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 and Heather F. Collins, M.S.

On March 22, 2018, the U.S. Environmental Protection Agency (EPA) released the Pesticide Registration Notice (PR Notice) 2018-1 issued by the Office of Pesticide Programs (OPP) entitled “Determination of Minor Use under Federal Insecticide, Fungicide, and Rodenticide Act Section 2(ll)” (PR Notice 2018-1).  Notice of Availability issued on March 21, 2018.  83 Fed. Reg. 12385.  The PR Notice states that it “describes the revised approach to interpreting economic minor use based on the concept of the registration of a pesticide as an investment.”  It “revises the method and criteria used by EPA for evaluating ‘sufficient economic incentive’ under FIFRA section 2(ll)(2),’” and it “also clarifies that minor use under FIFRA section 2(ll)(1) is based on acreage reported in the [U.S. Department of Agriculture (USDA)] Census of Agriculture.”

Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 2(ll)(1) defines a minor use of a pesticide as a use on a crop grown on 300,000 acres or less in the United States.  Section 2(ll)(2) of FIFRA defines a minor use of a pesticide as one that lacks sufficient economic incentive to seek or maintain a registration but has private or social value.

PR Notice 2018-1:

  • Clarifies that the USDA’s most recent Census of Agriculture, conducted every five years by the USDA’s National Agricultural Statistics Service (NASS), is the appropriate source for data on acreage or crops grown in the U.S. to establish a minor use under the acreage definition in FIFRA 2(ll)(1);
  • Revises and provides guidance to registrants concerning the method used by EPA for evaluating “sufficient economic incentive” under FIFRA Section 2(ll)(2);  and
  • Explains how qualitative information may be used to inform the quantitative analysis and interpret the results.

Previously, EPA’s interpretation of economic minor use in Section 2(ll)(2) was based on PR Notice 97-2.  EPA states PR Notice 2018-1 supersedes PR Notice 97-2.  EPA states that through PR Notice 2018-1, EPA “seeks to identify and encourage the registration of pesticides for minor uses to protect communities from harmful pests.”  EPA states in PR Notice 2018-1 that “the existing methods for identifying an economic minor use in PRN 97-2 do not consider all relevant factors which could affect the incentives of a registrant to apply to register a minor use,” and that “use of the approach in PRN 97-2 to identify economic minor uses could prevent applicants from registering pesticides that would be beneficial to users and growers, thus limiting the availability of pesticides for certain use sites.”  For this reason, “EPA revised the method to determine an economic minor use.”

PR Notice 2018-1 is significant because it can be applied to conventional pesticides, biopesticides, and antimicrobial pesticides to determine whether they meet the definition of minor use.  The criteria in PR Notice 97-2 only applied to conventional pesticides.

EPA states the rationale for revising the PR Notice to consist of the following:

  • EPA has decided to revise the policy on determining minor use.
  • First, PRN 97-2 is outdated regarding the crops that would not meet the acreage definition of a minor use under FIFRA section 2(ll)(1).  PRN 97-2 contained a fixed list of crops that were grown on more than 300,000 acres in 1997, but cropping patterns change over time and the list of crops provided in PRN 97-2 is no longer accurate.
  • Second, the method in PRN 97-2 does not accurately reflect economic incentive to register pesticides.  Gross revenue is not an appropriate measure for estimating returns on an investment; since it does not account for production and distribution costs, it overstates the returns to the investment.  However, revenue from a single year understates the time period when a firm would receive a return on an investment. Finally, gross revenue at full market potential does not account for the difference in timing between costs of registration and future returns.  Costs are likely to be incurred at the beginning of registration, whereas revenues will occur over multiple, future years.
  • Third, PRN 97-2 applies only to registration actions on conventional pesticides.  The notice specifically states that it does not apply to registrations of biopesticides and antimicrobials (e.g., disinfectants).  The method described in this PRN may be used to evaluate the registration incentive for all types of products registered by each of OPP's registering divisions.

Additionally of note, EPA states in PR Notice 2018-1 that seeking minor use designation is not required as part of the pesticide registration process.  It is an optional designation that an applicant can seek to obtain certain incentives associated with minor uses, such as:

  • Extension of exclusive use of data under FIFRA Section 3(c)(1)(F)(ii); and
  • Qualifying for an exemption from the fee or waiver of a portion of the registration service fee for an application for minor uses of a pesticide under FIFRA Section 33(b)(7)(D).

More information on other PR Notices is available on our blog under key phrase Pesticide Registration Notice.

 


 

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