Introduction

In the landmark case of Inhance Technologies, L.L.C. v. United States Environmental Protection Agency, adjudicated by the United States Court of Appeals for the Fifth Circuit on March 21, 2024, the court addressed the scope of the Environmental Protection Agency's (EPA) authority under the Toxic Substances Control Act (TSCA). The dispute centered around the EPA's issuance of Significant New Use Rules (SNURs) that targeted Inhance Technologies' long-standing fluorination process, which inadvertently resulted in the creation of long-chain perfluoroalkyl substances (PFAS). Inhance contended that the EPA overstepped its statutory authority by classifying a decades-old manufacturing process as a "significant new use" under TSCA Section 5, rather than regulating it under the more comprehensive Section 6. The Fifth Circuit's decision not only vacated the EPA's orders but also established critical precedents regarding the interpretation of "significant new use" within TSCA.

Summary of the Judgment

The Fifth Circuit vacated the EPA's December 2023 orders that prohibited Inhance Technologies from manufacturing or processing PFAS through its fluorination process. The court held that the EPA exceeded its statutory authority by applying Section 5 SNURs to a manufacturing process that had been in place for forty years, thereby misinterpreting "significant new use." The court emphasized that TSCA Section 5 is designed to regulate genuinely new chemical uses, not historical processes, and that the EPA should have resorted to Section 6, which requires a more rigorous cost-benefit analysis for ongoing uses. Consequently, the EPA's attempts to classify Inhance's established fluorination process as a significant new use were invalidated, though the court acknowledged that the EPA retains the authority to regulate the process under Section 6.

Analysis

Precedents Cited

The court referenced several key precedents to substantiate its ruling:

• Clean Water Action v. EPA: Emphasized that agencies must operate within the explicit authority granted by Congress.
• Sackett v. EPA: Highlighted the importance of interpreting statutes based on their plain meaning.
• Corrosion Proof Fittings v. EPA: Discussed the "substantial evidence" standard under TSCA and its distinct application apart from the Administrative Procedure Act (APA).
• Jennings v. Rodriguez: Addressed constitutional concerns related to administrative agency actions.
• R.J. Reynolds Vapor Co. v. FDA and Christopher v. Smithkline Beecham Corp.: Reinforced the principle that agencies cannot surprise parties with unexpected regulatory actions.
• Perez v. Mortgage Bankers Association: Illustrated the limits of agency interpretations of statutory language.

These precedents collectively underscored the necessity for the EPA to adhere strictly to the statutory language of TSCA and avoid overextending its regulatory reach.

Legal Reasoning

The court's legal reasoning hinged on the interpretation of the terms "new" and "significant new use" within TSCA Section 5. Inhance Technologies argued that its fluorination process, established in 1983, could not be considered a "new" use merely because the EPA had identified the creation of PFAS within that process. The court agreed, noting that "new" should be understood in its ordinary sense—pertaining to something recently established or not previously existing. Applying this to Inhance's long-standing process would distort TSCA's framework, which differentiates between genuinely new chemical uses (regulated under Section 5) and ongoing, historical uses (regulated under Section 6). The court also critiqued the EPA's reliance on its own expanded definition of "new," arguing that such an interpretation lacked support from the statute's plain language and undermined the procedural safeguards inherent in TSCA. Furthermore, the court emphasized the importance of fair notice—a constitutional requisite—to prevent agencies from retrospectively imposing regulations on established practices without clear prior indications.

Impact

This judgment has significant implications for the regulation of chemical substances under TSCA:

• Clarification of TSCA Sections 5 and 6: The court delineated the boundaries between Section 5's focus on new chemical uses and Section 6's broader mandate to regulate all chemical substances, especially long-established processes.
• Limitations on EPA's Regulatory Authority: The decision restricts the EPA from retroactively applying stringent regulations under SNURs to historical processes, thereby upholding the principle of legal certainty for businesses.
• Fair Notice and Due Process: Reinforces the constitutional requirement that agencies provide clear and predictable regulatory frameworks, preventing arbitrary or surprise enforcement actions.
• Guidance for Future SNURs: Sets a precedent that SNURs must be applied to truly new uses, encouraging the EPA to conduct comprehensive rule-making processes that account for existing uses before designating new ones.

Overall, the ruling ensures a balanced approach to chemical regulation, safeguarding both environmental and public health while respecting the operational realities of longstanding industrial practices.

Complex Concepts Simplified

Toxic Substances Control Act (TSCA): A federal law enacted in 1976 that regulates the introduction and use of chemical substances in the United States to protect human health and the environment.

Significant New Use Rule (SNUR): A regulatory tool under TSCA Section 5 that requires companies to notify the EPA at least 90 days before beginning manufacturing or processing a chemical substance for a use deemed "significant new use." This allows the EPA to evaluate and potentially restrict or prohibit the new use based on potential risks.

Section 5 vs. Section 6 of TSCA:

• Section 5: Focuses on regulating new chemical substances and significant new uses of existing chemicals. It involves a notification and review process without necessarily requiring a cost-benefit analysis.
• Section 6: Provides the EPA broader authority to regulate all chemical substances, including those with established uses. This section requires a detailed cost-benefit analysis before imposing restrictions.

Fair Notice Doctrine: A constitutional principle ensuring that individuals and businesses have clear and adequate notice of laws and regulations to comply with them, preventing arbitrary enforcement.

Substantial Evidence Standard: A legal standard that requires the agency's decisions to be based on evidence that a reasonable mind might accept as adequate to support a conclusion.

Conclusion

The Fifth Circuit's decision in Inhance Technologies v. EPA serves as a pivotal clarification of the Environmental Protection Agency's regulatory boundaries under TSCA. By affirmatively distinguishing between new and historical uses of chemical substances, the court has reinforced the necessity for regulatory actions to align strictly with statutory language and principles of fair notice. This ruling not only protects businesses from unexpected regulatory upheavals but also ensures that environmental and public health safeguards are implemented through appropriate legal channels. Moving forward, the EPA must navigate TSCA's framework with greater precision, leveraging Section 6 for established processes while reserving Section 5 for truly new chemical uses. This balanced approach fosters a regulatory environment that respects both ecological imperatives and industrial stability.