Environmental Defense Fund v. Environmental Protection Agency

          Argued October 12, 2018

          On Petition for Review of Final Action of the United States Environmental Protection Agency Robert P. Stockman argued the cause and filed the briefs for petitioner.

          Phillip R. Dupré, Attorney, United States Department of Justice, argued the cause for respondents. With him on the brief was Jeffrey H. Wood, then-Acting Assistant Attorney General.

          Donald P. Gallo, James W. Conrad, Jr., Richard S. Moskowitz, Peter D. Keisler, Samuel B. Boxerman, Timothy K. Webster, C. Frederick Beckner, III, Judah Prero, Samina M. Bharmal, David B. Weinberg, Martha E. Marrapese, Roger H. Miksad, Linda E. Kelly, Steven P. Lehotsky, and Michael B. Schon were on the brief for intervenors in support of respondent United States Environmental Protection Agency. Michael D. Boucher and Warren U. Lehrenbaum entered appearances.

          Before: Garland, Chief Judge, Millett, Circuit Judge, and Edwards, Senior Circuit Judge.

          OPINION

          MILLETT CIRCUIT JUDGE.

         The Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., requires the Environmental Protection Agency to publish an inventory of chemicals manufactured or processed in the United States. 15 U.S.C. § 2607(b)(1). The 2016 Amendments to the Act directed the EPA to issue a rule establishing a process for updating the Inventory. The EPA promulgated that rule the following year. See TSCA Inventory Notification (Active-Inactive) Requirements, 82 Fed. Reg. 37, 520 (Aug. 11, 2017). As part of that rulemaking process, the EPA abandoned questions that had required each company seeking to keep the chemical identity of a substance confidential to substantiate that the chemical identity "is not readily discoverable through reverse engineering." 15 U.S.C. § 2613(c)(1)(B)(iv).

         The Environmental Defense Fund challenges that 2017 rule on the ground that it unlawfully shields information from public disclosure. Environmental Defense is correct that the EPA's elimination of questions pertaining to reverse engineering was arbitrary and capricious, and so we grant the petition in that respect. We otherwise deny the petition for review.

          I

         A

         Congress passed the Toxic Substances Control Act ("Control Act") in 1976 to "assure that * * * innovation and commerce in * * * chemical substances and mixtures do not present an unreasonable risk of injury to health or the environment." 15 U.S.C. § 2601(b)(3). Congress charged the EPA with administering the Control Act, which included the tasks of "compil[ing], keep[ing] current, and publish[ing] a list of each chemical substance which is manufactured or processed in the United States." Id. § 2607(b)(1). That list, commonly referred to as the "Inventory," contains a confidential portion and a non-confidential portion. Id. § 2607(b)(4)(B)(i). Both portions are publicly accessible on the EPA's website. But the confidential portion identifies substances by "a structurally descriptive generic name" rather than a "specific chemical identity." 15 U.S.C. § 2613(c)(1)(C).^[1] The Inventory currently lists approximately 86, 000 chemicals, roughly 18, 000 of which are classified as confidential.

         "[C]oncern[ed] about the pace of EPA's work" keeping the Inventory up to date, H.R. Rep. No. 176, 114th Cong., 1st Sess. 12 (2015), Congress amended the Control Act in 2016. See Frank R. Lautenberg Chemical Safety for the 21st Century Act, Pub. L. No. 114-182, 130 Stat. 448 (2016) (codified at 15 U.S.C. § 2601 et seq.). As relevant here, the 2016 amendments directed the EPA to promulgate a rule-known as the Inventory Rule-that would impose new reporting requirements for chemical manufacturers and processors ("chemical companies"). See 15 U.S.C. § 2607(b)(4)-(5). Specifically, the Inventory Rule requires chemical companies to notify the EPA of each chemical on the Inventory that they had "manufactured or processed for a nonexempt commercial purpose" during the ten-year period prior to June 22, 2016. Id. § 2607(b)(4)(A)(i). Each chemical for which the EPA receives such a notification would be labeled "active," while all the rest would be labeled "inactive." Id. § 2607(b)(4)(A)(ii)-(iii), (b)(5)(B)(i)-(iii). Chemical companies also have to submit a notification form identifying in advance any inactive chemical substance for which they intend to resume manufacturing or processing going forward. Id. § 2607(b)(5)(B)(i).

         Congress directed the EPA to update the confidential portion of the Inventory as well. In particular, the 2016 amendments to the Control Act instruct the EPA to (i) "require any manufacturer or processor of a chemical substance on the confidential portion of the [Inventory] that seeks to maintain an existing claim for protection against disclosure of the specific chemical identity of the chemical substance as confidential" to notify the EPA of that request; (ii) demand that chemical companies provide "substantiation" for those claims of confidentiality; and (iii) "move any active chemical substance for which no [confidentiality] request [i]s received" to the non-confidential portion of the list. 15 U.S.C. § 2607(b)(4)(B).

         When an application to maintain confidential treatment is received, the EPA must independently determine whether confidentiality is warranted. To that end, Congress directed the EPA to "promulgate a rule that establishes a plan to review all claims to protect the specific chemical identities" asserted as confidential. 15 U.S.C. § 2607(b)(4)(C).

         Once the EPA compiles the initial list of active chemical substances, the Control Act affords the agency up to seven years to complete its review of which of those active chemical substances should receive confidential treatment. 15 U.S.C. § 2607(b)(4)(E). For those chemicals that remain on the confidential portion of the Inventory, the EPA must "develop a system to assign a unique identifier to each specific chemical identity" and must "apply that identifier consistently to all information relevant to the applicable chemical substance[.]" Id. § 2613(g)(4)(A).

         The EPA promulgated the final Inventory Rule in August 2017. 82 Fed. Reg. 37, 520 (codified at 40 C.F.R. §§ 710.23- 710.39). The Inventory Rule implements the retrospective and prospective reporting requirements that Congress required. Companies that manufactured and processed chemicals during the ten years prior to June 22, 2016 must submit a "Notice of Activity Form A." See id. at 37, 523, 37, 525. After the EPA designates substances as active or inactive, those that intend to revive the manufacture or processing of an inactive chemical must submit a "Notice of Activity Form B." See id. These Forms also allow a manufacturer or processor of a chemical that was originally on the confidential portion of the Inventory to seek to continue that confidential status going forward. And it may do so regardless of whether that manufacturer or processor was the one that had initially requested that the chemical identity be shielded from public disclosure. Id. at 37, 527.

         To assert a claim of confidentiality, the Control Act requires the requesting company to certify that:

(i) My company has taken reasonable measures to protect the confidentiality of the information;

(ii) I have determined that the information is not required to be disclosed or otherwise made available to the public under any other Federal law;

(iii) I have a reasonable basis to conclude that disclosure of the information is likely to cause substantial harm to the competitive position of my company; and

(iv) I have a reasonable basis to believe that the information is not readily discoverable through reverse engineering.

82 Fed. Reg. at 37, 544 (codified at 40 C.F.R. § 710.37(e)); see also 15 U.S.C. § 2613(c)(1)(B) (establishing these criteria).

         But the Control Act does not stop there. The Act further mandates that, once a claim of confidentiality is asserted, its proponent must "substantiate" the need for secrecy. 15 U.S.C. § 2613(c)(3); see also id. § 2607(b)(4)(B)(iii) (instructing the EPA to "require the substantiation of [confidentiality] claims"). To implement that substantiation requirement, the Inventory Rule requires applicants to answer the following questions:

• Do you believe that the information is exempt from [the Act's] substantiation [requirement]?

• Will disclosure of the information likely result in substantial harm to your business's competitive position?

• To the extent your business has disclosed the information to others (both internally and externally), what precautions has your business taken?

• Does the information appear in any public documents, including (but not limited to) safety data sheets, advertising or promotional material, professional or trade publication, or any other media or ...