Inhance is a Texas company that has been fluorinating plastic containers using the same process since 1983. The fluorination process creates a barrier that keeps dangerous substances from leaching out of their containers, and keeps outside substances from permeating in. The EPA began investigating Inhance after the presence of PFAS was detected in an insecticide that was stored in a container fluorinated by Inhance. After confirming that Inhance’s fluorination process resulted in the creation of PFAS, the EPA issued Inhance a Notice of Violation in March 2022. The Notice of Violation offered Inhance two options: (a) change its fluorination process so it no longer manufactured PFAS, or (b) temporarily halt the fluorination of any products that resulted in the creation of PFAS. Though Inhance did not change its process or stop fluorinating containers, it submitted two Significant New Use Notices to the EPA. After considering those Notices, the EPA issued the two orders in December 2023 prohibiting Inhance from manufacturing or processing PFAS through their fluorination process. Inhance asserts that if the orders are allowed to take effect, they will shut down Inhance’s fluorination process, bankrupting the company. Hence, Inhance immediately petitioned the U.S. Fifth Circuit for expedited review.

Initially, the Court recounted the legislative and regulatory history:  Congress enacted TSCA in 1976 to protect human beings and the environment from chemical substances that present an unreasonable risk of injury to health or to the environment. Under the Act, there are two ways the EPA may regulate chemical substances:

First, Section 5 allows the EPA to regulate the use of new chemical substances and any significant new use of a chemical substance. If the EPA labels the use of a chemical substance as a significant new use, then it proposes a rule regulating that substance, and affected entities are allowed the opportunity for notice and comment. At the end of the comment period, the EPA promulgates a final rule known as a Significant New Use Rule.  If a company wants to manufacture or process a new chemical substance or a chemical substance that has been deemed a significant new use, it must submit a Significant New Use Notice at least 90 days before such manufacture or processing. After review, the EPA must make one of three findings: (1) the chemical substance or significant new use presents an unreasonable risk of injury to health or the environment; (2) there is insufficient evidence to determine an evaluation of the health and environmental effects of the chemical substance or significant new use; or (3) the relevant chemical substance is not likely to present an unreasonable risk of injury to health or the environment. If the EPA finds that there is insufficient evidence to determine the effects of the substance or the substance presents an unreasonable risk of injury, then it must issue an order prohibiting or limiting the manufacture of the substance. These are known as Section 5(e) orders and Section 5(f) orders, respectively, and they are the types of orders at issue in this case.

Second, the EPA may regulate chemical substances under Section 6. The mandate of Section 6 is broader than Section 5, in that Section 6 applies to all chemical substances, not just new chemical substances or significant new uses of a chemical substance. However, the rulemaking process under Section 6 is also more rigorous than Section 5: It requires the EPA to conduct a cost-benefit analysis, weighing the negative effects of the chemical substance against the benefits of the substance and the economic consequences of prohibiting or limiting the substance. No such analysis is required under Section 5.

In response to growing concerns about PFAS, the EPA proposed a new Significant New Use Rule in January 2015, designating as a significant new use the manufacturing or processing of an identified subset of PFAS for any use that will not be ongoing after December 31, 2015, and all other PFAS for which there are currently no ongoing uses. Under the SNUR section entitled “Does this action apply to me?” the EPA included a non-exhaustive list of industries that might be affected by the SNUR. Those industries included fiber, yarn, and thread mills; carpet and rug mills; home furnishing merchant wholesalers; carpet and upholstery cleaning services; and chemical manufacturing and petroleum refineries. Notably, the fluorination industry was missing from the list, as was any industry with the same North American Industry Classification Code as the fluorination industry. The proposed rule also made clear that the SNUR would apply only to “any use not ongoing as of the date on which this proposed rule is published.”

In July 2020, the EPA promulgated the final SNUR. Like the proposed rule, it included a list of industries that might be affected by the SNUR. That list included other industries in addition to those already stated in the proposed rule, but it still did not include the fluorination industry. And the SNUR went into effect without any challenges.

With that backdrop, the Fifth Circuit vacated the EPA Orders in question, concluding that the EPA should have promulgated the Rule under Section 6, as opposed to Section 5:

“The EPA may not contort the plain language of TSCA’s Section 5 to deem a forty-year-old ongoing manufacturing process a ‘significant new use’ subject to the accelerated regulatory process provided by that part of the statute. In other contexts, ‘new’ may have nuanced meanings, but its meaning in the statute before us is plain, and plainly prohibits the EPA’s December 2023 orders aimed at Inhance.”

The Court hastened to add that its ruling “does not render the EPA powerless to regulate Inhance’s fluorination process. The agency can properly proceed, abiding the APA’s procedural guardrails, under TSCA’s Section 6 by conducting inter alia the appropriate cost-benefit analysis required for ongoing uses — a proposition even Inhance concedes. The EPA is just not allowed to skirt the framework set by Congress by arbitrarily deeming Inhance’s decades-old fluorination process a significant new use.”

 

Enhance Technologies v. EPA, 96 F.4th 888 (5^th Cir. 2024).