Court Opinion

ID: 9953396
Source: CourtListenerOpinion
Date Created: 2024-03-22 00:01:34.366982+00
Date Added: 2024-06-11T14:46:05.789733
License: Public Domain

Case: 23-60620        Document: 186-1         Page: 1   Date Filed: 03/21/2024

          United States Court of Appeals
               for the Fifth Circuit                                  United States Court of Appeals
                                                                               Fifth Circuit
                               ____________                                  FILED
                                                                       March 21, 2024
                                No. 23-60620
                                                                        Lyle W. Cayce
                               ____________
                                                                             Clerk

Inhance Technologies, L.L.C.,

                                                                    Petitioner,

                                     versus

United States Environmental Protection Agency;
Michael S. Regan, Administrator, United States Environmental
Protection Agency,

                                                                  Respondents.
                 ______________________________

              Appeal from the Environmental Protection Agency
                  Agency Nos. SN-23-0002, SN-23-0003,
                  SN-23-0004, SN-23-0005, SN-23-0006,
                  SN-23-0008, SN-23-0009, SN-23-0010,
                                SN-23-0011
                ______________________________

Before Richman, Chief Judge, and Graves and Wilson, Circuit
Judges.
Cory T. Wilson, Circuit Judge:
      In March 2022, the EPA charged for the first time that Petitioner
Inhance Technologies, L.L.C.’s (Inhance) fluorination process was subject

      _____________________
      
          Judge Graves concurs in the judgment only.
Case: 23-60620        Document: 186-1      Page: 2   Date Filed: 03/21/2024

                                 No. 23-60620

to a Significant New Use Rule regarding long-chain perfluoroalkyls (PFAS).
The EPA issued two orders under Section 5 of the Toxic Substances Control
Act (TSCA), 15 U.S.C. §§ 2601–2697, in December 2023, prohibiting
Inhance from manufacturing or processing PFAS during its fluorination
process. Because the EPA exceeded its statutory authority in doing so, we
vacate the orders.
                                      I.
         Inhance is a Texas company that has been fluorinating plastic
containers using the same process since 1983. The fluorination process
creates a barrier that keeps dangerous substances from leaching out of their
containers, and keeps outside substances from permeating in. The EPA
began investigating Inhance after the presence of PFAS was detected in an
insecticide that was stored in a container fluorinated by Inhance. PFAS are
“widely used, long lasting chemicals, . . . which break down very slowly over
time.”     EPA, PFAS Explained, www.epa.gov/pfas/pfas-explained (last
visited Mar. 15, 2024). “There are thousands of PFAS chemicals, and they
are found in many different consumer, commercial, and industrial products.”
Id. In recent years, research has shown that exposure to certain levels of
PFAS may lead to cancer, cardiovascular disease, and developmental delays
in children, among other things. EPA, Our Current Understanding of the
Human Health and Environmental Risks of PFAS, www.epa.gov/pfas/our-
current-understanding-human-health-and-environmental-risks-pfas         (last
visited Mar. 15, 2024).
         After confirming that Inhance’s fluorination process resulted in the
creation of PFAS, the EPA issued Inhance a Notice of Violation in March
2022. The Notice of Violation offered Inhance two options: (1) change its
fluorination process so it no longer manufactured PFAS, or (2) temporarily
halt the fluorination of any products that resulted in the creation of PFAS.

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Though Inhance did not change its process or stop fluorinating containers, it
submitted two Significant New Use Notices (SNUNs) to the EPA in
December 2022.1 After considering those SNUNs, the EPA issued the two
orders at issue here in December 2023. Both orders prohibited Inhance from
manufacturing or processing PFAS through their fluorination process.
Inhance asserts that if the orders are allowed to take effect, they will shut
down Inhance’s fluorination process, bankrupting the company.
        Inhance immediately petitioned this court for expedited review. We
granted Inhance’s unopposed motion for a stay pending appeal and expedited
briefing and argument.
                                           II.
                                           A.
        Before considering the parties’ arguments regarding the EPA orders,
it is necessary to sketch the statutory and regulatory background underlying
the case. Congress enacted TSCA in 1976 to protect “human beings and the
environment” from chemical substances that “present an unreasonable risk
of injury to health or the environment.” 15 U.S.C. § 2601(a). There are two
ways the EPA may regulate chemical substances under TSCA.
        First, Section 5 allows the EPA to regulate the use of “new chemical
substance[s]” and any “significant new use” of a chemical substance. Id.
§ 2604(a)(1)(A). The EPA determines what constitutes a significant new use
after consideration of four factors:

        _____________________
        1
          The United States filed an enforcement action in the United States District Court
for the Eastern District of Pennsylvania in December 2022 after Inhance refused to comply
with the Notice of Violation. See Complaint, United States v. Inhance Techs. LLC, 5:22-cv-
05055, 2022 WL 17903769 (E.D. Pa. Dec. 19, 2022). That action remains pending.

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        (1) the projected volume of manufacturing and processing of a
        chemical substance; (2) the extent to which a use changes the
        type or form of exposure of human beings or the environment
        to a chemical substance; (3) the extent to which a use increases
        the magnitude and duration of exposure of human beings or the
        environment to a chemical substance; and (4) the reasonably
        anticipated manner and methods of manufacturing,
        processing, distribution in commerce, and disposal of a
        chemical substance.

Id. § 2604(a)(2). If the EPA labels the use of a chemical substance as a
significant new use, then it proposes a rule regulating that substance, and
affected entities are allowed the opportunity for notice and comment. At the
end of the comment period, the EPA promulgates a final rule known as a
Significant New Use Rule (SNUR).2
        If a company wants to manufacture or process a new chemical
substance or a chemical substance that has been deemed a significant new
use, it must submit a SNUN “at least 90 days before such manufacture or
processing.” Id. § 2604(a)(1)(B). After review, the EPA must make one of
three findings: (1) the chemical substance or significant new use presents an
unreasonable risk of injury to health or the environment; (2) there is
insufficient evidence to determine an evaluation of the health and
environmental effects of the chemical substance or significant new use; or
(3) the relevant chemical substance is not likely to present an unreasonable
risk of injury to health or the environment. Id. § 2604(a)(1)(B)(ii), (a)(3). If
the EPA finds that there is insufficient evidence to determine the effects of
        _____________________
        2
         SNUR and SNUN are terms of art not used in the statute. But they are commonly
used by the EPA to describe the rule-making process under Section 5. See, e.g., EPA, Filing
a Significant New Use Notice (SNUN) under TSCA, www.epa.gov./reviewing-new-
chemicals-under-toxic-substances-control-act-tsca/filing-significant-new-use-notice (last
visited Mar. 7, 2024).

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the substance or the substance presents an unreasonable risk of injury, then
it must issue an order prohibiting or limiting the manufacture of the
substance.3 Id. § 2604(e), (f). These are known as Section 5(e) orders and
Section 5(f) orders, respectively, and they are the types of orders at issue in
this case.
       Second, the EPA may regulate chemical substances under Section 6.
See 15 U.S.C. § 2605. The mandate of Section 6 is broader than Section 5, in
that Section 6 applies to all chemical substances, not just new chemical
substances or significant new uses of a chemical substance. See id. § 2605(a).
However, the rulemaking process under Section 6 is also more rigorous than
Section 5: It requires the EPA to conduct a cost-benefit analysis, weighing
the negative effects of the chemical substance against the benefits of the
substance and the economic consequences of prohibiting or limiting the
substance. See id. § 2605(c)(2)(A)–(C). No such analysis is required under
Section 5.
                                          B.
        In response to growing concerns about PFAS, the EPA proposed a
new SNUR in January 2015, “designating as a significant new use
manufacturing . . . or processing of an identified subset of [PFAS] for any use
that will not be ongoing after December 31, 2015, and all other [PFAS] for
which there are currently no ongoing uses.” 80 Fed. Reg. 2885 (Jan. 21,
2015). Under the SNUR section entitled “Does this action apply to me?”
the EPA included a non-exhaustive list of industries that might be affected by
the SNUR. Id. at 2886. Those industries included fiber, yarn, and thread
        _____________________
       3
          Alternatively, if the EPA finds that the substance is not likely to present an
unreasonable risk of injury to health or the environment, then the SNUN submitter “may
commence manufacture of the chemical substance or manufacture or processing for a
significant new use.” 15 U.S.C. § 2604(a)(3)(C).

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                                      No. 23-60620

mills; carpet and rug mills; home furnishing merchant wholesalers; carpet
and upholstery cleaning services; and chemical manufacturing and
petroleum refineries. Id. Notably, the fluorination industry was missing from
the list, as was any industry with the same North American Industry
Classification Code4 as the fluorination industry. See id. The proposed rule
also made clear that the SNUR would apply only to “any use not ongoing as
of the date on which this proposed rule is published.” Id.
        In July 2020, the EPA promulgated the final SNUR. 85 Fed. Reg.
45109 (July 27, 2020). Like the proposed rule, it included a list of industries
that might be affected by the SNUR. Id. at 45110. That list included other
industries in addition to those already stated in the proposed rule, but it still
did not include the fluorination industry. See id. The SNUR went into effect
without any challenges.
                                            C.
        The EPA issued Inhance a Notice of Violation of the SNUR in March
2022 after confirming the presence of PFAS in a pesticide that had been
stored in containers fluorinated by Inhance. Though Inhance did not stop
fluorinating containers, it attempted to engage with the EPA through the
SNUN process. Despite submitting SNUNs for its products, Inhance
maintained that its fluorination process was not covered by the SNUR and
that Inhance’s SNUNs were not “admission[s] of fact” or a concession that
the SNUR was “legally applicable to the Company’s fluorination.”

        _____________________
        4
          “The North American Industry Classification System (NAICS) is the standard
used by . . . agencies in classifying business establishments for the purpose of collecting,
analyzing, and publishing statistical data related to the U.S. business economy.” EPA,
NAICS, rcrapublic.epa.gov/rcrainfoweb/action/modules/br/naics/view (last visited Mar.
15, 2024).

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                                      No. 23-60620

        In December 2023, the EPA determined that three PFAS
manufactured by Inhance presented an unreasonable risk of injury to human
health and the environment and six additional PFAS manufactured by
Inhance may do so. It therefore issued a Section 5(f) order for the first three
PFAS, requiring Inhance to stop manufacturing and processing those PFAS.
And it issued a Section 5(e) order for the remaining PFAS, requiring Inhance
to stop manufacturing or processing the PFAS, “at least until Inhance
completes further testing to address information gaps identified during the
review.” Inhance timely petitioned this court for expedited review of the
EPA’s orders.
                                          III.
        Generally, the Administrative Procedure Act (APA) “appl[ies] to
review of a rule or order” under TSCA. 15 U.S.C. § 2618(c)(1)(B).5 Under
the APA, a “reviewing court shall . . . hold unlawful and set aside agency
action, findings, and conclusions found to be . . . in excess of statutory
jurisdiction, authority, or limitations . . . [or] without observance of
procedure required by law . . . .” 5 U.S.C. § 706.
        Inhance argues that the EPA exceeded its statutory authority by
issuing orders under Section 5 instead of Section 6 because Inhance’s forty-

        _____________________
        5
          The exception to APA review in the TSCA context is that TSCA has its own
“more rigorous” substantial evidence standard. See 15 U.S.C. § 2618(c)(1)(B)(i)(II);
Corrosion Proof Fittings v. EPA, 947 F.2d 1201, 1213–14 (5th Cir. 1991). Because we do not
reach the EPA’s argument that its orders were supported by substantial evidence, that
exception is not relevant to our decision today.

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                                   No. 23-60620

year-old fluorination process is not a “significant new use” under TSCA.6
We agree.
       “[A]gencies, as mere creatures of statute, must point to explicit
Congressional authority justifying their decisions.” Clean Water Action v.
EPA, 936 F.3d 308, 313 n.10 (5th Cir. 2019). To determine an agency’s
statutory authority, we consult the statute’s text. See Sackett v. EPA, 598
U.S. 651, 671–74 (2023). “The appropriate starting point when interpreting
any statute is its plain meaning.” Sample v. Morrison, 406 F.3d 310, 312 (5th
Cir. 2005). “In ascertaining the plain meaning of the statute, [we] must look
to the particular statutory language at issue, as well as the language and design
of the statute as a whole.” Id. (quoting K Mart Corp. v. Cartier, Inc., 486 U.S.
281, 291 (1988)). “When statutory language is susceptible of multiple
interpretations, a court may shun an interpretation that raises serious
constitutional doubts and instead may adopt an alternative that avoids those
problems.” Jennings v. Rodriguez, 583 U.S. 281, 286 (2018).
       Section 5 allows the EPA to regulate the manufacturing or processing
of any chemical substance for a “a use which the [EPA] has determined . . . is
a significant new use.” 15 U.S.C. § 2604(a)(1)(A)(ii). But the statute defines
neither “significant new use” nor “new.” Thus, we “look first to the
word[s’] ordinary meaning[s].” Schindler Elevator Corp. v. U.S. ex rel. Kirk,
563 U.S. 401, 407 (2011).
       Inhance asserts that “new” means “having recently come into
existence,” or “not previously existing.” See New, Merriam-Webster
Dictionary, www.merriam-webster.com/dictionary/new (last visited

       _____________________
       6
         Inhance makes several other arguments for why we should vacate the EPA’s
orders. Because we agree that the EPA exceeded its statutory authority by proceeding
under Section 5, we do not reach those arguments.

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                                        No. 23-60620

Mar. 7, 2024); New, Oxford English Dictionary, www.oed.com
/search/dictionary/?scope=Entries&q=new (last visited Mar. 7, 2024).
Accordingly, Inhance urges that its fluorination process cannot be deemed
“new” because its “decades-old” fluorination process did not “recently
come into existence.” By contrast, the EPA offers a different definition of
“new,” as meaning “not previously known” or “known but a short time
although perhaps existing before.”                  See New, Oxford English
Dictionary              (1978);        New,       Webster’s             Third          New
International Dictionary (1976). Based on those definitions, the
EPA argues that a “significant new use” is any use “not previously known to
the EPA.”7 And because Inhance did not identify its fluorination process as
an “ongoing use” during the rulemaking process, the fluorination process
qualifies as a significant new use under Section 5.
        Inhance’s interpretation of Section 5 is more persuasive, for two
reasons. First, it more closely aligns with the text of Section 5 and the design
of TSCA as a whole. See 15 U.S.C. § 2604; Sample, 406 F.3d at 312. The
plain language of Section 5 requires a party to provide notice to the EPA
“before . . . manufacturing or processing” of a new chemical substance can
begin. Id. § 2604(a)(1)(B)(i) (emphasis added). Likewise, the four factors
the EPA must consider in determining whether something is a significant
new use are forward-looking. See id. § 2604(a)(2)(A)–(D) (stating that the
EPA must consider the “projected volume of manufacturing and processing

        _____________________
        7
          The EPA first argues that we should not reach Inhance’s statutory argument
because it is a “collateral attack[] on the SNUR,” and thus not properly before this court.
But the APA standard of review, which as explained in note 5 supra is largely incorporated
by TSCA, requires us to “hold unlawful and set aside agency action . . . in excess of
statutory jurisdiction, authority, or limitations . . . .” 5 U.S.C. § 706. The propriety of the
EPA’s orders necessarily involves EPA’s authority under TSCA to issue both the orders
and the SNUR.

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                                No. 23-60620

of a chemical substance” and “reasonably anticipated manner and methods of
manufacturing . . . [and] processing” (emphases added)). This suggests that
Section 5 is intended to regulate covered substances prior to their initial
manufacture, not decades after a manufacturing process has been in place.
       Furthermore, TSCA’s broader structure demonstrates that Section 5
is intended only to regulate significant new uses prior to first manufacture.
As explained above, there are two ways the EPA can regulate chemical
substances under TSCA:        Section 5 applies (only) to new chemical
substances and significant new uses; Section 6 applies to all chemical
substances. See id. § 2605(a). Unlike Section 5, Section 6 requires the EPA
to conduct a cost-benefit analysis, weighing the negative effects of the
chemical substance against the benefits of the substance as well as the
economic consequences of prohibiting or limiting the substance. See id.
§ 2605(c)(2)(A)–(C). This shows that Congress intended for the EPA to
consider more carefully the effects of its regulations on manufacturing
processes that have previously existed.
       Contrarily, the EPA’s interpretation of Section 5 distorts TSCA’s
framework and defies common sense. Under its approach, the agency can
regulate a use under Section 5 anytime it “discovers” a use not previously
known to the agency, even if that use has existed for decades. But that
reading undermines Section 6 and shortcuts Congress’s express directive to
the agency to weigh the costs to businesses and the overall economy before
shutting down an ongoing manufacturing process. More simply, the EPA’s
interpretation lacks intuitive force: A forty-year-old manufacturing process
is not “new” in any pertinent sense of the word. At bottom, the EPA’s
attempt to redefine “new” to expand the reach of the SNUR does not pass
muster because “an agency may not rewrite clear statutory terms to suit its
own sense of how the statute should operate.” Util. Air Regul. Grp. v. EPA,
573 U.S. 302, 328 (2014).

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       Second, the EPA’s definition of “significant new use” presents
serious constitutional concerns. See Jennings, 583 U.S. at 286. It is well-
established that administrative agencies must give the public fair notice of
their rules before finding a violation of them. See Wages & White Lion Invs.,
L.L.C. v. FDA, 90 F.4th 357, 374 (5th Cir. 2024) (en banc). This requirement
is rooted in the Fifth Amendment’s Due Process Clause. See id. at 374–76
(explaining the contours of the fair-notice doctrine). Thus, while companies
are required to stay apprised of laws and regulations, they are not required to
predict an agency’s actions with “extraordinary intuition or with the aid of a
psychic.” Id. at 381 (quoting United States v. Chrysler Corp., 158 F.3d 1350,
1357 (D.C. Cir. 1998)).
       According to the EPA, “significant new use” is a “term of art that
depends on EPA action, rather than a readily used term in common speech.”
During the rule-making process for PFAS, the EPA explained that it would
“not designate ongoing uses as significant new uses when the final rule [was]
promulgated.” 80 Fed. Reg. 2887. But to be designated as an ongoing use
the EPA required companies to submit their prior manufacture or use of
PFAS for approval under the proposed SNUR.              Ultimately, the EPA
“reviewed all ongoing use claims . . . and excluded from the definition of
‘significant new uses’” only those ongoing uses that had been submitted for
approval. 85 Fed. Reg. 45118; see also 40 C.F.R. § 721.10536(b)(5).
       Unfortunately for Inhance, neither it nor the EPA knew that its
fluorination process resulted in the creation of PFAS until March 2022,
nearly two years after the final SNUR was promulgated. Moreover, neither
the 2015 proposed SNUR nor the 2020 final version included the fluorination
industry as an industry that might be affected by the SNUR. See 80 Fed. Reg.
2886; 85 Fed. Reg. 45110. Thus, having no reason to know it would be subject
to the new SNUR, Inhance did not submit its fluorination process as an
ongoing use during the rule-making process. Nevertheless, under the EPA’s

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                                No. 23-60620

interpretation of Section 5, Inhance is still subject to the SNUR because its
manufacture of PFAS was not known to the EPA until 2022 (making it
“new” in the agency’s eyes), and Inhance did not presciently submit an
ongoing use for approval during the rule-making process.
       But this court has recognized that federal agencies “cannot ‘surprise’
a party by penalizing it for ‘good-faith’ reliance on the agency’s prior
positions.” R.J. Reynolds Vapor Co. v. FDA, 65 F.4th 182, 189 (5th Cir. 2023)
(quoting Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 156–57
(2012)). Indeed, “[d]ealing with administrative agencies is all too often a
complicated and expensive game, and players like [Inhance] are entitled to
know the rules.” Id. (internal quotations and citation omitted). Had
Inhance—or the EPA—known that its fluorination process was implicated
by the proposed SNUR, Inhance could have participated in the rule-making
process and perhaps prevented its fluorination process from being deemed
post hoc a significant new use by the EPA. Instead, because Inhance did not
possess “extraordinary intuition” or the “aid of a psychic” to foresee that
the EPA would regulate the fluorination industry, Inhance faces being
shuttered by the agency’s belated “discovery” of its process. See Wages, 90
F.4th at 376. Fortunately for Inhance, such foresight is “more than the law
requires.” Id. We therefore eschew the EPA’s interpretation of “significant
new use” and instead adopt Inhance’s more straightforward interpretation
of the statute. See Jennings, 583 U.S. at 286. And that dooms the EPA’s
orders at issue here, because Inhance’s fluorination process was not a
significant new use within the purview of Section 5.

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                                   IV.
      The EPA may not contort the plain language of TSCA’s Section 5 to
deem a forty-year-old ongoing manufacturing process a “significant new
use” subject to the accelerated regulatory process provided by that part of
the statute. In other contexts, “new” may have nuanced meanings, but its
meaning in the statute before us is plain, and plainly prohibits the EPA’s
December 2023 orders aimed at Inhance.
      We hasten to add that our ruling to this effect does not render the EPA
powerless to regulate Inhance’s fluorination process.      The agency can
properly proceed, abiding the APA’s procedural guardrails, under TSCA’s
Section 6 by conducting inter alia the appropriate cost-benefit analysis
required for ongoing uses—a proposition even Inhance concedes. The EPA
is just not allowed to skirt the framework set by Congress by arbitrarily
deeming Inhance’s decades-old fluorination process a “significant new use.”
See Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 105–06 (2015).
      Accordingly, the EPA’s December 2023 orders are
                                                              VACATED.

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