Bergeson & Campbell, P.C. serves small, medium, and large pesticide product registrants and other stakeholders in the agricultural and biocidal sectors, in virtually every aspect of pesticide law, policy, science, and regulation.

By Lisa M. Campbell, Lisa R. Burchi, and James V. Aidala

On July 18, 2017, a panel of three judges at the U.S. Court of Appeals for the Ninth Circuit issued an order denying petitioners’ Pesticide Action Network North America (PANNA) and the Natural Resources Defense Council (NRDC) (Petitioners) Motion for Further Mandamus in the chlorpyrifos proceedings.  In that motion, Petitioners asked the court to grant further mandamus relief, asserting that the U.S. Environmental Protection Agency’s (EPA) denial of Petitioners’ petition to revoke all food tolerances and cancel all chlorpyrifos registrations was inadequate because it contained “no new safety findings” and no “final determination as to whether chlorpyifos food tolerances must be revoked.”  More information on the motion is available in our blog item Petitioners File Motion for Further Mandamus Relief in Response to EPA’s Order Denying Petition to Ban Chlorpyrifos.

In its order, the panel held that since the prior mandamus proceedings “addressed the timing, not the substance, of EPA’s response,” EPA had “complied with the panel’s previous orders by issuing a ‘final response to the petition.’”  The mandamus motion thus was “premature, and its substantive objections to the EPA’s denial must first be made through the administrative process mandated by statute.”

The demand imposed by the court earlier was to make a decision, and EPA met that deadline with its denial.  This is a significant win for industry, but is far from the end of this debate, which will continue in a number of different forums.  More information on the proceedings is available on our blog under key word chlorpyrifos.

 


 

By Lisa R. Burchi, Timothy D. Backstrom, and James V. Aidala

On June 30, 2017, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in Center for Biological Diversity (CBD), et al. v. U.S. Environmental Protection Agency (EPA), Case No. 14-1036, resolving jurisdictional and substantive issues following complaints alleging that EPA violated Section 7(a)(2) of the Endangered Species Act (ESA) by failing to make an effects determination or to consult with the U.S. Fish and Wildlife Service (FWS) or the National Marine Fisheries Service (NMFS) before registering cyantraniliprole (CTP) under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).

Regarding the jurisdictional issue and the appropriate court in which to bring such a challenge, the U.S. District Court for the District of Columbia on May 14, 2015, had dismissed the ESA complaint of CBD, the Center for Food Safety, and the Defenders of Wildlife (Conservation Groups), finding that the Conservation Groups’ “Complaint gives rise to an ‘actual controversy as to the validity’ of the FIFRA Registration Order and is therefore governed by that Act’s jurisdictional grant.”  The D.C. Circuit affirmed the U.S. District Court’s ruling to dismiss the ESA petition on jurisdictional grounds, concluding that FIFRA “grants the court of appeals exclusive jurisdiction to review an ESA claim that is ‘inextricably intertwined’ with a challenge to a pesticide registration order.”

The D.C. Circuit also, however, granted the Conservation Groups’ FIFRA petition, finding that EPA registered CTP without having made an effects determination or consulting with the FWS and/or the NMFS as required under ESA Section 7(a)(2).  The court remanded the case to EPA for further proceedings, but allowed the CTP registration order to remain in effect until it is replaced by an order consistent with the court’s opinion.

Considering the growing number of complaints that allege a failure to consult with the FWS and/or the NMFS under the ESA, this decision could have broad reaching implications for how these complaints are filed and reviewed.

Background

On February 29, 2012, EPA announced that it had received applications to register pesticide products containing CTP under FIFRA.  On June 6, 2013, EPA announced its proposal to register CTP as a pesticide under FIFRA.  As part of its review, EPA prepared an “Environmental Fate and Ecological Risk Assessment for the Registration of the New Chemical Cyantraniliprole” in which EPA states that CTP is “highly toxic or very highly toxic” to multiple taxonomic groups, including terrestrial invertebrates such as butterflies and beetles.

On January 24, 2014, EPA registered CTP as a pesticide under FIFRA and approved fourteen end-use products containing CTP.  At issue in this case was EPA’s decision to register CTP without having made an effects determination or consulting with the FWS and/or the NMFS as required by ESA Section 7(a)(2) and implementing regulations (50 C.F.R. § 402.13-14).

Under the ESA citizen-suit provision, “any person” may “commence a civil suit on his own behalf … to enjoin any person, including the United States and any other governmental instrumentality or agency … who is alleged to be in violation of any provision of this chapter or regulation issued under the authority thereof.” 16 U.S.C. § 1540(g)(1).  “The district courts … have jurisdiction” of ESA citizen suits, id., but no action may be commenced “prior to sixty days after written notice of the violation has been given to the Secretary, and to any alleged violator.” Id. § 1540(g)(2)(A)(i).

FIFRA’s citizen-suit provision at 7 U.S.C. § 136n(b) provides the federal circuit court with exclusive jurisdiction to affirm or set aside an EPA pesticide registration order following a public hearing, provided a challenge is filed within 60 days of the registration decision.

With potentially conflicting statutory provisions regarding the court in which to file a complaint and the timing to do so, the Conservation Groups initiated two actions:  a complaint against EPA in D.C. District Court under the ESA’s citizen-suit provision; and a petition for review in D.C. Circuit Court pursuant to FIFRA’s citizen-suit provision.

Jurisdictional Issues

The D.C. Circuit first addressed the jurisdiction issue, which involved a determination of standing and a resolution of the “dueling jurisdictional provisions of the ESA and of FIFRA.”

On the issue of standing, the D.C. Circuit found that petitioners did in fact have standing, as not only did EPA make procedural omissions through “its failure to make an effects determination and to consult,” but the plaintiffs show that EPA’s failure affected the plaintiffs’ members’ “concrete aesthetic and recreational interests.” 

With regard to the appropriate court in which to bring this claim, the D.C. Circuit found that “FIFRA vests the courts of appeals with exclusive jurisdiction over controversies arising from an EPA pesticide registration, so long as, inter alia, registration follows a public hearing.”  The court thus also found:

  • Because FIFRA’s grant of exclusive jurisdiction to the court of appeals to review registration orders is more specific than the ESA’s citizen-suit provision, we believe the Conservation Groups must bring their ESA section 7(a)(2) challenge to us if 7 U.S.C. § 136n(b) is satisfied.  And the Conservation Groups do satisfy the requirements of 7 U.S.C. § 136n(b): they are adversely affected by the registration of CTP; they challenge the validity of the CTP registration order based on the EPA’s failure to make an effects determination and to consult; and their challenge comes after a “public hearing” by way of three notice and comment periods.  We therefore have “exclusive jurisdiction” to review their claim under FIFRA and the district court correctly dismissed their ESA citizen suit. (citations omitted).

Merits

While the ESA citizen suit was dismissed, the FIFRA citizen suit remained under the D.C. Circuit’s exclusive jurisdiction and review.  The court found that EPA violated ESA Section 7(a)(2) by registering CTP before making an effects determination or consulting with the FWS or the NMFS.

Significantly, the court decided to remand the case to EPA for further proceedings without vacating the CTP registration.  The court stated that remand without vacatur is appropriate in this case because “[n]otwithstanding the EPA’s failure to make an effects determination and to engage in any required consultation, it did not register CTP in total disregard of the pesticide’s potential deleterious effects; indeed, the Conservation Groups themselves rely heavily on the EPA’s ‘Ecological Risk Assessment for the Registration of the New Chemical Cyantraniliprole.’”  The court further stated that “allowing the EPA’s CTP registration order to remain in effect until it is replaced by an order consistent with our opinion will maintain ‘enhanced protection of the environmental values covered by the CTP registration order.’”

Commentary

This case is significant in at least two respects and should have implications in other cases being brought under ESA and FIFRA citizen suit petitions.  First, the court provides the same answer concerning the “dueling jurisdictional provisions of the ESA and of FIFRA” as prior decisions in the Ninth Circuit, finding that FIFRA’s jurisdictional grounds take precedence and that the Courts of Appeal have exclusive jurisdiction to review cases claiming ESA violations in the context of an approved FIFRA pesticide registration.  The court found the Conservation Groups’ arguments to the contrary “unavailing,” including but not limited to their argument that the public notice and comment periods that were provided did not constitute a “public hearing” under FIFRA Section 16(b) as well as their argument that the ESA challenge was not “inextricably intertwined” with FIFRA, even though the Conservation Groups were challenging the CTP registration order itself.  It also is significant that the court, while remanding the registration order to EPA for further actions under the ESA, did not immediately vacate the existing CTP registration order.

Some observers of the extensive ESA-FIFRA litigation over recent years wondered whether the CTP registrations would be vacated once challenged for conformity to ESA requirements.  EPA effectively admitted that it did not follow the full consultation process with FWS and NMFS, in this case substituting a relative risk argument that CTP was an improvement that would provide more species protection compared to the compounds it is expected to replace in the marketplace.  The remand without vacatur does not resolve what some have called the “train wreck” scenario, where the need to complete ESA consultation, combined with time and resource constraints at the respective agencies, will result in a virtual freeze on new pesticide product registrations.  The court makes it clear that, if EPA makes an affirmative ESA effects determination for CTP, consultation with the FWS and/or the NMFS must follow.


 

By J. Brian Xu, M.D., Ph.D., DABT®

On June 1, 2017, in the People’s Republic of China (China), the newly revised Regulation on Pesticide Administration (RPA) became effective.  The newly revised RPA was approved during the 164th executive meeting of the State Council of China on February 8, 2017, and published as Decree Number 677 of the State Council of China (China Decree 677) on April 1, 2017.  It requires the Ministry of Agriculture (MOA) to formulate relevant rules and measures for its implementation.

The first set of five implementation rules was initially released for public comment on March 17, 2017, and made final on June 21, 2017.  The five implementation rules include:   Pesticide Registration Management Measures (MOA Order No. 3, 2017), Measures for the Management of Pesticide Production License (MOA Order No. 4, 2017), Measures for the Administration of Pesticide Business License (MOA Order No. 5, 2017), Measures for the Management of Tests Used for Pesticide Registration (MOA Order No. 6, 2017), and Measures for the Administration of Pesticide Labels and Manuals (MOA Order No. 7, 2017).  They will become effective on August 1, 2017.

On June 30, 2017, the MOA released the second set of six implementation rules for public comment under the new RPA, which include Data Requirements on Pesticide Registration (Draft); List of Pesticides with Restricted Uses (Draft);  Measures for the Management of QR Code Pesticide Label (Draft); Review Rules of Pesticide Production License (Draft); Review Rules of the Test Institutes that Conduct Tests Used for Pesticide Registration (Draft); and Quality Management Practices of Tests Used for Pesticide Registration (Draft).  The comment period will end on July 30, 2017, but an implementation date was not provided.

Commentary

The MOA Order No. 3, 2017 requires that chemistry and toxicology tests should be completed in Chinese laboratories approved by the MOA or overseas laboratories that have a mutual recognition agreement with the relevant Chinese Authority, and that the tests for efficacy, residue, environment, and others that are closely related to environmental conditions and Chinese specific species shall be conducted in China.  Since China is not a member country of the Organization for Economic Cooperation and Development’s (OECD) Mutual Acceptance of Data (MAD) system, this requirement could reject all test reports from overseas for pesticide registration in China.

The requirements that literature or data in a foreign language shall be translated to Chinese are moved from the Pesticide Registration Management Measures (Draft) to the new Data Requirements on Pesticide Registration (Draft), but it is still not clear if whole articles/reports or only summaries should be translated into Chinese.  In addition, the new Data Requirements on Pesticide Registration (Draft) would add a new category of registration, “Pesticides for Overseas Uses Only.”  The registration of “Pesticides for Overseas Uses Only” requires only chemistry and toxicology data for the products at issue; the data that must be submitted include information on the production process, component analysis, quality specifications and analytical methods, acute “six-pack,” Acceptable Daily Intake (ADI), Acute Reference Dose (ARfD), and other safety and toxicology information.  The new draft rules would not require any efficacy, residue, or environment tests for registration of “Pesticides for Overseas Uses Only.”  The timeline for the second set of six implementation rules under the new RPA is not provided.  Considering it took only three months for the first set of five implementation measures to proceed from drafts for public comments to final versions that will become effective about one and half a months later (August 1, 2017), it is expected that the second set of six implementation rules will become effective by the end of the year.

The new RPA and its implementation rules significantly change registrations for pesticides in China.  Temporary pesticide registration is no longer an option, and pesticide registration now requires a full set of data, including two-year stability data in the initial submission, and requires that many of the tests must be conducted in China.  With these new requirements, the new pesticide registration process may extend the time for manufacturers to bring products to the Chinese market.  Because of many ambiguities in the new RPA and its implementation rules, many questions and uncertainties regarding the process for pesticide registration under the new RPA remain.


 

By Lisa M. Campbell, James V. Aidala, and Margaret R. Graham

On April 27, 2017, Senator Elizabeth Warren (D-MA) and Representative Frank Pallone (D-NJ) sent a letter to Inspector General Arthur Elkins, Jr. at the Office of Inspector General (OIG) at the U.S. Environmental Protection Agency (EPA) requesting the OIG to conduct an investigation into EPA’s March 29, 2017, order denying the September 2007 petition of the Pesticide Action Network North America (PANNA) and the Natural Resources Defense Council (NRDC) requesting that EPA revoke all tolerances and cancel all registrations for the pesticide chlorpyrifos.  The letter refers to the March 29, 2017, order as “Administrator Scott Pruitt’s order,” and asks OIG to address questions specifically targeting the rationale, communications, and consideration that Administrator Pruitt took prior to reaching the decision.   

The letter states that Administrator Pruitt's “hasty reversal of this decision … appears not to be based on EPA’s existing recent scientific findings about the risk, or any new information that contradicts the findings about the health and safety risks of chlorpyrifos.”  Further, the letter asserts that “it does not appear to be consistent with the law, which requires that pesticide products cannot be used unless ‘there is reasonable certainty that no harm will result from the aggregate exposure to the pesticide chemical residue.’”

  1. How did Mr. Pruitt reach the decision he announced on March 29, 2017? What was the timeline leading up to this decision? With whom did he communicate within EPA, the White House, or elsewhere in the Administration? With which outside entities did he communicate? Specifically, did Mr. Pruitt have any communication with staff or representatives of Dow Chemical or any pesticide industry trade groups including CropLife America?
  2. What was the rationale for Mr. Pruitt's decision, and why did he reverse an agency decision that had been years in the making? How was this rationale developed? Was it based on any new information or evidence?
  3. Was Mr. Pruitt's decision consistent with the requirements of the Administrative Procedures Act? Did he provide appropriate notice and comment and appropriately consider all relevant comments and information?
  4. Was Mr. Pruitt's decision consistent with the requirements of the FFDCA, which establishes a standard that, to maintain a pesticide tolerance, there must be "reasonable certainty that no harm will result from the aggregate exposure to the pesticide chemical petitition to revoke tolerances.pdf residue"? Has the EPA met the "reasonable certainty [of] no harm" standard in the law? Why did Mr. Pruitt note that chlorpyrifos was "widely used" when he announced his decision? Was this "wid[e] use" a factor in Mr. Pruitt's decision, and, if so, was this appropriate under the law? What other factors were taken into consideration by Mr. Pruitt?
  5. Is the EPA accurately and transparently presenting information to the public with regard to previous EPA actions concerning chlorpyrifos? For example, the EPA website for chlorpyrifos on January 2, 2017 contained information indicating that EPA "proposed to revoke all chlorpyrifos tolerances," and contained a link with detailed information about the health risks and the reasons for the EPA action.  This reference to the proposed ban, and the link to the detailed EPA analysis are no longer available on the chlorpyrifos web page, and the link to the analysis (as of April 3, 201 7) now gives a "Page Not Found" error.

Commentary

This letter not surprisingly continues the debate over the appropriate regulatory status of chlorpyrifos.  Those disappointed by the recent EPA decision, apparently including Senator Warren and Representative Pallone, want to press EPA to explain in more detail not only the reasons for the decision not to revoke chlorpyrifos tolerances at this time, but also the rationale EPA used to rebut what they believe to be the decision-making record that EPA had accumulated over the last two to three years.

The explanation that the arrival of new leadership at EPA with the Administration led to a change in position is perhaps only part of the answer.  The change in Administration did not change the underlying statutory requirements governing EPA’s registration, reregistration, and tolerance decisions, and EPA relied on these requirements as the basis for its decision not to make a decision at this time, as discussed in EPA Denies Petition to Ban Chlorpyrifos.

EPA’s response to any investigation initiated by this letter, as well as the OIG response, will be watched closely by all stakeholders.


 

By Lisa M. Campbell and Lisa R. Burchi

On February 22, 2017, the California Department of Pesticide Regulation (DPR) announced it was extending the filing date for applications to register products made from pesticide impregnated materials bearing pesticide claims from March 1, 2017, to July 1, 2017.  Specifically, each retailer (or authorized representative) of an affected product must submit an Application for Pesticide Registration (DPR-REG-030) to DPR by July 1, 2017.  DPR’s California Notice 2015-13 issued on December 11, 2015, informed pesticide product registrants and stakeholders of DPR’s intention to register products made with pesticide impregnated materials and bearing pesticide claims. 

The February 22 notice also states the following in terms of the requirements:

  • Each company with products made from pesticide impregnated material and sold under their own company name into or within California is required to register the product(s) as a pesticide;
  • The product must bear a federally approved pesticide label; DPR will assign a separate California-only registration number for purposes of tracking sales and use of the products in California;
  • Each company will need to obtain at least one registration for each use category of product sold (e.g., the apparel use category includes wearable items such as jackets, shirts, hats, socks, pants, and shorts; the non-apparel use category includes non-wearable items such as bedding, tents, seat covers, chopping blocks, shower curtains, and mouse pads); and
  • If items are impregnated with different pesticides or different percentages of the same pesticide, separate registrations will be required.

The requirements set forth in this notice do not apply to products that satisfy the requirements to be a treated article, including the requirement that any claims be related to protection of the article/substance itself.  The notice applies instead to those pesticide impregnated materials that include pesticidal claims that are not limited to protection of the material.  More information on the December 2015 notice is available in our blog item California Issues Notice Requiring Registration for Products Made From Pesticide Impregnated Materials and Bearing Pesticide Claims.


 

By Lynn L. BergesonJames V. Aidala, and Margaret R. Graham

On February 14, 2017, in the House of Representatives, Rep. Rodney Davis (R-IL) introduced H.R. 1029, the “Pesticide Registration Enhancement Act of 2017,” which reauthorizes the Pesticide Registration Improvement Act (PRIA).  H.R. 1029 was immediately referred to the Agriculture Committee and to the Energy and Commerce Committee; it was passed by the Agriculture Committee on February 16, 2017.  Per Agriculture Committee Chair Michael Conaway’s opening statement at the Business Meeting markup of H.R. 1029, changes to PRIA include “reasonable increases in registration fees, funding for Good Laboratory Practices, and a seven year reauthorization as opposed to the five-year reauthorizations of the past.”  H.R. 1029 would allow the U.S. Environmental Protection Agency (EPA) to collect up to 31 million in registration fees (up from 27.8 million) per year from fiscal years (FY) 2017-2023.  It also includes the following registration increases for FY2017 through FY2023:

  • The maximum annual fee for registrants holding 50 pesticide registrations or less would be $129,400 (up from $115,500);
  • The maximum annual fee for registrants holding over 50 pesticide registrations would be $207,000 (up from $184,800);
  • The maximum annual fee payable for a small business registrant holding 50 pesticide registrations or less would be $79,100 (up from $70,600); and
  • The maximum annual fee payable for a small business registrant holding over 50 pesticide registrations would be $136,800 (up from $122,100).

Commentary

PRIA represents a commitment by the pesticide registrants to help with the continued resource issues of the pesticide regulatory program.  This has become an issue of increased concern with the arrival of the Trump Administration after campaign rhetoric about eliminating EPA and cutting budgets.  Fees are seldom a popular topic, but an essential program component.  Without staff and resources to approve pesticide registrations, registrants would be left with new products destined to pile in EPA in-boxes.  PRIA is designed to help maintain some certainty and predictability to the review process.

Of some note is that in recent years Congress has appropriated funds at a level below the statutory minimum that originally was a line in the sand which, if breeched, would de-authorize EPA’s authority to charge application fees.  The regulated community has reluctantly supported Congressional action to lower this “minimum” level of funding to hold onto the programmatic progress which has been made since the first PRIA authorization.  This appears to be an uneasy acceptance of the budget realities surrounding federal spending on discretionary, non-defense expenditures.  


 

By Lisa M. Campbell and Lisa R. Burchi

The U.S. Environmental Protection Agency (EPA) today released a pre-publication version of a Federal Register notice to be issued on August 16, 2016, extending the deadline to submit comments on draft Pesticide Registration Notice (PRN) 2016-X from August 15, 2016, to September 14, 2016.  A discussion of draft PRN 2016-X, which proposes to update Section 5 of PRN 97-2, and to clarify and update criteria by which EPA classifies crops as “minor use,” is discussed in our blog item EPA Solicits Comments on Updated Method for Establishing Economic Minor Use

 

In the notice extending the comment period, EPA noted that the current comment period is “one of the busiest times of year for pest control experts” and provides an extension that “will allow them extra time to complete their review and comment on the PR Notice.” 

There is one comment that already has been submitted by the U.S. Department of Agriculture (USDA), which EPA stated it consulted prior to releasing the draft PRN 2016-X.  In its comments, USDA states:

  • Regarding acreage cutoffs, USDA supports EPA’s use of acreage estimates from the USDA Agricultural Census, as it is the “most reliable and comprehensive public source for such information in the country.”
  • Regarding EPA’s proposal to apply a seven percent discount rate, USDA recommends that EPA be “open to using supplemental information in determining whether or not an alternative discount rate should be considered.” 
  • Regarding EPA’s proposal that all cases be evaluated using values for costs that range from 60 to 85 percent of gross revenue, USDA requests that EPA provide its rationale as to why this range was chosen.  USDA states: “Although USDA understands that EPA is attempting to reveal the ratio of gross revenue to cost associated with the minor use rather than across an entire company, one could assume that a rational company would not pursue registering a minor use if the ratio of costs to gross revenue was exceedingly higher than the average standard ratio for the company.  Qualitative information, as suggested by EPA, could then be used to further refine the estimate for this ratio.”
  • Regarding EPA’s proposal to use study cost estimates provided by independent laboratories, USDA notes there are instances where data can be significantly more expensive than what would be expected generally and, thus, recommends that EPA “be open to additional, verifiable data a registrant wishes to submit that may indicate that its cost of data generation differs from EPA's standard estimates.”  USDA also suggests that EPA “consider making the cost estimates it is using for individual tests available publically to aid registrants in determining whether or not they need to submit alternative incurred costs for studies they have conducted.”

 

By Lisa M. Campbell and Lisa R. Burchi

The comment deadline of August 15, 2016, is approaching on the June 14, 2016, notice of availability of the draft Pesticide Registration Notice (PRN) 2016-X issued by the U.S. Environmental Protection Agency (EPA), in consultation with the U.S. Department of Agriculture (USDA).  Draft PRN 2016-X proposes to update Section 5 of PRN 97-2, and to clarify and update criteria by which EPA classifies crops as “minor use.”

Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 2(ll) defines “minor use.”  One of those definitions at Section 2(ll)(2) defines a minor use, in part, as one that does not provide “sufficient economic incentive.”  Current guidance in PRN 97-2 defines a use as minor under FIFRA Section 2(ll)(2) if gross revenues at full market potential do not cover the costs of registration.  EPA’s concern with this policy is, in part, that:

  • [T]he method in PRN 97-2 does not accurately measure economic incentive to register pesticides.  Gross revenue will overstate the registrant’s true return on the cost of registration while reliance on a single year of sales will understate the total stream of revenues.  The direction of bias is unknown.  Most importantly, it does not account for the difference in timing between costs of registration and future returns.

EPA states that the draft PRN is intended to clarify and update “its interpretation of how economic minor use status under FIFRA section 2(ll)(2) can be determined.”  Under the proposed PRN, EPA would interpret a minor use as one that “does not provide sufficient economic incentive to support the … registration” when “the registrant would not obtain sufficient revenues from sales of the pesticide to justify the cost of registration.”  Specifically, EPA states:

  • This PRN describes the revised approach to interpreting economic minor use based on the concept of the registration of a pesticide as an investment.  The registrant incurs costs associated with applying for a registration while the registration once granted allows the pesticide product to be sold, generating a stream of revenue in the future.  This approach provides several measures by which EPA can assess whether there are sufficient incentives for the registration of a pesticide use.  These measures include the net present value of returns, the benefit-cost ratio, and the internal rate of return, each of which provides insight into the magnitude of the incentive to register or maintain the registration of a pesticide.

With regard to calculating the net present value (NPV) of the investment (in registration), EPA provides the following formula: 

Formula

 

 

 

 

 

 

 

In the draft PRN, EPA provides guidance on the four primary components to conduct a quantitative analysis to estimate NPV, the benefit-cost ration (B/C), and the internal rate of return (IRR).  These components are:  (1) costs of registration (e.g., cost to generate data necessary to show the product can be used safely for the proposed use, PRIA fees, cost to prepare and submit an application); (2) net revenues from sales of the pesticides; (3) the discount rate; and (4) the time of investment.  EPA states that, in general, “if a use of a pesticide has a negative NPV, a B/C ratio < 1, and IRR that is lower than average for a particular sector, it will be considered to have insufficient economic incentives to pursue registration.”  EPA is not setting a firm threshold, however, and will review minor use determinations on a case-by-case basis. 

For a use that the applicant requests a designation of economic minor use under FIFRA Section 2(ll)(2), the applicant should include the following types of information in writing with the application:

  • The type of registration action for the specific site/use;
  • A list of the registration data requirements for the specific site/use;
  • Information to inform future sales, which might include the target pest(s), the application rate, the extent of the pest problem;
  • Information to inform the sales price of the pesticide, which might include the price of relevant competitors; and
  • A narrative addressing at least one of the criteria described in FIFRA section, 2(ll)(2)(A-D).  This summary should contain, at least, a brief description of how the pesticide will be used including the target pest(s) and alternatives.

Applicants may also wish to include the following to improve EPA’s understanding of the incentives they face in producing and/or registering a pesticide for the specific use:

  • A narrative describing any relevant factors that influence the cost of manufacturing and, therefore, the net revenue from product sales;
  • A narrative describing any relevant factors that influence the fixed costs of registering and marketing the pesticide;
  • A narrative describing any aspects of the market that might limit or enhance sales; and
  • A narrative describing any other factors which affect the economic incentive to register this use.

Commentary

EPA states its intent in revising the method and criteria for determining when a potential minor use does not present a sufficient economic incentive is because the current “outdated approach could prevent applicants from obtaining the incentives for registration that should be available to them.”  EPA further states that it is interested in developing an approach that is “simple and transparent” because a burdensome process would be “an added deterrent to registration.”  The draft PRN would indeed seem to expand the ability of registrants to seek minor use status; since EPA will be making determinations under this revised approach on a case by case basis, how broadly EPA will apply these criteria and what minor use approvals it makes will only be seen over time, however. 

It is important to note that EPA’s proposed policy has potential implications beyond minor use determinations.  For example, EPA’s discussion of the elements of the costs of registration as well as how those costs for applying for a registration are a part of the registrant’s investment could have implications in FIFRA data compensation contexts:

  • The cost of applying for registration can be viewed as an investment toward the eventual marketing of a registered product.  Applying for registration is the final step in the process of developing and marketing a pesticide.  The costs of applying for registration include the costs of generating data that EPA requires for registration, the registration fees, and the cost of paperwork burden from the registration process.  In terms of “economic incentive,” the main question to answer is whether the investment in registration of a particular use is worthwhile to the registrant, that is, whether future returns from sales are sufficiently high to justify the cost of obtaining/maintaining a registration. 

The proposal also is significant because it can be applied to conventional pesticides, biopesticides, and antimicrobial pesticides to determine whether they meet the definition of minor use.

Comments are due August 15, 2016.

Tags: minor use, EPA, PRN

 

By Lisa M. Campbell and Lisa R. Burchi

On July 29, 2016, the Environmental Appeals Board (EAB or Board) issued its Final Decision and Order (Order) upholding the Administrative Law Judge (ALJ) Initial Decision and an earlier order denying Bayer CropScience LP and Nichino America, Inc.’s (BCS/NAI) Motion for Accelerated Decision that held that the U.S. Environmental Protection Agency (EPA) was authorized to cancel the conditional flubendiamide registrations under Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 6(e) and did not need to provide BCS/NAI the full Section 6(b) cancellation process.  The Board also upheld EPA’s determination prohibiting BCS/NAI from the continued sale, distribution, and use of existing stocks of flubendiamide products, but found that EPA’s determination to prohibit the continued sale and distribution of existing stocks of flubendiamide end-use products by distributors and retailers other than BCS/NAI was not supported by the record.

Additional information regarding this case is available in our blog items EPA ALJ Issues Initial Decision in Bayer Flubendiamide Cancellation Proceeding, EPA ALJ Denies Bayer’s Motion for Accelerated Decision and Flubendiamide Registrants and EPA File Post-Oral Argument Briefs.

The EAB summarized BCS/NAI’s arguments concerning the overall proceeding with two questions: (1) whether EPA has properly initiated this cancellation action under Section 6(e) rather than Section 6(b); and (2) if the proceeding is properly initiated under Section 6(e), whether BCS/NAI can nonetheless challenge the lawfulness of a condition in their registrations in a Section 6(e) proceeding.

With regard to the first issue, the Board found that EPA appropriately commenced the proceeding under the expedited cancellation procedures set forth in FIFRA Section 6(e) because two criteria were satisfied:  (1) the registration must have been issued as a conditional registration under FIFRA Section 3(c)(7); and (2) EPA must have determined that BCS/NAI failed to satisfy a condition of that registration.  The Board found that “neither the plain language of the statute, its structure, nor legislative history” supported BCS/NAI’s argument that if EPA “has made an unreasonable adverse effects finding, FIFRA’s general cancellation provision in section 6(b) trumps section 6(e) and bars the Program from initiating a 6(e) cancellation proceeding, even where the elements for a section 6(e) cancellation are met.”  The Board further stated: “Bayer and Nichino’s argument that section 6(b) takes priority over section 6(e) is inconsistent with the structure and environmental protection goals of FIFRA.”  Instead, EAB states:

  • Given Congress’ decision to add an expedited cancellation provision to FIFRA -- separate and independent from section 6(b) -- it is difficult to square FIFRA’s environmental protection goals with Bayer and Nichino’s argument that the Pesticide Program must use the more time-consuming and resource-intensive section 6(b) procedures to cancel a pesticide in circumstances where section 6(e)’s expedited procedures are applicable. That is particularly the case when one considers that, unless the Program issues an “emergency order,” a registrant is allowed to sell and distribute the pesticide during the course of section 6 cancellation proceedings. See FIFRA § 6(b)-(c), 7 U.S.C. § 136d(b)-(c). If the Program were required to initiate cancellation proceedings under section 6(b) instead of under section 6(e), registrants would, in effect, be rewarded with additional time to sell and distribute their pesticides. Had Congress intended such a result, it could have subordinated section 6(e) to section 6(b) when it added the new conditional registration authority (including section 6(e)) to the existing statutory structure in 1978. See S. Rep. No. 95-1188, at 11 (1978) (Conf. Rep.). But Congress did not take such a step. Rather, in creating the possibility of allowing pesticides to be introduced to the market conditionally when they could not meet all the requirements for a general registration, Congress took steps to assure that such pesticide registrations could be promptly canceled when the terms of the conditional registrations were not met.

The Board also found that BCS/NAI could not demand a Section 6(b) cancellation proceeding because they “willingly accepted the termination condition in 2008 and 2009, knowing that it required them to submit a request for voluntary cancellation if the Program were to issue a determination that flubendiamide causes unreasonable adverse effects.”  EAB stated: “Given the language of the conditional registrations, Bayer and Nichino’s affirmative concurrence on that language, and the record of negotiations, we find that Bayer and Nichino willingly agreed to the termination condition, knowing that they were agreeing to an approach that could remove the flubendiamide products from the market rapidly.  Having knowingly agreed to this procedure, they cannot contest it now.”

With regard to the second issue as to whether BCS/NAI can nonetheless challenge the lawfulness of a condition in their registrations in a Section 6(e) proceeding, EAB found that the scope of a Section 6(e) cancellation is “narrowly limited to the following issues:  (1) whether the condition was satisfied, and (2) whether the Pesticide Program’s determination on the appropriate disposition of the existing stocks of the canceled pesticide is consistent with FIFRA.”  The Board found that the facts in this particular case demonstrated that BCS/NAI “had ample opportunity to challenge the lawfulness of the termination condition in a timely and permissible way but failed to do so.”  EAB noted, for example, that BCS/NAI could have declined to accept the registration terms and challenged EPA’s refusal to grant a conditional registration with terms acceptable to BCS/NAI. The Board further found that BCS/NAI understood the consequences of agreeing to the condition at issue and thus “knew, or should have known given the clarity of section 6(e), that any objection they had to the condition giving the Pesticide Program the option to effectively require cancellation without instituting a section 6(b) proceeding could not be raised in a section 6(e) cancellation for failure to comply with the termination condition.” 

As for the specific issues that the Board stated were properly before it in this appeal, it found BCS/NAI did not comply with their obligation to submit voluntary cancellation requests.  The Board rejected arguments that BCS/NAI’s failure to request cancellation is excused because EPA did not meet an important pre-condition to the termination condition by “engaging in dialogue” with BCS/NAI regarding the data and EPA’s conclusions related to that data.  Specifically, the Board found that this objection was not timely raised and thus was precluded, but that even if it had not been precluded, BCS/NAI had failed to establish by a preponderance of the evidence that EPA did not engage in such dialogue.

One aspect of the EPA’s determination that was overturned relates to whether existing stocks can continue to be sold or distributed.  Although the Board upheld as reasonable EPA’s denial of the sale and distribution of existing stocks by BCS/NAI because they violated the termination condition, EAB amended EPA’s existing stocks determination described in the Notice of Intent to Cancel “to allow distributors and retailers other than Bayer and Nichino to sell and distribute end-use flubendiamide products that have been formulated, packaged, and labeled for use and [that] have been shipped or released into commerce to distributors on or before the date of this Final Decision and Order, until those stocks are exhausted.”  EAB instead stated that EPA’s “rationale for denying the sale and distribution of existing stocks by Bayer and Nichino -- because they violated the terms of their conditional registrations -- has limited, if any, applicability to non-registrants.”  Distributors and retailers other than BCS/NAI can continue to sell and distribute end-use flubendiamide products that were formulated, packaged, and labeled for use and shipped or released into commerce to distributors on or before the date of this Final Decision and Order, until those stocks are exhausted.

Commentary

Although the resolution of this case has potential implications for current and future registrations, EPA has acknowledged the unique circumstances of this case, and indicated that it is unlikely that a conditional registration like that issued for flubendiamide will be issued again. If a registrant ever finds itself in a similar position to BCS/NAI, or facing a situation, as EPA has indicated, that seeks a condition of registration that would allow a registration to simply expire, such companies should carefully consider how to proceed, including considering options to challenge the lawfulness of the condition proposed by EPA or to demonstrate that the applicant/registrant is entitled to a general, not conditional, registration.


 

By Lisa M. Campbell, Timothy D. Backstrom, and Lisa R. Burchi

On July 1, 2016, in an administrative appeal of the June 1, 2016, Administrative Law Judge (ALJ) Initial Decision and an earlier order denying Bayer CropScience LP and Nichino America, Inc.’s (BCS/NAI) Motion for Accelerated Decision that held that the U.S. Environmental Protection Agency (EPA) was authorized to cancel the conditional flubendiamide registrations under Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 6(e) and did not need to provide BCS/NAI the full Section 6(b) cancellation process, the parties in the case filed post-oral argument briefs.  The briefs were ordered by the Environmental Appeals Board (EAB or Board) following oral arguments held on June 22, 2016, by BCS/NAI and EPA.

Additional information regarding this case is available in our blog items EPA ALJ Issues Initial Decision in Bayer Flubendiamide Cancellation Proceeding and EPA ALJ Denies Bayer’s Motion for Accelerated Decision.

The EAB requested that the parties submit post-order briefs responding to questions raised by the Board during oral argument, and the responses filed by the parties demonstrate their divergent views on issues related to this conditional registration and the process by which EPA sought to cancel such registration.

The specific questions asked by the Board and BCS/NAI and EPA’s responses are as follows:

1(a).  What authority does the Board have in a FIFRA section 6(e) proceeding to consider the lawfulness of a condition of registration, given that section 6(e) proceedings are statutorily limited to two issues:  (1) whether a condition of registration has been violated; and (2) whether EPA's determination with respect to disposition of existing stocks is consistent with FIFRA?

BCS/NAI argues that the EAB must resolve questions about the lawfulness of a condition of registration in determining whether the condition has been violated and to ensure that it has jurisdiction over this proceeding.  BCS/NAI states: “For the EAB to determine ‘whether the … conditions have been satisfied within the time provided’ under FIFRA § 6(e)(2), the Board must necessarily first consider whether the conditions are valid.”  BCS/NAI further argues that its “challenge to the lawfulness of the voluntary cancellation provisions is a challenge to the ALJ’s and EAB’s subject matter jurisdiction over this proceeding, the resolution of which is part of the Board’s inherent authority.”  BCS/NAI argues that the EAB should find that it lacks subject matter jurisdiction to administer this dispute and remand to the Office of Pesticide Programs (OPP).

EPA, in contrast, stated that EAB “lacks the authority to rule on an issue clearly beyond the well-defined and narrow scope of section 6(e).”  If the EAB disagrees with EPA’s position, EPA states that for all the reasons it set forth in its previous motions, “the challenged condition was clearly lawful.”

1(b).  If the Board does possess the authority in a section 6(e) proceeding to consider the lawfulness of a condition of registration, may a third party also challenge the lawfulness of either that condition or any other aspect of the registration?

BCS/NAI argued that the Board’s authority to consider the lawfulness of a condition of registration does not give third parties broad rights to challenge the lawfulness of the condition or all aspects of the registration.  On this point EPA seemingly agrees, stating “While EPA would want to do a more thorough study of relevant case law and legislative history before answering this question definitively, EPA has significant doubts that any third party could challenge any condition of registration in a FIFRA section 6(e) proceeding.”

1(c).  Finally, if the Board were to conclude that the voluntary cancellation condition in the flubendiamide registrations is unlawful, what effect would such a holding have on the registration itself?

BCS/NAI argues that striking the voluntary cancellation provisions would not invalidate the registrations.  Instead, “If the Board concludes that the voluntary cancellation provisions are unlawful, they can be stricken from the registrations and the registrations may continue without consequence other than ensuring that EPA cannot pursue an unlawful process.”  BCS/NAI states that if EPA still wishes to proceed with cancellation, it must do so under FIFRA Sections 6(b) and (c).

EPA takes the position that if the EAB “decides it has the authority under section 6(e) to review the lawfulness of the cancellation condition, and finds it unlawful, the EAB should void the flubendiamide registrations.”  Specifically, EPA states: “If the condition is found to be unlawful, the whole registration must be voided because it has never been found to meet the standard for registration under FIFRA without the cancellation condition.  Although the EAB can rule on the legality of EPA’s actions that are within the scope of this proceeding, the authority to issue a registration on different terms is reserved to OPP.”

2.  FIFRA section 6(e) provides that any hearing on a notice of intent to cancel issued under section 6(e) shall be conducted under FIFRA section 6(d). An order issued after a section 6(d) hearing "shall be based only on substantial evidence of record of such hearing." 7 U.S.C. § 136d(d).  What standard of proof does this provision require? In answering this question, take into account that FIFRA section 16 requires that a substantial evidence standard be applied by a court in reviewing EPA decisions following a hearing, and the Supreme Court's decision in Steadman v. SEC, 450 U.S. 91 (1981).

BCS/NAI argues that the preponderance of the evidence standard of proof applies to orders issued by the EAB after a Section 6(e) hearing.  EPA’s position is that a hearing to address the scope of FIFRA Section 6(e) must be conducted in accordance with FIFRA Section 6(d), which states that an order issued after such a hearing “shall be based only on substantial evidence of record of such hearing.”  

3.  What "conclusions" are covered by the requirement in the flubendiamide conditional registration that EPA "shall engage in dialogue about the data and the Agency's conclusions?" Does EPA's determination on the toxic endpoint level constitute a "conclusion" within the meaning of the registration?

BCS/NAI argues that EPA was required “to not only engage in general dialogue about the data, but also to disclose and engage in dialogue about the Agency’s final decisions and judgments about the data and whether they support continued registration,” including EPA’s unreasonable adverse effects determination and decisions on toxicological endpoints.  Specifically, BCS/NAI states: “It makes sense that a condition requiring good-faith dialogue before demanding cancellation based on an unreasonable adverse effects determination would include dialogue about the final determination. In this case, EPA precluded any opportunity for such dialogue by issuing its determination on the same day as its cancellation demand.”

EPA argues in the first instance that, as the ALJ determined, BCS/NAI did not timely raise the sufficiency of dialogue issue.  If EAB considers this issue timely, EPA provides a summary of EPA’s risk assessment process and argues that “the endpoint selection was one of many components that support the conclusions in the risk assessment, but the endpoint selections were not themselves identified as conclusions in the flubendiamide risk assessments.”

4.  Appellants argue on appeal that EPA presented "new conclusions in the January 29, 2016 Decision and supporting documents that were not discussed with Registrants." Appeal Brief of Bayer CropScience LP and Nichino America, Inc. at 22. If there were new conclusions presented in these documents, what were they, and where in the record are these conclusions detailed?

BCS/NAI argues that EPA presented at least three new conclusions in the January 29, 2016, documents that were not discussed with registrants: (1) EPA disclosed for the first time on January 29, 2016 its determination that “continued use of flubendiamide as currently registered … will result in unreasonable adverse effects to the environment;” (2) “Second, throughout the Decision Memorandum, EPA refers to its conclusions that exposure concentrations based on EPA’s theoretical modeling exceed or will exceed ‘Agency LOCs [levels of concern]’ within certain time periods based on unspecified toxicological endpoints”; and (3) “Third, and perhaps most critically, the Decision Memorandum and supporting documents contain buried within them EPA’s decision to adopt the 0.28 ppb sediment pore water endpoint from the spiked water study, which had been superseded by an endpoint from the scientifically more relevant and sound spiked sediment study, as the sole basis for its cancellation determination.”

EPA rejects Appellants’ argument that there were any new conclusions in its January 29, 2016, decision and supporting documents.  EPA continues to contend that the toxicity endpoint is not a “conclusion” or “new,” instead arguing that risk assessment documents indicate EPA has been relying on the .28 ppb concentration since 2008.

5.  EPA relied upon a toxic endpoint level from the Des-iodo Spiked Water 28-Day Study (MRID 46817023), among other evidence, in its January 29, 2016 unreasonable adverse effects determination for flubendiamide.  What does the record show as to whether Appellants were notified of EPA's intent to use this toxic endpoint level prior to January 29, 2016?

BCS/NAI argued that EPA deliberately thwarted dialogue on the use of the 0.28 ppb endpoint and did not disclose its final decision until January 29, 2016.  While acknowledging that the 0.28 ppb sediment pore water endpoint was calculated back in 2008, BCS/NAI notes that they submitted a spiked sediment study in 2010 based on comments from EPA for its preference for such a study, and that EPA reviewed the spiked sediment study in July 2011 and concluded that it supported a TWA pore water sediment endpoint of 19.5 ppb.  After that, BCS/NAI states:

  • [T]he record shows that OPP chose not to notify Registrants at a putative final meeting on December 15, 2015 that it had decided to revert to the 0.28 ppb endpoint; briefed the Assistant Administrator on the case for cancellation using analysis employing that endpoint the very next day; precluded meaningful discussion of the use of the lower endpoint by denying the Agency had made that decision at the January 6, 2016 meeting and presenting the lower endpoint as one endpoint among a “suite” of available endpoints; and deliberately obscured its reliance on the unsound endpoint in its final decision documents issued on the same day as the cancellation demand -- which do not even mention the choice, let alone provide the scientific basis for it.

EPA, in contrast, states that the record shows that EPA “openly and consistently treated the chronic toxicity endpoint from the Des-iodo Spiked Water 28-Day Study (MRID 46817023) as the appropriate regulatory endpoint, and neither withheld information regarding the endpoint, or changed its endpoint selection at any time between 2008 and the issuance of the [Notice of Intent to Cancel].”

6.  FIFRA section 6(f) mandates that voluntary cancellation requests may not be acted upon by EPA until a notice-and-comment procedure has been completed. If Appellants had requested voluntary cancellation of the flubendiamide registrations under section 6(f), could they have challenged EPA's unreasonable adverse effects determination during the notice-and-comment period?

BCS/NAI argued that if registrants had requested voluntary cancellation under Section 6(f), they could not have effectively challenged EPA’s unreasonable adverse effects determination during the notice-and-comment period.  BCS/NAI argues that “in exchange for the opportunity to submit public comments criticizing the lack of scientific support for EPA’s unreasonable adverse effects determination, Registrants would have had to cancel products that they believe should properly remain registered, forgo their statutory rights to a cancellation decision that is subject to interagency review by the Secretary of Agriculture and scientific peer review by the Scientific Advisory Panel and that can be challenged in an administrative proceeding, and, in doing so, potentially jeopardize their ability to seek and obtain judicial review of that decision.”  BCS/NAI states further: “No registrant should be forced to sacrifice its statutory and due process rights in order to raise scientific concerns that EPA is free to ignore. Nor should registrants be held to have lost their rights to challenge the conditions by failing to pursue such an unfavorable path, particularly when the conditions of registration at issue themselves point to the right to invoke and seek relief through the § 6(e) process.”

EPA’s position is that “comments submitted during the section 6(f) comment period would become part of the Agency’s records and, to the extent relevant to EPA’s cancellation decision, could be expected to be part of the administrative record if someone appealed EPA’s decision to approve or deny the voluntary cancellation request to the federal courts.”

7.  Is the doctrine of laches legally applicable to this proceeding? If so, explain how the record supports this conclusion.

A claim can be barred by laches when “the delay in filing the claim (1) is unreasonable and inexcusable and (2) materially prejudices the defendant.” BCS/NAI argued that the doctrine of laches does not apply here, as there was no unreasonable delay by registrants, and there is no prejudice to EPA.  BCS/NAI states that they were justified in not pursuing any of the purported options for an earlier challenge that EPA’s claims were available.  Instead, BCS/NAI chose “to generate the required data and satisfy the substantive conditions of registration, trusting that if the data did not show evidence of accumulation to levels of concern (which they did not), EPA would follow the science and the terms of the PAL and grant unconditional flubendiamide registrations.” 

While EPA agrees that if the proceeding is limited to the scope set forth by Section 6(e), the laches doctrine would not be applicable.  EPA also argues that “if EPA were to determine that the appropriateness of the cancellation condition is an appropriate issue for resolution,” then laches would apply.  To support its position, EPA states that there is “substantial evidence in the record” that BCS/NAI waited almost eight years to challenge the condition of their registration that is now at issue.  EPA further argues that it would be prejudiced because key negotiators of the cancellation condition and the initial registrations are no longer available and “this lack of available witness testimony could materially prejudice the Agency.”

Commentary

The questions posed by the EAB, and the respective responses by BCS/NAI and EPA, indicate fundamental differences regarding the facts and application of the law to this case.  Although the resolution of this case has potential implications for current and future registrations, EPA has acknowledged the unique circumstances of this case, and indicates that it is unlikely that a conditional registration like that issued for flubendiamide will be issued again.

EPA states: “the structure of the flubendiamide cancellation condition was unprecedented, and the flubendiamide experience shows that a condition requiring a registrant to request cancellation pursuant to section 6(f) is significantly less reliable than a condition that would allow a registration to simply expire.  EPA is unlikely to grant in the future a registration with conditions that depend on a registrant requesting cancellation pursuant to section 6(f).”  The statement by EPA that it is more likely in the future to impose a condition that would allow affected registrations “to simply expire” leaves unresolved the question of the rights a registrant would have to contest cancellation based on such an expiration date. 


 
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