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On 22 March 2024, the United States Court of Appeals for the Fifth Circuit ruled in favor of Inhance Technologies, agreeing with the Texas company that the U.S. Environmental Protection Agency (EPA) acted unlawfully when it issued orders under Section 5 of the Toxic Substances Control Act that directed Inhance Technologies to shut down its barrier technology facilities.
The decision by Chief Judge Priscilla Richman and Circuit Judges James E. Graves Jr. and Cory T. Wilson vacates EPA’s orders, securing the continued operations of Inhance Technologies’ 11 U.S.-based barrier technology facilities, and averting disruption to downstream industries and related supply chain impacts.
“I am exceedingly pleased with the ruling and grateful to our customers and employees for their resilience, dedication, and support,” said Andrew Thompson, President and Chief Executive Officer of Inhance Technologies, in a statement.
“We are very excited to continue to service our customers with our excellent team and technologies, which keep thousands of tons of harmful chemicals and fuels out of the environment, preserve product quality, and ensure compliance with many global regulations – all in a recyclable container,” Thompson said.
According to the company, Inhance Technologies’ barrier technology annually prevents more than 25,000 metric tons of chemicals from being released into the environment that would otherwise occur due to packaging permeation. Inhance Technologies’ fluorination technology are used since 1983 for barrier protection in products used for crop protection, healthcare, national defense, aerospace, and fuel systems.
EPA: Inhance Process Subject to a SNUR
In March 2022, EPA charged for the first time that Inhance Technologies’ fluorination process was subject to a Significant New Use Rule (SNUR) regarding long-chain per- and polyfluoroalkyl substances (PFAS). EPA issued Inhance a Notice of Violation, which offered Inhance two options:
• Change its fluorination process so it no longer manufactured PFAS, or
• Temporarily halt the fluorination of any products that resulted in the creation of PFAS.
Inhance did not change its process or stop fluorinating containers and submitted two Significant New Use Notices (SNUNs) to the EPA in December 2022. After reviewing those SNUNs, EPA determined that three PFAS manufactured by Inhance presented an “unreasonable risk of injury to human health and the environment” and six additional PFAS manufactured by Inhance may do so.
It issued two orders under Section 5 of the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601–2697 that prohibited Inhance from manufacturing or processing PFAS during its fluorination process, “at least until Inhance completes further testing to address information gaps identified during the review.”
Court: Companies Should Not Be Expected to Be Psychics
Despite submitting SNUNs for its products, Inhance maintained in court that its fluorination process was not covered by the SNUR and that its SNUNs were not “admission[s] of fact” or a concession that the SNUR was “legally applicable to the company’s fluorination.”
Companies are required to stay apprised of laws and regulations, but “they are not required to predict an agency’s actions with ‘extraordinary intuition or with the aid of a psychic,’” noted Judge Wilson, quoting from United States v. Chrysler Corp., 158 F.3d 1350, 1357 (D.C. Cir. 1998). Wilson wrote the opinion for the Fifth Circuit, with Judge Graves concurring only with the judgement.
Unfortunately for Inhance, neither it nor the EPA knew that its fluorination process resulted in the creation of PFAS until March 2022, nearly two years after the final SNUR was promulgated. Additionally, neither the 2015 proposed SNUR nor the 2020 final version included the fluorination industry as an industry that might be affected by the SNUR.
Having no reason to know it would be subject to the new SNUR, Inhance did not submit its fluorination process as an ongoing use during the rule-making process.
Court: EPA Exceeded its Authority
Inhance claimed that the EPA exceeded its statutory authority by issuing orders under Section 5 instead of Section 6 because Inhance’s 40-year-old fluorination process is not a “significant new use” under TSCA.
“We agree,” stated the court.
“TSCA’s broader structure demonstrates that Section 5 is intended only to regulate significant new uses prior to first manufacture,” noted Judge Wilson in the opinion. “There are two ways the EPA can regulate chemical substances under TSCA: Section 5 applies (only) to new chemical substances and significant new uses; Section 6 applies to all chemical substances.”
Unlike Section 5, Section 6 requires EPA to conduct a cost-benefit analysis which weighs the negative effects of the chemical substance against the benefits of the substance, as well as the economic consequences of prohibiting or limiting the substance.
“This shows that Congress intended for the EPA to consider more carefully the effects of its regulations on manufacturing processes that have previously existed,” wrote Judge Wilson.
According to the court, EPA’s interpretation of Section 5 “distorts TSCA’s framework and defies common sense.” Under its approach, the agency “can regulate a use under Section 5 anytime it ‘discovers’ a use not previously known to the agency, even if that use has existed for decades.”
That interpretation undermines Section 6 and shortcuts Congress’s directive to weigh the costs to businesses and the overall economy before shutting down an ongoing manufacturing process, noted Judge Wilson in the opinion, adding, “EPA’s interpretation lacks intuitive force: A 40-year-old manufacturing process is not ‘new’ in any pertinent sense of the word.
“At bottom, the EPA’s attempt to redefine ‘new’ to expand the reach of the SNUR does not pass muster because ‘an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.’”
“Because the EPA exceeded its statutory authority in doing so, we vacate the orders,” stated the ruling.
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About the author: Sandy Smith, Senior Reporter, 3E, is an award-winning newspaper reporter and business-to-business journalist who has spent 20+ years researching and writing about EHS, regulatory compliance and risk management and networking with EHS professionals. She is passionate about helping to build and maintain safe workplaces and promote workplace cultures that support EHS. She has presented at major conferences and has been interviewed about workplace safety and risk by The Wall Street Journal, CNN and USA Today.
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