Record EPA Penalty Calls for Action, Not Celebration

The U.S. Environmental Protection Agency closed 2005 by celebrating a
$16.5 million settlement with chemical giant DuPont as a victory for public health. DuPont agreed to pay the record administrative penalty for keeping secret its knowledge that a chemical used to make Teflon® had seeped into the water supply of communities in Ohio and West Virginia, and into the blood streams of pregnant employees and their unborn children. In paying the fine, DuPont admitted no wrongdoing. Conversely, DuPont continues to dispute the EPA’s position that it needed to report the widespread contamination of perfluorooctanoic acid, known as PFOA. Even though DuPont executives were concerned about the discovery of PFOA in the people and groundwater around its facility, DuPont’s says the chemical contamination never reached the EPA’s threshold reporting criteria of creating a “substantial risk” to public health or the environment.

DuPont’s non-admission of guilt should be a major concern to the EPA regulators. Rather than popping corks over winning the large fine, the EPA regulators should be sharpening pencils. If DuPont can interpret the EPA’s regulations differently than what EPA intends, and thus likely will keep silent over similar future environmental contaminations, it is the EPA’s duty to begin 2006 by clarifying what its regulations mean for a chemical to pose a “substantial risk” to public health.

Background

The $16.5 million settlement, once approved by the EPA’s Environmental Appeals Board (EAB), closes a complaint filed in 2004, alleging DuPont violated eight reporting requirements under two federal statutes. The 14 December 2005 settlement levies a $10.25 million administrative civil penalty, the largest EPA administrative penalty ever, and imposes a commitment by DuPont to spend $6.25 million on two environmental projects.

The complaint focused on DuPont’s failure to report to the EPA as early as 1981 that it knew about PFOA contaminations at its Washington Works Facility in Wood County, West Virginia. The EPA complained that DuPont failed to disclose results of studies investigating potential birth defects and PFOA contamination of the groundwater and drinking-water supply of Lubeck, West Virginia, population 1,600, and Little Hocking, Ohio, population 3,200.

The EPA became aware of these reporting failures as a result of a class-action lawsuit filed in West Virginia circuit court on behalf of residents who suffered harm from PFOA contamination of the public water supply. During discovery, DuPont turned documents over to opposing counsel, who provided the information to the EPA. The EPA then brought administrative action against DuPont on 8 July 2004. The class-action lawsuit was settled in 2005 with a commitment by DuPont to pay at least $107.6 million and to fund further blood studies. DuPont also currently funds bottled water delivery to eligible customers of the largest water supplier in Washington County, Ohio, which serves a population of about 12,000 people.

The EPA’s complaint did not allege Teflon®, DuPont’s popular nonstick product brand, was harmful to people or the environment.

The Eight Violations
The EPA accused DuPont of eight violations – seven counts under the Toxic Substances Control Act (TSCA) and one count under the Resource Conservation and Recovery Act (RCRA). The TSCA was enacted in 1976 (TSCA, Public Law [Pub. L.] 94-469) to allow the EPA to review health and environmental safety information of chemicals with commercial uses. The law
covers existing chemicals such as PCBs and asbestos, as well as new synthetic chemicals. DuPont has used the synthetic chemical PFOA at its Wood County facility since 1951. The RCRA was enacted in 1976 (RCRA, Pub. L. 94-580) to allow for end-to-end management of hazardous waste disposal, recovery, and minimization.

Under Section 8(e) of the TSCA, DuPont is required to report “immediately” to the EPA the results of toxicological research studies and surveys when the data “reasonably supports the conclusion” that PFOA presents a “substantial risk” of injury to health or the environment. The EPA defines “immediately” as within 30 days of obtaining data, even incomplete data. No definition or clarification is given for what constitutes “reasonably supports.” The core disagreement between the EPA and DuPont is the interpretation of the term “substantial risk” given in the statute.

• Defining “Substantial Risk”
The EPA defines “substantial risk” on its website (see Substantial Risk Information) and in the TSCA Policy Guidelines. The guidelines were issued in 1978 and last updated in June 2003 based on industry feedback in 1993 and 1995. (June 3, 2003 TSCA 8(e) Guidance (68FR33129)). Here, the EPA charged DuPont was responsible for filing substantial risk notices for both types of reportable information – health and environment.

• “Substantial Risk” of injury to health
Relevant to the health reporting requirements, Section V(A)(a) of the guidelines advises companies to report “any instance” of birth defects if the chemical is strongly implicated. Thus, DuPont would be required to report any instance of birth defects if PFOA was strongly implicated. DuPont also would be required to report “any pattern of effects or evidence” that PFOA “can produce” birth defects or toxic effects serious enough to cause death or prolonged incapacitation. The guidelines do not require all research conducted into birth defects to be reported. Thus, what triggers a reportable event is left open for interpretation of when a chemical shows sufficient likelihood of producing birth defects.

• “Substantial Risk” of injury to the environment
Relevant to the environmental reporting requirements, Section V(A)(b) defines five reporting situations: 1) widespread contamination; 2) indicators of bioaccumulation when coupled with the risk of “non-trivial adverse effects”; 3) non-trivial adverse effects of bioaccumulation known to be widespread; 4) significant changes in species or interference with ecosystems; and 5) unacceptable risks from hazardous degradation of a chemical in the environment. Here, the focus is on the first three situations.

Section V(A)(b)(1) of the guidelines requires companies to report information when the chemical is “known to cause serious adverse effects” through actual widespread environmental contamination. Companies are also required to file a substantial risk notice if there is a “substantial likelihood” that such risk will occur. Companies are not required to report information just because the chemical has contaminated the environment. Here, PFOA could be found throughout the community without triggering the reporting requirement. PFOA’s environmental contamination is not reportable until it is known to DuPont that PFOA caused or is likely to cause “serious adverse effects.”

Companies are also required to file a substantial risk notice if there is any “non-trivial adverse effect” associated with the bioaccumulation of the chemical.

• Count I to VIII
The EPA brought a total of eight administrative charges. DuPont, in its Answer and Request for Hearing, refuted all charges: “The small amounts of PFOA that DuPont discovered in a blood sample and in drinking water did not suggest that there was any risk to human health, let alone the sort of ‘substantial risk’ that is necessary to trigger reporting requirements.”

Specifically, the EPA accused DuPont of the following seven violations under TSCA Section 8(e) and one violation under the RCRA:

Settlement – No admission of legal liability
From July 2004 until April 2005, the EPA and DuPont met informally to
discuss the facts of the complaint, the possibility of settlement out of
court, and the amount of the penalty. The EPA could have levied a
maximum fine of nearly $315 million for the original four violations,
calculated as a daily fine for the duration of each violation. In April
2005, DuPont announced its willingness to pay $15 million to settle the
matter (DuPont’s
press release 14 December 2005). DuPont set aside $15 million for
the settlement in anticipation of an eventual fine and reported this
reserve to shareholders in its quarterly filing (Dupont Q12004 SEC
filing).

• “Substantial Litigation Risk”
On 14 December 2005, the EPA and DuPont reached a settlement of $16.5
million in fines and restitution, embodied in a Consent
Agreement and Final Order (CAFO), signed by both parties. The EPA
attributed the “significant reduction from the theoretical maximum
penalty” in this case to the “substantial litigation risk” under six of
the counts (CAFO,
p. 11). The EPA was concerned it would be unable to prove the
violations were of a continuing nature and not barred by the statute of
limitations.

• $16.5 Million
The settlement imposes a $10.25 million administrative civil fine but
does not require DuPont to admit liability. DuPont also will spend $6.25
million for two supplemental environmental projects. The first project
will evaluate the potential for fluorotelomer biodegradation. The second
project funds chemistry programs in five junior high schools and three
high schools in and around Wood County, West Virginia.

The EPA Environmental
Appeals Board (EAB) must approve the CAFO for it to take effect.

Implications of the Settlement

EPA’s settlement with DuPont over the company’s violations of the TSCA exposes two fundamental problems.
The first problem is with the amount of the fine. In his public statement about the settlement, Granta Y. Nakayama, assistant administrator for the Office of Enforcement and Compliance Assurance, said the settlement “sends a strong message that companies are responsible for promptly informing EPA about risk information associated with their chemicals.” Yet will a fine amounting to less than 2% of DuPont’s revenue from Teflon for one year, for violations spanning two decades, hurt DuPont enough to force a change? Further, will other chemical-industry giants really view this relatively small fine as a “strong message” that they had better begin reporting chemical pollution with more alacrity?

The second problem exposed by the settlement is with the EPA’s interpretation of the TSCA itself. The settlement shows that one of the biggest chemical manufacturers in the world seemingly remains befuddled by what, and when, risk information must be reported to the EPA. DuPont knew PFOA had spread into communities’ groundwater. DuPont knew PFOA increasingly was showing up in the bloodstreams of West Virginia and Ohio residents. DuPont knew PFOA was being passed from mother to fetus. DuPont knew PFOA was spreading even up-river from its Washington Works Facility. Yet DuPont believed the TSCA gave it no legal obligation to alert the EPA or the public.

The reporting requirements contained in section 8(e) of the TSCA have been a regular source of confusion. The EPA has attempted to clarify what conditions trigger a reporting requirement under section 8(e) since the regulation went into effect in 1977. The EPA published a “1978 Policy Statement,” then began a multi-year effort in 1993 to work with industry to clarify the 1978 clarifications. Industry comments plainly asked the EPA for more “bright line” rules defining “substantial risk,” and even suggested EPA issue a decision tree companies could use to decide when section 8(e) required them to report human and environmental risks.

The DuPont settlement shows major companies still misunderstand TSCA’s reporting requirements. It’s time for the EPA to issue clearer guidance to industry on what chemicals and in what quantities constitute a “substantial risk” to humans and the environment. Some chemicals, like PFOA and other perfluorinated compounds, have yet to be shown conclusively to threaten human health. Yet they are known to cause health problems in laboratory animals, to be found in low concentrations throughout the population, and to remain in the human body for a very long time. EPA was concerned enough about PFOA to release a preliminary risk assessment in April 2003 and to establish the Perfluorooctanoic Acid (PFOA) Risk Assessment Review Panel in March 2004. This review panel is tasked with evaluating the health risks of PFOA through its presence in the environment. The review panel is not researching whether DuPont’s Teflon products are hazardous to consumers’ health. The panel’s primary mandate is to review whether the PFOA may pose a serious risk of injury to health or the environment through incineration, water contamination, and degradation.

Currently, neither state nor federal guidelines establish benchmarks for when PFOA concentrations pose an unacceptable level of risk. DuPont established a voluntary guideline of 1 ppb only to be slapped by the EPA for exceeding it, even though the EPA has provided no guidance on what the critical reporting threshold is. By charging DuPont with legal liability for exceeding in-house benchmarks, the EPA is sending a message to industry not to establish voluntary safety and monitoring guidelines.

If the EPA wants to send a strong message to industry to report risk-related information in the absence of scientific certainty of a chemical’s safety, it needs to send a clear message. The EPA’s new guidance should err on the side of caution and set minimal levels of these chemicals to trigger a “substantial risk” reporting requirement until more research can be conducted.

• DuPont – E. I. du Pont de Nemours and Company (NYSE: DD)
• EPA and DuPont Settlement Agreement

• U.S. Environmental Protection Agency (EPA)
• Toxic Substances Control Act (TSCA)
• Resource Conservation and Recovery Act (RCRA)
• U.S. EPA PFOA Information
• Centers for Disease Control and Prevention (CDC)
• NIH National Toxicology Program