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 California
BEVERIDGE & 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 to

sell 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 this

product. 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