Fifth Circuit Limits EPA’s Attempts to Regulate PFAS Under Toxic Substances Control Act in Inhance Technologies v. EPA

On March 21, 2024, the U.S. Court of Appeals for the Fifth Circuit vacated two U.S. Environmental Protection Agency (EPA) orders under Section 5 of the Toxic Substances Control Act (TSCA), holding that EPA had exceeded its statutory authority when it issued the orders in an attempt to regulate the manufacture of per- and polyfluorinated substances (PFAS) by petitioner Inhance Technologies, LLC (Inhance). The Fifth Circuit’s decision comes after EPA’s Office of Enforcement and Compliance Assurance announced its National Enforcement and Compliance Initiatives for Fiscal Years 2024 – 2027, which involve increased emphasis on addressing PFAS exposure and contamination through enforcement actions and potential additional regulations.

In 2020, EPA finalized a new Significant New Use Rule (SNUR) under TSCA that required certain entities — primarily in the fibers, electronic manufacturing, wholesalers, and retailer industries — to provide at least 90 days’ notice to EPA before commencing manufacturing, importing, or processing certain long-chain PFAS. In 2022, EPA issued Inhance, a Texas company has been fluorinating plastic containers for 40+ years, a Notice of Violation of the SNUR when it determined that Inhance’s fluorination process resulted in the creation of PFAS in a product held within an Inhance-manufactured container. The SNUR did not list entities in the fluorination industry, such as Inhance, as entities that would be affected by the new requirements and noted that the SNUR was not applicable to PFAS uses that were ongoing at the time of the SNUR’s promulgation.

In December 2023, EPA issued TSCA Sections 5(f) and 5(e) orders to Inhance because it considered the creation of PFAS during Inhance’s fluorination process to be significant new uses of PFAS under the SNUR and thus EPA should have been notified at least 90 days prior to the creation of the PFAS. These orders required Inhance to either stop manufacturing and processing certain PFAS permanently or, for a separate set of PFAS, stop manufacturing and processing certain PFAS until additional testing was completed to address information gaps that EPA identified. Inhance appealed the orders, arguing that the SNUR requirements were not applicable to Inhance as its fluorination process was decades old and thus not a “significant new use” under TSCA.

EPA argued that Inhance’s fluorination process was subject to the requirements in the SNUR, claiming a “significant new use” under TSCA, includes use in a manner that was “not previously known to EPA.” If accepted, EPA’s novel interpretation would have greatly expanded EPA’s authority to regulate the manufacture, import, or processing of chemical substances that are the subject of SNURs. The Fifth Circuit, however, sided with Inhance, noting that while neither Inhance nor EPA knew that Inhance’s fluorination process resulted in the creation of PFAS until 2022, Inhance could not have predicted that EPA would seek to regulate Inhance’s decades-old fluorination process based on the proposed or final SNUR. In doing so, the Fifth Circuit stated that EPA’s proposed definition “distorts TSCA’s framework and defies common sense” and undercuts Congress’s “express directive to the agency to weigh the costs to business and the overall economy before shutting down an ongoing manufacturing process.”

The Fifth Circuit’s ruling does not prohibit EPA from regulating PFAS uses such as Inhance’s fluorination process, but EPA would have to proceed under TSCA Section 6, which necessitates a much lengthier agency process that must include a cost-benefit analysis and provide for public notice and comment. The ruling does, however, clearly reject this attempt to regulate chemicals under TSCA through an enforcement proceeding and without prior notice-and-comment rulemaking.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.