Clark Hill 2024 Automotive & Manufacturing Industry Review: Environment, Energy & Natural Resources

The Supreme Court’s repeal of Chevron deference and multiple activities regarding per- and polyfluoroalkyl substances (PFAS) were among the significant developments for manufacturers during the first half of 2024.

Supreme Court Overturns Chevron Doctrine

As noted in our prior alert, on June 28, the Supreme Court overturned the longstanding Chevron doctrine in Loper Bright Enterprises v. Raimondo, 603 U.S. __ (2024). The Chevron doctrine has been used by courts over the last 40 years to defer to an agency’s interpretation of what a statute means provided its interpretation is reasonable. As a result of the Court’s decision in Loper Bright, courts are no longer bound by such deference and are now able to exercise their independent judgment to decide whether a particular agency action is within that agency’s authority. This decision has changed the dynamics among the branches of government, especially between the judiciary and the executive branches. This decision is also likely to lead to more challenges to agency actions, forcing agencies to craft more limited regulations that are more clearly consistent with their statutory authority. However, the Supreme Court cautioned that its decision should not be used to overturn prior cases decided using Chevron, and that other doctrines used by courts to uphold agency’s actions and still in effect.

Designation of PFAS as Hazardous Substances and Subsequent Challenge

On April 17, the EPA issued its Final Rule designating perfluorooctanoic acid (PFOA) and perfluorooctanesulofonic acid (PFOS), including their salts and structural isomers, as “hazardous substances” under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The Final Rule was published in the May 8 Federal Register and became effective July 8. Among other impacts, the EPA’s action subjects releases of PFOA and PFOS to CERCLA’s liability scheme requiring liable parties to investigate and remediate such releases and likely will trigger new CERCLA cost recovery and contribution litigation. For example, PFOA and PFOS will now be included among the chemicals for which EPA can require additional investigations when conducting a Five Year Review to evaluate the implementation and performance of a remedy at a CERCLA site.

As noted in our prior alert, on April 19, the EPA also issued a PFAS Enforcement Discretion and Settlement Policy Under CERCLA indicating how the EPA intends to apply its enforcement authority under CERCLA. For certain entities that typically passively receive PFAS, the EPA’s policy indicates that the EPA “will focus on holding responsible entities liable who significantly contributed to the release of PFAS into the environment, including parties that manufactured PFAS or used PFAS in the manufacturing process, federal facilities, and other industrial parties.” Despite this focus, the EPA also clarified that it does not “intend to pursue entities where equitable factors do not support seeking response actions or costs under CERCLA.” These entities include but are not limited to:

• Community water systems and publicly owned treatment works
• Municipal separate storm sewer systems
• Publicly owned/operated municipal solid waste landfills
• Publicly-owned airports and local fire departments
• Farms where biosolids are applied to the land.

For these entities, EPA “can use CERCLA statutory authorities when appropriate to enter into settlements that provide contribution protection from third party claims for matters addressed in the settlement.”

EPA’s PFAS Enforcement Discretion and Settlement Policy has not been enough to placate concerns of industry groups who assert that they are “passive receivers” of PFAS, meaning they do not generate PFAS or have control over PFAS-containing items that enter their facilities. Some of these groups have lobbied Congress for a “passive receiver” CERCLA exemption since EPA first announced its intention to designate PFOA and PFAS as CERCLA hazardous substances. For example, Senate Bill S.1429 would exempt from CERCLA liability the release of a PFAS resulting from (1) the disposal or management of any residuals or byproduct of municipal solid waste in accordance with a permit, (2) the disposal or management of biosolids consistent with the Federal Water Pollution Control Act, or (3) the application or processing of compost in accordance with state law. However, the proposed legislation has not moved forward.

On June 10, three organizations (Associated General Contractors of America, Inc., National Waste & Recycling Association, and the Chamber of Commerce of the United States) filed a petition in the United States Court of Appeals for the District of Columbia challenging the EPA’s designation of PFOA and PFOS as hazardous substances. In a subsequent filing on July 12, the petitioners identified the following six issues for the court’s consideration:

1. Whether EPA failed to provide adequate notice and opportunity to comment prior to promulgating the Final Rule
2. Whether EPA must consider costs before designating a substance as hazardous under CERCLA section 102(a), 42 U.S.C. § 9602(a), and whether EPA appropriately considered costs in promulgating the Final Rule
3. Whether EPA erroneously interpreted CERCLA when designating PFOA and PFOS as hazardous substances
4. Whether EPA provided an adequate and reasonable explanation for its conclusion that PFOA and PFOS should be designated as hazardous substances
5. Whether EPA acted arbitrarily, capriciously, or in a manner otherwise contrary to law in promulgating the Final Rule
6. Whether EPA violated the United States Constitution by, for example, imposing retroactive liability through the Final Rule.

The challenge remains pending and will likely not be resolved until some time next year.

Drinking Water Standards for PFAS and Subsequent Challenges

On April 10, the EPA adopted the final National Primary Drinking Water Regulations for six PFAS: PFOA, PFOS, perfluorohexane sulfonic acid (PFHxS), perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid (HFPO-DA, commonly known as GenX Chemicals), and perfluorobutane sulfonic acid (PFBS). The Final Rule was published in the Federal Register on April 26.

Under the Final Rule, certain community water systems (meaning “a public water system which serves at least 15 service connections used by year-round residents or regularly serves at least 25 year-round residents”) and non-transient non-community water systems (i.e., “a public water system that is not a community water system and that regularly serves at least 25 of the same persons over six months per year”) must monitor for the presence of these PFAS. Such systems have three years to complete initial monitoring (i.e., by 2027), followed by ongoing compliance monitoring.

Covered water systems must also provide the public with information on the levels of these PFAS in their drinking water beginning in 2027. If the required monitoring shows that PFAS concentrations exceed the new MCLs, public water systems have five years (i.e., by 2029) to implement solutions to achieve compliance with these MCLs. Beginning in 2029, public water systems that have PFAS levels exceeding the MCLs will be considered in violation of the Final Rule and will be required to take action to reduce PFAS levels in their drinking water and to provide notification to the public of the violation.

As discussed in a prior update, beyond specifying drinking water standards, the Final Rule establishes the remedial action cleanup criteria for these PFAS in groundwater under CERCLA. The Final Ruled also effectively establishes groundwater cleanup standards in states that incorporate by reference any federal MCL. For example, in Pennsylvania, the federal MCLs became the Statewide Health Standard medium-specific concentration (MSC) values for groundwater effective June 25.

As with EPA’s designation of PFOA and PFOS as CERCLA hazardous substances, industry groups have filed petitions with the D.C. Circuit Court of Appeals challenging the Final Rule setting the PFAS MCLs.  The American Water Works Association (AWWA) and Association of Metropolitan Water Agencies (“AMWA”) filed a petition for review on June 7, and the National Association of Manufacturers (NAM) and American Chemistry Council (ACC) filed a separate petition for review on June 10. The AWWA/AMWA petition for review argues that:

The EPA did not rely on the best available science and the most recent occurrence data and used novel approaches as the basis for certain portions of the rule. The EPA finalized this rule without following the process mandated by Congress, without allowing the public an adequate opportunity to provide comment, and without addressing the concerns raised by those who work to deliver safe and affordable drinking water to their communities. Petitioners are seriously concerned about the impact of this rule on water affordability, particularly for households that struggle to pay for essential needs. The EPA has significantly underestimated the costs of this rule and the adverse impact that it will have on individual water users.

These two petitions, along with a separate petition filed by The Chemours Company, were consolidated at docket No. 24-1188 in the D.C. Circuit Court. Like the pending challenge on the CERCLA rule, this case remains pending and will likely not be resolved until some time next year.

Updated Deadlines and EPA Guidance for TSCA PFAS Reporting Rule

As noted in our prior alert, on Oct. 11, 2023, the EPA published a final rule under the Toxic Substances Control Act (“TSCA”) requiring manufacturers (including importers) to submit a one-time report of their use of PFAS  from 2011 through 2022. Under the final rule, PFAS manufacturers (as defined under the rule) were given 12 months from the effective date of the rule (Nov. 13, 2023) to collect the necessary information (i.e., Nov. 13, 2024). This is then followed by a six-month reporting period (i.e., reports were to be submitted to EPA by May 13, 2025). Additionally, “small manufacturers” that are solely reporting data on imported PFAS contained in manufactured articles have six months beyond that to report. Simply receiving PFAS from domestic suppliers or other domestic sources is not, in itself, considered “manufacturing PFAS for commercial purposes” for the purposes of the rule.

However, as described in our recent alert, the EPA announced, via direct final rule, its modification of the deadlines under the rule, including shifting the start of the data submission period from Nov. 12, 2024, to July 11, 2025, and shifting the reporting deadline from May 13, 2025, to Jan. 11, 2026 (with an additional six months for small importers of PFAS-containing articles). The EPA explained that it was “compelled to take this action in response to constraints on the timely development and testing of the software being developed to collect information pursuant to this reporting rule”—i.e., developments to the EPA’s Central Data Exchange (“CDX”) system. The agency also used the direct final rule to correct an unrelated typing error in the text.

In May, the EPA published updated guidance for compliance with the TSCA PFAS reporting rule including: TSCA Section 8(a)(7) Rule Frequently Asked Questions, updated Instructions for Reporting PFAS Under TSCA Section 8(a)(7), and a Public List of TSCA PFAS for 8(a)(7) Rule.

EPA’s Methylene Chloride Final Rule

The EPA’s Final Rule banning all consumer uses of methylene chloride, and strictly regulating most industrial and commercial uses, was published in the Federal Register on May 8. The Final Rule exempts certain uses including those “highly industrialized and important to national security and the economy.” In that regard, the Final Rule provides “a 10-year time-limited exemption under TSCA section 6(g) for emergency use of methylene chloride in furtherance of the National Aeronautics and Space Administration’s mission for specific conditions which are critical or essential and for which no technically and economically feasible safer alternative is available.”  The Final Rule, which became effective on July 8:

1. Prohibits the manufacture, processing, and distribution of methylene chloride for all consumer use
2. Prohibits most industrial and commercial use of methylene chloride and delays prohibition for two conditions of use (commercial use of methylene chloride in adhesives and sealants in aircraft, space vehicles, and turbine applications; and commercial use of methylene chloride in paint and coating removal for the refinishing of wooden pieces of artistic, cultural, or historic value)
3. Requires a workplace chemical protection program (“WCPP”), including inhalation exposure concentration limits and related workplace exposure monitoring and exposure controls, for 13 conditions of use of methylene chloride (including manufacture; processing; several industrial and commercial uses such as laboratory use; and disposal)
4. Identifies a de minimis threshold for products containing methylene chloride for the prohibitions and restrictions on methylene chloride; and
5. Requires recordkeeping and downstream notification requirements for manufacturing, processing, and distribution in commerce of methylene chloride.

The EPA’s methylene chloride final rule is part of its focus on stricter regulation of chlorinated solvent use. As noted in a prior alert, the EPA previously proposed to prohibit most industrial and commercial uses of perchloroethylene (PCE) as well as prohibit manufacturing, processing, and distribution of PCE for all consumer uses.

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