The Year Ahead in Chemicals Regulation

March 1, 2016

Companies that manufacture and distribute chemical products across the value chain in the U.S. need to be aware of several legal developments that could impact their business in the year ahead. This Client Alert summarizes regulatory proposals that deserve priority attention, and also notes troubling developments in consumer litigation.

California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”)

The California Office of Environmental Health Hazard Assessment (“OEHHA”) has proposed to significantly increase the content and dissemination of labels under Proposition 65. The proposal is supported by the Office of the Attorney General which would concurrently sharpen its enforcement efforts under the law.

Warning Requirements

Under Proposition 65, “clear and reasonable” warnings must be given to consumers prior to exposure to chemicals known to the state to cause cancer or reproductive harm. OEHHA now asserts that safe harbor warnings that have been used for decades lack the specificity necessary to ensure the public receives pertinent information about potential exposures. The proposed changes would require:

  • a statement that the product or the location can expose a person to a listed chemical (as opposed to the current general warning regarding the presence of a chemical in a product or location);
  • identification in the warning of at least one listed chemical to which the consumer would be exposed (with certain exceptions);
  • listing the URL for an OEHHA website that will provide information about listed chemicals, products, or locations commonly associated with those chemicals, and general advice for how to reduce or avoid exposure to those chemicals;
  • warnings provided in non-English languages in instances where product labeling contains information in alternative languages, or at locations where signs are posted in a language other than English; and
  • use of an exclamation-point for most warnings.

Other proposed regulatory changes would clarify the responsibilities of retailers, distributors, and manufacturers in providing the appropriate warning, with the goal of placing more responsibility on manufacturers and minimizing the burden on retail sellers of consumer products. In addition, for the first time, warnings for use on Internet sales sites are set forth in the regulations. “Tailored” warnings for specific kinds of exposures—such as alcoholic beverages, dental care, furniture, diesel engines, automobiles, recreational vessels, and amusement parks—are also proposed.

We believe the following information will become available on the OEHHA website once the regulations become final:

  • routes of exposure, including ingesting foods; contact with or use of products or services; occupational and environmental exposures; and strategies for reducing or avoiding exposure to chemicals;
  • links to information compiled by other “authoritative entities,” such as the U.S. Food and Drug Administration, the U.S. Surgeon General, the National Institute for Occupational Safety and Health, the National Academy of Sciences, U.S. Environmental Protection Agency, the International Agency for Research on Cancer, and the collective bodies of the National Institutes of Health;
  • reasonably available information concerning human exposure to listed chemicals;
  • provisions for a person to request a correction to material provided on the website; and
  • a disclaimer indicating that OEHHA cannot assure the accuracy of the information received from third parties.

The proposed regulations, if approved, will become effective two years after adoption, which is currently expected in November 2016. Companies are free to update their warnings before the effective date of the new regulations. If a warning is used pursuant to an existing court-approved consent judgment, it need not be changed for products covered under the judgment.  Any warnings approved by a judge in a consent judgment before the effective date of the new rules would remain sufficient for the party or parties to the consent judgment. 

A sell-through period of unlimited duration is also proposed for products manufactured prior to the effective date, as long as they comply with the previous version of the rule. This will obviate the need for relabeling or destroying existing inventories.  

Dose and Exposure Levels for Lead

OEHHA is considering changing the maximum allowable dose levels for lead, and clarifying how exposure levels and concentrations of chemicals in products are to be calculated.  Also under consideration is a new regulation that would establish background levels for certain ubiquitous chemicals, such as lead, that are naturally present in unprocessed foods.  

OEHHA’s action is in response to a July 3, 2015, petition by the Center for Environmental Health to repeal or amend Proposition 65 regulations as they relate to the maximum allowable dose level (“MADL”) (a measure of reproductive risk) for lead. The proposed regulation is also intended to address recent California court decisions that have allowed defendants to average lead exposures over time, further drawing into question the effectiveness of the current standard.  

OEHHA’s preliminary draft regulations provide a range of acceptable exposures based on the duration of the exposure, starting at 0.2 micrograms for every-day exposure, to 8 micrograms if exposure is only one day in every 116 or more days.  

A public hearing was held on October 14, 2015. No additional hearings or deadlines for action by OEHHA are currently scheduled.

NSRL Set for the Phthalate DINP

OEHHA has finalized the No Significant Risk Level (“NSRL”) (a measure of cancer risk) for diisononyl phthalate (“DINP”). The NSRL was set at 146 µg/day, and will go into effect April 1, 2016. This NSRL sets the level of exposure at which a Proposition 65 warning is required for DINP.

BPA Listing Goes Into Effect on May 11

Warning requirements are scheduled to go into effect for Bisphenol A (“BPA”) on May 11, 2016. This date represents the end of the one-year grace period following OEHHA’s 2015 listing of BPA as a reproductive toxin. Companies manufacturing, distributing, or selling products in California that contain BPA will be required to provide a Proposition 65 warning to consumers regarding exposure to BPA.  

OEHHA has not established an MADL for BPA, although in 2013 the agency proposed an MADL of 290 micrograms per day as part of an effort to better understand the impact of the potential listing of BPA.

Proposed New Proposition 65 Enforcement Regulations from the Attorney General 

Meanwhile, the California Attorney General is proposing new regulations aimed at ensuring that OEHHA receives a greater share of penalties paid under Proposition 65. These penalties are used to fund OEHHA’s Proposition 65 program.  

The proposed revisions would cap “in lieu of penalties” payments and limit the ability of private parties to divert some of the statutorily required penalty to themselves or third parties in the form of additional settlement payments.

The Attorney General’s proposal is also intended to improve the transparency of private-party settlements, and reduce the financial incentives for private parties to bring actions that provide no substantial public benefit.

California Safer Consumer Product Regulations/Green Chemistry Initiative

California’s Department of Toxic Substances Control (“DTSC”) has identified its first three “priority products” to be regulated under the Safer Consumer Product Regulations.

In the first quarter of 2016, the DTSC is expected to initiate rulemaking to identify children’s foam sleeping mats and pillows containing the flame retardants 1,3-dichloroisoproply phosphate (“TDCPP”) and 2-chloroethyl phosphate (“TCEP”) as priority products under the program. Other potential priority products include paint strippers containing methylene chloride, and two-part, spray polyurethane foam insulation systems with unreacted diisocyanates.

The Safer Consumer Product program is the first step in implementing the state’s Green Chemistry Initiative, which was mandated under legislation enacted in 2008 to eliminate harmful chemicals from consumer products.

Priority products are product-chemical combinations identified under the program as posing a substantial threat of harm to public health or the environment. Once named a priority product, manufacturers and other regulated entities must conduct a life-cycle assessment and an alternatives analysis to determine how the product can be made safer.

DTSC has identified seven categories of consumer products from which it will select the next round of priority products. The seven categories include beauty, personal care, and hygiene products; building products; cleaning products; clothing; household and office furnishings and furniture; consumable office machinery products (such as inks and toners); and fishing equipment.

Vermont Establishes Food Labeling Law

The state of Vermont recently enacted Act 120, which establishes mandatory labeling requirements for food products sold for human consumption that contain ingredients produced through genetic engineering. The new law prohibits use of the word “natural” or any “words of similar import” on product labels or advertising of covered foods, and requires companies to affirmatively label products entirely or partially produced from genetic engineering.

The Grocery Manufacturers Association (“GMA”), among other industry groups, challenged Act 120  in the U.S. District Court for the District of Vermont. That court declined to enjoin the new law. The GMA appealed, and now both sides have asked the Second Circuit court to delay the trial date until May 31, 2016, after the appellate court has ruled. Federal legislation that would preempt a state-by-state patchwork of labeling laws for genetically engineered ingredients in favor of a uniform federal standard (H.R. 1599: The Safe and Accurate Food Labeling Act of 2015) passed the House in July 2015 and is currently pending in the Senate.

TSCA Reform

Late last year, the U.S. Senate passed a bill that significantly rewrites the 40-year-old Toxic Substances Control Act (“TSCA”) in ways that will conform it to its European counterpart (“Registration, Evaluation, Authorisation and Restriction of Chemicals,” commonly referred to as “REACH”), including broad new powers to require testing and to implement new bans and restrictions for chemicals already in commerce. The House of Representatives passed its own version of the TSCA reform last June. The two bills are proceeding through the reconciliation process to resolve differences, and it is reasonably likely that President Obama will sign the final legislation.

The major changes from the current law include the following:

  • Both bills establish a new safety standard that ensures that only human health is considered in determining the safety of a chemical. The current law requires a cost-benefit analysis prior to designating a chemical as unsafe. Both bills also require that the risk assessment on a chemical consider the protection of children and other receptors most susceptible to harm from the chemical.
  • Once a chemical is designated as providing an unreasonable risk, both bills require that the U.S. Environmental Protection Agency (“EPA”) take some regulatory action that will reduce exposure to below the safety standard. Both bills eliminate the current TSCA requirement that the “least burdensome” action must be adopted. Before EPA can ban the chemical or order it phased out, it must take into account the costs and benefits of any alternative.
  • Both bills establish deadlines for prioritizing chemicals for risk assessment and for completing any assessment. Both bills require EPA to do a minimum number of assessments over specified periods, although the House version makes that obligation dependent on available funds.
  • Both bills eliminate the current presumption that existing chemicals are safe.
  • Both bills give EPA new authority to order a company to test a chemical, although the bills differ as to what can trigger EPA action.
  • Both bills limit a company’s “confidential business information” claims over data it provides EPA. Both bills authorize EPA to collect fees from businesses to pay for its program.

Both bills have provisions preempting state laws or regulations that conflict with TSCA as amended. The chemical industry has voiced concern that some states have been particularly aggressive in the regulation of chemicals, making for a patchwork of requirements in the industry. The Senate version preempts any state action imposing restrictions on the manufacturing, processing, distribution, or use of a substance where EPA has found that the substance meets or doesn’t meet the EPA safety standard. The preemption does not apply where the state has acted to prevent a different use of the chemical than that covered by the EPA assessment, or where state action is aimed at a different hazard than that covered by the standard. The same restrictions apply during a pending EPA safety assessment. The House version does not impose preemption during the assessment process.

States can continue to impose restrictions identical to federal requirements, adopted under the authority of a federal law, or adopted under a state air, water quality, waste treatment, or disposal law. States can also adopt restrictions on any chemical that EPA has designated as “low priority.”

Both bills grandfather any state action taken prior to August 1, 2015, or any action taken pursuant to a law in effect on August 31, 2003. The latter provision protects any action taken under Proposition 65, but not any action taken pursuant to California’s “Safer Consumer Products” law, which was adopted in 2008. 

Attorneys General from eleven states (including California’s Kamala Harris) have joined the debate with a joint letter sent to Rep. John Shimkus (R-Ill.), chairman of the Energy and Commerce Committee’s Subcommittee on Environment and the Economy, and Rep. Paul Tonko (D-N.Y.). The letter sets forth a set of “core principles,” focusing on federal preemption and a state’s ability to conduct its own chemical programs, that the Attorneys General believe should guide the conferees in determining the extent to which the new federal law will preempt state law.  In particular, the letter cites California’s Proposition 65, adopted in 1986, and Massachusetts’ Toxics Use Reduction Act, adopted in 1989. The letter notes that there appears to be a “consensus” to let these long-standing existing laws continue to operate.

IARC Lists Seven Chemicals as Possible or Probable Carcinogens

The International Agency for Research on Cancer (“IARC”) has classified seven widely used chemicals as either probably or possibly carcinogenic to people. IARC’s listing will impact how chemicals are labeled and the safety information that must be provided to workers.

The seven chemicals are:

  • dimethylformamide (CAS No. 68-12-2) ( “probably carcinogenic to humans;” group 2A), which is a solvent used in many industrial processes, surface coatings, films, and pharmaceuticals;
  • 2-mercaptobenzothiazole (CAS No. 149-30-4) (“probably carcinogenic to humans”), used to make natural and synthetic rubber;
  • hydrazine (CAS No. 302-01-2) (“probably carcinogenic to people”), used to make other chemicals, including rocket fuel and water treatment products;
  • tetrabromobisphenol A (CAS No. 79-94-7) (“probably carcinogenic to people”), a flame retardant;
  • 1-bromopropane (CAS No. 106-94-5) (“possibly carcinogenic to people”), a solvent used to clean optical equipment, electronics, metals and other materials, and used in spray adhesives;
  • 3-chloro-2-methylpropene (CAS No. 563-47-3) (“possibly carcinogenic to people”), used in the production of plastics and organic chemicals and, in some countries (but not the U.S.), as an insecticide and fumigant;
  • dimethyl-p-toluidine (CAS No. 99-97-8) (“possibly carcinogenic to people”), a hardening agent in dental and bone adhesives, an ingredient in industrial glues, and an intermediate in making dyes and pesticides.

U.S. Chemical Manufacturers to Face Stricter Rules

The EPA has proposed revisions to its Risk Management Program regulations, which are intended to improve chemical process safety, assist local emergency authorities in planning for and responding to accidents, and improve public awareness of chemical hazards at regulated sources. The regulations, if adopted, will require consideration of safer technologies and alternatives; third-party audits and root-cause analysis to identify process safety improvements for accident prevention; enhanced emergency planning and preparedness; and strengthened emergency response planning.

The proposed revisions to the Accidental Release Prevention regulations under section 112(r) of the Clean Air Act, also known as the Risk Management Plan (“RMP”) regulations, require certain facilities to develop and implement risk-management programs.  

The public will have 60 days from the date of publication in the Federal Register (which has yet to occur) to submit written comments online at www.regulations.gov (the portal for federal rulemaking), or by mail.

Consumer Class Actions Targeting Manufacturers of Consumer Packaged Goods Continue to Focus on Production Processes and Supply-Chain Issues

Social media continues to stoke and popularize consumer anxiety that a variety of chemicals are unsafe and unhealthy. These trends  continue to translate into consumer class action litigation against the manufacturers  and distributers of consumer products using such chemicals; challenging labeling and related claims that products are “natural”, “pure” or otherwise chemical free. This type of litigation has targeted a wide range of products in the past three to five years—from shampoo to potato chips to pet food to diapers—and there are no signs that this trend will abate any time soon.

The prevailing theory of liability in these cases is that consumer products are deceptively labeled and advertised because the products:

  • contain artificial and/or synthetically produced chemicals, such as sodium polycrylate, phenoxyethanol, methylisothiazolinone, potassium sorbate, sodium benzoate, magnesium stearate, and calcarea phosphorica;
  • contain ingredients that were themselves derived from allegedly “non-natural” methods, such as the production of citric acid through the fermentation of genetically modified sugar beets and corn; or
  • contain ingredients that are “artificial” because they are more than minimally processed.

Historically, these cases were concentrated in the California courts. But in recent years, plaintiffs have increasingly filed their cases in other jurisdictions, with significant upticks in states like New York, Florida, Illinois, and others. Judges usually decline to dismiss these cases as a matter of law - leaving it for a jury to decide whether such claims are in fact “deceptive” - but many manufacturers have prevailed at either summary judgment or in opposition to class certification.

In Conclusion

The coming months are likely to see a heightened level of interest in chemicals regulation, with potential disagreements as to the appropriate level of state involvement in the field.  It also appears likely that long-established programs such as TSCA and Proposition 65 could see significant changes. We will provide additional Client Alerts as events develop, and encourage the regulated community to stay abreast of changes as they occur.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Bob Nicksin, an O'Melveny counsel licensed to practice law in California, Eric Rothenberg, an O'Melveny partner licensed to practice law in Missouri and New York, and Hannah Y. Chanoine, an O'Melveny counsel licensed to practice law in Massachusetts and New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York's Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, Phone:+1-212-326-2000. © 2016 O'Melveny & Myers LLP. All Rights Reserved.