concentration in the additive and the maximum ingredient concentration in the fracking fluid. P o t e n t i a l O v e r l a p o f T S C A R e p o r t i n g w i t h B L M Requirements. Any eventual TSCA reporting and disclosure requirements could apply to operators who drill on federal and Indian lands (unless they are for some reason specifically exempted), provided they are considered to be manufacturers or processors of chemical substances or mixtures subject to TSCA. Operators on federal lands therefore could face disclosure requirements under both the TSCA and BLM rules. Such requirements could differ in significant ways. For instance, the timeframes for any EPA disclosure requirements could be different since BLM’s proposed timeframe requires reporting only after fracking operations are completed at a site. EPA also anticipates potential application of the disclosure requirements to a broader array of entities such as manufacturers and suppliers. In addition, EPA is more likely to impose obligations for reporting estimates of potential human exposures and environmental releases as well as related health and safety data. EPA also has a number of existing web-based portals through which it could make fracking chemical information available to the public. EPA Study of Fracking’s Impact on Drinking Water Resources. EPA has published the ANPRM at a time when it is preparing a draft report on its years-long comprehensive study of fracking operations’ potential risks to drinking water resources. Congress urged preparation of the report in 2009, and plans for the study have been in the works since 2010. A final report originally was anticipated in 2014, but now a draft report is not expected until late 2014. It is possible that the preliminary findings of the study will influence whatever action EPA will take under the umbrella of TSCA. It is also possible that the TSCA rulemaking’s stakeholder process will provide information that informs the drinking water study. EPA Inspector General Looking into EPA Oversight of Fracking Impacts on Water Resources. As EPA considers using its TSCA authority to increase the amount of information available about chemicals used in fracking, EPA’s Inspector General will be proceeding with an investigation of how EPA and the states have used their authorities to manage fracking’s potential threats to water quality. 18 The Inspector General intends to determine and evaluate what regulatory authority is available to the EPA and the states, to identify potential threats to water resources, and to evaluate the EPA’s and states’ responses to the threats. TSCA is one of a number of statutes that may be relevant to these inquiries. The Inspector General’s investigation and findings could intersect with and influence EPA’s decision-making in connection with the ANPRM. Department of Energy Advisory Panel “Favors Full Disclosure.” A Secretary of Energy Advisory Board (SEAB) task force convened by Secretary of Energy Ernest Moniz to evaluate the effectiveness of FracFocus issued its findings for public comment in March 2014. 19 FracFocus is a public, online hydraulic fracturing chemical registry created by the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission; a number of states permit or require operators to use FracFocus for chemical disclosure. 20 The task force praised FracFocus for quickly improving disclosure practices and providing uniformity, but was critical of the prevalent use of trade secret protections to shield chemical information from disclosure. The SEAB task force said that it “favors full disclosure of all known constituents added to fracturing fluid with few, if any exceptions.” To protect proprietary information and prevent reverse engineering, the task force’s report suggested use of a “systems approach” for disclosure, with chemicals reported separately from the names of additives and products that contain the chemicals. The “systems approach” concept seems likely to appear as a potential model for the “national list” EPA has alluded to in the ANPRM. Requirements of State Regulations Vary. EPA is also considering how to avoid duplication of state reporting and disclosure requirements. All states with major oil and gas operations already mandate some form of fracking chemical reporting, often including public disclosure and often using FracFocus. 21 A number of states require reporting of the trade name of each chemical substance used in the fracking operation, the intended use or function of each chemical, and the amount, in percent by mass, of each compound added to the fracking fluid. Many states do not require additional reporting of the specific chemical identity, CAS number, molecular structure, health and environmental effects studies, or exposure and disposal information. California’s fracking law, however, excludes certain chemical information from trade secret protections. As with the proposed BLM rule, most states require chemical reporting and disclosure only after the completion of the fracking operation. Conclusion The ANPRM comes after many states have already promulgated comprehensive regulations governing disclosure of chemicals used in fracking. EPA obviously is cognizant of these efforts and expresses an intent to tread lightly on these preexisting programs, at a time when concerns regarding preemption, and the respective roles of EPA and the states in chemical regulation, have taken on great significance in the debate about TSCA reauthorization. Nonetheless, TSCA reporting requirements would inevitably extend more federal control over fracking activities and would likely establish more uniformity and increase the emphasis on the potential impacts of human and environmental exposures to the chemical substances used in fracking fluids. Manufacturers, processors, and distributors of fracking chemicals, the companies that utilize those chemicals, and other stakeholders will want to engage with EPA to ensure that the Agency understands how potential disclosure mechanisms will affect the industry if implemented.