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6.3. Regulations on Microbial Products of Biotechnology

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The Toxic Substances Control Act (TSCA) requires EPA to regulate certain microorganisms. EPA had done so under the Agency’s 1986 Policy Statement. Regulatory Impact Analysis of Regulations on Microbial Products of Biotechnology is an RIA for a replacement microbial regulatory regime. Under the earlier policy,

"Industry is required to file with EPA a premanufacture notice (PMN) in connection with any new microogranism before it is manufactured, imported, or processed and intended for general commercial use, where a “new” microorganism is defined as any intergeneric microorganism not found on the TSCA Chemical Substance Inventory. More specifically, under this policy, new microorganisms are defined as “intergeneric” microorganisms, which are microorganisms created through the deliberate combination of genetic material originating from organisms in different genera." (p. I-3)

The new rule retains the definition of new mircroorganisms but changes the filing requirements and introduces certain exemptions. Ibid., p. I-7. Two filing levels are created: TSCA Experimental Release Application (TERA) for research and development purposes and Microbial Commercial Activity Notice (MCAN)

"For all “new” microorganisms manufactured, imported, or processed for general commercial use (defined as use for commercial purposes beyond R&D)." (p. I-10)

MCAN is a more thorough report than TERA but it comes at a later development stage and hence can build on an earlier TERA filing. Reporting exemptions are provided for experiments within a contained structure such as a greenhouse and where another federal agency has regulatory responsibility. Ibid., pp. I-8 to I-9. In addition,

"Specific microorganisms are eligible for Tier I or Tier II exemptions. These are microorganisms EPA has determined to be low risk with respect to the characteristics of the recipients, and users must comply with any prescribed measures for the introduced genetic material and for minimizing mircroorganism emissions from the contained facility in which they are used." (p. I-11)

Applications of new microorganisms are covered the rule unless those applications are exempted by TSCA. Exempted applications include human and animal medications, food and food additives, pesticides and national defense activities. Examples of covered microbial applications include microbial production of enzymes used in household detergents and microorganisms injected into oil wells to enhance oil recovery. Ibid., pp. II-3 to II-4.

After reviewing a filing, EPA may take restrictive action:

"EPA has statutory authority … to prohibit or limit production of a substance following review of a notification for a commercial product. … in the case of microorganisms, submitters may be required to provide additional data … limit an environmental application to certain locations, monitor the microorganism, implement controls to reduce unintentional releases … Under the rule, TERA submitters would be bound to follow monitoring and confinement procedures described in the TERA …." (p. IV-23)

Costs and Benefits

The rule imposes fixed and variable costs. Variable costs depend on the number of TERA, MCAN and exemption filings. The number of expected filings is small. The total number of submissions – TERAs, MCANs and exemptions – is expected to be 46 in 1993 and grow to only 54 in 1997. Ibid., Table IV-3. The document describes the projections as conservative, i.e., low.

Unit costs are also estimated.

"The average cost of [preparing a TERA] … is estimated to fall between $5,330 and $54,425 for one submission for the first strain reviewed in a research program. Additional strains covered in the same TERA or later strains in the same research program would have lower costs." (p. IV-17)

[The cost per MCAN] "falls between $6,931 and $32,722. This range is based on the following assumptions: 1) the low cost is estimated to be the cost associated with a MCAN preceded by a TERA …." (p. IV-20)

Other costs of a variable nature include record keeping and delays or product withdrawals and product rejections. One fixed or sunk cost is the cost of rule familiarization.

The document has combined all the quantified costs of compliance based on the projected number of submissions. The total costs are $1.2 - $3.0 million in the first year (1993) and $94 thousand - $693 thousand in year 5 (1997) (1995$). Ibid., Table IV-1b. The figures are incremental costs relative to the base case of the 1986 policy. Interestingly, some of the components that comprise these totals are negative; those cost components are less than under the earlier policy.

Although numbers may have a life of their own, the document’s authors are suitably modest:

"Because there are many costs that could not be quantified, the results should be viewed as conservative estimates of overall costs." (p. ES-5)

Product withdrawals and delays are examples of unquantified costs.

The government incurs costs, too. These are also stated relative to the 1986 policy. For year 1, costs are $95 thousand - $104 thousand and for year 5 they are negative, i.e., savings of $86 thousand - $234 thousand. Ibid., Table V-8b.

Benefits are discussed but not quantified and hence there is no monetization. For example:

"EPA regulation … is expected to reduce risks to health and the environment while concurrently resulting in greater regulatory efficiency and possibly improving the pace of commercialization." (p. III-1)

"Unfortunately, risks to human health and the environment associated with microorganisms cannot be quantified accurately with information currently available or, in some cases, even identified with confidence." (p. III-1)

"These requirements contribute to overall risk reduction by requiring researchers to address risk considerations …." (p. III-6)

"Researchers could be encouraged to design microorganisms that are less likely to exhibit novel behaviors … to reduce the level of review." (p. III-7)

There is another benefit, to the industry, of a novel sort:

"The industry also should benefit from the rule through the “seal of approval” that the public may perceive to be attached to microorganisms reviewed by the Agency." (p. III-10)

Regulatory Alternatives

The document considers and rejects several regulatory alternatives: the 1986 policy and three options more stringent than the final rule. Ibid., pp. IV-36 to IV-43. The more stringent options have fewer reporting exemptions or cover all microorganisms (versus only intergeneric ones). Their costs tend to be significantly higher which lead to their rejection. Regarding alternative 1,

"While society would benefit marginally from a reduction in these risks, regulatory costs associated with such benefits were judged to be inordinately high.… Thus, this alternative would be expected to increase overall regulatory costs substantially, while providing only marginal benefits.

"Alternatives 2 and 3 were rejected on similar grounds." (p. IV-38)

However, benefits or differential benefits were not quantified so the comparison among cases is judgmental. The section concludes:

"EPA concludes that in selecting the rule, it has put forward the most efficient scheme of oversight from among the alternatives considered, while at the same time ensuring that the vast majority of microorganisms presenting the greatest uncertainty will be subject to regulation." (p. IV-43)

Regulatory Flexibility

EPA found that, based on a threshold of $40 million in revenues, much of the regulated population would qualify as small businesses. Ibid., Chapter VIII. Several options were considered to mitigate the burden of the rule on these firms. EPA proposed among things relaxing the burden of up-front substantiation for claims of confidential business information for smaller firms.

Comments on EPA’s proposal expressed concern for impacts on products of low value or limited use. EPA ultimately determined that most such products would be exempt or involve only a minimal regulatory burden. EPA chose to relax the burden of substantiation for claims of confidential business information for all filers.

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