# BEVERIDGE~

&DIAMONDrcT

Karen M. Hansen 1350 I Street, N.W. Suite 700 Washington, D.C. 20005-3311

Direct: (202) 789-6056 Fax: (202) 789-6190 khansen@bdlaw.com

December 4,2009



### Via Electronic Mail

Debra Edwards, Ph.D. Director Office of Pesticide Programs U.S. Environmental Protection Agency One Potomac Yard 2777 South Crystal Drive Arlington, VA 22202 Re: Request for Agency Action to Stop Sales ofNalco's Unregistered Biocides

Dear Dr. Edwards: Thank you for your letter dated November 18,2009. On behalf of Ashland Inc., we appreciate your confirmation (1) that the issues pending before EPA in this matter are limited to the FIFRA registration requirements applicable to ammonium salt and urea products sold to the pulp and paper mill industry, which are used to treat microorganisms contained in high organic process wastewaters, and (2) that EPA is not addressing as part of its deliberations here the regulatory status of adjuvants, stabilizers, or other separately added non-pesticidal products. This scope of review is appropriate because the only FIFRA issues before EPA involve Nalco, Inc.'s decision to sell two unregistered pesticides without first submitting the required safety and other data to EPA and obtaining a proper registration allowing the sale and use of these products. Your letter also states that EPA intends to hold a meeting among the parties to this matter and to open a docket for public comment on these industrial biocide issues. However, EPA did 

### not specify a time frame for these actions. The prospect of an indeterminate process while Nalco's unregistered pesticide products remain on the market is inconsistent with FIFRA and raises a number of serious concerns, which we summarize in this letter. Ashland believes EPA 

### must enforce FIFRA's basic legal requirements now, by stopping the sale ofNalco's two products immediately. Only then is it appropriate, under FIFRA, for EPA to engage in a public comment process as outlined in your November 18 letter. To be clear, we intend to participate in EP A's new public comment process if that is what the Agency believes is warranted and will . assist its review. However, EPA must first enforce FIFRA's unequivocal requirement to register

Washington, D.C. Maryland New York Massachusetts New Jersey Texas CaliforniaBEVERIDGE & DIAMOND PC

Debra Edwards, Ph.D. December 4, 2009 Page 2

pesticides before selling them, by ordering Nalco to stop selling the two unregistered biocides at issue. 

### 1. FIFRA Requires Registration of Pesticides Before Sale and EPA Must

Immediately Enforce this Fundamental Rule of Law More than two years have passed since the issue ofNalco selling an unregistered ammonium-based biocide was first raised with EPA. During that time, Nalco has continued tosell its unregistered ammonium-based product and has introduced its also-unregistered ureabased biocide product to the marketplace. The two biocides at issue are marketed by Nalco under the brand name OxiPRO and involve the combination of either ammonium sulfate (Nalcon 60620) or urea (N alcon 606 i 5) with sodium hypochlorite to form a distinct active ingredient. The distinct active pesticidal ingredient in the ammonium sulfate product is monochloramine,not sodium hypochlorite; without proper controls, this chemistry can also produce di- and trichloramines. The distinct active pesticidal ingredient in the urea-hypochlorite chemistry was identified in Ashland's June 30, 2009 submittal to EPA as redacted CBI material due to the

proprietary nature of Ashland's evaluation of 

### this chemistry. The new active pesticidal ingredient formed by the urea-hypo chemistry is also distinct from sodium hypochlorite and can create dangerous byproducts in uncontrolled conditions. With both ofNalco's unregistered products, it is the distinct, new pesticidal active ingredient in each product, not the sodium hypochlorite, which performs the biocidal action on high organic pulp and paper mill process waters. These two Nalco products are intended, and are purchased by mills, to perform precisely the same biocidal function in mill water treatment systems that the FIFRA-registered ammonium-based products sold by Ashland and Buckman 

### perform. The mils view Nalco's products as directly competitive with the products sold by Ashland and Buckman because they serve the very same purposes as the FIFRA-registered products, namely, they are used to destroy microbiological organisms. Nalco's ammonium-based product involves the same type of chemistry that EPA has

already determined is pesticidal through the Agency's registration of the ammonium-based products sold by Buckman and Ashland. Rather than registering its product based on EPA's determinations and precedent, however, Nalco challenged Buckman's registration and proceeded to keep selling its own unregistered ammonium-based biocide. Furthermore, as Ashland has detailed in prior submittals, Nalco's separate urea-based product creates a new pesticide, which Nalco unilaterally introduced into the marketplace without any data submissions or prior review by EPA to assure its safe use and the protection of workers and others who are exposed to thisproduct. According to EPA, Nalco has submitted no information whatsoever to EPA on its ureabased product, let alone the type of toxicological and other health and safety data that EPA must evaluate to ensure the safety of pesticides before they are marketed.BEVERIDGE & DIAMOND pc

Debra Edwards, Ph.D. December 4,2009 Page 3

FIFRA vests EPA with the authority and responsibility to determine whether specific products are pesticides. EPA's daily work under FIFRA is to review pesticide applications and grant pesticide registrations when the required safety standards are met. Similarly, the Agency routinely enforces FIFRA's prohibition on selling pesticides prior to registration by requiring companies engaging in the sale of unregistered pesticides to cease such activities immediately. Here, Nalco has not submitted any FIFRA registration applications for these two products based on its assertion (which our prior submittals have shown is inaccurate) that its products are not 

### pesticides. However, Nalco is selling and the mils are buying these products for pesticidal purposes, making this situation no different from the many actions EPA routinely takes to stop sales of unregistered pesticides. Therefore, if EP A now intends to initiate a new and indefinite public comment process on the issues pending before it in this matter, then at a minimum EPA must require that Nalco immediately cease selling its unregistered urea-based and ammonium salt products while EPA conducts its evaluation.
The reasons for EPA to take this action are axiomatic under FIFRA. Whatever claims Nalco has made to assert, incorrectly, that these two products are not pesticides, the indisputable fact is that N alco' s products have not been reviewed by EPA under FIFRA to ensure public 

### safety prior to Nalco introducing these biocides to the marketplace. This directly contradicts FIFRA, which requires registration of pesticides even before advertising claims are made, much less actual sales and use under terms and conditions that have not be proscribed by EPA. See

FIFRA § 12(a)(1)(A) (prohibiting the distribution or sale of any unregistered pesticide); FIFRA § 2(gg) (defining "to distribute or sell" to include, inter alia, distribution, sale, and offers for

sale); 40 C.F.R. § 168.22(b)(4) (prohibiting the advertisement of unregistered pesticides for any use). FIFRA's requirements and EPA's own practices are not ambiguous regarding this requirement. Nearly 24 years ago, EPA's Environmental Appeals Board confirmed FIFRA's clear directive that a pesticide "must be registered before it is produced or marketed." See In the Matter of South Coast Chemical, Inc., 2 E.A.D. 139, at 8-9 (Mar. 1986) (emphasis added). In that case, the EAB agreed with EPA that a manufacturer's decision to sell an unregistered biocide precursor prior to resolving the FIFRA regulatory status of that product with EPA must have "consequences." The situation with Nalco's two products is no different, and EPA should not continue to allow these products to be sold while it evaluates the FIFRA regulatory status of these products. To do otherwise is contrary to law and EPA's own policies and precedent.

2. There Are Serious Negative Consequences to EPA's Ongoing Inaction

A. Unregulated Use of Pesticides As a result of EPA's not enforcing FIFRA to date, Nalco is unilaterally determining, without any review by EPA, the method of making and using its pesticides, including how much ammonium sulfate, urea and sodium hypochlorite to use in its in-situ chemical reaction processes

### BEVERIDGE &DIAMONDpc

Debra Edwards, Ph.D. December 4,2009

Page 4

used to generate the resulting biocides. Nalco's ability to increase and modify dosages in order

to achieve biological control of the mills' process water is taking place without any regulatory limits or controls. This is in stark contrast to EPA's careful review and oversight via registration and labeling of the specific dosage and use requirements applicable to the registered competitive

products sold by Ashland and Buckman. Moreover, EPA's lack of regulation regarding Nalco's products deprives those states which require registration of pesticides federal guidance and leadership on this issue. Under the current situation, EPA, the customers and the states do not know the safety and environmental risks from using Nalco's unregistered biocidal products. 

### B. Ongoing Uncertain Risks to Public Health and the Environment Further delay by EPA in removing Nalco's unregistered pesticides from the marketplace means that there are ongoing risks to public health and the environment from the uncertain impacts of these products. Hundreds of people, and not only Nalco employees, work in the mills where these unregistered products are being used without any prior review by EPA as to the process conditions and labeling to ensure safe use. The fact is that Nalco's two products are being used to treat microorganisms in mill process water -- this is a biocidal purpose. Moreover, the basic science of the chemical reactions associated with each product demonstrates that the new active pesticide created in each case is not sodium hypochlorite. EPA has already recognized the need to register the precursor chemical (ammonium salts) used in the creation of monochloramine in the Agency's prior decisions to register as pesticides the ammonium-based biocide products distributed by Ashland and Buckman. Indeed, this prior action by EPA establishes a presumption that Nalco's chemically equivalent products -- intended for use by the same customers for identical biocidal purposes -- are pesticides that must be registered under FIFRA. Instead, EPA has not reviewed N alco' s specific products to determine and define the conditions of use in which they may be deemed safe. FIFRA expressly authorizes EPA to issue a stop sale, use, removal and seizure order ("SSURO") whenever the Agency has "reason to believe" that a pesticide has been or is intended 

### to be distributed or sold in violation ofFIFRA. FIFRA § 13(a). The Agency's own Enforcement Response Policy for FIFRA ("ERP") further instructs that an SSURO must be issued whenever EPA has reason to believe that an unregistered pesticide presents a "potential 

### hazard to man or the environment." ERP at 6 (emphasis added). The Agency already has more than enough information to have "reason to believe" that Nalco is selling two unregistered pesticides in violation of FIFRA, and that these unregistered products, for which EPA has not conducted any safety review under FIFRA, present a "potential hazard to man or the environment." EPA's own guidance and FIFRA compel the Agency to issue SSUROs to Nalco for its two biocide products. FIFRA requires EPA to protect the public, not the manufacturer, if it has unresolved questions about the pesticidal nature of a product. In the current posture, EPA is not enforcing the FIFRA requirement that pesticides must be deemed safe for human and environmental

### BEVERIDGE &DIAMONDpc

Debra Edwards, Ph.D. December 4, 2009 Page 5

exposures via registration before being sold to the public. The Agency should protect public health and the environment by ordering Nalco's unregistered biocides to be removed from the market immediately.

C. Damage to Integrity of Regulatory Process In the several months since EPA first defined a process for reviewing these industrial biocide issues -- a process that the Agency now appears to be redefining -- Nalco has continued to profit economically from its unfair competitive advantage in the marketplace as a direct result of its avoidance of FIFRA registration requirements. As we advised EPA by letter dated November 16,2009, Nalco's executives recently reported to stock market analysts that Nalco is "gaining competitive share behind offerings, such as OxiPRO deposit control automation technology," and that "nearly two-thirds of our OxiPRO sales are to accounts earned from competitors, making this important technology to help us gain market share and drive (profit) margins." See Final Transcript, Thomson Streetevents SM "NLC-Q3 2009 Nalco Holding 

### Company Earnings Conference Call, October 28,2009 (pages 2 and 4). Nalco is able to make these claims of profit from its unfair competitive advantage because it is able to sell its unregistered products at lower prices that reflect its avoidance of FIFRA registration requirements. This is contrary to FIFRA, as well as EPA's practice and policy to work diligently to ensure that regulatory requirements are applied evenly so as to avoid creating an uneven competitive playing field among regulated entities. EPA has consistently identified and acted on

the importance of 

### this principle. For example, EPA's current "Enforcement" website in its Pesticides section specifically identifies "Deterring Violations by Recovering Economic Benefit" as a "key concept" providing a foundation for EPA's civil enforcement program. EPA explains:

In general, the Agency seeks to recover the economic benefit of violations by, for example, assuring that the value of a penalty offsets any gain realized by

postponing the cost of 

### building or operating a pollution control system. This concept protects the level playing field for law-abiding companies, is reflected in federal statutes, has been upheld in federal courts, and is endorsed by the U.S. 

### General Accounting Offce. http://www.epa.gov/pesticides/enforcement/enforcement.htm. last updated on June 18,2008. EP A's practices and policies in this regard reflect FIFRA' s requirement to prohibit the sale or use of pesticides before registration. EPA also emphasizes the importance of removing any incentive to avoid or delay compliance with FIFRA when it requires non-complying companies to pay for illegally gained economic benefits. See, e.g., In the matter of£.1. du Pont de Nemours & Co. Inc., Docket No. FIFRA-95-H-02 (Apr. 30, 1998). In that EPA enforcement matter, the administrative law judge accepted EPA's calculation of the economic benefit from unlawful product sales and noted the following:BEVERIDGE & DIAMOND pc

Debra Edwards, Ph.D. December 4,2009 Page 6

A primary purpose of FIFRA (enforcement) is to deter future violations. . . . Effective deterrence of future violations includes recovery of a Respondent's economic benefit when necessary to take "away the economic incentive to violate 

### the law." BJ Carney Inds., Inc., CWA Appeal No. 96-2 (EAB, June 1997) at 49. Although not explicitly provided for in (the FIFRA Enforcement Response Policy), the EPA General Enforcement Policy #GM-22 describes Agency policy for recovery of a violator's economic benefit from "selling products without required labeling or warnings." (at 1 0). Unless EPA promptly requires Nalco to stop sales of its unregistered biocides, EPA is facilitating Nalco's "economic incentive to violate the law." FIFRA does not sanction, let alone authorize, such a result. We do not understand why EPA is allowing this serious and inexplicable situation -- the ongoing sale of two unregistered pesticides for more than a year -- to continue indefinitely. As noted at the outset of this letter, Ashland believes EPA must enforce FIFRA' s basic legal 

### requirements now, by stopping the sale ofNalco's two products immediately. Only then is it appropriate, under FIFRA, for EPA to engage in a public comment process as outlined in your 

### November 18,2009 letter. We believe the Agency already has more than enough information to take this action, and that FIFRA compels this result. Thank you for considering the information and requested action set forth in this letter. Please let me know if you have any questions regarding the information in this letter or in any of Ashland's other submittals to EPA regarding this matter.
Best regards, 

# i:~M.~

Karen M. Hansen

cc: Ms. Joan Harrigan-Farrelly, Director, Antimicrobials Division Mr. Dennis Edwards, Branch Chief, Antimicrobials Division 

### Phillip Ross, Esq., Offce of General Counsel Mr. Jay Vroom, CLA Mr. Allan James, RISE Michael Boucher, Counsel for Buckman Seth Goldberg, Counsel for Nalco