THOUGHT LEADERSHIP SERIES
Achieving Effective ESA Consultations to Support FIFRA Registrations
Modern Crop Protection Business Strategies Need to Integrate Regulatory and Conservation Outcomes
A short history of the FIFRA-ESA regulatory debacle and a way forward for business, the environment, regulators, and society.
Ease of compliance is not necessarily the primary objective of environmental regulations; however, if regulatory processes are ineffective, outcomes can include legal disputes, business uncertainty, and failure to deliver on the intent of the laws. These are the convoluted circumstances of the crop protection industry and compliance with the United States Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Endangered Species Act (ESA). The strategy for success going forward is to better deploy both the FIFRA and ESA authorization processes, to achieve national scale pesticide consultations that are more practically linked to the landscape. Effectively balancing both crop and species protection is a win – for business, the environment, regulators, and society. Our team at Creekbank Associates is developing and sharing a series of FIFRA-ESA focused articles to inform and guide needed improvements in the registration process and resulting outcomes.
While both FIFRA and ESA regulations consider effects to the environment, they were not initially developed with process compatibility in mind. The result is a long history of two regulations that may have worked well on their own, but when it comes to shared outcomes, the processes have fallen short, leaving farmers with less products and species with unattended conservation needs. In this article we provide a short history of this issue to date as a platform for shared understanding and advancing progress.
It’s not good for listed species or business when environmental regulations don’t play well together and end up in court
The ESA aims to provide a framework for conserving and protecting endangered and threatened species and their habitats. Under the ESA, all Federal agencies are required to ensure that their actions are not likely to jeopardize the continued existence of a listed species or destroy or adversely modify their designated critical habitat. The ESA includes provisions that allow citizens to bring suit in court against Federal or private entities when they believe a listed species is not being adequately protected, based on procedural or substantive obligations. The EPA is responsible for all FIFRA registration effects determinations, each of which must include potential impacts to endangered species. Beginning in 2001, a series of lawsuits were filed against the Environmental Protection Agency (EPA) by plaintiffs alleging that during pesticide registrations the agency had failed to adequately consult on effects to listed species. The FIFRA-ESA wars are summarized in 2013 and 2015 newsletters by attorney David Weinberg, where it is noted that given their current resources neither EPA nor the Services (U.S. Fish and Wildlife Service and National Marine Fisheries Service) can catch up on ESA evaluations of existing crop protection products through registration review, including the court cases, and also meet statutory deadlines to evaluate new active ingredients (AI’s) or new uses of existing products. Weinberg refers to the largest firms as “basics” to differentiate them from the typically smaller, generics-focused companies.
The opening round of lawsuits targeting FIFRA-ESA were directed at older, post-patent “legacy” pesticides, placing both basic and generics companies’ registrations for these off-patent product formulations at risk. Through hearings and partial settlements, some aspects of ESA compliance were addressed by cancelling certain types of use, or terminating entire product formulations for the AI’s in question. The legal wrangling resulted in modified product labels or registration changes, and many extended court deadlines. The consequences of these court cases should be understood as initial negotiated outcomes in what remains an uncertain and incomplete regulatory process that is caught up in legal disputes–instead of focusing on delivering ESA compliance.
As the regulatory debacle has progressed, citizen-based suits are increasingly being redirected toward ESA compliance for “new use” registrations. A shift began to take place in the citizen lawsuit strategy and by 2014 it wasn’t just older legacy pesticide registrations heading to court. Dupont’s cyantraniliprole was challenged when the initial registration was issued by EPA, thus jeopardizing the return on investment for the new AI. This created a major threat in an industry where research, development and compliance studies for each new AI can take upwards of a decade, and cost between $300 – $500 million. Along the way, public concern about neonicotinoid insecticides and weed resistance to glyphosate and dicamba products have added to registration woes and contributed to grower concerns about available resource management options. With a multitude of compounds currently in litigation, there is roughly $5 – $6 billion dollars at risk at any one time.
The clock continues ticking on renegotiated deadlines for the legacy pesticide effects determinations and the resulting ESA Section 7 consultation decisions. As part of the legal settlement deadlines, EPA was required to complete Biological Evaluations, for these certain active ingredients, at the following schedule:
The future availability of legacy products and newer AI’s to meet grower needs and the viability of registrants’ revenues is on the line. This situation adversely impacts growers and ultimately consumers, all the while making no headway in addressing the status of endangered and threatened species potentially affected by the registration action. As the lawsuits stack up and species’ viability becomes more threatened, the returns on investment become increasingly tenuous.
Expect a standstill when siloed regulatory process collides with siloed industry structure
How and when the FIFRA-ESA wars began to impact crop protection companies depends on their business model and product line. Each FIFRA registrant assesses the value of the products in their portfolio and the costs to advance and maintain their registrations, with all new formulations and new uses of products undergoing the registration process. Companies with patent-protected, registered, new AI’s expect to recoup expenses and generate profit during the initial 15-year registration term. When a patent term expires, generic competitors can step in with new product formulations that include that once exclusive AI. As more companies compete in selling post-patent generic products, over time they drive prices down to the minimum margin above the cost of production and distribution. Many new players from India and China have entered the generics market over the past decade, adding to even more significant margin reductions on products containing older AI’s.
A company registering a patent-protected product will need to achieve positive outcomes from both the FIFRA environmental risk assessment and the ESA Section 7 consultation, and be prepared for the costs of both the registration process and the real delivery of any agreed-to conservation outcome. On the other hand, generic product registrants may opt to make use of post-patent AI “technical label” study data as part of their registration data packages. Because significant scientific research and data are required to support each pesticide registration, Congress included provisions in FIFRA relating to data compensation obligations for “exclusive-use” and compensation. The companies negotiate, and the AI’s main label technical registrant recoups some portion of their “data comp” investment expenses from those companies that want to use the “technical label” study data. Generic companies, with narrower margins, are particularly challenged by major new expenses in this process. They face the additional need of effective coordination with their direct competition in these post-patent AI consultations, so that the resulting Biological Opinion and Incidental Take authorization and associated conservation costs are equitably related to their respective products.
Crop protection companies traditionally organized their internal business structure with product development and regulatory divisions — discrete business units with clear project hand-offs, with the additional habit of maintaining very distinct lines of separation from corporate stewardship initiatives. However, in recent decades the agriculture industry, including crop protection, has begun investing in increased conservation and stewardship programming, such as precision planting technology (begun in the early 1990’s) and corporate sustainability initiatives with new research, tools, and increased education and outreach programs. Recently added stewardship divisions have focused primarily on conservation education and research. But these stewardship divisions remain siloed within their companies and disconnected from product development and desired regulatory outcomes. This is an operational structure that once served industry well but is no longer suited to the emerging paradigm —one in which success depends on achieving effective ESA consultations within FIFRA registrations.
On the flip side of the coin, the processes within the regulatory Agencies are just as siloed as the traditional crop protection business structure. Still today, EPA and the Services do not provide the regulated community with an integrated, streamlined process to effectively navigate the conjoined FIFRA registration and ESA consultation processes. Progress today remains at a virtual standstill, with the decades and billions of public and private investments piling up, and no appreciable improvement for threatened and endangered species. Meanwhile, a increasingly watchful public continues to file lawsuits on the failure of the agencies to effectively consult under the ESA. A different approach has become a necessity.
Modern business strategies need to integrate regulatory and conservation outcomes to grow and prosper
There is a clear need for an integrated regulatory process that better enables decision-making for both FIFRA and ESA because the current situation has only increased uncertainty for all stakeholders. Undue focus on refining the FIFRA environmental risk assessment to achieve “No Effect” or “Not Likely to Adversely Affect (NLAA)” listed species determinations has added up to a hefty price tag for all stakeholders, while not effectively addressing the conservation and protection of endangered and threatened species and their habitats. The FIFRA registration and ESA consultation outcomes provide for where, when, how and the amount of a product that can be used. These factors drive the determination of the market potential for that product. Registered products that have similar uses and application areas compete for market share. Successful crop protection companies are those with the most effective strategy to develop and deliver products that retain or expand market share against their competition.
Crop protection industry business strategies that follow the traditional approach to ESA consultations in FIFRA registrations, and then face the onslaught of citizen lawsuits, have reached the end of their utility. The cost of fixing the problem is likely to be cheaper than duking it out in court or hoping that the spotlight is focused on some other company’s product. The path to registration and reputable progress includes expanding conservation objectives within the crop protection industry. Forward-looking companies are seeking to better understand their options for utilizing combinations of avoidance, minimization, and offsetting potential listed species effects associated with their product registrations.
While stakeholders at extreme ends of the societal debates surrounding modern agriculture and environmental impacts will likely remain polarized, our experience with registrants, agencies, and representatives of the agricultural and environmental communities reflect an increased interest in effectively and innovative redressing the ESA compliance situation. Focusing on collaboration to secure solutions rather than wallowing in conflict is the practical, profitable and optimistic path forward. Forward-thinking industry leaders are seeing that the time has come to revise revenue models to include the costs, savings, public relations, and other real world benefits of conservation actions directly linked to their product registration program. Just as EPA and the Services need support to integrate their regulatory processes for effective outcomes, crop protection companies must invest in solutions to link their product registrations, and resulting markets, with effective conservation measures where necessary and appropriate.
Jody L. Bickel, Creekbank Associates, Chief Executive Officer