TSCA's Impact on Society and Chemical Industry - ACS Publications

3

Future for Innovation

Downloaded by EAST CAROLINA UNIV on June 4, 2018 | https://pubs.acs.org Publication Date: May 1, 1983 | doi: 10.1021/bk-1983-0213.ch003

CARL W. UMLAND Exxon Chemical Americas, Houston, TX 77001 Chemicals have traditionally s t i m u l a t e d technological progress and contributed substantially to our quality of life. The U.S. chemical industry has been highly i n n o v a t i v e in the past. The legislative history of the T o x i c Substances C o n t r o l Act (TSCA) demonstrates Congressional concern t h a t the economic impact of the Premanufacture Notification (PMN) process c o u l d unduly interfere w i t h the i n n o v a t i v e capacity o f a dynamic contributor to t h e economy. A t t h e same t i m e , t h e Act was t o assure t h a t i n n o v a t i o n and commerce in chemical substances do not present an unreasonable risk of injury t o h e a l t h or t h e environment. A f t e r five years of TSCA and n e a r l y three years of PMN activity, some evidence based on a c t u a l PMN experience has emerged which suggests substantial disruption of new chemical development and introduction. This appears to be largely a consequence of higher c o s t s and uncertainty engendered by the PMN process at an e c o n o m i c a l l y v u l n e r a b l e p o i n t in the life cycle of i n n o v a t i v e p r o d u c t s . Reassessment of the process seeking a more a p p r o p r i a t e balance between o p p o r t u n i t y for economic viability and protection from unreasonable risk for i n n o v a t i v e chemicals is indicated. An intelligent and pragmatic application of TSCA exemption authority to well-defined l o w risk situations o f f e r s significant hope for improvement in the outlook for chemical i n n o v a t i o n within the spirit of TSCA but w e l l short of laissez faire "business as usual". The chemical industry is linked to virtually every segment of t h e American economy as shown in F i g u r e 1. Chemicals are used by other industries as feedstocks, cleaners, additives, and p r o c e s s i n g aids for a wide range of products and industrial p r o c e s s e s . The chemical industry a l s o provides consumer products directly. These range from soaps and detergents to ink and paint. The effects of chemical innovations, t h e n , are felt far beyond t h e chemical industry. 0097-6156/83/0213-0023$06.00/0 © 1983 American Chemical Society Ingle; TSCA's Impact on Society and Chemical Industry ACS Symposium Series; American Chemical Society: Washington, DC, 1983.

24

TSCA! IMPACT ON SOCIETY AND CHEMICAL INDUSTRY

CHEMICAL

RAW

«4—Ί

MATERIALS

Agricultura1

Coal T a r

Petroleum

commodit i e s

products

&

Natural

M e t a 11 i c

Non-meta11ic

ores

ores

gas

I Inorganics

Industrial

Organic s


gases

BASIC

AND INTERMEDIATE

CHEMICALS

Chemical Functional

Chemical

Products

Agricultural

Surfactants

chemicals

Flavors

Med i c i n a 1 s Industrial

Carbon

and institutional

and fragrances black

Bioc ides

c leaners Explosives

Thickening

Adhes ives

Flame

Automotive

UV

chemicals

O i l - f i e l d

Paper

Other

Other

1

Metals

Wood refining

and paper

Food clay

Non-manufacturing

Mining

products

Textile

products

Machinery and

iles

Paper

Agricultural Forestry

equipment

processing

Glass,

chemicals

Γ"

Manufacturing

Processing

Text

additives

1f

f

Petroleum

agents

retardants

stabilizers

Food

chemicals

Catalysts

Pulp

Aids

Co l o r s

Polymers

Fisheries

products

C o n s t r u et i o n

stone, and

Petroleum

recovery

products

τ

Τ National

Food

A d d i t i v e sand

Processing

Clothing

Hous i n g

Medical

Economy

care

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Εduc a c i o n

ope r a t i o n s

Figure 1.

Materials and product flow of chemical industry. (Reproduced with permission from Ref. 13. Copyright 1980, C. H. Kline & Co.)

Ingle; TSCA's Impact on Society and Chemical Industry ACS Symposium Series; American Chemical Society: Washington, DC, 1983.

3.

UMLAND

Future for

25

Innovation

Even i n d i v i d u a l segments of t h e chemical i n d u s t r y have a very large economic importance. A s o n e e x a m p l e , an A r t h u r D. L i t t l e s t u d y h a s e s t i m a t e d t h a t 23 p e r c e n t o f a l l b u s i n e s s s a l e s , 16 p e r c e n t o f a l l c a p i t a l i n v e s t m e n t a n d 19 p e r c e n t o f t o t a l n o n - g o v e r n m e n t r e l a t e d j o b s a r e d e p e n d e n t on t h e p r o d u c t i o n o f p e t r o c h e m i c a l s ( 1 ) . A c c o r d i n g t o t h i s s t u d y , 35 to 45 p e r c e n t o f U n i t e d S t a t e s b u s i n e s s a c t i v i t y i s d i r e c t l y o r i n d i r e c t l y a f f e c t e d by t h e American p e t r o c h e m i c a l i n d u s t r y .


The Nature and P r o c e s s o f C h e m i c a l s

Innovation

I n d u s t r y ' s concern over t h e p o t e n t i a l l y s t i f l i n g impact o f T S C A ' s PMN p r o c e s s on i n n o v a t i o n d e r i v e s f r o m t h e n a t u r e o f new chemicals commercial development. Technological progress u s u a l l y c o n s i s t s o f a s e r i e s o f s m a l l i n n o v a t i o n s which must s u r v i v e t h e t e s t of t h e open market. I n c r e a s e d c o s t s , e s p e c i a l l y i n t h e i n i t i a l s t a g e s , c a n e a s i l y p u t an i n n o v a t i o n at a f a t a l d i s a d v a n t a g e i n c o m p e t i n g w i t h e s t a b l i s h e d p r o d u c t s . PMN c o s t s c o u l d s t o p t h e p r o c e s s b y w h i c h s m a l l , i n d i v i d u a l innovations c o n t r i b u t e t o s i g n i f i c a n t t e c h n o l o g i c a l changes. New c h e m i c a l s must h a v e t i m e t o p r o v e t h e m s e l v e s i n t h e marketplace. O f t e n , t h e t r u e v a l u e o f an i n n o v a t i o n i s n o t known f o r many y e a r s a f t e r i t s i n t r o d u c t i o n . T h e i n i t i a l u s e o f a new p r o d u c t i s i n d u s t r y ' s o p p o r t u n i t y t o a p p r e c i a t e t h e c h e m i c a l ' s p r o p e r t i e s a n d e x p l o r e i t s p o t e n t i a l . A new c h e m i c a l o f t e n i n i t i a l l y p r o d u c e d i n s m a l l q u a n t i t i e s , may b e c o m e a l a r g e s c a l e v e n t u r e a f t e r many y e a r s w i t h s i g n i f i c a n t and o c c a s i o n a l l y unanticipated applications. PMN c o s t s c o u l d c h o k e i n n o v a t i o n a t i t s m o s t v u l n e r a b l e s t a g e . A new p r o d u c t must h a v e " b r e a t h i n g r o o m " i n w h i c h t o t e s t i t s p o t e n t i a l f o r growth. Decisions to discontinue r e s e a r c h a n d d e v e l o p m e n t on many c h e m i c a l s b e c a u s e o f h i g h e r c o s t s could reduce major t e c h n o l o g i c a l breakthroughs i n the future. I n n o v a t i o n p a r t i c u l a r l y i n small volume c h e m i c a l s o f t e n d e p e n d s on a q u i c k r e a c t i o n t o m a r k e t o p p o r t u n i t i e s and l o w c o s t s . S i x major c h a r a c t e r i s t i c s of t h e chemical i n n o v a t i o n p r o c e s s f o r small volume c h e m i c a l s l e a d t o t h i s conclusion. Small volume c h e m i c a l s a r e o f t e n brought i n t o t h e market q u i c k l y ^ Chemical s p e c i a l t i e s e s p e c i a l l y a r e c r e a t e d and m a r k e t e d t o meet an i m m e d i a t e n e e d . A d e l a y i n a c h e m i c a l ' s i n t r o d u c t i o n c o u l d mean t h a t t h e u s e r w o u l d s e e k m a t e r i a l s e l s e w h e r e a n d c e r t a i n m a r k e t o p p o r t u n i t i e s w o u l d be l o s t . Some c h e m i c a l s s o l d i n s m a l l v o l u m e s c a n n o t w i t h s t a n d a l e n g t h y r e s e a r c h and d e v e l o p m e n t p r o c e s s . L a r g e R&D c o s t s w o u l d be s p r e a d o v e r t o o l o w a s a l e s v o l u m e t o a l l o w t h e p r o d u c t t o compete with e x i s t i n g c h e m i c a l s . Only those which are o b v i o u s l y e s s e n t i a l or o b v i o u s l y provide s i g n i f i c a n t t e c h n o l o g i c a l advance can support high i n i t i a l c o s t s .


26

TSCA: IMPACT ON SOCIETY AND CHEMICAL INDUSTRY


D e l a y s i n d e v e l o p i n g a new p r o d u c t s i g n i f i c a n t l y i n c r e a s e d e v e l o p m e n t c o s t s . In r e v i e w i n g t h e PMN r e q u i r e m e n t s , t h e C o u n c i l o n Wage and P r i c e S t a b i l i t y u s i n g a 1 0 - p e r c e n t d i s c o u n t r a t e , o b s e r v e d t h a t the c o s t t o the f i r m of a six-month d e l a y was a b o u t f i v e p e r c e n t o f t h e R&D i n v e s t m e n t ( 2 ) . Small volume c h e m i c a l s are an e x t r e m e l y important p a r t of c h e m i c a l s u b s t a n c e s T P r o d u c t i o n d a t a r e p o r t e d t o EPA s u g g e s t t h i s s t r o n g l y . In C o n g r e s s i o n a l t e s t i m o n y , t h e n EPA A s s i s t a n t A d m i n i s t r a t o r Steven J e l l i n e k r e p o r t e d t h a t about 70 p e r c e n t o f t h e c h e m i c a l s i n t h e EPA i n v e n t o r y a r e p r o d u c e d i n q u a n t i t i e s u n d e r 1 0 0 , 0 0 0 p o u n d s p e r y e a r , 50 p e r c e n t a r e u n d e r 1 0 , 0 0 0 p o u n d s and 30 p e r c e n t a r e u n d e r 1,000 p o u n d s ( 3 ) . A f u r t h e r e x a m p l e i s t h e t e s t i m o n y o f t h e ~ ~ k e i l l y T a r and C h e m i c a l C o r p o r a t i o n w h i c h r e p o r t e d t h a t 51 p e r c e n t o f i t s p i l o t p l a n t ( n e w l y i n t r o d u c e d ) p r o d u c t s had a n n u a l s a l e s v o l u m e s u n d e r 50 k i l o g r a m s w h i l e o n l y 1 7 p e r c e n t had s a l e s o v e r 1,000 kilograms (£). The s a l e s o f many new c h e m i c a l s r e m a i n s m a l l f o r s e v e r a l y e a r s a f t e r i n t r o d u c t i o n and a b o u t h a l f o f new c h e m i c a l s a r e d i s c o n t i n u e d because they are not commercially v i a b l e T T h e c h e m i c a l g r o u p o f t h e A n s u l Company p r o v i d e d a u s e f u l e x a m p l e i n i t s N o v e m b e r 1979 c o m m e n t s o n P r e m a n u f a c t u r e N o t i f i c a t i o n o f how t h e s a l e s v o l u m e o f one o f i t s t y p i c a l c h e m i c a l p r o d u c t s g r e w f r o m 1,000 p o u n d s t o o n l y 1 0 , 0 0 0 p o u n d s i n f i v e y e a r s (j>). Changes i n demand, b r e a k t h r o u g h s b y c o m p e t i n g c o m p a n i e s , f l u c t u a t i o n s i n t h e p r i c e o r a v a i l a b i l i t y o f raw m a t e r i a l s and f a u l t y o r i g i n a l e s t i m a t e s can a l l cause a product t o f a i l . Such m a r k e t p e r f o r m a n c e d r a m a t i z e s t h e u n c e r t a i n t y o f m a r k e t i n g new p r o d u c t s . I n d e e d , e x p e r i e n c e h a s shown t h a t a b o u t h a l f o f new commercial ventures f a i l . I m p o r t a n t u s e s f o r new c h e m i c a l s u b s t a n c e s h a v e o f t e n b e e n d i s c o v e r e d many y e a r s a f t e r t h e i r c o m m e r c i a l i n t r o d u c t i o n . ' Some of t o d a y ' s most i m p o r t a n t c h e m i c a l s , such as r e s i n s or p l a s t i c s w e r e c o m m e r c i a l l y u n i m p o r t a n t when t h e y w e r e f i r s t i n t r o d u c e d . The o r i g i n a l u s e s o f new c h e m i c a l s a r e s l o w l y s u p p l a n t e d b y new a p p l i c a t i o n s w h i c h i n c r e a s e t h e i r p r o d u c t i o n . T h e r e f o r e , a new c h e m i c a l must r e m a i n c o m m e r c i a l l y v i a b l e l o n g e n o u g h f o r new uses to be d i s c o v e r e d . Teflon F l u o r o c a r b o n R e s i n , f o r i n s t a n c e was d i s c o v e r e d i n 1 9 3 8 . T h e s u b s t a n c e was p r o d u c e d o n a s m a l l s c a l e t h r o u g h o u t W o r l d War I I f o r d e f e n s e a p p l i c a t i o n s . I t b e c a m e c o m m e r c i a l l y a v a i l a b l e i n 1948, b u t d i d n o t g a i n p u b l i c r e c o g n i t i o n u n t i l 1961 when i t was u s e d a s a l i n i n g f o r n o n s t i c k f r y i n g p a n s . Today, T e f l o n coats chemical process equipment, i n s u l a t e s e l e c t r i c a l equipment, c o a t s the blades of t o o l s , p r o t e c t s b u i l d i n g s f r o m e a r t h q u a k e s and i s u s e d a s a m a t e r i a l i n



3.

UMLAND

Future for

Innovation

27

a u t o m o b i l e s , p i a n o s , m i s s i l e s and s p a c e c r a f t . M o s t o f t h e s e u s e s w e r e unknown when T e f l o n was i n v e n t e d . I m p o r t a n t u s e s f o r new c h e m i c a l s u b s t a n c e s h a v e o f t e n b e e n d i s c o v e r e d many y e a r s a f t e r t h e i r c o m m e r c i a l i n t r o d u c t i o n . Some o f t o d a y ' s m o s t i m p o r t a n t c h e m i c a l s , s u c h as r e s i n s o r p l a s t i c s w e r e c o m m e r c i a l l y u n i m p o r t a n t when t h e y w e r e f i r s t i n t r o d u c e d . T h e o r i g i n a l u s e s o f new c h e m i c a l s a r e s l o w l y s u p p l a n t e d by new a p p l i c a t i o n s w h i c h i n c r e a s e t h e i r p r o d u c t i o n . T h e r e f o r e , a new c h e m i c a l m u s t r e m a i n c o m m e r c i a l l y v i a b l e l o n g e n o u g h f o r new u s e s t o be d i s c o v e r e d . Teflon F l u o r o c a r b o n R e s i n , f o r i n s t a n c e was d i s c o v e r e d i n 1938. The s u b s t a n c e was p r o d u c e d on a s m a l l s c a l e t h r o u g h o u t W o r l d War I I f o r d e f e n s e a p p l i c a t i o n s . I t became c o m m e r c i a l l y a v a i l a b l e i n 1948, b u t d i d n o t g a i n p u b l i c r e c o g n i t i o n u n t i l 1961 when i t was u s e d as a l i n i n g f o r n o n s t i c k f r y i n g p a n s . Today, T e f l o n coats chemical process equipment, i n s u l a t e s e l e c t r i c a l equipment, c o a t s the b l a d e s of t o o l s , p r o t e c t s b u i l d i n g s f r o m e a r t h q u a k e s and i s u s e d as a m a t e r i a l i n a u t o m o b i l e s , p i a n o s , m i s s i l e s and s p a c e c r a f t . M o s t o f t h e s e u s e s w e r e unknown when T e f l o n was i n v e n t e d . T h e d e v e l o p m e n t c o s t s o f m o s t new c h e m i c a l s c a n n o t be r e a d i l y p a s s e d on t o c o n s u m e r s . At t h e t i m e of t h e i r i n t r o d u c t i o n , m o s t new c h e m i c a l s r e p r e s e n t a m i n o r i m p r o v e m e n t o v e r e x i s t i n g m a t e r i a l s . Customers must b e l i e v e t h a t t h e p r o d u c t i s l e s s e x p e n s i v e o r more e f f i c i e n t t h a n t h e e x i s t i n g p r o d u c t . O n l y t h e n w i l l t h e new p r o d u c t h a v e an o p p o r t u n i t y t o expand i t s r o l e i n t h e economy. Even s m a l l i n c r e a s e s i n p r i c e c o u l d e l i m i n a t e the advantage t h a t a new p r o d u c t m i g h t e n j o y o v e r i t s a l r e a d y e s t a b l i s h e d r i v a l s . H i g h e r p r i c e s c o u p l e d w i t h the u n c e r t a i n p e r f o r m a n c e of a new p r o d u c t and l a c k o f c u s t o m e r f a m i l i a r i t y w i t h t h e c h e m i c a l may d e t e r c u s t o m e r s f r o m b u y i n g t h e new m a t e r i a l . T h u s , an i n c r e a s e i n c o s t g e n e r a l l y w i l l n o t be r e f l e c t e d i n a h i g h e r p r i c e , b u t i n a d e c i s i o n by t h e m a n u f a c t u r e r t o f o r e g o production. One m a j o r c h e m i c a l s p e c i a l t y c o m p a n y , f o r i n s t a n c e , u s e s a 1 0 - p e r c e n t p r o d u c t i m p r o v e m e n t as i t s c r i t e r i o n f o r d e t e r m i n i n g w h e t h e r t o m a r k e t a new p r o d u c t . T h a t i s , t h e p r o d u c t m u s t h a v e a 1 0 - p e r c e n t i m p r o v e m e n t i n p e r f o r m a n c e a t t h e same p r i c e o r t h e same p e r f o r m a n c e a t a 1 0 - p e r c e n t c o s t r e d u c t i o n . F r o m i t s e x p e r i e n c e , t h e c o m p a n y knows t h a t a new p r o d u c t w i l l n o t be a c c e p t e d i n t h i s c o m p a n y ' s m a r k e t s w i t h o u t s u c h an i m p r o v e m e n t . F o r t h i s c o m p a n y , a t y p i c a l c h e m i c a l ' s c o s t i s a b o u t 50 c e n t s p e r p o u n d . The f i r m g e n e r a l l y a s s u m e s no more t h a n a t h r e e - y e a r m a r k e t i n g l i f e t i m e f o r i t s t y p e o f new c h e m i c a l s . I f one t h e n a s s u m e s t h a t t h e c o r p o r a t i o n has t o r e c o v e r i t s PMN c o s t s d u r i n g t h e l i f e t i m e o f a c h e m i c a l , t h e p e r c e n t a g e i n c r e a s e i n c o s t c a n be c a l c u l a t e d f o r d i f f e r e n t PMN c o s t s as shown i n T a b l e I .



28

T a b l e I·

Product Cost PMN F i l i n g


Annual P r o d u c t i o n 2500 L b s . 25000 L b s . 100000 L b s .

jm — 5*

0.5% 0.1%

Increase Cost

$2000

$700ff

~m

~TS7% 19% 5%

5% 1%

$15000

W3% 40% 10%

One c a n r e a d i l y s e e t h e i n t e n s e v o l u m e a n d PMN c o s t s e n s i t i v i t y o v e r a n d a b o v e t h i s c o m p a n y ' s own d e c i s i o n c r i t e r i a o f a 1 0 % improvement over e x i s t i n g products b e f o r e c o n s i d e r a t i o n f o r m a r k e t i n g . T h u s , t h e h u r d l e l e v e l c r e a t e d b y PMN c o s t s c a n b e f a r g r e a t e r t h a n a c o m p a n y ' s o r i g i n a l d e c i s i o n c r i t e r i o n and t h e chances f o r small volume substances b e i n g brought f o r w a r d a r e r e d u c e d . O b v i o u s l y , with l o n g e r p r o d u c t l i f e t h e e f f e c t would be l e s s d r a m a t i c b u t n o l e s s r e a l . T h e c o s t o f d e v e l o p i n g a new c h e m i c a l w i l l n o t b e s p r e a d over t h e manufacturer's product l i n e . A s a general r u l e , no company w i l l i n t e n t i o n a l l y b e g i n a v e n t u r e u n l e s s i t b e l i e v e s t h a t t h e v e n t u r e w i l l r e c o v e r i t s i n v e s t m e n t a n d make a p r o f i t . If a m a n u f a c t u r e r does n o t b e l i e v e t h a t t h e p r o d u c t w i l l g e n e r a t e an a c c e p t a b l e r e t u r n on i n v e s t m e n t , t h e company w i l l i n v e s t i t s f u n d s e l s e w h e r e . Any o t h e r approach would b e u n e c o n o m i c and would e v e n t u a l l y harm t h e company. P r o d u c t f a i l u r e s , o n t h e o t h e r hand, become a f i x e d c o s t t o t h e c o m p a n y and m u s t b e r e c o v e r e d t h r o u g h h i g h e r p r i c e s f o r o t h e r p r o d u c t s i f t h e f i r m i s t o remain v i a b l e . Thus, t h e r e i s an i n c r e a s e d i n c e n t i v e t o a v o i d t h e e c o n o m i c u n c e r t a i n t y o f innovation. A c c o r d i n g t o t h e C o u n c i l o n Wage a n d P r i c e s t a b i l i t y "Studies of business innovation suggest that over the long term c o m p a n i e s t r e a t t h e i r r e s e a r c h and d e v e l o p m e n t b u d g e t s l i k e o t h e r i n v e s t m e n t s a n d a d j u s t R&D e x p e n d i t u r e s s o t h a t t h e r e t u r n is comparable t o t h a t earned on other c o r p o r a t e investments", TSCA Impact

on Innovation

We now h a v e n e a r l y t h r e e y e a r s o f PMN e x p e r i e n c e . A n a n a l y s i s o f b o t h t h e number a n d t h e c h a r a c t e r o f new s u b s t a n c e s i n t r o d u c t i o n a s r e p r e s e n t e d b y PMN f i l i n g s s u g g e s t s t h a t t h e r e has i n d e e d been a s u b s t a n t i a l n e g a t i v e impact on c h e m i c a l s i n n o v a t i o n . T h i s o b s e r v a t i o n i s b o l s t e r e d by a broad v a r i e t y of s t u d i e s a n d s u r v e y s w h i c h a r e h i g h l i g h t e d i n what f o l l o w s . L i m i t e d i n f o r m a t i o n e x i s t s o n t h e r a t e o f new p r o d u c t



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i n t r o d u c t i o n s b e f o r e T S C A . A r t h u r D. L i t t l e , I n c . e s t i m a t e d t h a t 1,000 c o m m e r c i a l new c h e m i c a l s w e r e i n t r o d u c e d e a c h y e a r , An e a r l i e r s t u d y by F o s t e r D. S n e l l , b a s e d on e x p e r t i n d u s t r y o p i n i o n , f o u n d t h a t 2 , 2 2 0 s u c c e s s f u l new s u b s t a n c e s w e r e i n t r o d u c e d e a c h y e a r b e t w e e n 1969 and 1974 o u t o f o v e r 5,000 o f f e r e d f o r c u s t o m e r e v a l u a t i o n . N a t i o n a l E c o n o m i c R e s e a r c h A s s o c i a t e s , I n c . (NERA) e s t i m a t e d t h a t a b o u t 1,700 new c h e m i c a l s u b s t a n c e s w e r e s o l d c o m m e r c i a l l y e a c h y e a r ( b a s e d on a s m a l l s a m p l e and a c c u r a t e o n l y w i t h i n a b r o a d r a n g e b u t c o n s i s t e n t i n o r d e r of magnitude) ( 7 ) . N e v e r t h e l e s s , t h e i n t r o d u c t i o n o f new c o m m e r c i a l c h e m i c a l s u b s t a n c e s as m e a s u r e d b y PMNs s u b m i t t e d a p p a r e n t l y h a s f a l l e n f r o m b e t w e e n 1,000 and 2,200 a n n u a l l y t o somewhere around 600-700 i n t h e l a t e s t 1 2 - m o n t h s . W i t h o u t t r y i n g t o be p r e c i s e , i t c a n be s e e n t h a t t h e r e h a s b e e n an a p p a r e n t d r o p i n new s u b s t a n c e i n t r o d u c t i o n i n t h e o r d e r o f 3 5 - 7 0 p e r c e n t . T h i s i s e v e n more s o b e r i n g when i t i s r e a l i z e d t h a t a b o u t o n e - t h i r d o f PMN c h e m i c a l s h a v e a c t u a l l y e n t e r e d c o m m e r c e b a s e d on a more d e t a i l e d p r e s e n t a t i o n o f t h e PMN s t a t i s t i c s by E P A s D. G. B a n n e r m a n . H o w e v e r , f o r t h e p u r p o s e s o f t h i s d i s c u s s i o n , one c a n o b s e r v e t h a t o f t h e more t h a n 1,000 PMNs s u b m i t t e d , o v e r 9 0 % a r e from l a r g e companies. Furthermore, estimated f i r s t year p r o d u c t i o n v o l u m e s h a v e s t e a d i l y moved away f r o m low v o l u m e c h e m i c a l s . A r t h u r D. L i t t l e , I n c . e s t i m a t e d t h a t p r i o r t o t h e PMN r e q u i r e m e n t a b o u t 70 p e r c e n t o f c o m m e r c i a l new c h e m i c a l s w e r e p r o d u c e d i n q u a n t i t i e s u n d e r 1,000 p o u n d s p e r y e a r and a l l R&D c h e m i c a l s w e r e b e l o w t h i s l e v e l ( 6 ) . When t h e PMN r e q u i r e m e n t s went i n t o e f f e c t , h o w e v e r , t h a t p r o p o r t i o n f e l l t o 33 p e r c e n t a l m o s t i m m e d i a t e l y and h a s s i n c e d e c l i n e d t o o n l y 11 p e r c e n t , b a s e d on a l o o k a t t h e f i r s t 723 PMNs. T h i s c a n a l s o be c o m p a r e d w i t h t h e 30 p e r c e n t of c o m m e r c i a l c h e m i c a l s on t h e T S C A i n v e n t o r y w i t h an a n n u a l p r o d u c t i o n v o l u m e o f l e s s t h a n 1,000 p o u n d s . F i g u r e 2 i l l u s t r a t e s t h e d e c l i n e i n t h e d i s t r i b u t i o n of low v o l u m e c h e m i c a l s b e t w e e n 1978 and O c t o b e r 1981 r a t h e r dramatically. T h e s a m p l e s show t h a t PMN r e q u i r e m e n t s h a v e c h a n g e d t h e way t h a t c o m p a n i e s do b u s i n e s s and t h a t t h e r e a r e f e w e r c h e m i c a l s w i t h s m a l l p r o d u c t i o n v o l u m e s b e i n g i n t r o d u c e d . The d e c l i n e i n t h e p r o d u c t i o n o f new, s m a l l v o l u m e c h e m i c a l s s u g g e s t s t h a t c h e m i c a l c o m p a n i e s a r e now c o n c e n t r a t i n g on p r o d u c t s t h a t h a v e ready markets. The s m a l l e r c h e m i c a l s p e c i a l t y m a n u f a c t u r e r s have been h u r t t h e m o s t . A r e c e n t s t u d y c o m m i s s i o n e d by t h e C h e m i c a l S p e c i a l t y M a n u f a c t u r e r s A s s o c i a t i o n i n d i c a t e s t h a t w h i l e new s u b s t a n c e d e v e l o p m e n t f e l l 26 p e r c e n t among c h e m i c a l s p e c i a l t y m a n u f a c t u r e r s , 98 p e r c e n t o f t h e d e c l i n e was c o n c e n t r a t e d among i n g r e d i e n t s u p p l i e r s w i t h l e s s t h a n $100 m i l l i o n of annual s a l e s ( 8 j , A l t h o u g h t h e g e n e r a l e c o n o m i c c l i m a t e may h a v e 1



30


100

20,000

40,000

60,000

80,000

100,000

Production Volume (Pounds) Figure 2.

Distribution of established chemicals and first-year chemical production under PMNs.



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31

Innovation

c o n t r i b u t e d t o some o f t h i s d e c l i n e , i t d o e s n o t e x p l a i n why such a d i s p r o p o r t i o n a t e s h a r e of t h e d r o p s h o u l d s e t t l e upon small companies. The d r o p i n i n n o v a t i o n was m o s t p r o n o u n c e d i n t h e m o r e f i n a n c i a l l y r i s k y t y p e s o f c h e m i c a l s . I n n o v a t i o n s aimed a t t h e g e n e r a l chemical market without d e f i n e d a p p l i c a t i o n s d e c l i n e d 38 p e r c e n t while chemical i n n o v a t i o n s manufactured at s p e c i f i c customer r e q u e s t f e l l o n l y 14 p e r c e n t . T h e r e d u c t i o n i n i n n o v a t i o n b e c a u s e o f f i n a n c i a l r i s k was p r e d i c t a b l e . F r o m s t u d i e s f o r . EPA b y A r t h u r D. L i t t l e , one would have e s t i m a t e d a 50-percent r e d u c t i o n a s s o c i a t e d with a $ 1 2 , 0 0 0 PMN c o s t ( 6 ) . The s i g n i f i c a n c e o f $ 1 2 , 0 0 0 d e r i v e s f r o m a s t u d y b y t h e R e g u l a t o r y R e s e a r c h S e r v i c e (RRS) (9). RRS a s s e s s e d t h e c o s t o f c o m p l e t i n g t h e PMN f o r m b y examining the c o s t s t h a t companies a c t u a l l y i n c u r r e d i n p e r f o r m i n g t h i s t a s k . RRS s e n t a q u e s t i o n n a i r e t o a l l c o m p a n i e s known t o h a v e f i l e d a PMN f o r m . I n a d d i t i o n , RRS e x a m i n e d E P A ' s p u b l i c f i l e s o n t h e PMNs i t h a s r e c e i v e d . A v e r a g e c o s t s a r e shown i n T a b l e I I , Table II.

PMN F i l i n g (PER

Costs

RRS) DOLLARS

Mean T o t a l F i l i n g C o s t Economic Burden of I n t e r m e d i a t e s E c o n o m i c B u r d e n o f A d v e r s e PMNs

7500 2300 2200

ΤΤϋϋϋ

I n t e r m e d i a t e s don't o f t e n r e a c h the m a r k e t p l a c e but do r e q u i r e a PMN u n d e r T S C A . S i m i l a r l y , many c h e m i c a l s a p p a r e n t l y had PMNs f i l e d t o b e r e a d y f o r m a n u f a c t u r e / m a r k e t i n g b u t t h e n f a i l e d t o make i t t h r o u g h t h e b u s i n e s s d e c i s i o n p r o c e s s f o r other reasons. T h e $ 1 2 , 0 0 0 - c o s t o f f i l i n g a PMN i s s t i l l a c o n s e r v a t i v e f i g u r e . The a d d i t i o n a l c o s t o f c u s t o m e r s r e q u i r i n g a PMN o n d e v e l o p m e n t a l m a t e r i a l w o u l d add a n o t h e r $ 1 0 , 0 0 0 t o t h e c o s t o f a PMN. S u c h c o s t s a r e b e g i n n i n g t o a p p e a r and a r e b e c o m i n g s i g n i f i c a n t i n some s e g m e n t s o f t h e c h e m i c a l i n d u s t r y , b u t a r e n o t i n c l u d e d i n t h i s c o s t c a l c u l a t i o n . I n a d d i t i o n , t h e RRS f i g u r e does not i n c l u d e a p r o v i s i o n f o r commercial v e n t u r e s which f a i l a f t e r the chemical e n t e r s the marketplace. The F u t u r e f o r I n n o v a t i o n T h e s i t u a t i o n d e s c r i b e d up t o t h i s p o i n t i s d i s t r e s s i n g and n e e d f u l o f r e m e d y . H o w e v e r , we've o n l y a d d r e s s e d t h e e c o n o m i c p a r t o f t h e e q u a t i o n . We a l s o h a v e t o c o n s i d e r w h a t k i n d o f



32


r i s k t o h e a l t h o r t h e e n v i r o n m e n t has b e e n r e p r e s e n t e d b y t h e PMNs s u b m i t t e d t o d a t e . F o r t u n a t e l y , t h a t e x p e r i e n c e has been a s s e s s e d and f o u n d t o o f f e r a reasonable b a s i s f o r a change in course. Recent s t a t e m e n t s b y EPA o f f i c i a l s p o i n t t h e way t o a p o t e n t i a l f o r relief. Mr. Don C l a y , D i r e c t o r o f t h e O f f i c e o f T o x i c S u b s t a n c e s , d i s c u s s e d t h e p r e m a n u f a c t u r e r e v i e w p r o c e d u r e s and e x p e r i e n c e w i t h PMNs t o d a t e a t a m e e t i n g o f t h e O r g a n i z a t i o n f o r E c o n o m i c C o o p e r a t i o n o n D e v e l o p m e n t (OECD) C h e m i c a l s F o r u m i n D e c e m b e r , ( 1 0 ) . He n o t e d t h a t E P A ' s c h e m i s t r y , t o x i c o l o g y , and e x p o s u r e assessment teams n o r m a l l y complete t h e i r p r e l i m i n a r y e v a l u a t i o n w i t h i n a week o f r e c e i p t o f a PMN, a n d , t h a t p r e l i m i n a r y a s s e s s m e n t e l i m i n a t e s a b o u t 50 p e r c e n t o f t h e s u b s t a n c e s a s c h e m i c a l s o f low c o n c e r n . T h e y t h e n p r o c e e d t o s t r u c t u r e a c t i v i t y a n a l y s i s and r e a s o n a b l e w o r s t c a s e a s s u m p t i o n s t o a s s e s s u n r e a s o n a b l e r i s k o r t h e n e e d f o r more d a t a . The r e s u l t s o f t h a t p r o c e s s w e r e c o m m e n t e d o n b y D r . J o h n T o d h u n t e r , EPA's A s s i s t a n t A d m i n i s t r a t o r f o r t h e O f f i c e of P e s t i c i d e s and T o x i c S u b s t a n c e s ( O P T S ) i n a s p e e c h d e l i v e r e d i n Rome t o r e p r e s e n t a t i v e s o f some o f o u r E u r o p e a n t r a d i n g p a r t n e r s ( 1 1 ) . He was c o m m e n t i n g o n t h e s m a l l amount o f t o x i c i t y d a F a s u b m i t t e d w i t h many o f t h e PMNs s u b m i t t e d t o d a t e . He p o i n t e d o u t t h a t E P A ' s e x p e r i e n c e shows t h a t t o b e due l a r g e l y t o t h e i n h e r e n t l y low h a z a r d p o t e n t i a l o f t h e b u l k o f t h e s u b s t a n c e s s u b m i t t e d f o r PMN r e v i e w . H i s e v i d e n c e was t h e f a c t o f n o i m m i n e n t h a z a r d a c t i o n s ( S e c t i o n 5 ( f ) ) and i n a d e q u a t e i n f o r m a t i o n a c t i o n s ( S e c t i o n 5(e)) on o n l y 9 c h e m i c a l s out of o v e r 1,000 PMNs s u b m i t t e d . He f u r t h e r n o t e d t h a t i n 6 0 c a s e s , i n d u s t r y had v o l u n t e e r e d more d a t a , r e d u c e d e x p o s u r e s , o r w i t h d r a w n PMNs. D r . T o d h u n t e r ' s c o n c l u s i o n f r o m a l l t h i s was t h a t i n d u s t r y i s d o i n g an e f f e c t i v e j o b of s c r e e n i n g s u b s t a n c e s b e f o r e s u b m i t t i n g PMNs. T h e C h e m i c a l M a n u f a c t u r e r s A s s o c i a t i o n (CMA) had r e a c h e d s i m i l a r c o n c l u s i o n s a b o u t a y e a r ago and f i l e d a p e t i t i o n w i t h EPA s u g g e s t i n g t h a t t h e r e was a s t r o n g c a s e t o b e made f o r e x e m p t i v e r e l i e f u n d e r S e c t i o n 5 ( h ) ( 4 ) o f T S C A f o r many p o l y m e r s , s i t e - l i m i t e d i n t e r m e d i a t e s , and c h e m i c a l s p r o d u c e d i n v o l u m e s o f l e s s t h a n 2 5 , 0 0 0 p o u n d s p e r y e a r . (An e x a m i n a t i o n o f t h e e f f e c t o f PMN c o s t s a t v a r i o u s p r i c e s and l e v e l s o f p r o d u c t i o n r e v e a l s t h a t t h e PMN c o s t , a s a p e r c e n t a g e o f t o t a l c o s t per pound of p r o d u c t , g e n e r a l l y r i s e s most r a p i d l y a s o u t p u t f a l l s b e l o w 2 5 , 0 0 0 p o u n d s . See t h e A p p e n d i x f o r a more d e t a i l e d d i s c u s s i o n . ) I t i s CMA's f i r m b e l i e f t h a t e x e m p t i o n c o u l d b e g r a n t e d i n t e r m s t h a t w o u l d o p e r a t e t o a s s u r e "no unreasonable r i s k " t o the p u b l i c i n terms of e i t h e r h e a l t h or the environment. S u b s e q u e n t o p e n d i s c u s s i o n s w i t h EPA h a v e p r o v e n h e l p f u l t o an u n d e r s t a n d i n g o f how s u c h a n e x e m p t i o n m i g h t b e g r a n t e d w i t h


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adequate s a f e g u a r d s t o o p e r a t e e f f e c t i v e l y . As a r e s u l t , t h e r e i s a r a y o f h o p e t h a t EPA w i l l s o o n p r o p o s e an e x e m p t i o n r u l e f o r p u b l i c comment as a f i r s t s t e p t o a s o u n d a n d r a t i o n a l c o r r e c t i o n o f t h e undue i n h i b i t i o n o f c h e m i c a l s i n n o v a t i o n which has o c c u r r e d over t h e p a s t t h r e e y e a r s .


I m p a c t o f an

Exemption

M o s t p o l y m e r s a r e i n h e r e n t l y n o n - t o x i c a n d c a n be s u f f i c i e n t l y d e f i n e d t o p r e s e n t no u n r e a s o n a b l e r i s k . S i t e - l i m i t e d i n t e r m e d i a t e s have l i m i t e d exposure p o t e n t i a l by d e f i n i t i o n which t o g e t h e r with c h r o n i c hazard c o n t r o l language w i l l p r e s e n t no u n r e a s o n a b l e r i s k b u t w i l l r e s u l t i n r e a l economic savings. A 25,000-pound p e r year p r o d u c t i o n r a t e i s not a d e m a r c a t i o n between l a r g e and s m a l l v e n t u r e s . Such a p o i n t w o u l d be a t a f a r h i g h e r s c a l e o f p r o d u c t i o n . I n s t e a d , t h e p r o p o s e d 2 5 , 0 0 0 - p o u n d e x e m p t i o n r e p r e s e n t s an e c o n o m i c a l l y j u s t i f i e d a n d v i r t u a l l y r i s k - f r e e means o f a i d i n g i n n o v a t i o n i n t h e c h e m i c a l i n d u s t r y , p a r t i c u l a r l y when c o u p l e d w i t h a p p r o p r i a t e c h r o n i c h a z a r d c o n t r o l l a n g u a g e as f o r i n t e r m e d i a t e s . In f a c t , c h e m i c a l s p r o d u c e d i n q u a n t i t i e s o f 2 5 , 0 0 0 p o u n d s or l e s s per year comprise a n e g l i g i b l e p r o p o r t i o n of chemical o u t p u t . C h e m i c a l s l i s t e d i n t h e TSCA i n v e n t o r y had a combined p r o d u c t i o n o f n e a r l y 4.1 t r i l l i o n p o u n d s i n 1 9 8 0 . C h e m i c a l s t h a t have p r o d u c t i o n volumes under 100,000 pounds per y e a r c o n t r i b u t e o n l y 0.006 p e r c e n t t o t h e t o t a l ( 1 2 ) . A 2 5 , 0 0 0 p o u n d e x e m p t i o n , t h e n , w o u l d f r e e an i n s i g n i f i c a n t p r o p o r t i o n o f chemical production from r e p o r t i n g requirements. Conclusion W i t h s u c h e x e m p t i o n s , i n n o v a t i v e c h e m i c a l s c a n be p r o d u c e d to e x p l o r e t h e commercial market and t o t e s t p r o d u c t v i a b i l i t y . Knowledge o f t h e i r economics and p o t e n t i a l f o r d i f f e r e n t a p p l i c a t i o n s c a n be e x p a n d e d . T h e s e e x e m p t i o n s w i l l l e s s e n t h e c o s t of market f a i l u r e s . S u c c e s s f u l c h e m i c a l s w i l l not have t o b e a r t h e a d d i t i o n a l PMN c o s t o f u n s u c c e s s f u l m a r k e t t e s t s . A s new s u b s t a n c e s d e m o n s t r a t e t h e i r v a l u e t o s o c i e t y and f i n d a s e c u r e p l a c e i n t h e m a r k e t , t h e y c a n t h e n b e g i n t o a b s o r b some of t h e c o s t s a s s o c i a t e d w i t h t h e PMN r e q u i r e m e n t s . T h e r e w o u l d i n d e e d be a c h a n c e f o r r e g a i n i n g much o f t h e s t r e n g t h o f an innovative chemical i n d u s t r y with a l l of i t s attendant b e n e f i t s t o s o c i e t y w i t h i n t h e c o n t e x t o f TSCA a n d t h e i n t e n t o f C o n g r e s s e x p r e s s i o n o f t h e w i l l o f t h e A m e r i c a n p u b l i c when i t i t was p a s s e d w i t h t h e s u p p o r t o f t h e c h e m i c a l i n d u s t r y i n 1 9 7 6 . 1



34 Literature

Cited


1.

Arthur D. Little, Inc., "The Petrochemical Industry and the U.S. Economy"(1978). 2. Council on Wage and Price Stability, "Premanufacture Notification under the Toxic Substances Control Act " March 13, 1981. 3. Testimony of Steven Jellinek before the Subcommittee on Consumer Protection and Finance of the House Committee on Interstate and Foreign Commerce, March 20, 1979. 4. Reilly Tar & Chemical Corporation, "Proposed Premanufacture Notification Requirements and Review Procedures. Comments f o r the U.S. Environmental Protection Agency", March 21, 1979. 5. Ansul Company, "Comments on EPA Reproposal of Premanufacture Notification Form and Provision of Rules", November 29, 1979. 6. Arthur D. Little, Inc., "Estimated Costs for Preparation and Submission of Reproposed Premanufacture Notification Form", September 1979. 7. National Economic Research Associate, Inc. Paper by Lewis J. Perl, "The Impact of Toxic Regulations on Industry", October 1981. 8. Chemical Specialties Manufacturers Association, "Impact of the Toxic Substances Control Act on Innovation in the Chemical Specialties Manufacturing Industry", January 1982. 9. Heiden, Edward J. and Alan R . Pittaway, "A Critique of the EPA Economic Impact Analysis of Proposed Section 5 Notice Requirements", Regulatory Research Service, (1981) 10. Don R. Clay, Director OTS-EPA, "The Premanufacture Review of New Chemicals Under the Toxic Substances Control Act", December 1981. 11. John A . Todhunter, Assistant Administrator EPA-OPTS, "Role of Administration and Industry in Implementing Hazard Evaluation Within a Regulatory Framework", December 1981. 12. Blair, Etcyl Η., "A Framework of Consideration for Setting Priorities for the Testing of Chemical Substances," Workshop on the Control of Existing Chemicals, Berlin, Germany, June, 1981. 13.

C u r r y , S . ; R i c h , S. "The K l i n e Guide to the Chemical Industry"; C . H . K l i n e & C o . : F a i r f i e l d , New J e r s e y , 1980; 4th E d i t i o n , p . 2.


3.

UMLAND

Future for

Innovation

35

APPENDIX R a t i o n a l e f o r Exempting

Substances

25,000 Pounds a Year or Less are


P r e c e d e n t s f o r a 25,000-Pound

When

Produced

Exemption

EPA h a s u s e d a 2 5 , 0 0 0 - p o u n d e x e m p t i o n i n i t s r e g u l a t i o n s g o v e r n i n g r e c o r d k e e p i n g i n t h e management of h a z a r d o u s waste u n d e r t h e R e s o u r c e C o n s e r v a t i o n and R e c o v e r y A c t ( R C R A ) . T h e r e g u l a t i o n s l i s t p a r t i c u l a r w a s t e s as " h a z a r d o u s " and e s t a b l i s h s t a n d a r d s t h a t t h e g e n e r a t o r s of such wastes must o b s e r v e . The r e g u l a t i o n s p r o v i d e a r e c o r d k e e p i n g exemption f o r h a z a r d o u s w a s t e s c r e a t e d by a " s m a l l q u a n t i t y g e n e r a t o r " . Such a g e n e r a t o r i s d e f i n e d as one who c r e a t e s l e s s t h a n 1,000 k i l o g r a m s o f h a z a r d o u s w a s t e p e r m o n t h . S i n c e 1,000 k i l o g r a m s e q u a l s a p p r o x i m a t e l y 2,200 pounds, the r e g u l a t i o n e f f e c t i v e l y reduces the r e c o r d k e e p i n g burden of f i r m s t h a t generate hazardous wastes i n q u a n t i t i e s of 25,000 pounds per y e a r or l e s s . I f 25,000 pounds i s t o o s m a l l a q u a n t i t y of hazardous w a s t e t o b e a r c a r e f u l s c r u t i n y u n d e r RCRA, a 2 5 , 0 0 0 - p o u n d PMN exemption f o r l o w - t o x i c i t y chemical p r o d u c t i o n i s s u r e l y justified. M o r e o v e r , t h e EPA O f f i c e o f P e s t i c i d e s and T o x i c S u b s t a n c e s has grouped p e s t i c i d e a c t i v e i n g r e d i e n t s i n t o t h r e e d i f f e r e n t c a t e g o r i e s b a s e d on p r o d u c t i o n and e x p o s u r e p o t e n t i a l . One o f EPA's t h r e e c a t e g o r i e s c o n s i s t s of "low" p r o d u c t i o n p e s t i c i d e s . T h e A g e n c y d e f i n e d t h i s c a t e g o r y as an a n n u a l p r o d u c t i o n v o l u m e of 25,000 pounds or l e s s . EPA's use of a 25,000-pound exemption ( a c t u a l l y a 2 6 , 4 0 0 - p o u n d e x e m p t i o n ) f o r h a z a r d o u s w a s t e r e c o r d k e e p i n g and i t s d e f i n i t i o n o f 2 5 , 0 0 0 p o u n d s as l o w - l e v e l p e s t i c i d e p r o d u c t i o n i n d i c a t e t h a t EPA b e l i e v e s t h i s v o l u m e o f c h e m i c a l s does not p r e s e n t a s i g n i f i c a n t r i s k . A r e l a t i v e l y s a f e s u b s t a n c e produced in a volume of 25,000 pounds or l e s s per y e a r , t h e n , w o u l d p o s e v i r t u a l l y no r i s k . Such an e x e m p t i o n f r o m t h e PMN r e q u i r e m e n t s w o u l d be r e a s o n a b l e . Economic

B u r d e n o f t h e PMN R e q u i r e m e n t

on P r o d u c t i o n C o s t s

A 25,000-pound annual p r o d u c t i o n volume exemption i s a l s o a r a t i o n a l p o i n t a t w h i c h t o e s t a b l i s h an e x e m p t i o n e c o n o m i c a l l y . S u c h an e x e m p t i o n w o u l d s h a r p l y r e d u c e t h e e c o n o m i c i m p a c t o f PMN r e q u i r e m e n t s w h i l e p r o t e c t i n g t h e p u b l i c f r o m u n r e a s o n a b l e risk. P r e s e n t l y , t h e c o s t o f f i l l i n g o u t a PMN f o r m a d d s s i g n i f i c a n t l y t o the u n i t c o s t of p r o d u c i n g a s m a l l volume



36


substance. As previously discussed, these costs f r e q u e n t l y cannot be passed on t o customers because of c o m p e t i t i o n f r o m e x i s t i n g p r o d u c t s . A t low l e v e l s o f o u t p u t , t h e a d d i t i o n a l c o s t per pound of s u b s t a n c e r i s e s d r a m a t i c a l l y . F i g u r e A shows t h e impact of $12,000 PMN-cost on t h e per p o u n d c o s t o f p r o d u c i n g a s u b s t a n c e a t low l e v e l s o f o u t p u t . A s u b s t a n c e w h i c h w o u l d n o r m a l l y c o s t 25 c e n t s p e r p o u n d e x p e r i e n c e s a 20 p e r c e n t c o s t i n c r e a s e a t a p r o d u c t i o n r a t e o f 60,000 pounds per y e a r . Costs r i s e b y 32 p e r c e n t i f o n l y 40,000 pounds per y e a r are produced a n n u a l l y . Below 25,000 pounds of o u t p u t , the p e r c e n t a g e i n c r e a s e i n c o s t per pound b e g i n s t o r i s e almost v e r t i c a l l y on the s c a l e . T h e i m p a c t o n c o s t a t 50 c e n t s a p o u n d i s s i m i l a r . The p e r pound c o s t i n c r e a s e s b y 16 p e r c e n t at 40,000 pounds of o u t p u t p e r y e a r , 2 6 p e r c e n t a t 2 5 , 0 0 0 p o u n d s p e r y e a r , and 6 4 p e r c e n t at 10,000 pounds per y e a r . A g a i n , the c o s t impact becomes i n c r e a s i n g l y s e v e r e at t h e l o w e s t l e v e l s of p r o d u c t i o n . The e f f e c t i s much t h e same a t c o s t s o f $ 1 and $ 2 p e r pound. The c o s t i n c r e a s e becomes i n c r e a s i n g l y d r a m a t i c a s t h e p r o d u c t i o n l e v e l d e c r e a s e s . A s F i g u r e A shows, however, t h e PMN-cost impact b e g i n s t o weigh most h e a v i l y on each pound of a s u b s t a n c e a t a l e v e l b e t w e e n 2 0 , 0 0 0 p o u n d s p e r y e a r and 6 0 , 0 0 0 pounds per y e a r , depending on the c o s t of the p r o d u c t . At 2 5 c e n t s per pound, c o s t s begin t o r i s e r a p i d l y under 60,000 pounds of o u t p u t , w h i l e at $2 p e r pound t h e most r a p i d c o s t i n c r e a s e s occur under 20,000 pounds of p r o d u c t i o n . Many c o m m e r c i a l c h e m i c a l s s e l l f o r u n d e r $ 1 p e r p o u n d . A t $1 p e r p o u n d c o s t s b e g i n t o e s c a l a t e m o s t r a p i d l y u n d e r 2 5 , 0 0 0 pounds of o u t p u t . An exemption, t h e n , s h o u l d not be s e t at l e s s t h a n 2 5 , 0 0 0 p o u n d s p e r y e a r t o m i n i m i z e t h e c o s t o f PMN f o r m s o n innovative chemical products. Even the spot p r i c e of most c h e m i c a l s i s under $ 2 per p o u n d . S p o t p r i c e s o n S e p t e m b e r 28, 1 9 8 1 , a s p u b l i s h e d b y t h e C h e m i c a l M a r k e t i n g R e p o r t e r , i n d i c a t e d t h a t o f 2,684 c h e m i c a l s s o l d b y t h e p o u n d o r k i l o g r a m , 1,516 o r 56 p e r c e n t w e r e p r i c e d b e l o w $ 2 p e r p o u n d . A b o u t 3 9 p e r c e n t w e r e p r i c e d b e l o w $1 p e r p o u n d , 1 9 p e r c e n t w e r e b e l o w 50 c e n t s p e r p o u n d and 4 p e r c e n t w e r e b e l o w 25 c e n t s p e r p o u n d . Such p r i c e s t e n d t o b e h i g h e r than the long-term c o n t r a c t p r i c e s under which c h e m i c a l s are u s u a l l y s o l d . T h u s , t h e c u r v e s i n F i g u r e A show t h e a p p l i c a b l e r a n g e o f c o s t s and o u t p u t . A l o w e r e x e m p t i o n , 1,000 k i l o g r a m s f o r i n s t a n c e , w o u l d c r e a t e a n u n n e c e s s a r y i m p e d i m e n t t o i n n o v a t i o n . New c h e m i c a l s w o u l d f a c e an a l m o s t i n s u r m o u n t a b l e c o s t b a r r i e r t o e x p a n d e d p r o d u c t i o n . T h e b a r r i e r w o u l d b e much l o w e r w i t h a 2 5 , 0 0 0 - p o u n d per year exemption. I n n o v a t i o n i s n o t j u s t t h e d i s c o v e r y and t e s t i n g o f new p r o d u c t s , b u t a l s o t h o s e p r o d u c t s ' a c c e p t a n c e o n a c o m m e r c i a l s c a l e and a t a c o m p e t i t i v e p r i c e . The i m p a c t o f PMNs o n t h e c o s t o f c h e m i c a l s u b s t a n c e s was c a l c u l a t e d u s i n g a



3.

UMLAND

Future for

37

Innovation

140

20,000

40,000

60,000

80,000

100,000

Pounds Annual Production

Figure A.

Additional cost of PMN requirement as a function of annual production rate.



38

TSCA! IMPACT ON SOCIETY AND CHEMICAL INDUSTRY

$ 1 2 , 0 0 0 - c o s t f o r e a c h PMN, T h i s c o s t a p p e a r s t o b e an a c c u r a t e estimate because the R e g u l a t o r y Research S e r v i c e d e r i v e d i t from a c t u a l c o m p a n y e x p e r i e n c e i n f i l i n g PMNs. C o m p a n i e s w e r e a s s u m e d t o r e c o v e r t h e PMN c o s t s o v e r f i v e y e a r s . M o s t new p r o d u c t s h a v e v e r y s h o r t l i f e t i m e s . F i v e y e a r s is reasonable. The a d d i t i o n a l income r e q u i r e d each y e a r t o r e c o v e r t h e e n t i r e c o s t was d e r i v e d b y c a l c u l a t i n g t h e c a s h f l o w n e c e s s a r y t o b r i n g t h e n e t p r e s e n t v a l u e o f PMN c o s t s up t o z e r o . A 1 0 - p e r c e n t d i s c o u n t r a t e was u s e d i n a l l c a l c u l a t i o n s . T h e r e s u l t i n g a n n u a l c a s h f l o w was t h e n d i v i d e d b y t h e p o u n d s o f o u t p u t per y e a r . P e r c e n t a g e changes were used t o i l l u s t r a t e t h e r e l a t i v e b u r d e n o f PMN c o s t s . D i f f e r e n t assumptions y i e l d s i m i l a r r e s u l t s . Figure Β i l l u s t r a t e s the impact o f assuming a $7,500 PMN-cost, a 1 5 - p e r c e n t d i s c o u n t r a t e , and e i t h e r a t h r e e - y e a r o r t e n - y e a r payback p e r i o d . The c h e m i c a l c o s t i s assumed t o be $1 p e r pound. A g a i n , PMN c o s t s b e g i n t o w e i g h h e a v i l y b e t w e e n 2 0 , 0 0 0 and 40,000 pounds o f annual o u t p u t . Under 20,000 or 25,000 pounds, the c o s t burden r i s e s d r a m a t i c a l l y .

100

Percent 8 0 Additional Cost Per Pound 60

40

20 3 Year Recovery 10 Year Recovery 20,000

40,000

60,000

80,000

100,000

Pounds Annual Production

Figure B. Additional cost of PMN requirement as a function of annual produc tion rate using the following assumptions: base product cost, $l/lb; PMN cost, $7500; and discount rate, 15%.

RECEIVED September 1, 1982


TSCA's Impact on Society and Chemical Industry - ACS Publications

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