&EPA
Off ice of
Pesticide Programs
Washington DC 20460
August 1982
EPA 540/9-82-013
Regulatory Impact Analysis
Data Requirements
for Registering Pesticides
under the Federal Insecticide,
Fungicide and Rodenticide Act
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Acknowledgements
This report was prepared by several staff members of the Economic
Analysis Branch, Benefits and Field Studies Division, Office of
Pesticide Programs. Authors of the report, in alphabetical order, were
Arnold L. Aspelin, Ph.D., Gary L. Ballard, Donald E. Eckerraan, Ph.D.,
Mark Glaze, Roger Holtorf, Peter J. Kuch, Ph.D., Robert E. Lee IT,
Ph.D., Russell Scarato, Linda Vlier and Edward Weiler. Special
recognition is given to Linda Stallard and Margaret Stuart who provided
the clerial support for production of the report.
Considerable support and assistance were provided by the OPP
Division Directors, and their designated staff members, as well as the
Office of the Director, OPP, without which this report could not have
been prepared.
Arnold L. Aspelin, Ph.D., Chief
Economic Analysis Branch
ADDENDUM TO ACKNOWLEDGEMENTS
Edward R. Brandt also authored sections of this report
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Regulatory Impact Analysis
Data Requirements for Registering Pesticides Under
The Federal Insecticide, Fungicide and Rodenticide Act
Table of Contents
I. Introduction 1
A. Purpose of Analysis 1
B. Description of Regulation 1
C. Requirements for Analysis 4
D. Scope of Analysis 4
II. Summary of Findings 8
A. Overview 8
B. Need for Regulation 9
C. Pesticide Program Impacts 11
D. Compliance Costs 14
E. Pesticide Producer Impacts 17
F. Pesticide User Impacts 18
G. Aggregate Economic Impacts 19
H. Benefit/Cost Analysis of Regulatory Alternatives 19
I. Registration Compliance Costs Compared to Overall
Compliance Costs 20
III. Need for Regulation and Alternative Approaches 23-
A. Overview of Pesticide Usage, Exposure and Effects 23
B. Nature of Economic Externalities Inherent from
Pesticide Producer and User Behavior 26
C. Alternative General Approaches to Dealing with
Pesticide Externalities 29
D. Approach Taken under FIFRA and Alternatives for Analysis 32
IV. Pesticide Program Impact Analysis 41
A. Registration Decisionmaking Programs and Their General
Pesticide Data Needs 41
B. Programmatic Rationale for Various Data Requirements and
Associated Guideline Subparts
C. Impacts of Alternatives on Functioning of Pesticide Programs 41
D. Impacts on Acute Human Hazards 55
E. Impacts on Chronic Human Hazard 58
F. Impacts on Environmental Hazards 63
V. Compliance Cost Analysis of Data Requirements 70
A. Data Costs for Registration of Pesticides Using
Alternative Approaches 70
B. Reregistration Data Costs 71
C. New Registrations 74
D. Direct Data Costs for All Registrations 74
E. Indirect Industry Costs 76
F. Change from Current Practice to Alternative Approaches 76
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VI. Pesticide Industry Impact Analysis
A. Pesticide Industry Overview
B. Producer Level Profile and Impact Analysis
C. Formulator Level Profile and Impact Analysis
D. Comparison of FIFRA Registration Compliance Costs
VII. Pesticide User Impact Analysis 102
A. Overview 102
B. Agricultural Users 102
C. Non-agricultural Users 104
D. Summary of User Impacts 109
VIII. Welfare Impact Analysis 110
A. Agricultural Sector 111
B. Non-agricultural Sector 113
C. Aggregate Welfare Impacts 113
D. Net Societal Benefits from Pesticide Use:
, An Alternative Approach 114
IX. Overall Benefit/Cost Analysis 118
A. Introduction 118
B. Costs 119
C. Benefits . .123
D. Benefit/Cost Evaluation 126
E. Benefit/Cost Sensitivity 126
F. Cost/Effectiveness 127
X. Summary of Impacts on Small Businesses or Other Units 128
A. Pesticide Producers 128
B. Formulators 130
C. Government Units 131
D. Pesticide Users 132
References 133
Appendix 1 - Unit Cost Estimates 138
Appendix 2 - Benefit/Cost Sensitivity 145
Appendix 3 - Cost-Effectiveness Analysis in Reducing Hazards 149
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I. INTRODUCTION
A. Purpose of Analysis
The Environmental Protection Agency through its Office of
Pesticide Programs, is charged with the responsibility for regulating
pesticide use in the United States. The legal authority for regulating
pesticides is established by the Federal Insecticide, Fungicide, and
Rodenticide Act, as Amended (FIFRA). FIFRA states, among other things,
"no person in any state may distribute, sell, offer for sale, hold for
sale, ship, deliver for shipment, or receive (having so received)
deliver or offer to deliver, to any person any pesticide which is not
registered with the Administrator." FIFRA further states "The
Administrator shall publish guidelines specifying the kinds of
information which will be required to support the registration of a
pesticide and shall revise such guidelines from time to time."
This report presents the results of a Regulatory Impact Analysis
of proposed data requirements which have been drafted by Agency staff
and are now proposed rulemaking. The registration data requirements
must be considered within the context of overall programmatic
activities concerning registration of pesticides under FIFRA. The cost
and benefits of these data requirements are manifested only by their
actual application in registration activities. The programmatic
context of the data requirements is presented here along with an
overview of compliance costs of other registration activities and
program policies.
B. Description of Regulation
The requirement that the Administrator specify the kinds of
information required to support registration of pesticides is contained
in Section 3(c)(2) of FIFRA. The Environmental Protection Agency has
been developing these requirements over a period of years covering
several topic areas. Information needed to support the registration of
pesticides includes product chemistry, environmental fate and
transport, toxicological effects, product performance, labeling,
exposure magnitude, good laboratory practices, experimental use
applications, and biorational pesticide data requirements. The
registration data requirements now include a total of more than 20
areas.
On June 25, 1975, EPA first proposed guidelines for registering
pesticides in the United States (40 FR 26802). In response to public
comments and further internal Agency review, EPA reproposed in 1978
guidelines subparts on product chemistry, environmental chemistry,
hazard evaluation for fish and wildlife, hazard evaluation for humans
and domestic animals (Toxicology). An economic impact analysis of the
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subparts proposed in 1978 was conducted and published in the Federal
Register at that time (FR, Sept. 6, 1978, Part II). Comments were again
received on the reproposed guidelines. These comments have been considered,
and along with additional internal review, revisions to the reproposed
guidelines have been made.
In addition to the subparts reproposed in 1978, development of subparts
covering other topic areas has been inltated by the Agency. Topics
additionally include product performance, label requirements, hazard to
non-target insects, hazard to non-target plants and micro-organisms, data
requirements for experimental use permits, exposure information for reentry
purposes, and good laboratory practices.
The Agency is now changing the approach taken in establishing data
requirements for registration. Plans now call for issuing non-
rulemaking documents describing the methods for generating specific test
data. A separate proposed Section 158 to the Code of Federal Regulations
containing Subpart B - Registration Data Requirements, is to be issued
specifying the test data submittal requirements for the remaining subparts.
In effect, Section 158 will establish the specific test data required to
support the registration of a product. Registrants or applicants for
registration will then be referred to the non-rulemaking documents to be
made publically available through the National Technical Information Service
(NTIS) for guidance on test methodologies. The regulatory requirements will
be keyed to specific product parameters, such as chemical class or
formulation type, and to intended use patterns which establish the causation
of need for specific test data. Subpart A - General Provisions - will also
be issued as a part of Section 158.
The generation and submission of data by applicants desiring to
register pesticide products with the EPA is not new and is necessary to EPA
in making registration decisions required under the law. Pesticides by
design are toxic to biological organisms. The need for understanding the
chemical properties, the potentials for exposure, and the toxicological
properties of the chemicals used as pesticides is the purpose of the data
requirements being proposed by EPA. FIFRA requires the Administrator of EPA
make a finding that if a pesticide is registered, its use in accordance with
widespread and commonly recognized practices will not generally cause
unreasonable adverse effects on the environment. The determination of
unreasonable adverse effects on the environment can only be made by having
knowledge about the chemical and toxicological properties of the pesticide
for which a registration is desired. Making such a finding is a complex
review and decision-making process that is beyond the reach of the general
population. This is especially true for long term effects which may result
from pesticides such as bioaccumulation or chronic health effects. The
complexities involved in making determinations of safety for pesticide use
moved Congress to regulate pesticides first through the U.S. Department of
Agriculture and later the Environmental Protection Agency.
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The data submittal requirements have been written to accommodate
situations which have been found historically to be typical of intended
pesticide registrations. Obviously unique use patterns, physical/
chemical properties, or biological properties may make certain
requirements unnecessary. Test standards may also require changes in
other unusual circumstances. The regulations, taken together with the
guidelines, have built in flexibility to cover these situations.
The Agency also intends to issue case-by-case waivers of data
requirements for minor uses as stipulated in Section 3(c)(2)(A) of
FIFRA. This section of FIFRA provides that in general, data
requirements for minor uses be commensurate with extent of use, pattern
of use and level of potential exposure for man and the environment.
Furthermore, test standards must take into account economic factors
such as national volume of use, extent of distribution, and the impact
of the cost of meeting the data requirements. In applying these
requirements to registration activities, the Agency is continuing to
implement a minor use policy which incorporates the requirements of
Section 3(c)(2)(A) of FIFRA.
By issuing these regulations and guidance, the Agency intends to
inform potential registrants of the types of studies that the Agency
considers as necessary for making determinations on the
registerability of pesticide products. Specific data requirements
represent the current scientific thinking as to the best ways to
measure the potential for exposure and the toxicological significance
of pesticides to various non-target species including humans. The
studies specified are generally accepted internationally as appropriate
means to evaluate the risk of toxic chemicals. The Agency also intends
that the base of knowledge on the effects of pesticides will be brought
up to current scientific standards. The data requirements outlined in
the proposed Section 158 are the result of evolution in both
identifying problem areas and further developing testing methodologies
that would serve as reliable indicators of situations where exposure or
toxicological properties of chemicals are likely to cause unreasonable
adverse effects.
The potential for interaction between pesticide registrants and
the Agency would not be diminished by issuing these regulations.
Registrants are required by FIFRA to bear the burden of demonstrating
the safety of their products given the intended manner of use for their
products. By issuing formal data submittal requirements, the Agency is
establishing its position as to the level of effort expected from
potential registrants who must by law bear the burden of showing the
safety of their products. With the regulations and guidance in place,
registrants remain free to interact with Agency staff in explaining
their data and applications in the course of the registration process.
Written guidance on Agency requirements is useful to the pesticide
industry for planning its R&D activities as well as being useful to
Agency staff, in administering pesticide programs.
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C. Requirements for Analysis
This report is intended to meet the requirements of regulatory
impact analysis as established by Executive Order No. 12291, the
Regulatory Flexibility Act and Section 25 of FIFRA. This document also
serves as an input in preparing any analysis required under the Paper
Work Reduction Act of 1980.
Executive Order 12291 requires that adequate information concerning
the need for, and consequences of, a proposed action be presented. The
order requires a finding that potential benefits to society would
outweigh the potential costs; and of all the alternative approaches to a
given regulatory objective, the proposed action will maximize net
benefits to society. In effect, proposed regulations need to undergo a
rigorous cost/benefit analysis as permitted by available data. The
regulatory impact analysis is to show that alternative means of achieving
regulatory goals are available and these have been given proper
consideration. Executive Order 12291 also recognizes that legal
constraints may play a role in selecting among alternative approaches to
achieving regulatory goals.
The Regulatory Flexibility Act requires that Agencies issuing
regulations take special note of the impact of proposed regulations on
small entities. Analysis requirements under the Regulatory
Flexibility Act can and should be combined under the analysis required
under Executive Order 12291.
FIFRA, in Section 25, requires that the Administrator of EPA
consider such factors as the effects of regulation on production and
prices of agricultural commodities, retail food prices and otherwise on
the agricultural economy when issuing regulations affecting pesticides.
D. Scope of Analysis
This regulatory impact analysis encompasses the costs, benefits
and impacts of five alternative approaches to information generation
that supports the FIFRA objective to reduce the adverse human health and
environmental effects from pesticide use to acceptable levels while still
permitting society to benefit from pesticide use. The core of this
analysis is a comparison of the Agency's proposal to issue regulations on
information required in support pesticide registration, with alternative
approaches in obtaining the necessary information.
The proposed regulation and alternative approaches will be
explained in more detail in Section III of this report; briefly the
alternative approaches include:
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1. Reference Guidelines. The Agency issues non-regulatory
guidance as to the current state-of-the-art testing
methodologies. Rulemaking on data submittal requirements is
not issued. Studies needed to support a pesticide
registration are determined by interaction between applicant
and Agency reviewers.
2. Regulatory Requirements. The Agency issues regulations on
data submittal requirements for the different types of
pesticide products and uses to be registered. Waivers are
permitted and tiered testing approaches specified where
appropriate. Non-regulatory guidance on testing methodologies
would be made available by the Agency.
3. Self-Certification. Premarket data are not required to be
submitted. Applicants must certify their products will not
cause unreasonable adverse effects.
4. Comprehensive Data Requirements. The Agency issues
regulations specifying a list of all data requirements that
products must fulfill to obtain registration. Waivers and
tiered testing are not considered in this approach.
5. Provisional Registration. Registrants are allowed to market
their products on a limited basis after having submitted
results from "indicator studies" which are short-term and
relatively low cost. Full marketing rights would be granted
only after all studies, including chronic effects tests, are
submitted. Registration of new chemicals and significant new
use patterns would be subject to this approach.
The analysis assumes full implementation of these alternatives as
specified so as to indicate costs, benefits and impacts on affected
sectors or groups. This is done recognizing that, in reality, a
combination of two or more of these might be implemented to maximize
net benefits to society. Partial implementation of a single
alternative is also a possibility, for the same reason. Consideration
is also given to the feasibility of government non-regulatory options
such as education or training, as well as no government role
whatsoever, other than provision of the judicial system to deal with
litigation involving impacts of pesticide use resulting in damage
claims.
The alternatives selected for analysis are based upon continuing
review by pesticide program staff dating back to the first economic
impact analysis of the guidelines prepared in 1978. Comments and
inputs have been soliciited and obtained from various parties and
groups prior to and since the 1978 analysis. Consideration has been
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given the submissions received by Vice President Bush in response to
his request for input by the Task Force on Regulatory Relief. Several
submissions relate to the Pesticide Program and the guidelines or
data requirements initiative in particular. Although a separate
evaluation and response will be made concerning the comments received
by the Task Force in general, this analysis is designed to relate to
the concerns expressed about data requirements and corresponding
suggestions.
The guidelines subparts which correspond to various data
requirements are in varying states of development. Data submittal
requirements with the largest cost factors are now in approximately
final form and the associated costs can be estimated quite accurately.
There are other subparts where the related data submittal requirements
are more subject to change, but requirements are well enough defined to
allow prediction of impacts. The less well defined requirements
generally call for less costly studies. Specific changes in data
data guidance after this time in the near term are not likely to
substantially alter the results of this impact analysis of all
requirements and guidance taken together.
The analysis of the 1978 proposed guidelines indicated that about
1,460 active ingredients were registered at that time. Of this number,
about 1,000 active ingredients were contained in products being
produced or marketed, and the remaining 460 were not in current
production. Since 1978, a reregistration program called Registration
Standards (RS) has begun with the purpose to reregister all currently
registered products. For planning and prioritization, the currently
registered active ingredients have been grouped into clusters. The
1,460 active ingredients have been reduced to about 600 active
ingredients or active ingredient groupings for which standards are to
be written. -The reduction from 1,460 to 600 results from several
factors including identification of obsolete chemicals no longer
produced; grouping together of related salts, esters, acids, etc., of
the same active ingredient for which a single data base is necessary
under the RS program; and identification of many chemicals that are
considered as inert ingredients as opposed to active ingredients.
The 600 active ingredients have been divided into 48 clusters
based on similarity of major use patterns. In using this cluster
approach in assigning priorities for the RS program, active ingredients
which substitute for one another on major use sites will be reviewed
and reregistered in approximately the same time period. This approach
is thought to be necessary to provide equitable treatment for
registrants since reregistration is expected to extend over several
years. Otherwise, registrants with chemicals reviewed early in the RS
program might be at cost disadvantage with competing registrants'
products that might be reviewed at a much later time. Also users might
be steered toward a less desirable product because it's labeling had
not been modified at the same time. This analysis assumes that
reregistration will proceed as now planned.
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Under the RS program concept, different scenarios or schedules are
possible. The 1978 analysis of the proposed guidelines presented two
scenarios based on an assumption of 50 standards per year would be
completed. One scenario assumed that each standard would identify the
schedule for submission of data to obtain reregistration and that data
gaps would be filled some years after the standard was established in
interim form. The second scenario assumed the establishment of a
program to identify data deficiencies for products before a standard
was developed and issued covering those products. EPA would then
inform registrants of missing data and require them to submit data when
the standard development was undertaken and published. The intention
of this early notification to registrants was to expedite initiation of
testing that might require years to complete.
Currently, the RS program has shown that 50 standards per year was
optimistic in that there has generally been more data requiring review
than previously thought. Plans now are to complete 25 to 40 standards
per year depending upon available Agency resources.
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II. SUMMARY OF FINDINGS
A. Overview
The Environmental Protection Agency through its Office of
Pesticide Programs regulates distribution, sale and use of pesticides
under authority of FIFRA and FFDCA. Under FIFRA, the Program is
responsible for decision-making on applications for registration of new
products and new uses of registered products, as well as the
reregistration of currently registered products. To this end, FIFRA
requires EPA to specify the kinds of information it requires to support
the registration of pesticides. EPA has proceeded with the development
of regulations and guidance covering the diversity of topic areas
pertaining to the evaluation of pesticides for possible unreasonable
adverse effects on the environment.
The registration data requirements have been analyzed in
accordance with requirements for regulatory impact analysis under
Executive Order No. 12291, the Regulatory Flexibility Act, and Section
25 of FIFRA relating to impacts on the agricultural sector of the
economy. As established by Executive Order No. 12291, the framework
for this analysis is a comparison of the costs and benefits for a range
of alternative approaches to achieving a regulatory objective. The
objective of this regulation is the generation of sufficient
information about pesticides to provide for informed and reasoned
decisions to keep the adverse human health and environmental effects
from pesticide use to acceptable levels, while still permitting society
to benefit from pesticide use.
Numerous market-oriented and regulatory approaches have been
considered for achieving the stated regulatory objective.
Market-oriented approaches operating in the absence of regulatory
authority have been judged unlikely to satisfy the highly-complex
requirements of the registration decision process. Pesticides are
capable of causing chronic effects which may manifest themselves ten or
twenty years after initial exposure. This long lag time generally
would not allow those people potentially harmed by pesticides to
effectively recover damages from pesticide producers and users.
Several regulatory approaches have been reviewed. Five
alternative approaches were selected for detailed analysis of costs and
benefits. These approaches were:
#1. Reference Guidelines - The Agency issues non-regulatory
guidance. Studies needed to support a pesticide registration
are determined from interaction between applicant and Agency
reviewers.
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#2. Regulatory Requirements - The Agency issues regulations on
data submittal requirements. Waivers permitted and tiered
testing is employed where appropriate.
#3. Self-Certification - Applicants must certify their products
not to cause unreasonable adverse effects. Agency enforces
this certification.
//4. Comprehensive Data Requirments - Agency issues regulations
specifying a list of data required for all registered
pesticide products. Waivers and tiered testing not allowed
in this approach.
#5. Provisional Registration - Registrants are allowed to market
new chemicals for significantly new use sites on limited
basis following submission of short-term studies. Full
registration marketing rights to be granted only after all
studies, including chronic-effects tests, are submitted.
These alternative approaches have been analyzed to determine their
relative cost and benefits. Key findings of the analysis are presented
in the remainder of this section of the report. Sections III through X
of this report summarize the analysis in greater detail. The complete
analysis is reported in a separate document (Cost/Benefit Analysis of
Data Requirements for Registering Pesticides under FIFRA, OPP/EPA, May
15, 1982).
B. Need for Regulation
1. Domestic pesticide consumption in the United States totals
about 1*2 billion pounds of active ingredient annually, not counting
such products as elemental chlorine, sulfur, creosote and other wood
preservation materials. Pesticide markets currently exhibit a real
growth on the order of only 1 or 2 percent annually. In contrast,
pesticide usage had doubled between the early 1960's to the late
1970*s, giving an average real growth rate of 5 percent per annum in
that time period.
2. The agricultural sector of the economy consumes a majority,
about 72 percent, of the 1.2 billion pounds active ingredient consumed
annually. The combined industrial/governmental/institutional sector
accounts for the second largest share of pesticides consumed, about
21%. Finally, home and garden pesticide use represents about 7% of
annual domestic consumption in the United States.
3. Actual and potential exposure of people to pesticides is
widespread. A majority of the 2 million commercial farms in the U.S.
use pesticides. There are about 40 thousand commercial pesticide
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applicators who periodically treat the multitude of structures and
facilities in the industrial/governmental/institutional and residential
sectors of the economy. An estimated 90% of all households use some
pesticides in the home, garden, or yard. The vast majority of the
population is potentially exposed to pesticides while applying them, or
through contact with residues from past application.
4. Virtually the entire U.S. population is exposed to pesticide
residues in food. These residues currently are generally at or below
levels established by EPA, and enforced by FDA.
5. Pesticides are by design biological poisons seldom specific as
to the time, place and target of their biocidal activity. Pesticides
are toxic to broad categories of pests and at the same time acutely and
chronically toxic to at least some parts of the nontarget biota,
including humans. The long term effects of chronic exposure to
pesticides are complex matters with considerable uncertainty as to
specific outcomes. Pesticides thus, inherently tend to create
opportunity for economic externalities (undesired side effects) which
need to be controlled.
6. Given the low probability of demonstrating an actual
cause/effect relationship for chronic health hazards associated with
pesticide exposure, a pesticide producer's expected cost of future
liability lawsuits due to chronic effects from his product is low.
Economic theory suggests that, in the absence of regulations, firms
might find it irrational to spend a million dollars to examine the
chronic toxicity of a pesticide chemical. Similar conclusions can be
made about the expense of testing pesticides for other adverse effects,
particularly for non-target flora and fauna. As such, market oriented
approaches for reducing the potential externalities inherent in
pesticides use would be of limited effectiveness unless all pesticide
producing firms where absolutely socially responsible.
7. Data requirements in support of pesticide product registrations
have evolved through a series of legislative initiatives, regulations,
and policy directives over the years, dating back to 1910. As
potential health or environmental problems were recognized, data to
guide appropriate regulatory responses were required of applicants.
Current requirements are enforced under authority of FIFRA, as amended,
and the Federal Food, Drug and Cosmetic Act. The burden of proof has
been placed by law on pesticide registrants to show that their products
will not cause unreasonable adverse effects when applied within
commonly accepted use practices.
8. The selection of any one of the five alternative approaches to
meeting the Pesticide Program's regulatory directive on information
requirements would affect several parameters including timeliness of
program activities, program costs, programmatic benefits of reduced
hazards to humans and the environment, industry compliance costs, and
user impacts.
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C. Pesticide Program Impacts
1. Pesticide products are regulated under FIFRA largely through a
registration mechanism. The decision to register a product and the
accompanying decision on permitted conditions of use are based upon
review of data either submitted or cited by a registration applicant.
2. Applications to register new chemical active ingredients have
resulted in an average of 14 new chemical registrations per year during
the 1970's. All new chemical registrations are required to be
supported by test data. In FY 80, 70 submissions of cycles were
received with an average of 5 submissions per final acceptance.
3. Applications to amend the registration of current products
such as the addition of new sites or making formula changes are also
processed by OPP. In FY80, about 2,350 such applications were
processed.
4. OPP processes applications for registration of products that
are identical or substantially similar to currently registered
products. Thousands of such applications are processed annually. Such
registrations can, with certain legal restrictions, rely on data
previously submitted to the Agency.
5. OPP reviews several hundred special registration requests such
as for Experimental Use Permits, Special Local Needs Registrations and
Emergency Exemptions. Some of these reviews involve data
that would be covered by the registration data requirements and
guidelines.
6. Under the amended Federal Food, Drug and Cosmetic Act, EPA
establishes tolerances for the maximum levels of pesticide residues
allowed in food or feed commodities. Residue chemistry and toxicology
data are needed to set tolerances at levels where public health
protection will be assured. Several hundred petitions for tolerances
and amendments to existing tolerances are received by EPA each year.
7. FIFRA requires EPA to reregister all currently registered
products in an expeditious manner updating the decision data bases to
satisfy current scientific standards and regulatory policy. All
currently registered active ingredients have been organized into 600
groupings for the purpose of reregistration processing under a program
entitled Registration Standards. An important outcome of the
Registration Standards process is to identify and have filled, gaps in
the information available on the potential adverse effects of all
registered pesticides. Some of these pesticides were registered more
than twenty years ago on the basis of test data generated under even
older methodologies and before some chronic effects and enviornmental
test data were recognized as required.
8. The Registration Standards program contains as a sub-program a
Data Call-in feature. Its goal is to inform registrants of current
products that long-term chronic health data are needed for certain
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kinds of products and to have these data submitted before the full
review of the chemical starts. Registrants are required to show
progress in producing these data such that complete data bases from
chronic effects testing will be available when a chemical is scheduled for
review in the Registration Standards program. Otherwise, a delay of up to
four years would ensue after the initial Registration Standards review, if
a chronic feeding study, for example, was found to be needed. Although
invalid studies may still create delays, the disruption of the
Registration Standards program is expected to be lessened by having data
call-in.
9. Data requirements to support product registration have impacts
because of both the costs of generating data and the time required for
generation and review of the data. Historically, the average elapsed time
from discovery of a chemical's pesticide activity to commercial
registration has trended upward from about 5 years in the 1960's to over 7
years in the latter 1970's. By alternative, the estimated time from
original discovery to commercial registration is as follows:
Alternative Months
#1 - Reference Guidelines 85-95
#2 - Regulatory Requirements 80-90
#3 - Self-Certification 60-80
#4 - Comprehensive Data 100-120
#5 - Provisional Registration 60-80
10. Alternative approaches to data requirements can affect the
certainty of the ultimate outcome of product registerability decisions.
Alternative #4, comprehensive data requirements, would result in the
maximum information. Alternative #1, reference guidelines, and
Alternative #2, regulatory requirements would come next in terras of
certainty of decision outcomes with Alternative #2 having a slight edge.
Alternative #5, provisional registration, would rank next because some use
of pesticides would be allowed prior to completing the final data base.
Alternative #3, self-certification, would achieve the poorest level of
certainty about whether products should or should not be allowed in use.
Allowing pesticide use and then finding the need to cancel registrations
can lead to economic disruption. For example, 12 major EPA
cancellation/suspension decisions in the past have been estimated to cause
economic dislocations of $350 million. Additional significant amounts of
government and industry resources are required in the litigation that
accompanies these adversary actions.
11. OPP's current estimated FY 1982 budget is $62.1 million.
Set out below are the budget changes estimated to be necessary if each
of the five alternative approaches were in place. Impacts are not
significant except for the decrease of about 7 percent for regulatory
requirements (#2) and an increase of about 5 percent for provisional
registration (#5).
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Increase or Decrease (-) from
Alternative Alternative #1 in Millions
#2 - Regulatory Requirements $ -4.1
#3 - Self-Certification -0.3
#4 - Comprehensive Data 0.1
#5 - Provisional Registration 3.4
12. Pesticides by design are toxic to living organisms.
Non-target species including humans may suffer acutely toxic effects
from exposure to pesticides. Various individuals within the population
including applicators, mixer/loaders, flaggers, field workers, harvesters,
by-standers, and home users of pesticides may encounter different
severities and frequency of exposure. Approximately 140 fatalities due to
pesticide poisoning occur annually in the U.S. About 50 cases are
accidental, the remainder appear to be self-induced. About 2,000 non-fatal
poisonings requiring hospitalizations occur annually. Also, records
indicate that there are an estimated 30,000 physician-treated
non-hospitalized poisonings each year.
13. More importantly pesticides may also produce general types of
chronic health effects. The routes of exposure for differing segments of
the population are generally the same as for acute effects plus important
category of dietary exposure. There is a lack of concensus over chronic
health effects but it is recognized that chemical exposure may be a cause
even though data are limited with regard to the actual extent of pesticide
induced carcinogenicity, teratogenicity, reproductive effects, and
mutagencitity.
14. The information requirements under the five alternative
approaches analyzed are expected to each have essentially the same outcome
with respect to acute pesticide poisonings. For chronic health effects,
estimates of the proportion of these effects resulting from pesticide
exposure are very tentative. Estimates in the range 0.1% to 0.5% have
been made. Improvements in the quality of information about the potential
chronic health effects of pesticides can be expected to reduce the annual
cost of such effects. Precise measurement of the improvement is however
not possible. Conversely, reductions in the stringency of requirements .
can be expected to increase those health costs.
15. Each of the five alternatives would produce no detectable change
in the state of acute health effects attributed to pesticides as compared
to current levels. Self-certification could permit more such effects than
the others, depending upon how well industry quality assurance programs
work and the effectiveness of enforcement. Regulatory programs tend to
have less impact on acute health effects. Tests for these effects are
generally low cost, firms are quite sensitive to potential liability
damage suits because of relative ease in linking cause and effect, and
users are more likely to be aware of potential hazards, thus exercising more
caution.
13
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16. Pesticide registration programs have more impacts upon
chronic human health effects, such as cancer and more subtle effects
such as fetal death and birth defects. Alternatives differ as to their
effectiveness in detecting and avoiding potential chronic health
effects. An ordinal ranking can be constructed as follows:
Alternatives Relative Order for
Potential Cases Avoided
#1 2
n 2
#3 5
#4 1
#5 4
Relative to Alternatives #1 and #2, reference guidelines and regulatory
requirements respectively, comprehensive requirements (#4) would be most
effective in avoiding health effects and self-certification (#3) is least
effective, provisional registration (#5) also tends to be less effective
than Alternatives #1 and #2.
17. Environmental effects are reduced by the current program, and
could be reduced further under alternatives #2 and #4. Major problems
are more likely under #3. Some temporary, localized, reversible,
problems are likely under #5 and there may be permanent effects from a
single episode of contamination.
D. Compliance Costs
The summary tables below show that significant data generation
compliance costs are involved in all of the alternatives. Also, they
show that comprehensive data (#4) tends to have the highest industry
test costs while self-certification (#3) tends to have the lowest
costs. The other alternatives have costs in an intermediate range.
The incremenal costs of changing from the current baseline to the
alternative approaches are generally significant for the change to
comprehensive data requirements and self-certification.
1. Registration data requirements are defined by testing
standards and specific data reporting requirements. Flexibility in the
requirements results in variability in the estimates of unit costs for
individual studies. Unit costs for various tests were estimated from
recent studies of testing costs and from data obtained by Agency staff
directly from registrants and testing firms. All cost estimates
presented below are in 1980/81 prices.
2. Testing costs for a typical active ingredient would be
significantly different for the alternative approaches. The costs are
estimated for the alternatives as follows:
14
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Food Use
Alternative Chemicals
#1
#2
#3
#4
#5
Non-Food Use
Chemicals
~1 T -,. „
1,811,900 -
1,811,900 -
905,950 -
2,717,850 -
1,358,925 -
2,874,200
2,874,200
2,874,200
4,311,300
2,155,650
364,500
364,500
182,250
546,750
273,375
704,000
704,000
704,000
- 1,056,000
528,000
3. Testing costs for an initial typical formulated (end-use)
product, are much less than for an active ingredient. Many follow-on
formulated products registered would incur much lower costs since
previously submitted studies could be cited. By alternative approach,
they are estimated as follows:
Alternative Costs
($)
#1 - Reference Guidelines 24,700 - 66,000
#2 - Regulatory Requirements 24,700 - 66,000
#3 - Self-Certification 12,350 - 33,000
#4 - Comprehensive Data 37,050 - 99,000
#5 - Provisional Registration 18,525 - 49,500
4. The annual direct costs of data requirements will vary with
the pace of the Registration Standards program and with Data Call-in.
The program is expected to produce at least 25 standards per year, with
possibly as many as 40 to 50 standards, if program resources permit.
The registration of new products is projectable based on historical
data. Using the assumptions of 15 new chemicals registered per year
and 25 standards issued per year, the annual direct costs are estimated
as follows:
Alternative Annual Costs
—$Million
Range
#1 - Reference Guidelines 56.3 - 107.0
#2 - Regulatory Requirements 56.3 - 107.0
#3 - Self-Certification 32.2 - 107.0
#4 - Comprehensive Data 80.9 - 153.9
#5 - Provisional Registration 51.2 - 99.6
15
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5. The five alternative regulatory approaches on data requirements
are expected to affect the indirect costs of the pesticide industry. The
estimated indirect costs incurred by alternatives are:
Alternative
Annual Costs
#1 - Reference Guidelines
//2 - Regulatory Requirements
#3 - Self-Certification
//4 - Comprehensive Data
#5 - Provisional Registration
$Million
27.3
27.3
31.4
23.4
27.6
6. Total annual data costs (direct and indirect) of one likely
scenario including new registrations (15 new chemicals/yr.) and
reregistration (25 standards/yr.) with data call-in are projected as
follows:
Alternative
Annual Costs
-$Million-
//l - Reference Guidelines
#2 - Regulatory Requirements
#3 - Self-Certification
#4 - Comprehensive Data
#5 - Provisional Registration
83.6-134.3
83.6-134.3
63.6-138.4
104.3-177.3
78.8-127.2
Midpoint
109.0
109.0
101.0
140.8
103.0
7. The corresponding changes in costs (direct and indirect) of
•moving from current practices to the alternative approaches are as
follows (25 standards/yr., with data call-in):
Alternative
Difference
#1 - Reference Guidelines
#2 - Regulatory Requirements
#3 - Self-Certification
//4 - Comprehensive Data
//5 - Provisional Registration
$Million
0
0
-8.0
31.8
-6.0
16
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Alternatives #1 and #2 would not generate any significant cost impacts, as
costs would be about the same as under the current program. The current
program is most similar to Alternative #1, as efforts have been made in the
last several years to move toward implementation of proposed guidelines.
E. Pesticide Producer Impacts
1. Costs for current data requirements of $1.8-$2.9 million per major
new active ingredient (some active ingredients may require up to $4.0
million in data) are quite significant but account for only about 3 to 6
percent of total developmental costs ($50-$70 million.) Costs of data are
accentuated because many of these costs occur early in the R&D cycle and are
quite risky.
2. Total industry-wide compliance costs of $84-$134 million per year
would be equal to about 1-2 percent on sales. Many of these costs would be
incurred by firms, as a matter of good business practice even if EPA did not
require the data.
3. About 130 firms are the active ingredient manufacturers, of
which 30 large-scale firms account for the bulk of the technical
grade materials. About 100 small firms produce lower volume and speciality
products.
4. The market structure of the basic producing industry can be
described as a moderately to highly concentrated oligopoly. Relatively
few firms produce the bulk of product and a few products tend to
dominate national, regional and local markets for individual site/pest
combinations. Individual firms tend to significantly influence supply
and prices in the markets in which they compete, as is typical of
oligopolistic industries.
5. Structure and behavior of the basic producing industry would be
affected most significantly if self-certification (#3) or comprehensive
data requirements (#4) were implemented. Self-certification would tend to
reduce concentration, reduce entry barriers and stimulate competitive
behavior. The opposite would be true with comprehensive data
requirements.
6. New pesticide product innovation is heavily dependent upon R&D
expenditures, which are concentrated among relatively few firms.
Decisions to commit R&D funds are influenced greatly by whether patent
rights can help insure profits over a period of years and whether one or
more major pesticide markets can be served with the resulting product(s).
Issuance of written guidance on test protocols and data submission
requirements would improve R&D planning by firms. It would also permit
firms to locate chemicals which have undesirable risks factors sooner, thus
saving R&D effort.
17
-------
7. The pesticide producing industry has moderate to high profit
rates and a high degree of R&D among major firms. Profit rates, R& D
and product prices would decline significantly with self-certification
and would increase with comprehensive data requirements. Provisional
registration would improve incentives for R&D on new active ingredients
by permitting earlier commercialization of products, on a limited basis.
8. Impacts on formulators and small firms would be quite nominal
with alternatives #1, #2, and #5, due to minor use policy and waivers
for small volume products. Self-certification would help small firms
to a degree, but comprehensive data requirements would adversely affect
small firms and products due to lack of waivers.
F. Pesticide User Impacts
1. The aggregate increase in the cost of pesticides to all users
(assuming all costs are passed on by the manufacturers) would range
from a decline of -$20 million per year to an increase of $43 million,
depending upon which alternative is implemented. Pesticide prices could be
changed from minus 0.3 to a plus 0.7 percent, if all costs were passed on
to users. Approximately 60 percent of this increase would be sustained by
agriculture.
2. Pesticide user prices would be increased by the following
percentages by alternatives, if testing costs were all passed on to users,
which is likely in the long term.
Increase
Alternative in user prices
Percent
#1 - Reference Guidelines 0
#2 - Regulatory Requirements 0
#3 - Self-Certification -0.3 to 0.1
#4 - Comprehensive Data 0.3 to 0.7
#5 - Provisional Registration -0.1
3. Users would lose at least some existing small volume products
under each alternative, due to costs of maintaining them and/or costs
of product liability. Losses would be generally nominal, except for
comprehensive data requirements, where many would be lost due to
limited data waivers.
4. Overall, under each alternative except comprehensive data
requirements, there should be no significant impact on farm prices,
production, or the agricultural economy.
18
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G. Aggregrate Economic Impacts
1. The aggregate change in net welfare due to the imposition of
data requirements would range from a loss of $34 million to a gain of $16
million per year (excluding pesticide program costs and costs of adverse
health/environmental effects). Whereas a substantial portion of the
increased pesticide costs would be passed on to final consumers in the
agricultural sector, in the non-agricultural sector, most of the
increased costs would be absorbed either by the pesticide manufacturers
or the users of pesticides in the production of other goods and services
for sale to final consumers. The breakout of net welfare changes by
sector by alternative is as follows:
Net Welfare Impact /Yr
#1
#2
#3
#4
#5
Alternative
- Reference Guidelines
- Regulatory Requirements
- Self-Certification
- Comprehensive Data
- Provisional Registration
Agricultural Non-ag
i
0
?MillJ
0
+8
-9
+2
to
to
to
-2
-18
+3
+8
-8
+3
Lon-
(
)
0
to
to
to
-1
-16
+2
Total
0
0
+16 to
-17 to
+5
-3
-34
2. The above net economic welfare impacts are quite nominal, of
limited significance to these sectors in view of their overall size,,
3. None of the alternatives would be capable of generating
significant economic impacts on macroeconomic variables such as
employment, inflation or balance of payments.
H. Benefit/Cost Analysis of Regulatory Alternatives
1. The results of the analysis of impacts the alternatives would
have upon pesticide program, producers and users and the economy at large
provide the basis for the overall benefit/cost analysis of the
alternative, as required by Executive Order 12291. The methods used in
benefit/cost analysis and the detailed results are presented in Section
IX of this report.
2. The benefit/cost analysis was conducted by summarizing the
results of the impact analysis in terms of benefits and costs of the
alternatives. All qualitative and quantitative impacts were not uniformly
amenable of being monetized, so that net benefits could be estimated in
dollar terms. Because of this, a benefit/cost rating framework was used
as a proxy for benefits and costs.
19
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3. The rating framework provides 100 rating points each for
benefits and costs. The points are awarded to the alternatives on the
basis of their merits and the importance attached to the various
factors (criteria) of program performance (i.e. types of benefits and
costs). Once benefit and cost ratings were determined, differences and
ratios were computed as basis for judging the relative merits of the
alternatives on the basis of benefit and cost criteria. The summary
results of the benefit/cost rating analysis are presented in Table
II-l.
4. Self-certification had by far the lowest net benefit rating
and rating ratio, thus giving it the lowest overall rating of the
alternatives. Regulatory guidelines had the highest net benefit rating
and ratio, far above the other alternatives. Provisional registration
was a relatively close second to regulatory requirements followed by
reference guidelines, comprehensive requirements and finally, self-
certification. Cost/benefit rating outcomes were computed for some
alternative program criteria (weighting factors). The general
conclusion to be reached was that the overall rating outcomes were not
highly sensitive to differing criteria within the ranges that are
consistent with the mandates under FIFRA.
5. The general conclusion to be reached from the analysis is that
regulatory requirements is the preferred regulatory approach on the
basis of benefit and cost criteria.
6. This analysis is of the five general alternatives applied
across all types of chemicals (whether large or small, for food or
non-food uses, highly toxic, etc.) and types of registration by program
area. It is likely that ultimately, the "best" overall program
approach or scenario during a given period of years would be regulatory
requirements with minor applications of one or more of the others to
capitalize on their features to fit particular needs of particular
regulatory situations.
1. Registration Compliance Costs Compared to
Overall Compliance Costs
1. Total FIFRA, FFDCA and RCRA compliance costs (to registrants,
applicators, users and state agencies) are approximately $232 million
per year under the current program, which includes registration data
compliance costs along the lines of the reference guidelines (#1). Of
this total, about 33-40 percent ($77-92 million) are costs for data
generation under FIFRA, including data for RPAR chemicals (about $5.5
million).. These FIFRA costs are an amount equal to about 1.3-1.6
percent of the annual user expenditures for pesticides in the U.S.
($5.8 billion in 1980).
20
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Table II-l
Cost/Benefit Rating Sunnary of Alternative Approaches for Generating Ifazard Testing Information on Pesticide Products
Total Benefit Rating
Total Cost Rating
Net Benefit Rating
Ratio of Benefit
and Cost Ratings
Overall Ranking
on Basis of Benefit
and Cost Criteria
#1
Reference
Guidelines
21.3
20.5
0.8
1.04
3
#2 //3 //4
Regulatory Self-Certification Comprehensive
Requirements by Registrants Requirements
24.2 10 25
20 15.6 26.8
4.2 -5.6 - 1.8
1.21 0.64 0.93
15 4
#5
Provisional
Registration
19.5
17.1
2.4
1.14
2
Total Rating
Points
100.0
100.0
-
-
Source: Tables DC - 1, 2, 3, and 4.
-------
2. Total FIFRA, FFDCA and RCRA compliance costs are incurred
(1980) by groups as follows according to industry function:
Function Annual Cost
$ Million
Basic Production 120
Formulation 42
Application, State Regulation, etc. 70
Total 232
22
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III. NEED FOR REGULATION AND ALTERNATIVE APPROACHES
A. Overview of Pesticide Usage, Exposure and Effects
Large quantities of chemicals, primarily synthetic organic chemicals,
are released into the environment as pesticides each year- In 1980, an
estimated 1.175 billion pounds (excluding chemicals such as elemental
chlorine, creosote, coal tars, elemental sulfur and others) were used in
the U.S. (active ingredient basis) (EPA, September, 1980). On a
formulated product basis, the total weight of pesticides used was about 3
times the above quantity, or 3.6 billion pounds. Active ingredients equal
only about 32% of the total formulated product on the average. The
remaining 68% of the total weight of formulated products consists of
diluents, carriers, propellants, and other so-called "inerts."
The pesticide program focuses on the use of active ingredients as
they produce potential exposure and risk to hunianss animals and the
environment. "Inerts" are generally not tested and regulated as
intensively as active Ingredients but dos in some instances, present risk
potential to man and the environment. Some very significant problems have
been identified with respect to contaminants in formulated pesticide
products such as the "dioxin" problem. A large number of products contain
at least at low level dioxins, which are among the most toxic of organic
compounds•
Agricultural uses of pesticides account for more than 70% of total
pesticide use in the United States (846 million pounds or 72% of the total
in 1980). This equals about 2.3 billion pounds on a formulated product
basis. The usage of pesticides in agriculture results in residues in feed
and food products produced on farms which causes human exposure when food
is consumed. Farm pesticide usage also produces exposure potential to
farm applicators of pesticides, families living on farms and environmental
components in rural areas. Pesticides are used on a majority of the 2
million commercial farms in the U.S. Farm field workerss numbering
3.8 million in the U.S. (in 1979), are subject to a high degree of
exposure to pesticides, primarily through dermal contact with pesticide
residues on plant surfaces.
The second ranking category of pesticide use in the U.S. is in the
industrial/governmental/institutional sector which accounts for 21% of the
total active ingredient (about 247 million pounds in 1980). Most
industrial, governmental and institutional buildings, facilities or other
sites have pesticides applied to them at least periodically if not
annually producing potential exposure to humans and the environment.
There are 40 thousand commercial pesticide applicators applying pesticides
to structural sites alone. These applicators are subjected to exposure
along with associated workers and by-standers or occupants of such sites.
Home and garden usage of pesticides equals about 7% of total usage on
an active ingredient basis (82 million pounds in 1980) (EPA, September;,
1980). About 90% of U.S. households use pesticides in house9 garden or
yard based on an EPA study for 1976-77 (EPA, July, 1980)o About 84% of
households use pesticides in the house and about 21% of households use
them in the garden and about 39% use pesticides in the yard.
23
-------
Pesticide applications in the home by the homeowner or his family
tend to be somewhat risker than used for other uses because the homeowner
tends to be less proficient in the handling of pesticides and because of
the potential for exposure to other persons in the home, particularly
children. Historically, there have been several thousand pesticide
poisonings per year. As many as 14,000 individuals may be non-fatally
poisoned by pesticides in a given year, 6,000 seriously enough to require
hospitalization (EPA, May, 1974) (OPP Strategy, page 3). Each year
between 100 and 200 deaths occur from pesticide poisonings (including a
number of suicides and homicides).
The EPA 1976-77 household survey indicated that approximately 2.5
million households had members of their households who experienced
dizziness, headache, nausea or vomiting after using pesticides (3% of
total). Most of these (more than 90%) were not severe adverse affects
related to pesticide use and were not treated by a physician. These
data are indications of only acute exposure and effects from pesticides in
the household. Chronic effects are much longer term in nature and less
subject to estimation, certainly by survey techniques. Further discussion
of chronic as well as acute exposure to pesticides will be presented later
in this report.
The trend is for increased usage of pesticides in the United States,
although growth is not likely to continue at the rapid rate of the 1960*s
and 70's. Since the early 1960's, total pesticide usage has about doubled
(Figure II1-1). Most of the increase in usage is due to expanded
agricultural usage, which nearly tripled since 1964. Non-agricultural
usage has not shown a consistent tendancy to increase in absolute or
percentage terms since the mid-1960's. During the last few years, the
growth rate on agricultural use of pesticides has slowed somewhat due to
economic conditions and the influence of improved pest management programs
resulting in more efficient application of pesticides and alternative
non-chemical controls of pests.
A key aspect to exposure and hazards of pesticides is that the
chemicals are generally designed as biological poisons, designed to kill
or repel biological entities where the mode of action is seldom specific
as to the time, place and target of the chemical activity. Pesticides are
designed to be acutely toxic to animals, plants and other lower life forms
and at the same time are likely to be acutely if not chronically toxic to
at least some part of the biota that is nontarget. Long term effects of
the chronic exposure of human, animal and other environmental components
to pesticides becomes a matter of considerable uncertainty. There are
many possibilities for chemical/toxicological interactions between
pesticides and living organisms, particularly those resulting from long-
term low dosage exposure. The pesticide regulatory program is mandated to
deal with such uncertainties and accept only reasonable risks while
permitting the benefits to users and the economy generally from the
application of pesticides.
24
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Figure III-J
Ul
UNITED S
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77 78 79 80
-------
B. Nature of Economic Externalities Inherent from Pesticide
Producer and User Behavior
1. Introduction
The next two sections of this document discuss the nature of negative
externalities generated by pesticide use and production, and alternative
approaches for dealing with these externalities. The sections present a
theoretical economic rationale for governmental intervention in the
pesticide marketplace and identify what alternative mechanisms of
intervention are economically, politically, and operationally viable.
Because of the existence of negative externalities, the government
may intervene in the marketplace and regulate or initiate other
non-market or market mechanisms to improve economic efficiency and/or
distributive equity. Both areas are of concern with respect to the use
and production of pesticides. In an unregulated market, pesticide
producers would be free to market pesticides with any given level of risk
(taking exposure from use and toxicity into consideration). The
producer's primary goal is to produce and sell in order to maximize
profits.
The costs of pesticide use (in terms of health hazards and environ-
mental damage) are incurred primarily by pesticide applicators and the
general population. Pesticide applicators are exposed to pesticides
voluntarily through the application process; the general population is
exposed involuntarily through consumption of foodstuffs containing
pesticide residues, and involuntary dermal and inhalation exposure (e.g.
drift) during and after pesticide applications. The general population
also incurs the cost of detrimental environmental effects of pesticide
use (e.g. non-target, endangered species losses).
Benefits of pesticide production and use accrue to three segments of
society. Pesticide producers earn profits, pesticide users increase the
productivity of their inputs and earn higher revenues, and consumers are
offered goods or services (e.g., agricultural products) at a lower
price. Alternatively, consumers may use pesticides as final products
(i.e., consumption of pesticide would not be as an input to another
productive activity). For example, the use of a household mosquito
repellant would be the use of a pesticide as a final product.
Although some pesticides are used as final products, most pesticides
are used "as an input to the production of other products (e.g. agricultural
crops) or services. Under these circumstances, the demand for a
pesticide depends upon its price, the prices of all other inputs, and the
price of the output. When a pesticide is used as an input to another
product, the demand for the pesticide is a derived demand since it
depends on the price of the product (e.g., agricultural crop) and is thus
derived indirectly from the demand for that product.
26
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2. Economic Efficiency
Economic inefficiencies will occur in the pesticide market due to the
existence of negative externalities, imperfect competition, imperfect
information, etc. FIFRA attempts to reduce the negative externalities
associated with the consumption of pesticides by regulating both the
production (e.g., registration process, RPAR process, etc.), and
consumption (e.g., certified applicators, enforcement to prevent misuse,
etc.) of pesticides.
Given that the negative externalities of pesticide use are not taken
fully into consideration by either pesticide users or producers in the
pricing of a pesticide in the private marketplace, in an unregulated market,
the prices paid for many pesticide products will be too low. In other
words, pesticide use potentially exceeds the quantity that would be applied
if the market reflected all costs and benefits of pesticide use. This
represents less than optimal efficiency in use of resources. An ideal
regulatory program would cause amounts and types of pesticides to be used
that which would occur if all costs and benefits were considered in the
market.
3. Equity
The second issue at hand is one of distributive equity and the
reallocation of goods/quality of life among different segments of society.
Equity considerations become an issue particularly with respect to the human
health effects of pesticide exposure. While pesticide producers, users, and
consumers benefit from the use of pesticides, the incidence of the costs are
distributed disproportionately throughout the population (in terms of acute
and chronic toxic effects such as cancer). Therefore, there will be
"victims" from pesticide usage and distributive equity considerations may
require their compensation.
Many cause/effect relationships can be directly demonstrated for acute
effects of pesticide exposure. In such cases, the victims may be able to
prove pesticide producer liability (assuming improper labeling, inadequate
warning, etc.) and receive compensation for the detrimental health effects.
However, chronic effects such as oncogenicity or teratogenicity may not
become evident until 20-30 years after pesticide exposure.
Mutagenic effects may not occur for one or more generations. In such
cases, a cause/effect relationship will generally be impossible to
demonstrate. Without demonstration of cause and effect, liability of the
pesticide producer is not likely to be proven, and victim compensation will
not be available.
27
-------
Distributive equity considerations are of particular concern when the
benefits of pesticide use accrue to the current generation and some of the
costs are borne by future generations in terras of mutagenic, teratogenic,
and ecological effects. In such cases, current consumption of pesticides
reallocates goods/quality of life between generations with future
generations bearing some of the costs, but none of the benefits.
4. Regulation and the Need for Data Requirements
The current regulatory framework requires submission of data to the
Federal government (OPP) by pesticide producers which indicate levels of
acute and chronic toxicity of their pesticide products as well as the
potential for environmental damage associated with use. The Federal
government registers (i.e. regulates) pesticides for specific uses based
on performance standards (as opposed to design or input standards) in that
the toxicity, exposure, and other detrimental side-effects of the
compound, as well as, the expected benefits of the compound, enter the
decision criteria for registration.
For example, a pesticide is not denied registration because its
LD5Q exceeds a design standard (i.e. some unacceptable LD5Q level).
Rather, a highly acutely toxic chemical may be registered because it is
demonstrated that the actual use of the pesticide will result in negligible
exposure, and therefore negligible risk even though the toxicity of the
product is high. Required toxicity and exposure data enable pesticide
producers and the Federal government to determine what compounds meet the
performance standards. The government generally regulates pesticides based
on such standards. In the absence of these data requirements, it is
reasonable to expect that pesticides would be sold that would result in
higher levels.of human health and environmental hazard than those which are
currently registered.
In fact, in the absence of regulations which require data, a
profit maximizing firm may determine that it is economically
irrational to perform a battery of laboratory tests to examine chronic
toxicity of a pesticide. As earlier discussed, cause/effect relationships
can be generally demonstrated for acute human health effects of pesticide
exposure, and under certain circumstances pesticide producers could be
liable for resultant damages.
However, there is a low probability of demonstrating precise
cause/effect relationships for chronic health hazards associated with
pesticide exposure. Therefore, the pesticide producer's expected (and in
fact actual real world) cost of future liability claims concerning chronic
effects of pesticide exposure is also likely to be low. Under such
circumstances, it would be economically irrational for a pesticide
producer to spend a million dollars to determine chronic toxicity of a
chemical when, in fact, chronic toxicity would not positively affect the
future net revenues of the firm and could decrease them by uncovering
evidence of chronic effect's.
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C. Alternative General Approaches to Dealing with Pesticide Externalities
1. Introduction
Under the current regulatory process, the Federal government requires
submission of health and environmental hazard data for each pesticide
active ingredient to ensure that use of the pesticide will not result in
unreasonable adverse effects on the environment. Under FIFRA, the burden
of proof of the safety of the proposed use of a pesticide is with the
applicant for registration. The data requirements and regulatory
activities were discussed in the previous section. Alternative mechanisms
in addition to or in place of, regulation could be proposed to ensure that,
pesticides are used in a manner consistent with social welfare.
Conceptually, current data requirements could be lifted and market
incentives could be established to improve efficiency of the pesticide
market. Alternatively, all regulations could be lifted leaving the court
system as the only mechanism to ensure equitable treatment of victims.
Educational mechanisms could also be employed to supplement regulatory
activites in order to decrease the adverse effects of pesticide use.
Under any of these approaches, direct regulation, market
incentives, no regulation (i.e. free market conditions), and reliance on
educational mechanisms, the Federal and the State/local governments may
carry out independent policies and programs. Under a no regulation
Federal approach, it would be expected that State/local governments
would substantially increase their regulatory role regarding the
production and use of pesticides.
2. Market Incentives
Market incentives, such as taxes and subsidies, can be used to
directly affect the production and use of pesticide products. The
establishment of a system of taxes and subsidies could be based on the
criteria of economic efficiency. In this case, taxes would be established
such that the optimal amount of the pesticide would be marketed. Under
such a taxing structure, taxes would have to be set for each pesticide
product. Due to differing market structures for pesticide products
(monopolistic versus competitive), equitable taxes could not be accurately
levied. Data requirements for establishment of the tax would include:
- estimation of the demand, private marginal cost, and social
marginal cost curves for each pesticide product, and
- determination of the relevant market conditions for each
pesticide product.
In many cases, data limitations make estimation of the marginal social
costs impossible because the social costs of health and environmental
effects cannot be computed.
29
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Even if calculation of taxes/subsidies were administratively possible
for each pesticide product, an economically efficient taxing scheme would
likely be politically unacceptable.
Since an economically efficient taxing system cannot be
implemented, alternative taxing schemes could be developed. Criteria
could be established at which tax rates would be imposed aad/or
incrementally adjusted. The difficulty would be in the selection of the
criteria. For example, taxes imposed could be based on the 1.050 °f
chemicals; however, this criterion would not take exposure, chronic effect,
and environmental damage factors into consideration. Alternative criteria
could be identified, but unless the criteria take human exposure by use
site and chronic and acute toxicity into consideration as well as aspects
of non-human environmental damage, the taxing system may not be as
effective in reducing unreasonable adverse effects on the environment as
the current regulatory framework.
Furthermore, to develop a taxing scheme based on the relevant exposure,
toxicity, and environmental damage criteria would require data similar to
that required under current Federal regulations and additional data on the
supply and demand function of each chemical product by site. In addition to
evaluating the data, the Federal government would also be required to
administer a highly complex tax system. This could increase the
administrative costs of regulation far above those imposed under the current
regulations.
3. Elimination of Federal Pesticide Regulation
All Federal pesticide regulation could be abandoned and the market
could operate without Federal intervention. Under such a free market
approach, negative externalities would continue to occur. In the absence
of regulation, it would be necessary to rely on judicial mechanisms to
help ensure that the production and use of pesticides do not result in
unreasonable adverse effects. In this regard, judicial mechanisms would
primarily be used to compensate victims (individuals and groups of
individuals adversely affected by pesticide exposure).
There are major disadvantages associated with total reliance on
judicial mechanisms to ensure production and use of "safe" pesticides.
The most serious disadvantage is the inability to demonstrate cause/effect
relationships for chronic adverse human health effects. In the absence of
proof of a cause/effect relationship under current tort law, firms
generally would not be held liable for their products and victims would
not be compensated.
A further complication would be the absence of required product
testing by the pesticide producer. The first step in demonstrating
cause/effect relationships is determination of the toxic effects of the
chemical. If pesticide producers are not required to generate chronic
30
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effects data, and the government became concerned about hazardous effects of
certain chemical, this testing function might have to be absorbed by the
Federal government. This would shift testing costs from chemical producers
(the group obtaining revenues and hence benefits from pesticide sales) to the
general taxpaying public.
It would appear that the most effective way for the court system to
efficiently reduce large scale negative externalities would be through
passage of legislation enabling class-action suits. This would reduce the
transaction costs but it still would not resolve the issue of proof of
causality.
4. Educational Mechanisms
Educational mechanisms can be evaluated as either an alternative
or supplement to Federal regulation of pesticides. By educating
pesticide users to adjust their behavior regarding the application of
pesticides, the detrimental side-effects of pesticide use and
production can be reduced. To the extent that education programs
reduce the inefficient use of pesticides (unnecessary prophylactic
treatments, inaccurate identification of pest species, inaccurate timing
of applications, improper rates of applications, etc.), human, and
environmental exposure to pesticides and therefore detrimental effects,
can be reduced.
Educational mechanisms can be combined with regulatory mechanisms
such as the certified applicator/restricted pesticide program to ensure
reductions of detrimental side-effects due to use of the most hazardous
compounds. Educational mechanisms will not directly affect the level
of data requirements necessary to establish that a compound's use will not
result in unreasonable adverse effects on the environment; however,
educational mechanisms when combined with regulation, can help minimize
adverse effects.
5. State and Local Regulation
Currently, pesticides can be regulated at the Federal, State and
local levels. Recent proposals of decentralization and returning Federal
powers to the States have been made for many Federal activities. In the
case of pesticides, elimination of Federal regulation and leaving all
responsibility for pesticide regulation to each state independently is an
economically inefficient proposal. The primary disadvantage of
State/local regulation is the potential non-uniformity of pesticide
product requirements between jurisdictions, resulting in increased
administrative costs (governmental) and increased costs to pesticide
producers in attempting to comply with a multitude of non-homogenous
regulations. Firms may be unwilling for reasons of cost to perform
long-term tests to gain entry into a state market. They may view the
market as insufficient size in terms of potential revenue.
31
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A powerful example of the unreasonableness of such regulation would
be the establishment of pesticide residue tolerances on foodstuffs given
the interstate transfer of agricultural commodities in the United States.
The administrative costs of each State establishing independent tolerances
for all agricultural commodity/pesticide combinations would be much higher
than the current centralized regulatory tolerance setting mechanisms.
Furthermore, the ability of growers to apply pesticides to their
agricultural products and ship them interstate might be severely hampered.
Clearly, severe disruptions in the food industry could occur resulting in
negative macroeconomic effects.
D. Approach Taken Under FIFRA and Alternatives for Analysis
1. Options to the Current Program
Analysis of alternative approaches to achieving a regulatory
objective is specified as mandatory in both Executive Order 12291 and
OMB guidance implementing that Order. Four major types of alternatives
need to be considered. These include:
- Consequences of having no regulation.
- Major alternatives that might be beyond the specific
legislation under which the proposed regulation is being
promulgated.
- Alternatives within the scope of specific legislation such as:
a. alternative stringency levels;
. b. alternative effective dates; and
c. alternative methods of ensuring compliance.
- Alternative, market-oriented ways of regulation.
With these types of alternative approaches, there are, of course, many
specific alternatives. The analysis of a regulation includes the
identification of reasonable approaches which are to be the subject of
more detailed cost and benefit analyses.
Concerning the "no regulation alternative", the previous discussion
of the need for regulation has detailed the theoretical reasons why the
marketplace would not operate efficiently to internalize the social costs
of pesticide use. Briefly, the long lag time between exposure and the
manifestation of chronic effects would make it difficult if not
impossible to establish a direct cause and effect relationship that would
be necessary for establishing liability. The information requirements
needed in an efficiently functioning market do not exist with respect to
pesticide effects.
32
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There are alternative regulatory approaches outside the scope of FIFRA
to ensure that adequate information on the effects of pesticides are
generated. A key feature of FIFRA, as amended, is that the Administrator is
required to make a finding that a pesticide will not cause unreasonable
adverse effects. In essence, the applicant for registration must shoulder
the burden of proving to the Agency that their product can be used within
acceptable levels of risk. If the enabling legislation were provided, the
opposite philosophy might be tried. Applicants could be required to
self-certify to the Agency that their products would not cause unreasonable
adverse effects on humans or the environment. The Agency could disallow or
limit use only if it had evidence to prove that the self-certification from
registrants had been incorrect. This option will be more fully described
and analyzed in latter sections of this analysis•
The stringency of the requirements is left to the Agency<> Two options
with differing philosophy as to stringency of requirements will be described
and analyzed in this analysis. Brieflys one approach allows for waivers of
testing requirements where such waivers can be supported<, Additionallys
tiered testing requirements are used where scientifically defensible<> The
other option is to lay out blanket testing requirements for all pesticide
chemicals so that all chemicals are subjected to the same testing regimen<>
The requirements to have data in support of registration do not
lend themselves to options as to effective dates» Once testing
requirements are established, they should be factored into the
registration process. There can, however, be options as to whether
data requirements should be pre-market or post-market. This analysis
will consider a provisional registration plan where some limited sales
of pesticide products are permitted before all data requirements are
met. This approach is described and analyzed in more detail below°
2. Approaches to be Included in Analysis
From the broad guidance from OMB implementing Executive Order
12291, specific alternative approaches have been selected for further
analysis of costs and benefits. As noted in Section I, this analysis
will cover five such alternatives including:
# 1. Reference guidelines;
# 2. Regulatory requirements;
# 3. Self-certification by registrants;
#4. Comprehensive data requirements;
# 5. Provisional registration.
These five alternatives were selected to represent the major types of
alternatives which are applicable to the regulatory objective of
generating data on the possible adverse effects of pesticides. The
five optional approaches will be described below.
33
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a.) Reference Guidelines (//I)
Data requirements are currently formed from the historical merging
of advancing scientific knowledge and the precedents estabished by
policy in response to newly recognized health or environmental problems
related to pesticide use. OPP presently is reviewing and processing
registrations or amendments to registration applications. Basic data
requirements including toxicity, chemistry, environmental fate, and
non-target organism hazards are being generated and submitted by
applicants. Applicants tend to have a rather complete understanding of
the data required from them to support registration of their products.
Firms with existing registrations are more likely to be in position to
anticipate data needs. Other applicants rely on interaction with OPP
personnel to determine the testing requirements. Both industry and OPP
personnel may refer to the basic data requirements listed in
regulations issued in 1975 on registration procedures (40FR 28212).
Specific guidance for individual registration actions now occurs
through interaction between applicants and OPP reviewers as stated
above. Different reviewers, in exercising their scientific judgements,
may emphasize different aspects of testing requirements. Reviewers
make the scientific determinations as to whether an applicant has
adequately demonstrated that his product will not cause unreasonable
adverse effects on the environment.
Data requirements are also now being identified for the
reregistration of currently registered pesticide products. Under the
Registration Standards program, pesticide active ingredients are
reviewed to determine how well registrations are supported by data.
When significant data gaps are identified, the Agency uses its
authority under Section 3(c)(2)(B) of FIFRA to require that these data
gaps be filled^ Another feature of the Registration Standards program
is the Data Call-in process. The Agency has begun to inform
registrants with pesticides registered on food or feed use chemicals
that tests on chronic effects are needed to support those
registrations. The Agency again uses its authority under Section
3(c)(2)(B) of FIFRA to require that these studies be done and reports
submitted. This option involves continuing the interactive - iterative
process for developing necessary risk data.
b.) Regulatory Requirements (// 2)
Issuance of data submission requirements as regulation would serve
primarily to make formal the information requirements in support of
pesticide registrations. The specific testing requirements for a
product would be discernable from the regulations with more limited
interaction between registrants and the Agency. Protocols for testing
individual chemicals are to be available publicly through the National
Technical Information Service (NTIS). Reviews of test submissions
would be expedited because common elements recur in information
provided across chemicals. Decisionmaking would be expected to improve
with the greater consistency in data being submitted for review.
Testing performed would be substantially the same as Alternative #1.
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c.) Self-Certification by Registrants (#3)
One approach that would require changes in legislation would
involve a self-certification frota registrants that their products would
not cause unreasonable adverse effects. Risk of corporate or personnel
liability for adverse pesticide effects would serve to guide the
selection of appropriate levels of testing by registrants. The Agency
would maintain a strong monitoring and enforcement posture to protect
the public against mistakes in judgement and outright fraudulent
activity. That is, any intentionally or unintentionally false
representations concerning the potential adverse effects of pesticides
would need to be dealt with by the Agency. This would represent a
significantly different regulatory philosophy as compared to the first
two approaches presented. In the first two approaches, the concept is
to prevent the use of products that are likely to cause unreasonable
levels of risk. In this approach, direct Agency involvement would
serve to stop the use of a product only after unreasonable adverse
effects were discovered.
d.) Comprehensive Data Requirements (/M)
Pre-marketing data requirements for pesticides serve as inputs for
decisions as to the registerability of products. The greater the
quantity and quality of data, the more certain the accuracy of the
decisions. Studies on the effects of pesticides have evolved into
categories of acute or short-term and chronic or long-term studies.
One alternative approach to data requirements is to develop a
comprehensive list of studies that measure both acute and chronic
effects and require that all chemicals be subjected to the same testing
scheme where possible. Very limited waivers from requirements would
be granted. Also testing would not be done on a tiered basis, i.e.,
the need to one test would not depend on the results of other studies.
The comprehensive testing requirements would be based on the theory
that the probability of not identifying a potential adverse effect should
be kept at a minimum. Hence, long terra studies for all chemicals would be
required. The full complement of studies would be the same as for
Alternative #2 without use of tiered approaches or waivers.
e.) Provisional Registration (#5)
The last approach to be considered in this analysis is to offer a
provisional registration that divides information requirements into
pre-marketing and post-marketing sets. This approach would require a
statutory change. The philosophy behind this approach is that limited
sales of a pesticide would be allowed based on a limited data base. If
broader sales were desired, then complete information requirements would be
imposed. Products could therefore begin generating revenues while
long-term chronic studies were being performed. The basic features of
provisional registration are:
35
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- Indicator studies (short-terra) must not show adverse findings;
- Registrant agrees in advance to additional restrictions on
registration should adverse effects be indicated by long-terra
studies. The additional restrictions would include cancellation
if potential risks were judged high enough to warrant such
action; .
- Pesticide would be limited both in terms of amount allowed in
use, as well as restrictions on allowable use sites
Provisional registration would be applied to new chemical registrations
and in some instances of registration of a currently registered
chemical on a significant new use site.
3. Other Program Implications of Options
The above five options relating to pre-market information requirements
have implications for other program areas or aspects of the pesticide
program. There are implications for enforcement, monitoring and research as
well as risk/benefit decisionmaking. A matrix summary of these aspects of
the five alternatives is presented in Figure III-2. The most dramatic
differences from reference guidelines, which is nominally the current
program, occur with self-certification. This alternative is vastly
different from the others in that it places much more burden on the industry
to regulate itself. The public-at-large would be responsible for seeking
reparation for damages caused by pesticides which could result from use of
pesticides with less rigorous testing. More publicly funded monitoring,
enforcement and research would be needed for the self-certification
approach.
The differences between reference and regulatory requirements are
quite nominal in many ways because much of Alternative #2 is now being
implemented. EPA announced its intention to implement data requirement
regulations several years ago. As a result, although regulatory
requirements are not actually in place per #2, the Agency for the most
part, is using proposed guidelines to identify requirements to be met by
registrants under the current Section 3 regulations of the Act. The
industry is generally responding by meeting these requirements.
Implementation of comprehensive data requirements would involve,
essentially, implementing the regulatory requirements approach with little
or no exemptions. This would significantly reduce the need for
risk/benefit decisionmaking and effects research. Rulemaking would need
to take place in order to handle waiver policy so as to minimize
exemptions, taking due consideration into the Minor Use Amendment of 1978.
36
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Figure III-2
General Characteristics of Alternative Pesticide Regulatory Program Approaches
Characteristics
Reference Guidelines
i'2 Regulatory
Requirements
Self Certification
04 Comprehensive
Data Requirements
#5 Provisional Registration
1. Key word description
2. Pre-inarket testing
3. Exposure/risk/benefit
analysis and decision-
making
4. Use Management
a. Surveys of actual usage
b. Ed/trg/certificatlon
5. Enforcement
6. Effects Monitoring
7. Effects Research
8. Legislative/Rulemaklng
Data rtqulreraents result from
interaction .between OPP and
industry.
Industry safety testing based
upon Informal Industry/GPP
interaction and Informal use oi
reference guidelines.
Moderate levels of effort undei
RPAR/RS Programs and special
problem cheras.
Minlmun program of labeling,
IPM, training, Moderate
certification. Minimum data or
actual usage.
Minimal private app./prog.
Moderate connercial applicator
and producer enforcement.
Minimun program - problem
focus.
Mininum GPP Program - being
phased down.
Moderate ORD effort.
Moderate USDA/EPA Exposure
work.
Rulfiraaking only.
Formal regulations
specifying data required
with waivers available.
Testing based on
regulations. Registrant's,
all work from same basis.
Waivers are granted with
proper justification
Moderate levels of effort
for RPAR/RS Programs.
Comparative risk
assessment work be done on
same basis for RPAR
analysis.
Minimum program of labeling
IPM, traini(ig. Moderate
certification. Minima
data on actual usage.
Minimal private app./prog.
Moderate commercial
applicator and producer
enforcement.
Minimum program - problem
focus.
Possible reduction in
overall effort for EPA J
industry would bear burden
of being on forefront of
testing science.
Rulemaking only.
No pre-marketlng data required.
Registrants certify to OPP that
products do not cause
unreasonable risk.
Not required but firms likely
to test to some degree.
Higher levels of effort for
RPAR/RS programs.
Increased importance due to
uncertainty of risk factors.
High private applicator,
coriaercial applicator, and
producer enforcement effort.
Higli priority. Adverse effects
need to be Identified without
prior testing indications.
Epidemiology studies for
various adverse effects would
be needed.
Greater need for government
involvement.. Identify problem
areas for monitoring program.
Major FffRA overhaul and rule-
making.
Cook book of data require-
ments; no waivers;
indepeirient of use patterns.
Required on an Increased
level.
Low levels of effort for
RPAR/RS. Maxiiam data base
generated up front.
Less Important since safety
factors may be more wall
known.
Could continue as under
current program.
Could continue as under
current program.
Reduction In need for EPA
involvement.
Major rulemaking.
Limited market access givtn to new
chemicals on the basis of acceptAle
results on short ten: indicator
studies, i.e., rcut.ir'.Qnicity studies,
structure/activity quantitative
analysis-
Chronic feeding studies must be
initiated but not necessarily
completed before provisional
registration.
Rules oust be specified Wiich penult
the amount of allowable exposure.
Exposure controlled by site and
production/distribution limitations.
No change from currant progrjta.
Registrant must ccraply with
production/distribution Limitations.
No change froa current program.
Increased need for EPA involvement
on potential hazards.
FfflSA amendments plus rulemaking.
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Provisional registration is in line with suggestions by the pesticide
industry, and others, to limit pre-market testing to a relatively few
indicators (or core) studies. After these have been conducted, a chemical
could be marketed to some extent while other requirements are being met.
This, in effect, now is occurring to a degree with authority to use
chemicals under experimental use permits (Section 5) and also for special
local needs (Sec. 24(c)).
4. Presidential Task Force on Regulatory Relief
In August of 1981, the Vice President's Task Force on Regulatory
Relief identified the pesticide registration program as a regulatory
activity potentially needing reform. The Task Force had received comments
from business, State and local governments, agriculture, and educational
institutions indicating that the registration process appears to
unnecessarily delay the distribution of new pesticide products and
inhibits new uses of existing products without providing commensurate
health and environmental benefits. Comments were received recommending
changes in the overall registration process including, Registration
Guidelines, the Registration Standards/RPAR process, and Data Call-in. \J
These comments are briefly summarized in Figure III-3.
Five regulatory options have been proposed for evaluation. The
concerns expressed by respondents to the Regulatory Task Force would be
impacted differently under the alternative options. One major area of
concern raised by pesticide firms in the comments to the Regulatory Task
Force is that testing procedures or protocols should not have the force of
regulation, but should be made available as guidance only. The Agency
proposal, regulatory requirements (#2), adopts this structure whereby
testing requirements are issued as regulation, but protocol guidance is
made available in non-regulatory documents.
The general criticisms that the current registration process takes
too long and is too costly have been addressed in the regulatory impact
analysis of alternatives. Steps have been taken to minimize such problems
under the current program. Also, they would be very positively affected
by adoption of either Alternative #4 (self-certification), or #5
(provisional registration). Self-certification would allow registrants to
set their own time frames for registration of products. Generally,
operations of OPP would not adversely affect the timeframe for
registration of pesticide products. Reduced interaction with OPP would
also reduce industry costs to register products. Under provisional
registration, data review by OPP would be maintained; however, advance
marketing (prior to completion of all chronic testing) of products would
alleviate the effects of data costs (relative to the current situation)
while, in effect, reducing the pre-market testing requirements.
\T Comments regarding specific pesticide policy decisions were also
submitted to the Task Force. However, only the comments on data
requirements and processes will be discussed in this section.
38
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Figure III-3
Summarization of Comments Pertaining to Data
Requirements Received by Regulatory Task Force I/
Concern
Recommendations
Section 3 Registration
Process (general):
Registration process takes too
long (as currently conducted)
and data requirements impose a
financial burden.
Registration Guidelines:
Registration guidelines are too
complex and impose expensive
testing requirements.
Registration Standards/RPAR
"Expedited data reviews
"Simplify registration
procedures
"General outline (as regulation)
of "kinds of information" required
for regulation
"Should not be formal rulemaking,
only guidance documents
"Eliminate R.S. process: continue
product-by-product approach using
3(c)(2)(B) to fill data gaps
"Eliminate or substantially alter
the RPAR process
Requirements are rigid and
costly reducing available
resources to pursue research
and in some cases forcing small
producers out of business.
"Registrants should jointly develop
data and share cost of data
production by "market share." Any
registrant who agrees to share the
cost of producing the data shall
be entitled to examine and rely
upon such data in support of
maintenance of registration.
_!/ Only summarizes comments pertaining to data requirements or related
processes.
39
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The registration process is however only one item with which the
pesticide industry is concerned. Hence, one cannot conclude industry
support for self-certification. In fact, the industry has indicated that
self-certification is not a favored option. As will be developed in later
sections, industry product liability and the possibility of facing
individual state regulations would be of much greater significance without
a reasonably strong Federal program
Respondents also suggested substantial revision of, or elimination
of, the Guidelines. Self-certification takes this recommendation into
consideration. All other options would operate using the guidelines as
either formal or informal data requirements. Several respondents also
recommended elimination of, or substantial revisions in, the Registration
Standards Program, the RPAR process, and Data Call-in. Under options #1,
2, 3, and 5, these programs/processes would not be substantially altered.
Under self-certification, option #4, data call-in, would only be used when
adverse effects were suspected and the Registration Standard Program (as
currently operated) would be eliminated. The RPAR process or a similar
process would remain in place in order to evaluate pesticides potentially
posing unreasonable adverse effects on the environment.
40
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IV. PESTICIDE PROGRAM IMPACT ANALYSIS
A. Registration Decisionmaking Programs and
Their General Pesticide Data Needs
In order to obtain registration for a product, the applicant is
required to submit certain information and data in support of the
registration application. The types of registration activities which are
subject to data or other requirements for registration under FIFRA are
shown in Table IV-1. The major data requirements are associated with new
chemical registrations and reregistrations which are done largely under
the registration standards program..
B. Programmatic Rationale for Various Data Requirements and
Associated Guideline Subparts
The registration data requirements and guidelines can be divided by
topic area into parts which singly and In combination support program
decisionmaking on pesticide products. Each part establishes criteria
under which data are needed in support of the registration of
manufacturing use and end-use products. Each part also establishes the
type of data required when these criteria are met. The preambles to the
various guidelines subparts contain complete discussions of the background
and issues pertaining to each subpart. The key points as to the
scientific rationale, programmatic use of information, consequences of not
having the information, and specific alternatives considered have been
summarized in the following charts (Figures IV-1 to IV-6).
C. Impacts of Alternatives on Functioning of Pesticide Programs
1. Time to Obtain Registrations
An important aspect of the alternative approaches is their impact on
the time required to obtain registrations under FIFRA, particularly for
new products. It is in the interest of both the applicants for
registration and the Pesticide Program to minimize the time that is
necessary to obtain registrations for a product, provided that
unreasonable adverse effects are avoided. That new criterion was added
for decisionmaking under FIFRA in 1972<> By avoiding delays in processing
and reviewing of applications, the Agency is being more efficient in its
operations and at the same time the pesticide industry and users benefit
when products are registered and placed on the market in a timely fashion.
This section discusses the potential for impacts on time to obtain
registrations from the point of view of the functioning of the pesticide
registration process. The significance of the timeliness of decisions
from the point of view of the industry is discussed in the industry
impacts section of this report.
41
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Table IV-1 Description of Different Registration Actions
Registration Action
Description
Section of FIFRA
New Chemical
Amended Registrations
"Me Too" Registrations
Supplemental Distribution
Experimental Use Permit
Special Local Needs
Emergency Exemption
Registration Standard
New active
ingredient
New use, and other
label changes
Identical end use
products (same
formulations)
3(c)(5), 3(c)(7)
3(c)(5) or 3(c)(7)
3(c)(7)
Name and address vary 3
but product the same
Interim permit for 5
data collection
Individual states 24(c)
on a local need
basis
Emergencies 18
Standard for 3(g)
registration decisions
on an active
ingredient
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Figure IV-1 Data Requirement/Guideline Subpart Program Rationale
PURPOSE:
SCIENTIFIC RATIONALE:
CONSEQUENCES OF NOT HAVING
INFORMATION:
PROGRAMMATIC USE OF
INFORMATION:
ALTERNATIVE APPROACHES
CONSIDERED:
Subpart D; Product Chemistry
Identify intentional and unintentional
components of products.
Toxicity and exposure potential are directly
related to components of pesticide products.
Unknown major or minor components in pesticides
may pose high toxicological risks to humans or
environment.
1. Decisions on allowable inerts;
2. Enforcement of labeled contents; and
3. Tolerance setting.
Identification of components to 0.01% level as
opposed to 0.1% level with microbial bioassay
screening for toxic components.
Figure V-2 Data Requirement/Guideline Subpart Program Rationale
SUBPART/TITLE:
Subpart E; Hazard Evaluation; Wildlife and
Aquatic Organisms
Subpart J; Hazard Evaluation; Nontarget Plants
Subpart L; Hazard Evaluation; Nontarget Insects
PURPOSE:
SCIENTIFIC RATIONALE:
CONSEQUENCES FOR NOT HAVING
INFORMATION:
PROGRAMMATIC USE OF
INFORMATION:
ALTERNATIVE APPROACHES
CONSIDERED:
Assess the toxicity of pesticides to non-target
organisms in the environment.
Laboratory and field studies are used to assess
the hazards of pesticide use to wild mammals,
birds, aquatic life, plants, and pollinator
insects.
Pesticide usage without this information may
cause population reduction or elimination of
species of wildlife and other organisms.
1. Decisions on acceptable sites, formulations,
application methods;
2. Label warnings.
Tiered testing requirements are chosen over
uniform testing schemes.
43
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Figure IV-3 Data Requirement/Guideline Subpart Program Rationale
PURPOSE:
SCIENTIFIC RATIONALE:
CONSEQUENCES OF NOT HAVING
INFORMATION:
PROGRAMMATIC USE OF
INFORMATION:
ALTERNATIVE APPROACHES
CONSIDERED:
Subpart F; Hazard Evaluation; Humans and Domestic
Animals
Assess the acute and chronic affects of human and
domestic animal exposure to pesticides.
Laboratory animals serve as indicators of
potential response of humans and domestic animals
upon exposure to pesticides.
Determination of acceptable levels of exposure
not possible. Health effects in population with
unknown causes might occur.
1. Decisions on acceptable sites, formulations,
application methods;
2. Label warnings; and
3. Tolerance setting.
Various combinations of short-term and long-term
studies have been considered. Use of indicator
studies for chronic effects is not scientifically
supported currently.
Figure IV-4 Data Requirement/Guideline Subpart Program Rationale
SUBPART/TITLE:
PURPOSE:
SCIENTIFIC RATIONALE:
CONSEQUENCES OF NOT HAVING
INFORMATION:
PROGRAMMATIC USE OF
INFORMATION:
ALTERNATIVE APPROACHES
CONSIDERATIONS:
Subpart G; Product Performances; Public Health Uses
Ensure that pesticide products control public
health threatening pests listed on labels.
Ineffective pesticides cause undue pollution
without offsetting benefits of pest control. Public
health pests, if not controlled, adversely affect
human health..
Public health will be seriously affected.
Increase in unnecesary pollution. Increase in
consumer fraud.
1. Decisions on acceptable sites, pests
controlled, allowable label claims;
2. Label warnings; and
Extend product performance guidelines to
non-public health uses was considered; decision
has been made that markets will effectively keep
ineffective products off of market for those
other uses.
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Figure IV-5 Data Requirement/Guideline Subpart Program Rationale
SUBPART/TITLE:
PURPOSE:
SCIENTIFIC RATIONALE:
CONSEQUENCES OF
NOT HAVING INFORMATION:
PROGRAMMATIC USE OF
INFORMATION:
ALTERNATIVE APPROACHES
CONSIDERED:
Subpart K; Exposure Data Requirements; Reentry
Protection
Provides data on residues and residue dissipation
of pesticides on foliar and other surfaces. Data
used to establish reeentry intervals for
agricultural workers.
Workers may be exposed to pesticide residues on
crops and surrounding area. Residue levels vary
with crop, pesticide formulation, meterological
condition, etc.
Workers subjected to unknown hazards from
pesticide exposure.
1. Establish reentry intervals;
2. Label warnings
Establish reentry residue levels as opposed to
reentry time intervals.
Cover all crop sites as opposed use patterns with
high exposure potential.
Figure IV-6 Requirement/Guideline Subpart Program Rational
SUBPART/TITLE:
PURPOSE:
SCIENTIFIC RATIONALE:
CONSEQUENCES OF
NOT HAVING INFORMATION:
PROGRAMMATIC USE OF
INFORMATION:
ALTERNATIVE APPROACHES
CONSIDERED:
Subpart N; Environmental Fate
Describes data needed on pesticide metabolism,
degradation, dissipation, mobility, and
accumulation in the environment for purposes of
exposure assessment.
Pesticide chemicals may be chemically changed and
physically moved from intended site after
application. Sunlight, water, soil, and air all
may interact with pesticides.
The fate and persistance of pesticide residues in
the environment could not be determined.
1. Decisions on acceptable sites, formulations,
application methods;
2. Label warnings;
3. Tolerance setting.
Several options on choices between laboratory
studies and field studies were considered and
choices made.
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a.) Elapsed Time to Obtain Registrations JY
Approximately 7 years of elapsed time occur between the time a new
chemical entity is discovered and the time it can be marketed with a full
commercial registration under FIFRA, as amended, in the 1970's. Between
1973 and 1980, an average of 88 months (7.3 years) elapsed between
discovery of chemicals and the receipt of registrations (Table IV-2).
During the period since the 1972 amendments, there has been no consistent
trend up or down in elapsed time from original discovery (Figure IV-7).
The peak of 110 months was reached in 1977 at the height of the
difficulties in the registration process precipitated by a number of
lawsuits concerning compensation for proprietary data. This problem is
still a complicating factor in the program, but has been ameloriated to a
degree by 1978 amendments and rulemaking by the Agency concerning data
compensation.
b.) Processing Times of Applications in EPA
Processing of registration applications for new active ingredients
(FY 82) is targeted to take an average of 28 weeks for new chemicals and
an average of 22 weeks for new bio-rationals. Processing time varies
however, depending on the complexity and quality of test data submitted
for scientific review. This is demonstrated from an historic perspective
in step 3 of Table IV-3. Few new pesticide chemicals, with or without a
tolerance petition, attain registration within a single cycle of the EPA
procedure.
Alternative #4 (comprehensive data requirements) would represent the
most stringent registration procedure of a new pesticide chemical. This
option could conceivably lengthen the maximum time required for the
existing procedure, especially if any data gaps were revealed during the
Hazard Evaluation Division review.
Alternative #3 (self-certification) would require the least amount of
EPA involvement in the registration of a new pesticide chemical. Review
of test data would be eliminated as it would not be required for
registration. Time required would be greatly shortened in this instance
since registrants would self certify that no unreasonable risk would
result from product use.
Reference guidelines (#1) best represents the current EPA procedure
for new pesticide chemical registration. The primary concern at this time
is in regard to the completeness of submitted risk data, which determines
the number of times the concurrent scientific review period must be
repeated. The risk data review is the most time consuming step of the
registration process. It should be noted however, that the review status
of every new pesticide chemical is checked on day 150 of this period and
the findings are reported to the applicant.
If The data on elapsed time to registration presented in this section are
those published by the National Agricultural Chemical Association,
based on its annual surveys of participating members•
46
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Table IV-2. Elapsed Time to Obtain Registrations for
New Active Ingredient Under FIFRA,
Available Years, 1963-80
Average elapsed time to full commercial
registration from:
Year
Prior to 1963
1963-67 average
1967-71 average
1970
1973
1974
1975
1976
1977
1978
1979
1980 a/
1973-80 average
Final submission
for
registration
NA
NA
NA
NA
NA
18
14
15
29
14
19
23
19
First temp/
experimental
submission
vr 4-V.
6
7
18
11
22
42
30
38
40
32
44
35
35
Discovery
of
chemical
61
61
69
63
80
97
93
74
110
69
92
88
88
NA - Not available.
a/ Conditional registration only; data for all other years are for full
comercial registrations.
Source: National Agricultural Chemicals Association, Annual Surveys.
47
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00
FIGURE IV-7
ESTIMflTE OF TIME REQUIRED TO COMMERCIflLIZE
fl PESTICIDE PRODUCT. 1970-1381.
ELflPSED TIME
120
108
36
84
72
60
48
36
24
12
0
»»•
\
\—I—I—I—I—I—I—I—I—I-
DISCOVERY
TO MflRKETING
FIRST SUB
FINflL SUB
70 71 72 73 74 75 76 77 78 73 80
YEflR
SOURCE* NflTIONflL flGRICULTURflL CHEMICflLS flSSN.. INDUSTRY PROFILE SURVEYS
NOTE* DflTfl FOR 1380 flRE FOR CONDITIONflL REGISTRflTION
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Table IV-3. Time Requirements for EPA Administrative Regulatory Procedure
for New Pesticide Chemical, FY 81 and FY 82
Action Time Requirement
FY 81 & FY 82 weeks
1. Administrative Classification 2
of Pesticide Chemical
2. Acknowledge Receipt of 1
Registration Application
3. Hazard Evaluation Division 24-32
Data Review
4. Receipt of Data Review by
Registration Division and 1-2
Industry Notification
5. Industry Response to EPA 4
Notice of Data Review
6. Supplemental Data Generation if 4-52
Required
7. Repeat Step 3 (conditional registration) 16-24
8. Label Review, Provisional 2-4
EPA Acceptance
9. Industry Conformance to
Administratiave Details 2-4
10. EPA Formal Acceptance of 2-4
Pesticide Chemical Registration
Total for Full Registration 58-129
Total for Conditional Registration 38-53
(Omit Steps 6 and 7)
Total Time Savings 20-76
49
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Provisional registration (#5) is a somewhat less rigid registration
method than the existing conditional registration process which is
described in Section 3 of FIFRA. This option, like conditional
registration, could effectively shorten the scientific review period, by
not requiring some of the lengthier toxicological tests to be completed at
the time of application for registration.
Finally, regulatory requirements (#2) would also have a shortening
effect on the present registration process. By formulating specific data
requirements and granting test data waivers, time could be reduced. The
applicant could further benefit by being relieved of performing risk-
related tests which may not apply to the pesticide chemical in question.
Ostensibly, all of the pesticide chemical registration options
presented deal primarily with some manipulation of the quantity and
totality of pre-market test data. With the concurrent scientific review '
period requiring the majority of time in the registration procedure,
modification of the requirements and timeliness of this step would produce
the greatest benefit for the individual applicant.
In addition to reducing EPA review time, elapsed time to reach
registration determinations could be reduced by the time necessary to
conduct certain tests, particularly the human hazard chronic tests.
This is especially true for the industry self-certification option and
provisional registration. Savings for those options would be in the range
of 2-3 years compared to guidelines. The estimates of time savings cannot
be made precisely because of differing modes of operations of firms and
multiple use of test facilities and projects (to meet various needs within
the firm and for other possible regulatory requirements).
Taking into account the time it takes the Agency to process
applications and the time it takes for various testing/data collection
activities to take place by registration applicants, the alternative
approaches would be likely to have the following approximate times
required from original discovery to obtain registration of a new
chemical:
Alternative Months
//I 85-95
\\l 80-90
#3 60-80
#4 100-120
#5 60-80 I/
Options #3 and #5 offer the greatest opportunities for time saving.
T/Refers to initial limited marketing only.
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2. Certainty of Registerability of Pesticides
An optimum pesticide registration decisionmaking program, from the
point of view of information input to those decisions, would be one in
which the cost of additional information would be at least equal to the
benefits of additional information (i.e., cost of further information
would outweigh the benefits). The costs in this instance would be in
terms of user benefits denied, costs of generating the additional
information to the industry, dissipated market advantage and other
time-related costs to the industry. The benefit, on the other hand, is
the value of the reduction in the number of incorrect registration
decisions made. The purpose of this section is to briefly discuss the
accuracy of decisions that would be likely to result under the 5 program
options.
The most accurate alternative would be #4, comprehensive data
requirements, in which a full complement of data would be obtained before
authorizing any registration of a new active ingredient. Under that
approach, the maximum amount of information would be obtained, thus
minimizing the chances of a chemical with unsatisfactory risk properties
being registered.
Options #1 and #2 would rank second in accuracy of decisions with
option #2 being somewhat better than option #1. Generally, somewhat more
strict requirements would be met under option #2 than option #1, thus
improving the accuracy of decisions to some degree. Option #5,
provisional registration, would rank next. There would be a tendency for
more incorrect decisions to occur with that approach due to the more
limited information available at the time usage was authorized. On the
other hand, usage would tend to be limited to the less risky sites until
all testing deemed necessary would in fact be completed.
The poorest alternative, in terms of accuracy of decisions by the
Federal Government, would most likely be the self-certification option.
Here, the regulatory body would have quite limited information to base its
decision upon, and the industry would basically be relying on its own
judgement as to the pesticide's safety. Quality control could be a
particular problem as some firms are likely to be much more rigorous and
conscientious in their testing and decisionmaking than are other firms.
The cost of reviewing registration applications can be impacted by
the guidelines and alternatives. Where guidance is available to the
registrant as in options #1, #2, and #4 and #5, the registrant is in a
better position to determine what is actually needed to obtain a final
registration. This can permit building of efficiences into the research
and development activities of the firms and also minimizes the number of
times applications need to be resubmitted to the Agency before they are
successful in getting registrations. During FY 1977, the average number
of submissions was 3.4 per application granted (more recent data are not
-available).
51
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At this point, it is very likely that provisional registration (and
possibly self-certification) would result in significant numbers of
resubmissions because of the uncertainty in submission requirements.
Producers of pesticides would tend to benefit from options #1, #2,
and #4 because fewer R&D resources would be wasted on "loser" chemicals.
Fewer resources would be misspent on the development of products sought
to be registerable but upon further, closer, preregistration testing
would be screened out. This would eliminate "dead weight" burden of R&D
expense undertaken with no ultimate producer/user benefit in the form of
a new registered chemical at the end.JL/
Alternatives which induce the industry to do more "up front" safety
testing of chemicals, benefit not only the public at large due to reduced
potential exposure and risk at a later time, but help the industry in
identifying "losers" at the earliest possible date. Alternatives which
let the research and development process continue on, substantially
longer, before critical risk information is available tend to drive costs
of the industry upward in the long run. Options #3 and #5 allow this
phenomenon which could add to R&D costs, as well as other costs in the
case of either discovered losers or chemicals which ultimately must be
removed from the market.
3. Interrelationships with Other Statutes/Programs
In regulating the use of pesticides under FIFRA, the Office of
Pesticide Programs interacts with and/or affects other Federal and
regulatory programs. Chronic and acute toxicity test data and
degradation information collected under environmental fate data
requirements are useful to OSHA in their regulatory activities and are
also used in -decisions made under Resource Conservation and Recovery
Act (RCRA). Furthermore, the data are used to establish tolerances for
pesticide residues in foodstuffs under FFDCA; these tolerances are
established by EPA and enforced by FDA. The level of Federal data
collection and evaluation of the detrimental effects of pesticides also
determines State decisions pertaining to the need for supplemental
State and local regulation (above those regulations imposed by Federal
government) of pesticide use. As alternative regulatory approaches are
evaluated, the impacts of these approaches on other Federal and State
decisionmaking activities must be recognized.
Under regulatory option #3, self-certification, pre-market testing
of products would not be required by the Office of Pesticide Programs.
The extent of testing performed would be at the option of the
registrant. The absence of data collection on the various detrimental
\J There is no pesticide program benefit from this type of action (in
terms of reduced actual health or environmental impacts) because the
products never reach market. When they do so, and it could have been
prevented by other options, there would be such program benefits.
-------
effects caused by pesticides could hamper regulatory activities under
OSHA, FFDCA, and RCRA. Theoretically, chronic and acute toxicity test
data for new chemicals would only be available at the registrants'
discretion under a regulatory policy of self-certification.
Regulatory activities under FFDCA would be most severely affected.
Currently, tolerance setting requires a full battery of test data and
description of analytical chemical methodology for detecting and
measuring residues. In the absence of access to such datas tolerances
could not be set by OPP under a self-certification regulatory approach.
Alternative mechanisms for tolerance setting would have to be
established. Clearly abandonment of tolerance establishment and
enforcement could severely endanger the health of U.S. consumers.
The lenient Federal regulatory stance under a registration program
of self-certification may be considered unacceptable by many of the State
governments. Currently, California, Wisconsin, New York and other states
often impose more stringent regulations than EPA. Data collection and
evaluation at the State level could considerably increase the aggregate
costs of pesticide use and production. States would have to
substantially increase their staffs and/or create entirely new program
areas. Industry currently believes that regulations under FIFRA allow
the States too much discretionary power to require data and regulate
beyond the standards established by the Federal government. This is
evidenced by industry testimony presented to the House Agriculture
Committee during hearings on FIFRA authorization during the spring and
summer of 1982.
The Office of Pesticide Programs, in administering FIFRA, is
primarily concerned with preventing unreasonable adverse effects from.'
pesticides. This goal cannot be expected to be always consistent with
industry goal of maximizing the certainty of the registerability of
products. An effective regulatory program can attempt to maximize the
certainty of registerability given the constraints of the requirements of
FIFRA.
4. Impact of Alternative Regulatory Options on Pesticide Program Costs
a.) EPA Programs
In the President's budget prepared in March 1981, the estimated
pesticide budget in FY 1981 was $69.6 million. The estimated budget for FY
1982 is $62.1 million. The FY 82 reduction in the budget occurs mostly in
the areas of Research and Development and Registration Standards Programs.
An analysis of the impact of alternative regulatory options on the
pesticide budget for a typical year is contained in Table IV-4. It shows
that the largest resource saving to EPA occurs with regulatory
requirements (option #2). The cost savings is estimated to be slightly
over $4 million for a typical year which is about 6% of the FY 1982
53
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Table IV-4
Impact of Regulatory Alternatives on Pesticide Program Budgets,
Typical Current (FY 82) Year Basis
Regulatory Alternative
Current Budget
Program
Research & Development
Registration
Special Beg.
Tolerances
Registration Standards
RPAR Reviews
EIS Preparation
Pesticide Enforcement
Grants Support
Grants
Certifications & Training
Federal & State Programs
Total
NC = No change
- = decrease
Estimate
(1982)
6.9
7.9
2.0
2.2
10.5
16.0
0.1
4.3
0.4
8.7
2.5
0.5
62.0
#1
Reference
Guidelines
NC
NC
NC
1C
NC
NC
NC
NC
NC
NC
NC
NC
NC
*2
Regulatory .
Requirements
_ _ _ _ _ \H 1 1 4 nv^s
-0.4
-0.4
0.4
NC
-0.5
-3.2
NC
NC
NC
NC
NC
NC
-4.1
#3
Self.
Cert.
2.0
-4.0
-0.4
-1.1
-6.0
4.0
NC
1.0
NC
1.0
1.2
2.0
-0.3
*4
Comp.
Data
-0.7
4.0
0.8
NC
3.0
-6.0
NC
NC
NC
-1.0
NC
NC
0.1
K
Provisional
Registration
0.7
-0.2
-0.2
NC
NC
1.0
NC
1.1
NC
1.0
NC
NC
3.4
Source: EPA budget material and EPA estimates of changes under the Regulatory Alternatives.
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budget. Reference guidelines, self-certification and comprehensive data
requirements (options #1, #3 and #4) do not significantly change overall
budget requirements. Provisional registration would result in an
increased cost of $3.4 million (about 5%).
b.) USDA/SAES Programs
Program costs for USDA/SAES (State Agricultural Experiment Stations)
relating to pest control, totaled $336 million in FY 79 (3,104 scientist
years).
Presented in Table IV-5 is a qualitative analysis of impacts of the
five options. The analysis indicates relatively minor impacts, based on
a brief review. Options #2, #4 and #5 would result in fewer RPAR's and
hearings which could save the USDA and the states up to $10 million per
year. Option #3 would increase needs for applicator training and also
RPAR's/hearings to a degree.
D. Impacts on Acute Human Hazards
1. Nature and Extent of Acute Human Hazards of Pesticides
a.) Acute Toxicity of Pesticides
Pesticides are biologically active chemicals that are intentionally
selected and introduced into the environment for the express purpose of
killing or injuring some undesirable form of life. Unfortunately, these
chemicals as a rule, also have the inherent capacity to kill or injure
desirable life forms, including man. This general lack of target
specificity is due, in part, to pesticides' abilities to alter life
processes shared by many organisms. Assurance of safety to desirable
non-target species greatly depends upon the judicious selection of
pesticides, quantities and methods of use that minimize potential risks
to these species. Assessment of this risk to humans requires an accurate
knowledge of the inherent toxicity and an estimation of the likelihood
and magnitude of exposure to them.
The known effects of pesticides range from barely detectable to
discomfort to gross morbidity and mortality. Depending on the intensity
and duration of these effects, they are broadly characterized as acute or
chronic in nature — acute effects being relatively more severe and/or
shorter duration, whereas chronic effects are those that persist over a
long period of time. Acute toxicities most often, though not
necessarily, occur following one or a few exposures to relatively high
levels of pesticides, such as might occur with persons who handle, use or
otherwise come into direct contact with them. By far, the vast majority
of reported poisonings are the result of occupational exposures, careless
use, misuse or mishandling acutely toxic pesticides.
55
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Table IV-5
Resources Allocated to Research on Pest Control by Federal and State Goverrments,
(Pesticide Regulatory, Research and Educational Program Costs), FY 1979/80
Reference Guidelines
(Current Program)
#1
Regulatory
Requirements
#2 .
Self
Certification
#3
CODE)* Efat<:i
#4
Provisional
Registration
#5
$ m-minm Scientist
Years
FY 79 336.5 3,104
FY 80 375.5*
Slight increase
($5-10 million
due to fewer
RPAR's)
Some increases in
State Ed. Programs,
more RPAR's and
hearings ($10 to
$20 million)
$10 million
decrease due
to fewer RPAR's
and hearings
Slight decrease
($5-10 million
due to fewer
RPAR's)
*ARS data are available for FY-80 actual gross appropriations.
from FY-79.
FY-80 funding increased 11.6 percent
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b.) Acute Exposure
Acute exposure to pesticdes may occur under many circumstances and by
several routes. The most important of these are exposure from handling of
concentrated pesticides during mixing, loading and cleanup activities,
exposure from entry into treated areas following application, incidential
exposure to bystanders near sites being treated, and dietary exposure from
consumption of foods containing pesticide residues. Exposure from all of
these routes is somewhat documented in the open scientific literature and
cited in OPP regulatory documents such as RPAR Decision Documents.
c.) Effects
In the United States, approximately 140 fatalities (0.65 per million
population) due to pesticide poisonings are reported in a typical year. It
has furthermore been estimated that about 100 nonfatal poisonings occur for
each fatal one (Hayes, 1975).
2. Impacts of Alternatives on Exposure and Risk
Testing designed to identify and quantify the acute effects of
pesticides ordinarily consists of a set of 4 or 5 short-term relatively
inexpensive studies which are universally accepted as being essential for
the evaluation of short-term or acute hazards. There is little doubt that
industry requires such studies to be performed on nearly all pesticide
products, and that they would generally be performed and reported in a
satisfactory manner, even without a regulatory requirement to do so.
Therefore, selection of a specific overall approach by EPA to regulate
pesticides or finalize the guidelines generally would have little impact on
the evaluation of acute risk. There is some possibility that risk could
increase to a degree under self-certification.
Pimental, et al. (1980) has calculated the economic costs of
accidental pesticide poisonings. The costs have been updated to 1980
values. Also a discount rate of 10 percent has been used in computing the
present value cost of fatalities. The cost of each acute poisoning is
estimated to range from $39 for physican services to $112,327 in the case
of death. The total direct and indirect costs of acute poisonings is
estimated to be $15.2 million annually. It should be noted that the
estimates represent economic costs and should not be interpreted as value
of life estimates.
The alternative approaches to achieving regulatory objectives on
information requirements have previously been characterized as having no
significant effect on the generation of data about the acute effects of
pesticides. The conclusion is based on the presumption that the basic
acute toxicity studies are relatively low cost and that knowledge of acute
toxicities is needed as basic information for the market development of a
pesticide. The pesticide industry is thus expected to perform studies to
measure the acute toxicity of their products regardless of the regulatory
57
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environment under which they must function. Therefore, changes in the acute
effects testing and associated costs would be minor under any of the
alternative approaches analyzed in this study.
E. Impacts on Chronic Human Hazard
This section will discuss in general terms 1) the exposure to and
chronic toxicity of pesticides as currently used; 2) project the type of
changes which can be expected under alternative regulatory scenarios; and 3)
project as fully as possible the cost of adverse chronic health effects under
each regulatory scenario.
1. Nature and Extent of Chronic Human Hazards of Pesticides
a.) Chronic Toxicity of Pesticides
Chronic effects are those that tend to develop over a relatively long
period of time. Some of these effects such as hypersensitivities, allergies,
storage of chemicals in body tissues and adaptive liver changes may be regarded
as being of lesser concern in humans. But also included in this category are
effects that are considered to be very severe and serious such as
effects on the nervous system, birth defects, inheritable changes in genes and
cancers. These latter types of effects are recognized as being seriously
debilitating and are often of an irreversible nature. In addition,
considerable experience from animal studies clearly suggests that chronic
effects are potentially capable of affecting nearly every organ and system in
the human body.
b.) Chronic Exposure
Exposure to pesticides may occur under many circumstances and by several
routes. The most important of these are exposure from handling of concentrated
pesticides during mixing, loading and cleanup activities, exposure to diluted
spray during application, exposure from entry into treated areas following
application, incidental exposure to bystanders near sites being treated, and
dietary exposure from consumption of foods containing pesticide residues.
Exposure from all of these routes is now reasonably well documented in the open
scientific literature and cited in OPP regulatory documents such as RPAR
Decision Documents.
(i) Dietary Exposure
Since 1964 the Food and Drug Aministration and the U.S. Dept. of
Agriculture have monitored the pesticide residues in the American diet.
This surveillance program is referred to as the Total Diet Program or
the "Market Basket Survey." In this program the food in the "Market
Basket" is usually defined as the food constituting the diet of the
average American male, age 15 to 20 (the nation's biggest eater). In a
related program, parallel data are collected for infants and toddlers.
58
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Pesticide residues in the American diet are at a level considered
acceptable by EPA and generally much less than the acceptable daily
intake (ADI) recommended by the Joint Committee on Food Additives of
the United Nation's Food and Agricultural Organization and the World
Health Organization (FAO/WHO).
(ii) Population Exposed
Table IV-6 presents estimates of the number of individuals in
various groups which are chronically exposed to pesticides.. The final
figures presented in this table are not additive in that a single
individual could fall into more than one of the population categories.
2. Costs of Chronic Effects, as Impacted by Alternatives
The purpose of this section of the analysis is to present
estimates of the unit cost of chronic effects and relate these to the
changes which can be expected under the five regulatory options under
consideration.
The last part of this section will discuss each option in turn;
the first will not, since the information presented applies equally to
all the options.
a.) Unit Costs of Chronic Effects
It was possible to estimate the unit costs of cancer using
published data from the health care sector of the economy. Data
relevant to unit costs of other chronic effects which could be linked
to a pesticidal cause were not available. In Section IX, some
hypothetical unit costs for other effects have been postulated and
their implications explored.
Cancer, being one of the primary chronic effects, appears to be
the largest contributor to the cost of pesticide-related health
effects. Table IV-7 presents the derivation of the estimate of the
unit cost of cancer (average per case cost). The derivation depends,
in large part, on data and estimates on aggregate costs of chronic
effects (see detailed cost/benefit analysis report). It is estimated
that the average cost of cancer is $52,000 including both direct and
indirect costs. Direct costs consist of medical care costs and
indirect costs are the discounted value of lost wages due to morbidity
and mortality.
It is recognized that the "human capital" approach, upon which the
above estimate is based, is not an ideal method for estimating the full
cost of a mortality to society. Such estimates do not include for
example the cost of pain and suffering, and as such are not estimates
of the value of lifesaving.
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Table IV-6
Estimated Number of Persons Chronically
Exposed to Pesticides by Type of Exposure
Population Category
Total U.S. Population
U.S. Farm
Private Certified Applicators c/
Commercial Certified Applicators
Number of Persons
(1000)
220,099 a/
6,241 £/
1,097 b/
114 b_/
a/ Source: USDA. 1980. Agricultural Statistics.
Washington, D.C.
b/ Source: American Association of Retired Persons. 1981
Data on Certified Applicators and Structural
Program. Washington, D.C. July.
Type of
Exposure
Dietary
Occupational
Occupational
Occupational
Collection of State
Pest Control
c/ A large percentage of this category would also be included in the U.S. farm
population figures.
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Table IV-7
Estimated Cost of Cancer
Total Number of Cancer Cases aj 660,680
Total Direct and Indirect Cost of Cancer (1980) b/ $34,349,000,000
Unit Cost of Cancer $52,000
a/ Hartunian, N.S., et al., 1980. The Incidence and Economic Cost of
Cancer, Motor Vehicle Injuries, Coronary Heart Disease, and Stroke: A
Comparative Analysis. American Journal of Public Health. Vol. 70, No. 12.
December.
W Estimated from U.S. Dept. of HEW. 1978. Health-United States. Public
Health Service. Washington, D.C. December.
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b.) Impacts of Guidelines and Alternatives
Since it is not really possible to quantitatively estimate the
changes in chronic health effects across the regulatory options being
considered, this section will discuss the health cost impact of chronic
effects in largely qualitative terms (see Table IX-4).
(i) Reference Guidelines
This option would essentially continue the status quo and as such
would not involve a change in the health cost currently being incurred.
Consequently, the health costs resulting from pesticide use are
projected to remain at the current levels.
(ii) Regulatory Requirements
Health costs should be reduced slightly under this option.
Because of test protocol specification, information on potential
chronic health effects are likely to be more detailed than the
information currently being prepared by registrants. In practice,
however, it is likely that this option would not generally result in
significantly different health costs than the reference guidelines.
(iii) Self Certification
It is anticipated that this option would lead to a significant
increase costs due to adverse health effects. Basic economic
incentives militate against doing high quality chronic effects testing.
Once in place, it would take a considerable time for chronic health
problems to become apparent under this option. Because of long latency
periods, the full extent of the resultant health cost increase may not
be known for years•
(iv) Comprehensive Data Requirements
Chronic health effects costs under this option would be very
similar to those under Option (ii). However, some reductions in the
level of chronic health risks can be expected to result from the shear
volume of testing which would reduce the probability of accepting false
negative results from any single test.
(v) Provisional Registration
This option would introduce considerable uncertainty as to what
adverse chronic effects could be expected from a pesticide. There is
considerable disagreement in the scientific community as to how
reliable indicator studies are. This would drive health costs above
the level expected under the reference guidelines. At best, health
costs would be no lower than those resulting from that option.
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F. Impacts on Environmental Hazards
1. Introduction
Currently 1.2 billion pounds (a.i.) of pesticides are being
applied to 230 million acres annually. This represents almost 11
percent of the U.S. land base. Given the periodic nature of pest
infestations and the multi-year rotations of timber stands, the
percentage of the land base treated with pesticides over a longer
period of time (say ten years) is much higher. With the use of
pesticides on this extensive a scale, the potential for environmental
damage is immense. David Pimentel and his colleagues have estimated
that non-target environmental effects of pesticides cost the United
States some $515 million annually (D. Pimentel and J. H. Perkins eds.,
Pest Control; Cultural and Environmental Aspects, Westview Press,
Boulder, Colo., 1980, p. 136). This estimate excludes recreational and
existence values of the damaged environment. Hence, there is a need to
carefully screen each new pesticide prior to registration for potential
adverse environmental effects.
2. Toxic Effects
The response to a pesticide can be as varied as the number of
species exposed to it. The extremes of the response range from no
response to death. Death may involve only a few individual organisms,
whole age cohorts, or even whole populations of specie. Even though
immediate toxic effects rarely affect an entire population, significant
population loss can have a major effect on specie reproduction and
consequently its associated ecosystem. The magnitude of this effect
can vary from small to large. Usually it will be small, however it
will nonetheless exist. The ideal situation is for non-target
organisms not to be affected at all. This is rarely the case; in any
biological situation, things are rarely "black and white". Besides
immediate toxic effects, sub-lethal or chronic effects are possible.
3. Chronic Effects
There are many manifestations of chronic pesticide exposure. Some
pesticides have the ability to disable the complex reproduction cycle
without causing death to the individual exposed. The reproduction cycle
is very complex in all organisms, from the simplest plants to man. If
any step is altered, changed or blocked in any way, the result can be
reproduction failure. A well known example of a reproduction cycle
alteration resulting in a large population decline, is DDT's thinning
effect on eggshells.
Other chronic problems not related to reproduction, are behavioral
changes. An example is the effect organophosphate insecticides (OPs)
have on birds and mammals. OPs inhibit an enzyme crucial to the proper
functioning of the nervous system. When the enzyme inhibitor is
present, birds and mammals become lethargic.
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A third classification of chronic problems facing non-target
organisms, is habitat destruction or alteration. Admittedly, in most
cases this problem is generally confined to less mobile organisms, but
it too can be a problem to larger more mobile organisms as well.
4. Population Dynamics
Although this is not the forum for a complete discussion of
pesticidal effects and population dynamics, a brief explanation is
needed to complete the discussion of the benefits of the testing
requirements. The removal of an individual from a population, for
whatever reason, has an effect on that population. Pesticides have the
ability to exert localized as well as widespread effects. Population
dynamics deals with a multitude of interwoven factors relating to one
another. Some of the more important factors are food abundance,
predator pressure, available habitat and reproduction potential. It
has been demonstrated that pesticides do have an effect on all of
these; thus pesticides have the potential to significantly effect
non-target populations. Can the effect of a pesticide on a population
be predicted prior to the pesticides release? Yes, but the amount of
information normally available is insufficient to make quantitative
predictions. The type of effect that can be anticipated, is generally
all that can be predicted.
5. Environmental Fate
Environmental fate information is essential to anticipate these
hazards. It is extremely important to know the potential amount of a
pesticide in a certain matrix of the environment, how long it will
persist there, its potential for biconcentration in the biota of that
matrix, for movement to other matrices of the environment, and by what
mechanisms and to what substances it will degrade. This information is
obtained from the studies delineated in the environmental fate
guidelines.
It is anticipated that the types of adverse environmental effects
described above can hopefully be predicted and avoided in the future by
a careful analysis of the environmental fate parameters generated from
the required scientific studies.
6. Impact Alternatives
What are the alternatives and how do they effect the quality of a
hazard assessment?
a.) Reference Guidelines
The current program has been established to require more studies
necessary to determine hazards to humans, livestock, wildlife and
plants. The tests requested provide the information needed to identify
the ecological risks associated with a chemical use.
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The past record speaks quite well for the system,. Few, if any,
chemicals registered after 1978, when this program went into operation,
have been cancelled or suspended <> This is not so for chemicals
registered prior to that time.
b.) Regulatory Guidelines
It is impossible to predict and establish a complete testing
program prior to the existance of a chemical. There are as many
different problems with a chemical as there are organisms exposed to
it. Thus, a sequential tiered-testing strategy for identifying
ecological effects was developed9 and is currently being used by OPP.
The proposed regulatory guidelines for ecological testing merely
codifies this and specifies the best current practices with regard to
the protocals for the tests used in each tier.
c.) Self-Certification
Theoretically, self-certification is a good option. The chemical
companies know their chemical better than anyone else. During the
product development phase, the firm will examine many of its
properties. They examine the chemical's toxicity to many organisms in
the attempt to identify a marketable product. The only problem with
this system are conflicts between the cost of testing, the amount of
profit to be made, and the speed with which their competition is
moving. If these obstacles could be overcome and an adequate amount of
motivation instilled, the system might work. Whereas, fear of
liability suits would no doubt provide motivation for human hazard
testing, such a concern is not likely to be present with regard to most
ecological hazards and hence provide no motivation for this type of
testing.
d.) Comprehensive Data Requirements
Simply stated, this would require all tests for all chemicals.
These subparts have a tier system built into their requirements. The
higher-tier tests tend to be long-term field studies that are quite
expensive. Unless the lower-tier tests indicate a potential problem,
information from higher-tier tests are redundant. Thus, this option is
much less cost-effective than regulatory guidelines.
e.) Provisional Registration
Initial testing sufficient to insure a pesticide's safety, even in
limited use, would have to be equivalent to the first tier of
ecological testing, as proposed in the guidelines. If monitoring of
the pesticide in its limited use is to effectively identify chronic-
type or longer-term fate problems, such monitoring will have to be so
structured as to be virtually indistinquishable from the higher tier
tests being proposed. Thus, in terms of testing costs, there is
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probably not much difference between the regulatory requirements being
proposed and the provisional registration alternative. The larger the
provisional use allowed, the greater the risk of environmental damage;
however, unless such use is relatively large, little income will be
generated to offset testing costs.
7. The Value of Environmental Benefits Emanating from the Alternatives
a.) Introduction
The benefits to be gained from the alternative methods for
assessing environmental risk from pesticide use depends first on the
number, specie, and location of the plants and animals likely to be
protected under each method as opposed to another, and secondly, on the
value society places on these plants and animals in particular
settings. The types of plants and animals, let alone their number that
would be ultimately protected from harm by the regulatory guidelines
being proposed, in particular Subparts E, F, J, L and N, as opposed to
each alternative, cannot be predicted. However, social values have
been estimated for certain species of wildlife and aspects of the
natural environment. In addition, values can be developed for
non-target species that have commerical value. A number of these
estimated values are presented and discussed below to serve as
indicators of the importance that should be placed on preventing
ecological damage from pesticides.
b.) Types of Benefits
Wildlife, plants and particular natural ecosystems have value to
individuals, and hence society, in terms of their use or potential use,
but also in terms of their very existence. Use value is a reasonably
straightforward concept. Use can either take the form of commercial
harvesting of certain species or a recreational activity for which the
specie or particular ecosystem is essential. Value is more or less
directly measured by observing what people are willing to pay for the
harvested wildlife or expend in pursuit of the recreational activity.
The option value is the amount individuals would be willing to pay
to preserve the resource (in a usable state), until future conditions
are known with sufficient certainty to establish its subsequent use
values.
Existence value relates to the satisfaction individuals obtain
vicariously from the knowledge that species or ecological complexes
survive, even though they may have no interest, or prospect, of being
exposed to them directly. Existence value is the amount they would be
willing to pay to insure such survival.
Bequest value is in many respects similar to existence value. It
is the value individuals place on the satisfaction they derive from
endowing future generations with an undimihished natural environment.
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c.) Commercial Use Values
Salmonoid species tend to be more sensitive to the toxic effects
of pesticides than other finned fishes. The U.S. Forest Service
estimated (Table 1, "Revision of the 1980 RPA Values", October 23,
1979) that the dock-side value of anadromous (salmon and steelhead)
fish was $630-$800 per thousand pounds. Retail value would be much
higher. Clearly pesticide intrusion into the rivers where salmon and
steelhead spawn can have major economic consequences.
The closure of the James River fin and shellfish fisheries in
December 1975, as a result of Kepone contamination is estimated to have
resulted in a loss of commercial catches worth $12.4 million (present
value) during the period, 1976 through 1981 (based on G.K. O'Mara and
R.R. Reynolds, "Evaluation of Economic and Social Consequences of
Restricting Fishing Due to Kepone Pollution in the James River,
Virginia," Economic Analysis Branch, OPP, EPA February 1976). It
should be noted that species involved here, have less commercial value
per pound than the salmonoids. A continued ban on fishing for certain
fin-fish species (i.e., striped bass, croaker, eel, bluefish, sea-trout
and spot) for the foreseeable future seems likely, due to extreme
persistence of kepone in the river bed.
Pimentel, et al. have estimated that pesticide related commercial
fishery losses amount to some $5.5 million dollars annually. (D.
Pimentel and J.H. Perkins, eds. Pest Control; Cultural and
Environmental Aspects, Westview Press, Boulder, Colo., 1980, p. 132).
Honey bees are highy susceptable to a number of common pesticides
such as carbaryl and methyl parathion. The market value of the annual
honey and beeswax output of the typical honey bee colony has ranged from
$35 to $65 in recent years (pg. 4 Honey Production, 1977-79), ESCS,
USDA, January; 1980.
Pimentel, et al. have estimated that the annual loss to society
from pesticide honey beekills and resulting reduced pollination of
agricultural crops is on the order of $135 million annually (D.
Pimentel and J.H. Perkins, eds. Pest Control; Cultural and
Environmental Aspect, Westview Press, Inc., Boulder, Colo., 1980, p.
124). It should be noted that a good deal of this sum (perhaps as much
as $110 million) is associated with lost crop output resulting from
reduced pollination, not related to pollination contracts with
beekeepers.
d.) Recreation Use Value
Recreational use of natural resources is conventionally measured
in terms of recreation days engaged in a particular activity such as
hunting waterfowl, salmon fishing, watching shore birds, or canoeing on
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on the Flambeau River. User willingness-to-pay is generally estimated
from observed expenditures, direct or indirect (such as imputed travel
cost), by persons engaged in the activity. It may include an estimate
of the opportunity cost of the time the recreationist devotes to the
activity. In 1970, the U.S. Department of the Interior estimated that
hunters and fishermen spent a total of $7 billion dollars in pursuit of
these recreation activities (Fish and Wildlife Service, "National
Survey of Fishing and Hunting", U.S. Department of the Interior, Res.
Publ. 95, 1970). Extrapolating this sum to 1980 on the basis of the
growth in personal consumption expenditures over the 1970-80 period,
yields an estimate of almost $19 billion dollars spent on hunting and
fishing recreation.
Whereas there seems to be no simple functional relationship
between the abundance of a fish or game species and the number of days
spent in its pursuit, pesticide intrusion into fish or game habitat may
be sufficient to terminate the activity altogether.
This latter sort of a situation could develop as a result of
endrin ingested by migratory waterfowl this year in the Montana wheat
fields. If concentrations of the pesticide exceed action levels in
enough duck's tissue, the waterfowl hunting season could be cancelled
in as many as 17 states in the Central and Pacific Flyways. These
states account for an average of 5.29 million waterfowl hunting days
per season (pg. 24, Office of Migratory Bird Management, U.S. Fish and
Wildlife Service, Annual Migratory Bird Hunting Regulation: Federal
Regulatory Impact Analysis, Department of the Interior, June, 1981).
Conservatively valued at $9 per day, this would imply a social cost of
$47.6 million in lost recreational use.
Insofar as pesticides not intended for aquatic use frequently find
their way into lakes and rivers where they seriously degrade water
quality, the general recreational value of water quality becomes
relevant. The U.S. Forest Service uses $69.59 as the annual value of
water quality for swimming, boating and fishing per U.S. household
(R.G. Walsh, "Recreational User Benefits from Water Quality
Improvement", Outdoor Recreation; Advances in the Application of
Economics, GTR WO-2, U.S. Forest Service, USDA, March 1977). The
user value of water quality in the South Platte River Basin has been
estimated at $56.68 per year, or $3.76 per use day, based on 15 use
days per year (R.G. Walsh, D.A. Greenley, R.A. Young, J.P. McKean and
A.A. Prato, "Option Values, Preservation Values and Recreational Values
of Improved Water Quality: A Case Study of the South Platte River
Basin, Colorado", U.S. EPA, January, 1978).
e.) Option, Existence and Bequest Values
As far as can be determined, option, existence and bequest values
have not been estimated for individual plant and animal species. The
estimates of these values that have been done have focused on water
qualityo
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Walsh, Greenly, Young, McKean and Prato, in'the study cited above,
estimated the option value of water quality in the South Platte to be
$22.60 per year for user households. The addition of option value to
use value increases the benefits of water quality to user households by
40 percent. Existence and bequest values estimated for households that
did not use, nor ever plan to use, the South Platte for recreational
purposes were $24.98 and $16.97 respectively. Thus, it appears that
households that had no intention of making use of the river basin,
valued improvements in its water quality at $41.95 per year, or 53
percent of the value user households placed on such improvements.
f .) Comparative Ecological Impacts
It is difficult to be very precise about how the alternative
approaches for generating information on pesticide products will
ultimately effect the level of ecological risk. Presumably, the
reduction in risk to the environment is an inverse function of the
amount and quality of non-target species, environmental fate and
product chemistry test data generated. In that regard, the
comprehensive data requirements option will generate the most good test
data, and the self-certification option will generate the least. Among
the options in the middle range, the regulatory requirements would
probably produce somewhat more quality ecological test data than either
the current reference guidelines or the provisional registration
alternative. Consequently, one can conclude (see Table IX-4) that the
greatest reduction in risk of ecological damage would result from the
adoption of the comprehensive data requirements option. Slightly
smaller reductions in ecological risk would result from adopting the
regulatory requirements, and still smaller reductions in such risks
would follow from adopting either the reference guidelines or
provisional registration options. Least risk reduction, or the highest
levels of ecological damage, can be expected to result from adoption of
self-certification option. This stems from the fact that on their own
firms have little economic (liability) incentive to do non-target
species testing well, if they do it at all.
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V. COMPLIANCE COST ANALYSIS OF DATA REQUIREMENTS
Implementation of any of the five alternative approaches involves
costs of generating and submitting testing information which are costs
directly associated with Agency requirements, and other costs
indirectly related to requirements. This section presents estimates
of the direct compliance costs under various scenarios, along with
costs that are indirectly affected. Some of the major indirect costs
are estimated quantitatively while others can only be discussed
qualitatively because of insufficient data to make projections.
The calculation of direct compliance costs involves estimation of
unit costs of individual studies and estimation of the number of
studies expected to be required on an annual or other time-period
basis. Unit cost information has been collected from several sources
including contract (for fee) laboratories and pesticide industry firms
which have their own testing facilities. The information collected was
then narrowed into consensus ranges•
The approach used in the cost analysis was to estimate (a) total
costs of meeting Agency requirements under each of the alternatives for
specified scenarios of program activity during a. 10 year period
(1982/91) and (b) incremental compliance cost impacts of shifting from
the baseline of the current program, which has compliance costs
comparable to alternatives #1 and #2, reference guidelines and data
requirements. Although the current program is not the same as either
alternative #1 or #2, it has costs about the same as those two options.
A. Data Costs for Registration of Pesticides
Using Alternative Approaches
1. Active Ingredients
To estimate the annual costs of data requirements for new chemical
active ingredients under alternatives #1 and #2, the approach taken was
to describe two model new chemicals and predict the data requirements
necessary for chemicals having those model characteristics. As a
generalization, the major distinguishing features of chemicals as they
relate to triggering the need for data, are whether the chemical is
intended for use on a food or feed crop and whether it is to be used
outdoors. The model chemicals selected for predictive purposes are:
1) a food crop use pesticide with at least four food use sites; and 2)
a non-food use pesticide that has some limited outdoor use
possibilities. These two models were chosen to be representative of
chemicals with respect to the volume of data typically required to
register new food use and non-food use pesticides. The range
represented by the two models is not intended to reflect the highest
possible costs nor the lowest possible.
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Under alternative #3, self-certification, predictions of specific
tests that might be done would be very speculative. It is known from
the surveys published by the National Agricultural Chemical Association
(NACA) that the industry does significant testing beyond that required
by EPA. A logical presumption is that the industry would do a
significant amount of testing regardless of regulatory requirements. A
reasonable conclusion is that outlays for testing new active
ingredients would, at a minimum, be 50% of the estimates for
alternatives #1 and #2. The maximum for alternative #3 would be the
same as for alternatives #1 and #2.
Alternative #4, comprehensive requirements, would involve
totalling all testing costs of studies identified for alternative #2,
but without waivers. The costs would be 50% higher than for
alternatives #1 and #2. Alternative #5, provisional registration, is
expected to have costs falling in between the low end of alternative #3
and alternatives #1 and #2. For this analysis, it is assumed that 75%
of the costs under alternatives #1 and #2 would occur under actual
implementation. The unit costs of the various test requirements used
in deriving the costs in Table V-l are presented in Appendix 1. Table
V-l summarizes the data costs for a new active ingredient by
alternative approach.
2. Formulated Products
Section 3(c)(2)(D) of FIFRA, as amended, states that an applicant
who purchases a registered product for purposes of formulating that
product into an end-use product (formulation) shall not be required to
submit or cite data on the safety of the purchased product.
However, in addition to the testing performed by basic producers,
data requirements have also been established in the regulatory
requirements for end-use formulated products. Data on product
chemistry and acute toxicity are specified for Individual formulated
products as a generality. Other testing may be needed depending on the
nature of the formulated product. These testing requirements are those
that would typically be met by the formulator registrant and not the
producer of the active ingredient, when these companies are not the
same. The estimate of of $24,700-$66,000 is obtained for both
alternatives #1 and #2. Table V-2 summarizes the data costs for a
formulated product, independent of the testing costs for active
ingredients for each alternative approach.
B. Reregistration Data Costs
1. Scenarios for 1982-91
The Registration Standards (RS) programs's mode of operation is to
collect the existing test data on a chemical and the formulated
products produced using that chemical. These test data are then
reviewed with respect to how well they satisfy the requirements for
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Table V-l
Basic Producer Testing Costs for
New Ingredient by
Alternative Approach
Alternative
#1
1.
// 2.
# 3.
# 4.
# 5.
Food Use
Chemical
1,811,900 -
1,811,900 -
905,950 -
2,717,850 -
1,358,925 -
2,874,200
2,874,200
2,874,200
4,311,300
2,155,650
Non-Food Use
Chemical
364,500
364,500
182,250
546,750
273,375
704,000
704,000
704,000
- 1,056,000
- 528,000
Table V-2
Formulated Product Testing
Costs by Alternative Approach
Alternative
* 1.
# 2.
# 3.
# 4.
# 5.
Formulatec
All I
24,700 -
24,700 -
12,350 -
37,050 -
18,525 -
1 Product
Jses
66,000
66,000
33,000
99,000
49,500
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registration. The review process combines the information known about
a chemical and policies of the Office of Pesticide Programs into a
regulatory position on the registerability of a chemical for the
chemical's intended use sites.
One variable in the Registration Standards process is the number
of reviews that will be undertaken annually. In large measure, the
rate of reviewing chemicals depends on resources available to the
Registration Standards program. Alternative scenarios are used here to
reflect the level of resources expected to be available in the future.
Should more resources become available, output would be higher.
Another scenario within the Registration Standards program under
development by OPP is the initiation of data call-in actions for
chronic effects toxicology studies (Chronic Feeding, Oncogenicity,
Reproduction and Teratology). In this program, registrants would be
notified that chronic effects toxicology studies will be required to
support the registrations of their products.
Data call-in and Registration Standards are part of the same
process for expeditiously completing the reregistration of all
currently registered pesticide products. The data call-in notices and
the RS schedule are based on the same priorities in selecting
individual chemicals for processing. As the data base for the chronic
effects studies is established, the chronic effects area should no
longer be a significant source of data gaps. Therefore, as long as
data call-in generally Is coordinated with the RS schedule, after 3 or
4 years data call-in will not cause the industry to incur costs at a
different overall rate than the RS program, i.e., 25 to 40 chemicals
per year.
2. Projected Costs, 1982-91
The annual costs of data for reregistration under the five
alternative approaches will depend on which scenario occurs concerning
the pace of the Registration Standards program, waiver policy, and the
continuance of data call-in under the Registration Standards program.
Costs to be incurred are net of costs previously incurred under various
scenarios, that is, there are currently available data in EPA files that
are useful to support registration. The cost of this old data is not
counted in any of the 5 approaches here. In order to cover the range of
annual costs over 1982-91, three projections have been made. One assumes
that the development of standards will begin at 15 chemicals per year and
increases to 25 chemicals per year. Data call-in is not assumed to occur.
The second projection assumes a constant rate of 25 standards developed per
year, and that the data call-in procedure is used. A third projection
assumes 40 standards developed and a data call-in procedure is used.
For the first twelve chemicals that have data gaps identified in
either published or draft standards documents, costs for data development
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to be incurred by basic producers were $9.3 million and by formulators were
$2.7 million for a total of about $12.0 million. For data call-in, the
average cost per chemical for these four chronic effects studies would be
about $560,000. At 50 chemicals slated for data call-in per year in the
initial years of the program, the cost of studies to be initiated would be
about $28 million. These costs do not_ reflect an addition to the total
costs of the Registration Standards program.
C. New Registrations
1. New Chemicals
For applications to register products containing new active
ingredients, there is little that the Agency can do to directly affect
the number submitted annually. For purposes of this analysis, the
assumption is made that the applications for registration of new
chemicals will continue at the current rate of about 15 chemicals
approved each year.
2. New Formulated Products from New Chemicals
In addition to costs incurred by the basic chemical producers, there
would also be costs incurred by formulators of the new chemicals. (The
firms may be the same). In Table V-2, the expected costs for a new
formulation of a new chemical have been estimated to range from $12,350 to
$99,000 depending on the alternative approach. These are the costs in
addition to the studies performed by basic producers using either technical
grade material or typical formulated product preparation. It is assumed in
this analysis that 20 new formulated products per new chemical would be
registered in .the early years of the new registration.
3. New Formulated Products from Old Chemicals
In addition to currently registered products and new formulated
products from new chemicals, the data requirements will also affect new
formulated products from old chemicals. Costs of $2,500-$5,000 per product
are assumed for each alternative since basic product testing is expected to
be done under all alternative approaches.
The Agency currently registers about 3,000 new products containing old
chemicals annually. If this rate of registration continues, the annual
costs for data would be $7.5 - $15.0 million for this category of products
for each alternative.
D. Direct Data Costs for All Registrations
Summarized in Table V-3 are costs directly associated with complying
with data requirements for existing and new pesticides during the 1982/91
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Table V-3
Costs Directly Associated with Meeting Data Requirements for
Rereglstration and Registration of New Pesticides,
by Scenario and Alternative Approach, 1982/91
Ul
Scenario/
Alternative
15-25 stds/yr.
Alt. # 1
Alt. # 2
Alt. # 3
Alt. # 4
Alt. # 5
25 stds/yr. with
data call-in
Alt. # 1
Alt. # 2
Alt. # 3
Alt. # 4
Alt. # 5
40 stds/yr. with
data call-in
Alt. # 1
Alt. # 2
Alt. f 3
Alt. # 4
Alt. # 5
Cost/year
46.3-79.0
46.3-79.0
27.2-79.0
65.9-111.9
41.2-71.6
56.3-107.0
56.3-107.0
32.2-107.0
80.9-153.9
51.2-99.6
71.3-122.0
71.3-122.0
39.7-122.0
103.4-176.4
66.2-114.6
10 Year Total
533.0-760.0
533.0-760.0
307.0-760.0
764.0-1,074.0
482.0-686.0
661.0-888.0
661.0-888.0
371.0-888.0
956.0-1,266.0
610.0-814.0
811.0-1,038.0
811.0-1,038.0
446.0-1,038.0
1,181.0-1,460.0
760.0-964.0
-------
period. Costs range from a low of $27.2-79.0 million for the lowest cost
scenario under self-certification (#3) to $103.4-176.4 million per year for
the most costly scenario under comprehensive data requirements (#4).
E. Indirect Industry Costs
In addition to affecting the direct compliance costs of generating
data in support of registration, the five alternative regulatory approaches
affect indirectly other components of costs borne by the pesticide industry
registrants. Costs of interacting with EPA to register products and the
cost of managing the testing of chemicals are the largest indirect cost
item. The costs associated with resolving RPAll's (review of chemicals
potentially presumed to cause unreasonable adverse affects) would be
expected to vary inversely with the stringency and cost of the alternative
regulatory approaches. The need for inspections for enforcement purposes
would also be expected to show the same pattern. There is evidence that a
significant reduction in federal regulation, such as under option 3,
self-certification might cause many States to increase their own
requirements of pesticide producers. Thus the regulatory approaches would
indirectly affect the cost of compliance with state regulations. Table V-4
summarizes the projected levels of costs that would be indirectly
affected/changed by adopting each of the five alternative approaches.
Table V-5 summarizes the direct compliance costs and the costs indirectly
affected by alternative approach and registration scenario.
There are conceivable other indirect changes in the costs to the
industry. For example, changes in risk for product liability would likely
be inversely related to the stringency of regulation. As a corollary
insurance premiums would conceivably be affected. No data were available
to serve as a basis for estimating changes in other cost areas that might
be indirectly .affected.
In Section VI of this report, a summary is presented of all pesticide
industry costs incurred as a result of federal regulatory requirements
under FIFRA, FFDCA, and RCRA to place into perspective all regulatory
related costs which can be estimated.
F. Change from Current Practice to Alternative Approaches
An important aspect of the estimated costs of the several alternative
aproaches is the level of change from what is the cost of current
requirements. The Agency, as previously stated, now requires data in
support of registration of pesticide products. There is general knowledge
on the part of the industry as to what data EPA now expects, and these data
are being sent to the Agency as part of the normal interaction between the
Agency and registrants. Current practice is best described in alternative
#1. The changes in direct industry compliance costs from moving from
current practice to alternative #1 (and #2) is thus zero. Table V-6
provides the net changes in moving from current practice to the other
approaches analyzed here.
-------
•Bible
Projected Cost Areas Indirectly Affected
by Alternative Approaches to Data Requirements,
1982/91, Per "fear
Cost
Area
Registration Activities
and Overhead a/
RPAREBta
BPAR Rebuttal
Administration
Inspection
Compliance with State
Requirements b/
Total
#1
Reference
Guidelines
19.4
5.5
2.1
0.3
-
27.3
-
#2
Regulatory
Requirements
19.4
5.5
2.1
0.3
-
27.3
Option
13
Self-
Certification
11.7
8.5
3.1
0.6
7.5
31.4
#4
Comprehensive
Data Requirements
22.1
0.5
0.5
0.3
23.4
#5
Provisional
tegistratlon
18.2
6.5
2.6
0.3
27.6
a/ Includes costs of interaction with EPA to obtain registration and costs to manage testing required to
support registration.
b/ The cost for compliance with state requirements is stated In terms of changes from an unspecified
baseline.
-------
Table V-5
Total Costs of Data Requirements by Registrants (Costs Directly and
Indirectly Related to EPA Requirements), for Reregistration and New
Registrations, 1982/91 Period, Per Year
Scenario/
Alternative
Range
Midpoint
15-25 stds/yr.
Alt. #1
Alt. #2
Alt. #3
Alt. #4
Alt. #4
25 stds/yr. with
data call-in
Alt. #1
Ait. n
Alt. #3
Alt. #4
Alt. #5
40 stds/yr. with
data call-in
Alt. #1
Alt. #2
Alt. #3
Alt. #4
Alt. #5
73.6-106.3
73.6-106.3
58.6-110.4
89.3-135.3
68.8- 99.2
83.6-134.3
83.6-134.3
63.6-138.4
104.3-177.3
78.8-127.2
98.6-149.3
98.6-149.3
71.1-153.4
126.8-199.8
93.8-142.2
-$ Million-
90.0
90.0
84.5
112.3
84.0
109.0
109.0
101.0
140.8
103.0
124.0
124.0
112.3
163.3
118.0
78
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Table V-6
Change in Estimated Industry Compliance Costs from
Current Program to Alternative Approaches,
1982/91, Per Year
Scenario/ $ Millions
Alternative Per Year
15-25 stds/yr.
Alt. #1 0.0
Ait. n o.o
Alt. #3 -5.5
Alt. #4 22.3
Alt. #5 -6.0
25 stds/yr. with
data call-in
Alt. #1 0.0
Alt. #2 0.0
Alt. #3 -8.0
Alt. #4 31.8
Alt. #5 -6.0
40 stds/yr. with
data call-in
Alt. #1 0.0
Alt. #2 0.0
Alt. #3 -11.7
Alt. i*4 39.3
Alt. #5 -6.0
79
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VI. PESTICIDE INDUSTRY IMPACT ANALYSIS
A. Pesticide Industry Overview
The pesticide industry is a generally profitable and growing sector.
Sales and production have trended upward since its beginning during and
after WW II as DDT led the way toward the synthetic organic pesticide
industry we know today. The U.S. is the largest single market in the world,
with about one-third of the world's pecticide sales at the user level. The
primary component of the industry is a nucleus of about 30 major basic
producers of pesticides. These generally are a part of larger
multi-national chemical or petroleum corporations, with production and
marketing facilities worldwide. This group of firms is noted in Figure VI-1
along with other key profile features of the pesticide industry, at the
marketing and user levels.
The focus of this section of the report is upon the basic producers,
because these firms conduct the majority of pesticide safety testing,
thereby being the primary group impacted by the alternative approaches to
data requirements. The producing industry employs approximately 15,000
people in the production of up to 1,400 different chemical active
ingredients. R&D is an important aspect of the industry, resulting in 10 to
20 new active ingredients each year (more than 140 since 1970). Each year,
about 200 new firms register pesticides with EPA for the first time. These
are primarily formulators (or distributors) who are marketing products
containing active ingredients manufactured by one or more of the basic
producers.
Presented in the remainder of this section of the report is an analysis
of the alternative approaches as they would impact upon market structure,
competitor behavior (conduct) and performance, generally as currently
defined (Scherer, 1980).
B. Producer Level Profile and Impact Analysis
1. Current Profile
The profile of producers is subdivided into three parts: market
structure (Figure VI-2), competitive behavior (Figure VI-3), and
performance (Figure VI-4). The basic taxonomy for these three parts is
derived primarily from Economic Profile of the Pesticide Industry prepared
by ICF Incorporated (ICF Inc., 1980a). The taxonomy serves both as the
profile of the industry and as the basis for comparison of the regulatory
alternatives under consideration.
2. Impact Analysis
a. Production Costs and Prices
Compliance costs to registrants impact upon production costs, and in
turn, prices charged for pesticides. The compliance costs for all
registrants for the five alternatives are as follows:
-------
Figure VI-1
U.S. Pesticide Production and User Sectors
Key Profile Parameters
(Approximate Values)
Basic Production
Level
Marketing
Level
User
Level
30 Major Basic Producers
100 Other Producers
1,400 Active Ingredients
Registered
1,000 Active Ingredients
in Production
200 Major Active Ingredients
in Production
15 New Active Ingredients/Yr.
15,000 Employment
3,300 Formulators
29,000 Distributors
and Establishments
35,000 Formulated Products
Registered at Federal
level
200 New Firms Registering
Pesticides/Yr.
1980 Market Estimates-
1-2 Mil. Farms
75,000,000 Hauseholds
40,000, Commercial Pest
Control Finns
(Several Other Industry/
million) Government
Users
Production 1.5 Ml. Ibs. U.S. Active Ingredient 1.2 Ml. Ibs
Exports 0.4 Ml. Ibs. Agricultural Usage Share 72%
Imports 0.1 Iixi/Govt. Share 21%
Value of
U.S. Sales $3.3 Ml. ftjme/Garden 7%
Value of Purchases $5.8 bil.
Agricultural Share 62%
Ind/Govt. Share 24%
Hme/Garden Share 14%
81
-------
Factor
1. Number of Firms
2. Seller Concentration
a) Industry Sales
Figure VI-2
Market Structure Profile of U.S. Pesticide Producing Industry
Key Word Description Explanation
small number
oligopoly core and monoplistically
competitive fringe of firms;
moderately high and increasing as
industry definition narrows
30 major manufacturers of active ingredients and 100 small scale
producers.
The top four firms produce 35% to 40% of total production and
the top 20 firms produce the bulk (97%) of the pesticides.
b) Market Level Sales
highly concentrated within specific
site/classes particularly within
regions
For specific site/classes of pesticides, particularly region
specific (i.e., cotton/weevil in California), the market often
is very concentrated tending toward monopoly.
c) Industry R5D
3. Product Differentiation
highly concentrated
highly differentiated products,
especially proprietary items
Less than 10 firms account for 50% of Rffl.
Each Ingredient is a distinct chemical and often unique in
efficacy, persistence and toxicity to crops and "non-targets".
Sellers further differentiate by offering ancillary goods and
services and by contracting product exclusivity, thus preventing
distributors- from handling competing products.
-------
Factor
4. Barriers to Entry
Figure VI-2-ncontlnued
Market Structure Profile of U.S. Pesticide Producing Industry
Key Work Description Explanation
a) Economies of Scale in not significant generally
Production
b) Capital Requirements highly capital intensive
Examples of wide differences in plant size for the same
product.
Ratio of value added to gross book value of assets about .61 in
comparison to all manufacturing industries ratio of 1.30.
oo
c) Research and
Development
d) Patents
5. Integration
high R&D expenditure requirements
high degree of protection on new
products
not highly integrated by ownership
ownership
Ratio of R&D expenditure to sales about
pharmaceutical and heavy chemicals of
respectively.
£ compared to
and 2-4%
Patents are important particularly for new products. About 3/4
of all products in sales dollars are proprietary.
Producers tend not to be femulators' however defacto inte-
gration can exist by contracts between producers and
formulation/distribution.
6. Level of Information
of Buyers and Sellers
low: limited published market data; Most of the market data available within producers is treated as
buyers not particularly well proprietary.
informed
Source: ICF Inc., Economic Profile of the Pesticide Industry; August 1980.
-------
Figure VI-3
Factor
Competitive Behavior Profile of U.S. Pesticide Producers
Key Word Description Explanation
1. Pricing Patterns
2. Non-Price Behavior
a) Investment
b) R&D
c) Product Strategy
and Advertising
Oligopolistic/
monopolistic firms
influencing market
prices and sales'
volume by their
individual actions
Quite responsive to
demand
tfeavy emphasis on
new product discovery
High degree of
product differentiation
Firms can exploit inelastic price
demand relationship. High degree of
seller concentration and integration;
less than optlnun Information
available between buyers and
sellers.
Producers generally respond well to
increasing demand; during the past 20
years (thru 1976), substantial
additional production capacity was
built.
Competitive advantage Is sought
through R&D discovery of new
products for which patent rights
restrict competition and sometimes
allow near monopolistic market
development.
Intensive promotional activities
to create brand preference
including trial or free product
testing, and subsidizing
application equipment purchase and
contractually limiting fomulator
processing of competitive products.
Source: IGF Inc., Economic Profile of the Pesticide Industry; August 1980
-------
oo
Ul
Factor
1. Prices
2. Profits
3. Production
4. Innovation
a) Ifew Chemical
Registration
b) Research and
Development
Effort
c) Product
Development
Costs
d) Development
Time for tfew
Chemicals
Figure
Performance Profile of the U.S. Pesticide Producers
Key Word Description Explanation
Favorable price
performance
Medium to high
Growth and industry
Frequent new
products/chemicals
High degree of effort
High
Rather long
Price declined during the 50's and 60's attributed to process Improvements for new
products. Price increases in the 70's associated with inflationary conditions and
petroleum prices.
Prices of individual products often give no evidence of responding to the changing
balance of supply and demand and of price changes in competing pesticides suggesting
that the pesticide producers tend to be oligopolistic.
Older products are considered commodities and are incorporated in many products
forcing prices down.
Return on sales about 6.6% and return on equity Investment about 16%. Profits often
very high on individual products or divisions, which are masked by overall firm
profit rate.
About 1.4 billion Ibs. in 1980, an Increase of 45% over 1964 production. Value
added per production worker is nearly double all chemical industries.
Average annual new chemical registration with EPA was 14 per year between 1971 and
1980; no consistent trend down or up.
During the past 10 years, R&D expenditures kept pace with sales. (R&D expenditures
are about 8% of 1980 gross sales); more than most other industries.
Reportedly $50-70 minion per new chemical.
About 85-95 months from time of pesticide discovery to product marketing.
Source: IGF Inc., Economic Profile of the Pesticide Industry; August 1980.
-------
Cost of Compliance/Yr.
$Mi11ions
Difference from
Total Current Baseline
#1 Reference Guidelines 109.0 (83.6-134.3) 0
#2 Regulatory Requirements 109.0 (83.6-134.3) 0
#3 Self-Certification 101.0 (63.6-138.4) -8.0
#4 Compliance Data Requirements 140.8 (104.3-177.3) +31.8
#5 Provisional Registration 103.0 (78.8 - 127.2) -6.0
A majority of these costs would be incurred by the basic producers, who also
do most of the formulating. Possibly 80-90 percent of these costs would be
incurred by the 130 firms which engage in basic production. Specific data
are not available to permit a precise breakout of compliance costs for firms
which are only formulators.
Current compliance costs costs to firms engaged in pesticide production
in the range of $100 million per year are obviously significant, even
through they equal only about 3.0 percent on sales at the production level
of the industry ($3.3 billion in 1980). A compliance cost of $100 million
would equal about one fourth of industry producer R&D, $395 million in 1980,
(NACA, May, 1981). Alternatives #3 and #5 would reduce compliance costs by
less than $10 million per year, which could be quite a nominal impact on
producer prices (0.3 percent). Comprehensive data requirements would
increase compliance costs measureably, by more than $30 million, this would not be
evenly distributed, as much of the R&D is by a few firms. For example, in 1980,
only 13 firms accounted for 74 percent of total R&D (NACA, May, 1981).
In conclusion, pesticide prices now reflect data costs in the range of
the Agency proposal and the alternatives would necessitate rather nominal
price changes.
b.) Profits and Development Time.
A reduction in time to registration is associated particularly with
self-certification and provisional registration. For a typical product,
there is a projected decline of resubmissions of data from registrants and
the more timely processing of applications. The projected reduction in time
to registration can impact profits, which is illustrated in the detailed
cost/benefit analysis report (EPA/OPP, May 15, 1982). Reduction in time to
registration would tend to increase the accumulated earnings between the pesticide
investment breakeven point and the time when the product patent expires, thus
increasing returns on investment.
86
-------
The uncertainty of continuance of a registration is a major concern
of industry. The probability of a chemical registration being disallowed
or cancelled after RPAR review is reduced by providing the data,
particularly with registration requirements and comprehensive data
requirements. This enables EPA, as well as industry, to more thoroughly
screen out problematical chemicals.
The impacts of the alternatives upon the time required to obtain EPA
registrations are as follows: Alternative #1 would not cause major
changes; Alternative #2 could reduce the time about 5 months on the
average and potentially as much as an additional 10 months. Alternative
#4 would increase the time over present guidelines, by 25 months.
Alternative #5 (provisional registration) would shorten the time similar
to the reduction estimated for Alternative #3, about 15 to 25 months. In
addition, by eliminating EPA review, the time to registration
determination could be decreased if some tests were abandoned completely
(as may be the situation under Alternative #3, self-certification). To
the extent that the alternatives would reduce the time to registration,
they could serve to increase the incentives for R&D investments, and
possibly increase the number of new registrations.
c.) Production
The analysis of the impacts under the alternatives reviewed indicates
that the market for certain low volume active ingredients would not justify
the expense of generating the required data with comprehensive data
requirements. A minimum of $500,000 to $1 million in annual sales of an
active ingredient (equivalent to several hundred thousand to one-half
million pounds of production) would seem to be required depending on profit
rates and market strategies. For the products in which sales volume and
profits do not justify the expense of generating the required data, the
various waivers would most likely apply particularly for the non-food and
non-feed crop use products. The impacts on small volume active ingredient
producers would be reduced by the waiver of data requirements for certain
chemicals as provided for in all the alternatives reviewed except #4.
For Alternative #4, where all waivers are disallowed, many small
volume product lines would be abandoned and there would be a redistribution
of performance factors, perhaps for the 100 small volume firms. The
production (and perhaps profits and employment) could be reduced among
small volume producers and increased among large scale producers where there
are viable substitutes for the abandoned speciality products.
When Registration Standards guidance packages are sent to registrants,
they are informed of the data gaps which they must fill in order to maintain
their registrations. As of October 1981, responses from registrants
relative to nine RS chemicals have been received. Of all active ingredients
associated with the 9 RS chemicals, the voluntarily cancelled products
accounted for less than 0.1% of the combined production volumes of those
chemicals. In essence, the initial responses to the Registration Standards
program caused insignificant effects on the markets for individual chemicals
and pesticides as a whole.
87
-------
Making projections of the level of future voluntary cancellations under
the five alternative regulatory approaches can only be done tentatively.
Alternatives #1 and #2, reference guidelines and regulatory requirements
respectively, have been concluded as having essentially the same costs.
Hence, voluntary cancellations would be the same under each alternative. As
chemicals having food and feed crop uses become dominant in the RS program,
it is likely that more significant data gaps will be found and hence the
data costs for individual chemicals might be more burdensome for some of the
lower sales volume chemicals and end-use products.
Under Alternatives #1 and #2, as many as 100 or more of the 600 RS
chemicals which Registration Standards are to be developed may not be
reregistered. As large as this figure may seem, a loss of 100 active
ingredients would affect mostly low sales volume products. The loss in
total volume of pesticides used would likely be less than 5% after the RS
program has proceeded through the 600 chemicals.
Under Alternative #3, self-certification, few if any active ingredients
and associated products would be voluntarily cancelled. Under an approach
where waivers would not be granted, as in Alternative #4, comprehensive
requirements, it is estimated that as many as 300 of the 600 RS chemicals
might not be reregistered. The withdrawal of these chemicals would alter as
much as 10-15% of the total pesticides marketed annually. Under Alternative
#5, provisional registration, the voluntary cancellation level would be the
same as for Alternatives #1 and #2.
d.) Industry Concerns about Impacts on Innovation
Innovation through research and development creates new products and
new uses for existing products. User benefits are associated with pest
control, generally for public health, crop production and aesthetic
appeal and, in addition, to replace products for which there is
increasing pest resistance or environmental concern. Producers benefit
through increased profits which in turn motivate innovation. New products
enable innovators to obtain greater profits through the competitive
advantage gained by early market entry and patent protection.
The impact of regulations on the innovative process is seen by industry
as negative as is expressed in a recent CAST Report (CAST, 1981) in which
the increase in EPA regulation activities were associated with the increase
product development costs. Industry, through the referenced report,
specifically claims that the increase in R&D expenditures associated with
registration will effect a relative decrease in R&D expenditures for product
development. The concern is that there will be an eventual decline in the
introduction of new products. It is argued that the newly emerging products
used in IPM and the biological control agents which have very limited and
specific use patterns will be particularly affected, along with other small
volume or minor use products.
-------
Claims are made in the referenced CAST Report that R&D expenditures
are diverted from product development activities such as synthesis,
screening and field testing to registration-related activities and hence
these expenditures are unproductive in terms of new product innovation.
They also claim that the current trend is to direct R&D activities to
develop broad spectrum products where there are large scale market
potentials rather than products with more specific or narrow areas of end
use. Reportedly, the incentive for R&D investment is reduced by regulatory
activities and all but eliminated for small volume and minor use cases.
In the CAST Report, it is maintained that, under these circumstances, a
decline in innovation is likely and, indeed, the CAST Report claims there
has been a decline in R&D productivity. Furthermore, it is argued that the
EPA data requirements will divert technical and scientific capacity from
developmental i.e., synthesis, screening and field development of new
materials, to regulatory activities with associated loses in the
development field; that innovation for limited use products, particularly
for the newly emerging areas of IPM and biological control, will be
curtailed, and that these difficulties will encourage firms to develop and
market products in foreign countries where regulations are not as
restrictive, resulting in actual disinvestment. If these contentions are
realized, a reduction in new products entering the market will further
increase industry concentration and exacerbate the already concentrated
pesticide market structure.
EPA pesticide registration does contribute to industry costs by
requiring compliance with the registration regulations. Industry direct
costs range from $1.8 to $2.8 million per major crop chemical. The major
indirect costs are associated with the potential revenues foregone during
the time delays in complying with EPA's registration procedures. These
costs can be significant, and are generally passed on to users in the
form of price .increases. If these costs were to be borne by all
applicants in all cases, they could effectively stop innovation, product
development and registration for low volume or minor use pesticides—in
effect the contentions of industry previously enumerated would be realized.
However, there is no evidence that they have reduced the industry's
innovative activities through R&D, particularly for the major crop high
volume pesticides.
Current regulations allow data waivers for products where volume and
use do not cause environmental concerns. These waivers are specifically
applicable to minor use and small volume IPM pesticides. Subpart "M" of
the regulatory guidelines, "Data Requirements for Biological Pesticides"
effectively provides a waiver for the data requirements for the
biologicals. Thus, these waivers, implemented according to the existing
procedures will greatly reduce the negative impact of these regulations
on low volume and minor use products, removing much of the industry's
cause for concern previously discussed.
89
-------
A conclusion that little if any reduction in innovations can be related
to the current regulatory structure in the pesticide industry seems
appropriate. This conclusion is corroborated in a study by the Conservation
Foundation (Conservation Foundation, 1980). The Study has drawn three
significant conclusions:
First, innovation in pesticides has not been adversely affected by
regulation.
Second, of the regulation-related factors that influence a firm's
decision to innovate, time delay is probably the most important.
Third, the impact of regulatory requirements thought to fall much
more heavily on small firms than on large ones was not
corroborated.
The conclusions of a recent report by the Office of Technology
Assessment (OTA, 1981) are generally consistent with the Conservation
Report. The OTA report adds that "while FIFRA tends to reinforce a
pattern of product innovation targeted toward large markets, the level
and pattern of pesticide innovation are determined primarily by market
factors." Thus while EPA regulations clearly impose a significant cost
factor ($1.8 to $2.8 million), these costs represent a small part of the
total costs of commercially developing a pesticide ($20 to $70 million).
Furthermore, it is an arguable matter if these costs can be attributed to
the regulatory process—some may be incurred as prudent business
behavior. These costs may increase the barrier to entry, but there is
little evidence that these factors have diminished industry's innovative
attempts through R&D expenditures. While, the conclusion presented in
the OTA report is that entry barriers created by EPA regulation are likey
to have their greatest effect on small firms, they did not consider the
allowance of waivers for small volume pesticides and the special handling
allowed for the biorationals. The CAST report acknowledges the potential
lessening of the negative impacts of the regulatory guidelines on small
volume producers since the 1978 FIFRA amendments but states that the
effects of these provisions have yet to be demonstrated. Perhaps
regulatory actions resulting from the implementation of the mentioned
waivers may lessen the industry's concerns about the impacts on the small
volume producers.
e.) Impacts on R&D Expenditures
Due to the costs for developing a new pesticides, only a relatively
small number of individual markets are large enough to justify the
development of a new pesticide. In general, pesticides are initially
developed and registered for major crops and subsequently tested and
registered for minor crops. This characteristic is generic to the industry
and not clearly associated with regulatory procedures.
90
-------
The total R&D expenditures are estimated at $395 million in 1980
representing 8.5% of sales (Table VI-1). While this is a significant increase
from the $70 million spent in 1970, it represents a relatively constant rate of
R&D expenditures as a percent of sales.
The CAST Report cites as a factor in these increased R&D costs a
decline in pesticide innovation associated with a declining R&D
productivity in the pesticide industry. This decline in productivity is
(according to the CAST Report) associated with the increase in R&D
expenditures in the registration-related activities, e.g., the various
toxicology, metabolism and environmental residue tests required to
obtain registration. The implicit argument is that since total R&D expenditures
have remained relatively constant at about 8% of sales, the allocations for the
three general R&D activities deemed essential to new product development may
suffer, (i.e., while total R&D expenditures have kept up proportionately with
sales, expenditures allocated to product synthesis, screening, field testing
and formulation and process development have not kept up with sales
proportionately). The CAST Report cites as a conclusion that the number of
compounds screened per employee has declined. However, they also cite that the
number of compounds screened for pesticide activity rose between 1967 and
1978.
Registration related activities have indeed increased from about 20% of
the total R&D expenditures in 1970 to about 30% in 1980. The cost increase
associated with registration required tests, aside from inflation, is
attributed partially to a change in testing protocols and laboratory standards
during the same period. Since responsible firms would presumably perform
substantial testing of new active ingredients even in the absence of EPA
requirements, it is difficult to determine the precise share of testing costs
due strictly to regulations.
R&D expenditures may not be significantly affected by the proposed
alternatives studied, except under Alternative #4. To the extent that
specialized markets for small volume products would be restricted (in
contrast with the third conclusion cited from the Conservation Foundation),
there may be less incentive to invest in R&D. The small volume specialty
market affected under Alternative #4 is not only the purview of the small scale
producer but it also provides all firms with a profit source both during
periods before a product reaches market maturity while market development is
occurring and after market maturity, before a product is completely phased out
of production. Since the R&D activities are already heavily concentrated
within the large scale producers as previously discussed, the reduction in R&D
investment incentives even under Alternative #4 might not impact significantly
the total amount of industry R&D expenditures.
The above review of cost, time and related impacts upon the pesticide
producing industry indicates that structure, conduct and performance
outcomes under the five alternatives would be as indicated by key word
descriptors in Figure VI-5. Impacts of shifting from the current program
would not be highly significant except for #3 and #4.
91
-------
Table VI-1
Pesticide R&D Expenditures and Sales: Basic Producer Level
1970-1980, current Dollars
.3
O
Registration - Related R&D Expenditures
Year
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
Including
"All Other" I/
10
10
11
13
18
21
26
39
45
60
78
89
104
tot Including
"All Other" 2/
Million
9
9
10
12
17
20
25
35
41
44
60
69
78
Tbtal R&D
Expenditures
Dollars
52
56
65
70
88
98
111
135
160
195
250
289
332
Basic Producer Registration Related R&D Expend. As Percent of Tbtal R&D Tbtal R&D Exp.
Sales
639
691
693
722
1,044
1,154
1,417
1,956
2,471
2,576
3,115
3,607
4,154
Including
"All Other"
19.2
17.9
16.1
18.6
20.5
21.4
23.4
28.9
28.1
30.8
31.2
30.8
31.3
(tot Including
"All Other"
Percent
17.3
16.1
15.4
17.1
19.3
20.4
22.5
25.9
25.6
22.6
24.0
23.8
23.5
As fferoent of
Sales
8.1
8.1
9.4
9.7
8.4
8.5
7.8
6.9
6.5
7.6
8.0
8.0
8.0
1980
119
94
395
4,658
30.1
23.8
8.5
-------
Figure VI-5
Summary of Economic Outcomes in the Pesticide Producing Sector from Alternative Approaches in Generating Safety Information
on Pesticide Products
#1
Reference
Guidelines
#2
Regulatory
Requirements
#3
Self-Certification
by Registrants
#4
Comprehensive
Requirements
#5
Provisional
Registration
a. Producer
Structure
b. Producer
Competitive
Behavior
c. Producer
Performance
d. Small Firm/Impacts
medium to high
concentration/
entry barriers
oligopolistic,
with occasional
rivalry, especially
during periods of
declining demand
medium to high
profits, R&D and
product choice
moderate cost
impacts, except
where waivers are
disallowed
medium to high
concentration
entry harriers
increased slightly
oligopolistic, with
some proprietary
products dominating
markets
medium to high
profits and R&D;
some loss in product
choice possible
moderate cost
impacts, except
where waivers are
disallowed
medium concentration/
entry barriers
oligopolistic, but with
increased competitive
rivalry especially on
non-patented products
medium profits; R&D
would suffer; product
quality could suffer;
reduced time for
registration.
mirviniiTi impacts
high concentration/
entry barriers
oligopolistic, with
powerful firms
dominating competitive
interaction
very high profits;
reduced product choices
with abandonment of
small value products
major impacts due to
no waivers
medium concentration/
reduced entry barriers
oligopolistic, with
some increased rivalry
of new products with
old ones
Madium to high profits;
R&D incentives improved
for new active ingredi-
ents due to earlier
commercialization
moderate cost impacts,
except where waivers
are disallowed
-------
C. Formulator Level Profile and Impact Analysis
1. Current Profile
The economic profile of the U.S. pesticide formulators is described
in terms of market structure and competitive behavior in Figures VI-6 and
7.
2. Impact Analysis
Market structure conditions, as illustrated in the profile, are expected
to prevail under Alternative #3 (self-certification) and Alternative #5
(provisional registration). Under Alternative #4, which allows no waivers,
the barriers to entry would be increased particularly for the small volume
market formulators. Under the current Agency regulations, there is a
"horizontal" exemption clause which waives much of the registration
requirements resulting in a very low registration cost. Formulators who
incorporate a previously registered active ingredient into their own
formulation are not held responsible for the testing required on the technical
grade active ingredient nor are they required to share in the costs associated
with the testing requirements for the active ingredient. As previously
discussed for producers, the extent of product differentiation would remain
high for the alternatives reviewed. However, under Alternative #4, the
withdrawal of market volume on speciality products would somewhat decrease
product differentiation.
D. Comparison of FIFRA Registration Compliance Costs
With regard to the pesticides regulatory program, industry incurs
compliance costs for various laws and sections of those laws. A primary
purpose of this report is to evaluate registrants', costs of complying with
data requirements for registration under Section 3 of FIFRA (the Federal
Insecticide, Fungicide and Rodenticide Act, as amended). Industry also
incurs costs of complying with other sections of FIFRA and with some parts
of FFDCA (the Federal Food, Drug and Cosmetic Act) and RCRA (the Resource
Conservation and Recovery Act).
The industry, as affected by compliance costs, consists of registrants
(basic producers and formulators) and others (pesticide users, custom
applicators, dealers, distributors, and state agencies). The total cost of
compliance with all sections of FIFRA, disposal requirements of RCRA and
with the tolerance setting requirements of FFDCA is estimated to be in the
range of $227 - $242 million annually for all sectors of the pesticide
industry (Table VI-2). Approximately 70 percent of this amount is incurred
in connection with basic production and formulation combined ($158 - $173
million), and 30 percent for other purposes ($69 million). The single
industry category most affected by compliance costs is basic production.
Its compliance costs are estimated to be in the range of $116 - $127
million annually, or about 52 percent of total compliance costs for the
industry.
94
-------
Factor
1. Number of Firms
2. Concentration
a) Overall
Figure VI-6
Market Structure Profile of U.S. Pesticide Fornulators
Key Word Description Explanation
Approximately 3,300 fontulators in the U.S.
moderately high
Moderately high and Increasing somewhat at all levels.
Four firms produce approximately 25% and 20 firms
produce the bulk of total formulated pesticides.
Concentration Bates
b) Ag. Herbicides
c) Ag. Insecticides
d) tbusehold and
Industrial Pesticides
3. Product Differentiation high
4. Barriers to Entry
a) Economies of Scale none
b) Capital Requirements not capital intensive
c) Research and
Development
d) Integration
very little
evident but low
(Percent of Production)
4 firms 20 firms 50 firms
53
46
67
83
68
93
52
85
97
Each ingredient tends to be chemically distinct and
unique efficacy, persistance and toxicity in crops and
non-target organisms. Formulations of the same active
ingredient differ only by the type of inert
ingredients. Sellers differentiate by offering
ancillary goods and services with products.
No major overall economies of scale
Mich less capital intensive than pesticide producers.
The ratio of value added to gross book value of
assets for fornulators is the same as the ratio for
all manufacturers as a uhole, 1.30.
There seems to be little R&D by fornulators.
Firms conmonly operate in several site/classes of
pesticides. Manufacturers sometimes formulate their
own pesticides and/or have some of their production
formulated by others under contract and sold under
their own labels. An estimated 13-15% of pesticide
production is retained by the manufacturer for
formulation. In recent years manufacturers have begun
to formulate more of their own products, but the
industry does not have a high degree of vertical
integration except through contractual arrangements
between producers.
95
-------
Factor
Figure VI-7
Competitive Behavior/Performance Profile of U.S. Pesticide Forntilators
Key Word Description Explanation
1. Pricing Patterns
difficult to analyze
due to data limitations
2. Nan-Price Indicators
a) Investments
Increasing
b) Product Strategy and
Advertising
extensive
3. Research and Development
a) Expenditures Trends
very little R&D done
by fomulatois that
do not produce active
ingredients
The USDA index of prices paid by fanners
(composite of 12 leading formulated
pesticides) begins to rise a few years
earlier than the OPP and IGF producer price
indices and somewhat later than the BLC
producer price Index. In aggregate, the
four indices show steady price declines
during the 50's and 60's attributed to
process improvements for recently developed
products; and price Increases in the 70's
associated with inflationary conditions and
petroleum prices. Other factors being equal,
patented products have higher prices than
non-patented products.
Investment by pesticide formulators jumped in
the mid-1970's following several years of
relatively low levels of investment during the
early 1970's. The pesticide industry has
responded to excess demand with Increased
capacity relatively quickly, an indication of
a competitive Industry behavior.
Pesticide manufacturers make a considerable
effort to advertise their products and create
brand preference. The attempt to create brand
preference extends to the smaller formulators
and distributors, who typically sell pesticide
products under private labels. Extension
agents, farm organizations, magazines and word
of mouth are also factors affecting user's
pesticide-use decisions.
There appears to be little R&D by pesticide
formulators. Roughly 30 companies contribute
the bulk of R&D expenditures and the majority
are large multi-product companies which are
manufacturers of active ingredients.
96
-------
f Table VI-2. Awuol riklustry Coats of Cuuvllanu; with t'esticides Regulation
'' • under, ROW, Fltttt, FFOCAa/, 1980 Es
Law or
FIKttt Section -
Basic
Production Fornulatlon
Cuciblivod
B.P. aid
FonaiLitlon Other
Total
tbta Costs
3. Cast of tata for
Registration b/
25 Standards/yr.
40 Standards/yr.
FHXAc/
53.4
63.8
35.0
24.0
28.6
77.4
92.4
35.0
77.4
92.4
35.0
6. RPAR Data
Other Costs
3. Registration Activities d/
4. Restricted Use/Application
Certification
6. Rebutting RPARs
7. Registration of Establishments
8. Books and Records
9. Inspection
Disposal and Storage
RCRA
FIFRA/Section 19
24. State Requirements
25. Child Resistant Packaging
5.5
D.6
—
2.1
. 0.5
1.5
0.1
4.5
—
_
Sm
—
5.8
—
NA
2.6
6.7
0.2
0.8
—
_
Sm
5.5
19.4
—
2.1
3.1
8.2
0.3
5.3
—
_
1.7
—
uur.
33
04
—
—
—
22.6 .
13.1
—
"^
5.5
19.4
33
2.4
3.1
8.2
04
27.9
0.1
_
1.7
TOTAL e/ (5 million)
116.2-126.6 40.1-44.7 158.0-173.0
69
227.0-242.0
Costs If
Percent of Total
46-50
60-64
49-53
34-38
Note: * Indicates that Industry category Is not affected.
MA means no estimate available.
Sm indicates that no estimate is available, but impacts In Industry Is expeced to be
quite small.
a/ Costs for registration data (25 standards/year and 40 standards/year) are cyan costs for •
first ten years after implementation of guidelines; remainder of costs are estimates for
1980.
b/ Exclusive of R&D expenditure for RPARs.
c/ Costs Of data for establishing tolerances in addition* to those Included in the FIFRA Section
3 figures above.
d/ Exclusive of costs of generating data. These costs have been evaluated separately and are
displayed under "Data Costs" above. Included are "Adninlstration/Overhead" costs for
registration-related %D, plus "Registration" costs (from NACA, 1980, Schedule 6-A). Basic .
. production and fornulatlon shares of these costs have been set proportional to their share of
Section 3 data costs.
£/ Low end range from 25 standards/yr; high end for 40 standards/yr.
f/ Subtotal of Section 3 + RPAR data + FFDCA data.
97
-------
The cost of studies for generating the data necessary for compliance
is the major component of compliance costs. Depending on. whether it is
assumed that EPA will process 25 or 40 registration standards per year,
registration data costs account for 49-53 percent of total compliance costs
for registrants. Other members of the industry do not generally share in
the costs of generating data. If data costs for tolerances (FFDCA
compliance) and RPAR activities are included, the sum of all data costs
accounts for approximately 80 percent of total compliance costs for
registrants (Table VI-2).
Earlier in this report, several alternatives were described —
reference guidelines, regulatory requirements, self-certification,
comprehensive data requirements, and provisional registration. Costs of
compliance for registrants (basic producers and formulators) under each of the
alternatives are compared in Table VI-3. The compliance cost totals fall into
a range from approximately $150 - $210 million. Alternative #4 ($188 - $209
million) is at the upper end of the range and alternative #3 ($148 - $159
million) is at the lower end. The differences among these direct and indirect
compliance costs for the alternatives were described in Section V of this
report.
In the above discussion, only regulatory activity associated with the
proposed registration requirements have been addressed. The Office of
Pesticide Programs has also considered changes in two other areas: RPAR
Risk Criteria, and Registration, Reregistration and Classification
Procedures (40 CFR, Part 162; FIFRA Section 3 Regulations). Compliance
costs under the current and proposed programs are displayed in Table VI-4
for each of the three regulatory proposals. They total $115 - $130 million
annually for the current program, depending on whether 25 or 40
registration standards are processed annually. Under the proposed changes,
total compliance costs would be reduced slightly to a range of $111 - $126
million annually. Under either the current or proposed programs,
compliance costs associated with all of the proposed actions are about 50
percent of costs for the industry (Table VI-5). The proposed changes would
lower total compliance costs to a degree, i.e., in the range of $3 - $4
million.
98
-------
•Bible VI-3
Annual Registrant Compliance Costs with Pesticide Regulation under
FIFRA, FFDCA airi RCEA, by Alternative aj
law or
FIFRA Section
3. Cost of Data for
Registration J>/
25 Standards/Yr.
40 Standards/Yr.
FFDCA.C/
6. RPAR Data
Other Costs
3. Registration Activities d/
6. Rebutting RPARs
7. Registration of Establishments
8. Books and Records
9. Inspection
24. State Requirements
25. Child Resistant Packaging
RCRA/Disposal
TOrmLe/
Alternatives
ft.
Reference
Guidelines
77.4
92.4
35.0
5.5
19.4
2.1
3.1
8.2
0.3
—
1.7
5.3
158.0-173
n
Regulatory
Requirements
77.4
92.4
35.0
5.5
19.4
2.1
3.1
8.2
0.3
—
1.7
5.3
.0 158.0-173
#3
Self
Certification
. . _<• \M11-lnniiii_i
63.0
74.2
35.0
8.5
11.7
3.1
3.1
8.2
0.6
(0.3-0.9)
7.5
(5.0-10.0)
1.7
5.3
.0 147.7-158.9
#4
Comprehensive
Data
111.1
132.0
35.0
0.5
22.1
0.5
3.1
8.2
0.3
—
1.7
5.3
187.8-208.7
#5
Provisional
Registration
71.2
86.2
35.0
6.5
18.2
2.6
3.1
8.2
0.3
—
1.7
5.3
152.1-161.8
tfote: - indicates that alternative is not affected.
a/ FIFRA - Federal Insecticide, Fungicide and Rodenticide Act;
FFDCA - Federal Food, Drug and Cosmetic Act; RCRA - Resource Conservation and Recovery Act. All costs
in 1980 dollars.
_b/ Costs for registration data (25 standards/yr. and 40 standards/yr. are mean costs for first ten years
after implementation of guidelines.
£/ Costs of data for establishing tolerances in addition to those included in the FIFRA, Section 3
figures above.
A/ Exclusive of costs for generating data. These costs have been evaluated separately and are displayed
under "Data Costs" above. Included are "Adninistrative/Cverhead" costs for registration-related R&D,
plus "Registration" costs (from NACA, 1980, Schedule 6-A).
e/ Lew end of range for 25 standards/yr; high end of range for 40 standards/yr.
99
-------
o
o
Table VI-4
Annual Compliance Costs of Proposed Actions for All Affected Parties; Under Current and Proposed
Regulations by Regulatory Area
Regulatory Area
Registration Data a/
RPAR Risk Criteria
Section 3 Regulations
Total J>/
Current
109.0-124.0
7.9
5.8
115.1-131.1
Proposed
_____ / 6M* 1 1 1 f\r> \ ___-
109.0-124.0
7.1
2.4
111.7-126.7
Difference
0
-0.8
-3.4
-3.4-4.4
aj Lower end of range for 25 standards/yr.; upper end for 40 standards/yr.
J)/ Total for current and proposed columns is not the sum of the columns. The RPAR activity is
indirectly affected by Registration Guidelines and the $7.9 million RPAR compliance cost is
included in the compliance cost figures for these guidelines. To avoid double-counting, this
has been taken into account when calculating the totals.
-------
Table VI-5
Compliance Costs of Proposed Actions Compared to
Total Compliance Costs
Compliance Cost Category
Current
Proposed
Proposed Actions aj
Other
FIFRA Section:
115.1-131.1
-$ Millions •
111.7-126.7
4. Restricted Use/Applicator
Certification
5. Experimental Use Permits b/
7. Registration of Establishments
8. Books and Records
19 Disposal and Storage
25. Child-Resistant Packaging d/
FFDCA
RCRA
Subtotal
33
—
3.1
8.2
13.1
1.7
35.0
27.9
122.0
33
—
3.1
8.2
13.1
1.7
35.0
27.9
122.0
TOTAL
237.1-252.1
233.7-248.7
Proposed Actions •? Total (percent)
49-52
48-51
/ From Table VI-4.
j/ Both data and administration costs are associated with experimental use permits.
However, these costs are contained in the guidelines and Section 3 calculations
under "Proposed Actions." To avoid double counting, this row item is deleted.
-------
VII. PESTICIDE USER IMPACT ANALYSIS
A. Overview
The United States uses approximately 1.2 billion pounds of
pesticides annually, at a user cost of about $5.8 billion (EPA, 1980).
Manufacturers have registered more than 40,000 pesticide products
containing 1,400 active ingredients. These pesticide products control
about 21,500 pest species. All major economic sectors use pesticides
in the United States (Table VII-1).
As discussed in Section V, the expected data requirements and
indirect costs of providing the data required under the reference
guidelines for registration are estimated to range from $84 to $134
million annually. However, as previously discussed, the industry is
already complying with the majority of the requirements under
Alternative #1 (and 2). Hence, the additional incremental costs
associated with the alternatives which would impact users in the coming
years are estimated by the cost differences between Alternative #1 and
Alternatives #2, #3, #4, and #5. The costs associated with the
Alternatives are shown in in Table VII-1.
The incremental costs of the Alternatives are estimated as
follows:
Costs ($ millions)
Alternative
Reference Guidelines
Regulatory Requirements
Self-Certification
Comprehensive Data Req.
Provisional Registration
Absolute
84-134
84-134
64-138
104-177
79-127
Incremental
0
0
-20 to 4
20 to 43
- 7 to -5
% of sales
0
0
-0.3 to 0.1
0.3 - 0.7
-0.1
Therefore, the cost impacts on users would be a small amount with a
range from minus 0.3 to plus 0.7 percent of pesticide costs, depending
upon the operative scenario (see Section V).
B. Agricultural Users
The agricultural sector accounted for about 72 percent (846
million pounds a.i.) of pesticide use and about 62 percent ($3.6
million) of pesticide sales in the U.S. during 1980. A USDA survey in
1976 found that pesticides were applied to over 60 percent of the land
used for major field crops and hay (Eichers, et al., 1978). For
specific field crops such as peanuts, cotton, tobacco, corn, and
soybeans, over 90 percent of the acreage received pesticide
treatments.
102
-------
lable VII-1 Sumnary Distribution of Pesticide Costs by Pesticide User Groups by Alternative
Annual
Pesticide Sales a/
Pesticide User
Croup
S % of Total
mi. %
Agriculture 3,600 62
Industry, Gxnnerce
and Government 1,390 24
Hxisehold 810 1A
Total 5,800 100
Regulatory Self- Comprehensive Provisional
Reference Guidelines Requirements Certification ttita Requirements Registration
Absolute Absolute Incremental Absolute Incremental Absolute Incremental Absolute Incremental
Cost ($) b/ % of Sales Costs ($) b/ Cbst($) tests ($) b/ Costs ($) Costs ($) b/ Costs ($) Costs ($) b/ Costs ($)
Mil. % Millions
52-83 1.1-2.0 52-83 0 40-86 -12 to 3 64-110 12 to 27 49-79 -4 to -3
20-32 1.1-2.0 20-32 - 0 15-33 , - 5 Do 1 25-42 5 to 10 19-30 -2 to -1
12-19 1.1-2.0 12-19 0 9-19 - 3 to 0 15-25 3 to 6 11-18 -1 to -1
84-134 1.1-2.0 84-134 0 64-138 -20 to 4 104-177 20 to 43 79-127 -7 to -5
a/ Source: EPA, Pesticide Industry Sales and Usage: 1980 Market Estimates, Washington, D.C. September 1980.
_b/ Source: Chapter V as previously presented.
-------
Despite the relatively widespread use of pesticides in the
agricultural sector, their costs accounted for only 3 percent of the
1976-1978 average farm production expenditures (derived from annual data
in Agricultural Statistics, 1980). The most important expenditures of
U.S. farmers for factor inputs are for feed, repair and operation of farm
equipment, depreciation, and miscellaneous costs.
The extent of agricultural pesticide use varies by crop site and
region. A comparison was made of current pesticide expenditures with the
total variable costs for producing individual field crops, fruits, and
vegetables. (In addition to pesticide costs, variable cost of production
includes the costs for seed, fertilizer, field cultivation, and harvesting.)
The share of pesticide costs in the production budgets for cotton
varies significantly by region. In the major cotton producing states of
Texas, Mississippi, and California, pesticide costs range from 10 to 31
percent of the variable costs of production. For field crops such as
peanuts, corn, and soybeans, pesticide expenditures in the major
producing states range from about 15 to 28 percent of variable costs.
Pesticide treatment costs in wheat account for only about 1 percent of
variable costs. For fruit crops such as apples and oranges, pesticide
costs are about 13 percent of variable costs. For vegetable crops such
as carrots, broccoli, snapbeans, and tomatoes, 3 to 6 percent of the
variable costs are for pesticide treatments.
Studies required for registration of agricultural pesticides under
the Regulatory Requirements are expected to cost pesticide manufacturers
and formulators an estimated $84 to $134 million per year. Under the
simplifying assumptions that pesticide users will not reduce their
consumption of pesticidal inputs (i.e., the demand curve is relatively
inelastic), retail prices of agricultural pesticides would increase from
a minus 0.3 to plus 0.7 percent for the alternative consideration. For
the crops discussed above, the maximum increase in pesticide costs per acre
would range from less than $.01 for wheat to less than $0.02 for tomatoes.
The proposed alternative would not increase the variable production costs of
these crops.
The small potential change in pesticide costs would have little
noticeable effect on the costs or production of farm commodities.
Likewise retail prices of food items should not be perceptively affected
by the proposal to establish data requirements for registering
pesticides. Overall, the incremental impact of the proposed Part 158 on
the agricultural economy should not be significant.
C. Non-Agricultural Users
1. Profile of Non-Agricultural Users
This section provides a descriptive overview of the domestic uses of
pesticides on industrial, commercial, institutional, household, and
-------
governmental sectors (IGF, 1980) and estimations of typical user cost
impacts resulting from the regulatory requirements and alternative
scenarios. In each example, the added costs to pesticide users (assuming
all added costs resulting from the regulations are passed on from the
manufacturer to the user) are shown to be negligible relative to the value
of output.
a). Industrial
All types of pesticides, including rodenticides, miticides, and
nematocides are used in industrial complexes. Industrial herbicides
primarily control vegetation along roads, in parking lots and equipment
yards, and around rights-of-way for railroads, pipe lines, and power
lines.
Insecticides control pests such as termites, roaches, ants, and
mosquitoes in forests, lumber yards, greenhouses, and nurseries. The food
processing industry uses insecticides and rodenticides to control pests
during production and storage operations.
Pesticides are also used in water quality management. Weeds, insects,
algae, and fungi create problems in static water areas. Their control is
of special importance in industrial processing waters and in cooling
towers.
Control of the various pests is done by commercial pest control
operators, lawn and tree services, or the industrial firm itself. When a
firm does not employ the services of outsiders, it usually buys its
pesticides from janitorial supply houses.
b). Commercial
Commerical firms have essentially the same types of pest problems as do
industrial firms. They too must control unwanted vegetation, insects,
vertebrates, and fungus problems. A wide variety of chemicals are used in
this sector similar to the industrial sector.
c). Institutional
Use of pesticides by the institutional sector is small in comparison to
the industrial and commercial sectors. Institutions include homes for the
aged, blind, orphans, deaf and dumb, private grade schools, high schools,
and colleges, churches, private hospitals, tax-exempt charitable
foundations, museums, and other nonprofit organizations. Pest control is
incidental to the normal functioning of the organization, and primarily
involves landscaping and control of nuisance pests indoors.
Hospitals have very important pest control needs. Control of all
insects, vertebrates, and fungus, as well as bacteria and virus, is
essential to providing the healthy environment hospitals require.
105
-------
d). Household
Residential pesticides are used for both indoor and outdoor purposes:
herbicides control weeds in lawns and gardens; fungicides control growths
on trees and shrubs; insecticides, miticides, and rodenticides protect
structures and living area from infestation; and biocides are used as
disinfectants for personal hygiene and in sanitizing surfaces.
e). Government
Government agencies at the federal, state, and local levels use
pesticides for such purposes as disease control, road maintenance, land
and water management, and rodent or other predator control.
2. Estimated Guideline Impacts to Selected Non-Agriculture Users
As discussed previously, industry, commerce, institutions, and
government use herbicides to control unwanted vegetation, insecticides to
control destructive insects, fungicides and wood preservatives to protect
structures, and fumigants to control destructive pests and disease (EPA,
1974). Given the size and diversity of this group (i.e., non-agricultural
users), an exhaustive evaluation would be far beyond the scope of the
present analysis. Therefore, in this section, estimates of the cost
impacts due to the alternative data requirements are estimated only for
some major categories of non-agriculture users.
a). Wood Preservatives
The wood preservation industry in the United States has developed
because of the need for prolonging the life of wooden structural members,
primarily where contact with the ground is intended (EPA, 1974). Wood is
preserved by the treatment(s) with a variety of chemicals which have
fungicidal, insecticidal, and fire retardant properties. Historically,
railroad ties, telephone poles, and marine pilings treated with creosote
have been the major products of the industry. In recent years, lumber and
plywood treated with leach-resistant preservative salts have experienced
rapid growth.
The wood preservation industry provides the only major use for
creosote (other than fuel) and consumes over a billion pounds of creosote
annually. About 46 million pounds of pentachlorophenol—almost 80% of the
total amount produced—is also consumed in the preservation of wood.
Certain inorganic products containing chromium, copper, and arsenic are
also used in relatively large quantities for the preservation of wood.
The total amount of these products used in wood preservation amounts to
about 41 million pounds, valued at about $190 million in 1978, representing
only a small part of the annual billion dollar preserved wood market in the
U.S. If the additional data required for the proposed alternatives were to
106
-------
cost from minus 0.3 to plus 0.7 percent of pesticide sales, and if those
costs were to be absorbed uniformly by all the users, then the wood
preservation industry would experience about a $570 thousand decrease to
$1,330 thousand increase in pesticide costs, a very small part of the wood
preservative market.
b). Railroads
Railroads are concerned with controlling vegetation along their
rights-of-way. Vegetation control is mandatory on an 8 to 24-ft wide
band centered over the rails. This control zone constitutes a firebreak
to protect adjacent properties from sparks thrown off by the wheels of
railroad cars. The faster the trains travel through an area, the wider
is the required weed-free area. In addition, weeds shorten the life of
railroad ties, can reduce traction for braking, reduce drainage, and foul
the ballast on tracks.
There are approximately 330,000 miles of track in the United States.
Three distinct areas on the track require weed control: the ballast, the
roadbed, and the right-of-way. The ballast is a strip 12 to 16 ft wide,
made of coarse material such as cinders or gravel, and is very porous.
Insoluble and contact herbicides are the most suitable for use on the ballast.
The roadbed and rights-of-way require soil sterilants to remove vegetation and
provide the firebreak mentioned above.
Total acreage treated by the railroads with herbicides amounts to about
766 thousand acres, which includes the tracks, the yards, and the bridges and
sidings. An estimated 11.5 million pounds of chemicals are used annually for
this purpose by railroads in the U.S. (EPA, 1974). The peak consumption for
all herbicides for railroads was estimated to be about $16 million per
year (Kline, 1976B). If the additional data required under alternatives to
the reference .guidelines were to cost from a minus 0.3 to plus 0.7 percent of
pesticide sales, and if these costs were distributed uniformly among all users,
then the railroads would experience about a $48 thousand decrease to a $112
thousand increase over current annual pesticides expenditures representing a very
small part of total railroad budgets.
c). Utilities
The utility companies are concerned with controlling vegetation along
their rights-of-way. Utility rights-of-way include land areas devoted to the
transmission of communications, electrical power, gas, and fluids such as
oil, sewage, and water. Transmitting devices may be underground, laid on the
soil, or suspended overhead on poles and towers. The land area involved is
long and narrow—usually many miles long by 10 to 200 ft wide.
107
-------
The total consumption of herbicides by electrical utilities is about
5 million pounds and was slightly over $15 million in 1975 (Kline,
1976B). If the additional data required under alternatives to the
reference guidelines were to cost from minus 0.3 to plus 0.7 percent of
pesticide sales, and if these costs were distributed uniformly among all
users, the electric utilities would experience about a $45 thousand
decrease to a $105 thousand increase over current annual pesticide
expenditures, an insignficant percent of the total industry costs.
d). Professional Pesticide Applicator Services
(i) Pest Control Operators
Pest control operators (PCO's) are commercial firms that provide
service for institutional, commercial, industrial, and residential
clients. Both insect and vertebrate pests are controlled by PCO's using
a wide variety of chemicals. Most of their work is done indoors. For
expository purposes, PCO's are divided into two major
categories—structurcal PCO's (exterminating, wood-destroying organisms)
and general PCO's. Approximately 8,000 individual firms exist
throughout the U.S.; about half of them are one or two-person operations.
The two-person companies are by far the most numerous, each having many
firms located across the country.
The total dollar volume of the PCO industry in 1975 is estimated at
about $900 million, of which $53 million represents the cost of the
pesticides employed. If the additional data required for the
alternatives to the reference guidelines were to cost from minus 0.3 to
plus 0.7 percent of pesticide sales, and if these costs were distributed
uniformly among all users, the PCO would experience about a $159 thousand
decrease to a $371 thousand increase over current annual pesticide
expenditures, representing an impact of less than 0.1% of total dollar PCO
industry market.
(ii) Lawn and Tree Services
Pest control firms that provide lawn service and tree care are a
separate group from PCOs (although many firms providing diverse services
would fall under both categories). There are an estimated 15,000
individual firms providing lawn and tree care in the U.S.
Companies providing landscaping and lawn services consume about $37
million in insecticides, herbicides and fungicides (Kline, 1976B). If
the additional data required for registration were to cost from minus 0.3
to plus 0.7 percent of pesticide sales, and if these costs were
distributed uniformly among all users, the lawn and tree service industry
would sustain an $111 thousand decrease to a $259 thousand increase over
current annual pesticide expenditures.
108
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e). Textiles
The U.S. textile industry with total sales of about $35 billion in
1978 used about $3 million in bactericides, mildewicides and other
preservatives, with a projected annual increase of about 3% through 1983.
If the additional data required for alternatives to the reference guidelines
were to cost from minus 0.3 to plus 0.7 percent of pesticide sales, and if
these costs were distributed uniformly among all users, the textile industry
would experience about a $9 thousand decrease to a $21 thousand increase
over current annual pesticide expenditures, representing an insignificant
part of total textile sales in the U.S.
f). Paint
In 1978 paint sales reached almost $5 billion (Kline, 1976B) (in
producer prices), consuming about 15 million pounds of biocides valued at
somewhat less than $35 million. If the additional data required for
alternatives to the reference guidelines were to cost from minus 0.3 to plus
0.7 percent of pesticide sales, and if these costs were distributed
uniformly among all users, the paint industry would experience about a $115
thousand decrease to a $240 thousand increase over current annual pesticide
expenditures, representing an insignificant part of the total paint sales.
g). Commercial Forests
Of an approximate 483 million acres of commercial forest land, only a
small percentage is treated with pesticides. Estimated annual
manufacturers' sales of pesticides between 1975 and 1980 is about $10
million annually (Kline, 1976B). If the additional data required for
alternatives to the reference guidelines were to cost from minus 0.3 to plus
0.7 percent of pesticide sales, and if these costs were distributed
uniformly amonfe all users, the commercial forests would experience about a
$30 thousand decrease to $70 thousand increase over current annual pesticide
expenditures.
D. Summary of User Impacts
The aggregate change in the cost of pesticides due to the various
alternatives to the reference guidelines would range from a decrease of $20
million to as much as an increase of $43 million representing a minus 0.3 to
plus 0.7 percent, depending which alternative is enacted (Table VII-1). The
bulk of such impacts would be sustained by agricultural users, where
pesticides constitute a significant share of factor inputs. In contrast, in
the non-agricultural sector, pesticides constitute only a minute fraction of
total inputs. One notable exception is the wood preservation industry,
wherein pesticides constitute nearly 16 percent of total inputs (U.S. Dept.
of Commerce, 1972).
109
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VIII. WELFARE IMPACT ANALYSIS
As s~fi6wn in Section VII, alternative data requirements would
affect pesticide production costs. Further, it was assumed that the
incidence of these changes would be borne ultimately by pesticide
users. Economic theory predicts that such users, when faced with an
increase in the cost of a factor of production (pesticides, in this
instance) will reduce their demand for that input, either by
substituting other inputs or by reducing output. Thus, depending upon
the technical possibilities for factor substitution, as well as the
relative prices of the alternative inputs, prices of consumer goods may
be increased depending upon which of the approaches is selected for
data requirements.
In the two cases where costs decrease, it cannot be stated a_
priori that in the short run agricultural producers would increase
their usage of pesticides in response to lower prices. If the current
level of usage is optimal in a technical sense, the agricultural
producers would have no incentive to increase pesticide inputs in
response to lower prices. In this event, the reduced pesticide costs
would result in higher profits for producers. In the long run, these
incremental profits would be progressively eliminated as growers
expanded their output (in response to the incentive of greater net
returns). Thus, agricultural output would expand as a result of lower
pesticide prices; and consumers would ultimately benefit from the
resulting lower prices.
If the current level of pesticide usage is not technically
optimal, then demand for pesticides would increase in the short run;
and as a result, agricultural output (through yield enhancement) would
increase. Again, consumers would ultimately benefit from the resulting
lower prices•
Although it has some theoretical limitations as a measure of
economic worth, the use of the net welfare concept to measure the
efficiency I/ impact of a given regulation has become standard
practice 2J. Thus, the change in welfare resulting from changes in
data requirements can be measured by the algebraic sum of the change in
consumers' and producers' surplus. An attempt at an empirical
estimation of this impact is made in the following parts of this
report section.
I/The efficiency solution includes only those effects which can be
measured in the market. Thus excluded are all phenomena variously
characterized as negative externalities, environmental spillovers,
etc. Equity considerations are also excluded.
21 For a discussion of both the theory as well as the controversy
surrounding this concept, the reader is referred to: Hertford,
Reed, and Andrew Schmitz, "Measuring Economic Returns to
Agricultural Research," in Arndt, Thomas M., Dana G. Dalrymple, and
Vernon-W. Ruttan (eds.) Resource Allocation and Productivity in
National and International Agricultural Research.
Minneapolis: University of Minnesota Press, 1977.
-------
A. Agricultural Sector
In order to estimate the net welfare change resulting from the
proposed data requirements, the hypothesized pesticide cost changes
were exogenously inserted (as changes in the production costs of
agricultural producers) into a simulation model I/ of the field crops
portion of the agricultural economy. The crops included in AGSIM
account for approximately 67% (USDA, 1981) of total agricultural
sales.~J The resulting changes in net welfare ranged from a loss of
$12.2 million per year to a gain of $5.4 per year, depending upon which
scenario was assumed operative (Table VIII-1).
With regard to the remainder of the agricultural economy i.e.,
for crops other than those modeled in AGSIM only some crude guesses
can be made as to the magnitude of the net welfare changes due to
increased pesticide costs. By extrapolating from the results in AGSIM
for the major field crops, one can derive at least an upper bound for
the estimated net welfare impact for these other crops. The results of
this procedure are also shown in Table VIII-1. Analogously to the
previous results, the estimated annual impacts for the other crops for
all alternatives taken together range from a loss of $6.0 million to a
gain of $5.4 million.
The validity of the foregoing estimates for non-AGSIM crops can be
corroborated only indirectly from a set of relationships found in the
1972 Input-Output Tables (U.S. Department of Commerce, 1979). When the
value of pesticide inputs for all other crops not included in AGSIM
(specifically: grass seeds, tobacco, fruit, tree nuts, vegetables,
sugar crops, and miscellaneous) is divided by the total value of
pesticide inputs for all crops, the resulting ratio 1 : 5.27 or about
19 percent..£/ From Section VII of this report, it can be seen that
the maximum annual increase in pesticide costs for agricultural users
would be $27 million ($110 million - $83 million; see Table VII-1).
Assuming that a constant ratio of pesticide use between the two crop
groupings (i.e., AGSIM vs. non-AGSIM crops) still holds, the maximum
cost increase under any scenario for non-AGSIM crops would be $5.1
million ($27 million * .19 = $5.1 million) ... a value which is close
to the maximum net welfare impact for non-AGSIM crops of $6.0 million
(see Table VIII-1).
Z7Reference here is to AGSIM, an econometrically based simulation
model developed by C. Robert Taylor and Glenn Collins at Texas A&M
University under EPA Contract No. 68-01-5041.
.£' The following crops are modeled in AGSIM: corn, cotton, wheat,
barley, oats, sorghum, and soybeans.
I/ Derivation: 148.7/535.2 = 0.1897. The pesticide input values,
expressed in millions of 1972 constant dollars, were taken from row
27.03 of Table 1, Volume I of the 1972 Input-Output Tables. The
numerator is the sum of the following column entries: 2.0203,
2.0300, 2.0401, 2.0501, 2.0502, and 2.0503. The denominator is the
sum of the following entries: 2.0100, 2.0201, 2.0202, and 2.0600.
Ill
-------
Table VIII-1. Estimated Annual Change in Net Welfare Due
to Costs of Alternative Data Requirement Approaches
for the Agricultural Sector
Alternative
Annual Net Welfare Change a/
Field Crops b/
Other Crops c/
All Crops d/
Reference Guidelines
Regulatory Requirements
Self-Certification
Comprehensive Data Req.
Provisional Registration
0
0
+5.44 to -1.15
-5.92 to -12.19
+1.15 to +1.98
- -$ Millions- -
0
0
+2.68 to -0.57
-2.92 to -6.00
+0.57 to +0.98
0
0
+8.12 to -1.72
-8.84 to -18.19
+1.72 to +2.96
a/ A positive sign indicates an increase in total economic welfare; a negative sign represents a
decrease in total economic welfare.
_b/ Results from AGSIM.
£/ [Net welfare change all crops] minus [net welfare field crops].
d/ Extrapolated by dividing AGSIM results by the percentage of total agricultural receipts
represented by field crops. Example: $-1.15 million/.67 = $-1.72 million.
-------
Thus the estimated net welfare impact for all agricultural
commodities for the alternatives taken together would range from a loss
of $18.2 million to a gain of $8.1 million annually. In view of the
fact that personal consumption expenditures for food, beverages, and
natural-fiber clothing in 1980 were roughly $400 billion (George and
King, 1971) _!/, it is unlikely that impacts of these magnitudes
(whether gains or losses) would be perceptible at the national level.
B. Non-Agricultural Sector
Unfortunately, no model which can measure welfare impacts in a
manner analogous to AGSIM exists for the non-agricultural portion of
the economy. While there is not sufficient data available to permit
any rigorous analysis, fragmentary evidence from the economics literature
suggests that the incidence of the cost increases due to any of the
proposed data requirements options would fall (a) on the pesticide
manufacturers, (b) on the pesticide users in the non-agricultural sector,
or (c) be shared by both.
In a study of price behavior by stage of processing, Popkin (1974)
has shown that retail prices in the non-food sector are generally less
sensitive to changes in the prices of raw materials than are those in
the non-food sector. Elsewhere it was shown that producers' prices in
the food sector translate into retail price changes of equal magnitude
or less (USDA, 1982). Taken together, these two points indicate that,
at least in the short term, retail prices would most likely increase
very little or not at all as a result of the proposed data
requirements.
With regard to long-term effects, one might argue that the cost
increases borne by the pesticide manufacturers and/or users might
induce shifts out of the affected industries, ultimately resulting in
higher consumer prices. As discussed previously in Section VII,
however, pesticide expenditures account for only a small percentage
either of total inputs or sales volume. Therefore, no perceptible
long-term price effects would be expected.
C. Aggregate Welfare Impacts
The aggregate annual change in net welfare due to the imposition
of data requirements would range from a loss of $34 million to a gain
of $16 million per year, (excluding pesticide program costs and costs
of adverse health-environmental effects). Whereas a substantial
portion of the increased pesticide costs would be passed on to final
consumers in the agricultural sector, in the non-agricultural sector,
\J Specifically, it was shown (Table 10, p. 62) that the elasticity of
price transmission for a variety of foods was less than 1.0. The
elasticity of price transmission for the the commodity is defined
as follows: retail ^producer
ipretail
113
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most of the increased costs would be absorbed either by the pesticide
manufacturers or the users of pesticides in the production of other
goods and services for sale to final consumers. The breakout of net
welfare changes by sector by alternative is shown in Table VIII-2.
D. Net Societal Benefits from Pesticide Use:
An Alternative Approach
Given that the objective of the present analysis is to evaluate
the economic impact of alternative regulatory approaches, it follows
that the costs and benefits of the data requirements themselves have
been the focus of this analysis. As an alternative approach, however,
one might evaluate the costs and benefits of pesticide use rather than
pesticide regulation(s). Indeed this alternative approach is implicit
in the legislation which authorizes EPA to regulate the manufacture,
sale, and use of pesticides. Thus, prior to the publication of any
proposed regulation in the Federal Register, FIFRA requires the EPA
Administrator to take into account: "...the effect of the regulation of
production and prices of agricultural commodities, retail food prices,
and otherwise on the agricultural economy...".
While over the past several years the Economic Analysis Branch
(EAB) within the Office of Pesticides has routinely incorporated the
aforementoned factors into its RPAR-related pesticide "benefits
analyses," such studies have been conducted on a chemical-by-chemical
basis. Thus to date, agricultural economists have not succeeded in
measuring aggregate net benefits of pesticide use in a rigorous manner
The classic attempt was made several years ago by (Headley, 1968)
whereby an aggregate production function for agriculture was estimated
with pesticide expenditures included as an argument. By that author's
admission, various data problems as well as serious collinearity
between the variables left the empirical relevance of the estimated
productivity parameters open to question.
In subsequent work, Headley limited himself to a qualitative or
conceptual discussion of the benefits from pesticide use (Headley,
1972). Noting that economists typically dichotomize a given
technological development as being either "output-increasing" or as
"cost-saving," Headley nevertheless states that pest control activity
in conjunction with other technological advances has resulted in both
increased output and reduced costs. The key words here are "in
conjunction with." While non-technical reports on agriculture
routinely attribute significant yield increases to pesticides, it is
interesting to note in Headley's estimated production function that the
use of pesticides was highly correlated with both total labor (r =
0.77) and fertilizer (r = 0.50).
114
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Table VIII-2. Estimated Annual Changes in Net Welfare by Sector Due
to Costs of Alternative Data Requirements Approaches
Annual Net Welfare Impacts by Sector a/
Alternative Non-
Agricultural b/ agricultural cj Total
Reference
Guidelines
Regulatory
Requirements
Self-
Certification
Comprehensive
Data
Provisional
Registration
0 00
0 00
46 to -2 48 to -1 4-16 to -3
-9 to -18 -8 to -16 -17 to -34
+2 to +3 +3 to +2 +5
a/ A positive sign indicates an increase in total economic welfare; a
negative represents a decrease in total economic welfare.
_b/ From Table VIII-1.
c/ Derived from data in Table VII-1.
115
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In view of the foregoing considerations, one cannot state
unambiguously that pesticide use results in increased output in the
long run. In the short run, pesticides indirectly increase output by
protecting the crop from pest damage, and hence increase output over
and above what it would have been had pesticides not been used. This
latter point assumes that pest control technology is fixed; but in the
long run, however, producers will shift to the least-cost control
techniques, which may or may not involve the use of pesticides. Viewed
from this latter perspective, pesticide use is primarily a
cost-reducing technology.
Since the regulatory process must take into account (and often
focuses exclusively on) the short run effects of a given policy option,
a measure of the benefits from pesticides in the short run is
essential. As discussed previously, these short run benefits are most
accurately viewed as (indirectly) output-increasing in nature.
To measure the short run benefits of pesticide use, one must
answer the following question posed by Pimental et al. (1978): "What
would our crop losses to pests be if all pesticides were withdrawn
from use, and readily available non-chemical control methods were
substituted where possible?" In answer to his own question, Pimentel
estimated that the present crop losses with pesticides would increase
from 33 percent of the total value of crop production to 42 percent
following the ban of all pesticides.
In Table VIII-3, Pimentel's estimates of crop losses and
additional costs imposed by a ban of all pesticides have been
summarized and subsequently inflated to reflect 1980 price levels.
This total ($11.1 billion) when divided by the total treatment cost
with pesticides ($3.1 billion) yields a return of about $3.60 for each
dollar spent on pesticide treatments.
Table VIII-3. Estimated Costs with and without Pesticide Use
Value
Cost Item Description (Billions of 1980 $)
Increased Crop Losses w/o Pesticides
Increased Costs of Non-Chemical Control Methods
Total _
Current Pesticide Treatment Costs
(includes material and application) 3.1 b/
a/ Derived from Pimentel, 1978 updated to 1980 dollars.
_b/ Derivation: $2.2 billion inflated by PPI factor of 1.39.
116
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At $3.60, the return per dollar of pesticide expenditure estimated
here is $.40 less than in the original work by Pimentel. This
reduction has occurred because the value of agricultural production
(the numerator) has increased more slowly than the cost of pesticide
treatments (the denominator). Thus the benefit from pesticide use is
not a fixed parameter, but instead a variable which fluctuates with
(among others) agricultural prices.
To arrive at an estimate of net social benefits, all external
public costs from pesticide use (e.g., deleterious health affects),
must be added to the aggregte private costs (i.e., $3.1 billion; see
Table VIII-2) of pesticide treatments. When Pimentel's estimate
(Pimentel, 1978) for external public costs of $3 billion _!/ (annually)
is inflated to 1980 dollars (i.e., $3 billion x 1.39) and added to
aggregate private costs, the total cost of pesticide use is $7.3
billion annually ($3.1 + ($3.0 *1.39) - $7.3 billion). Use of the
latter figure reduces the return per dollar of expenditure from about
$3.60 to about $1.50 ($11.1 billion -r $7.3 billion = 1.52). The
measure could just as well be interpreted as the more familiar
benefit-cost ratio (BCR).
Conceptually it would be possible to evaluate the impact of the
proposed regulatory requirements (and alternatives thereto) within the
foregoing framework by adding the additional costs imposed by the
guidelines to the denominator of the BCR. At the same time, the
reduced social costs as a result of the implementation of the
guidelines would be subtracted from the denominator. In the absence of
any information with regard to the latter, it is not possible to
predict the resulting change in the BCR.
Finally, it should be pointed out that the magnitude of the BCR
shown above cannot be compared with any BCR's associated with the costs
and benefits of pesticide regulations. Neither analytical framework is
superior; the choice of which to use will obviously depend upon the
focus of the analyst.
I/ By Pimental's own admission, this estimate is somewhat conjectural.
117
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IX. OVERALL BENEFIT/COST ANALYSIS
A. Introduction
Executive Order 12291, issued February 17, 1981, directs Agencies
initiating major rulemaking activities to conduct a regulatory impact analysis
and submit it to OMB prior to publication of the proposed rules. Basically,
the Executive Order calls for the Agency to calculate the costs and benefits
of the proposed regulation and to make a comparison of them with the costs and
benefits of other approaches. The proposed approach should be the one which
maximizes net social benefits. The purpose of this section of the report is
to integrate the results of the impact analyses reported in earlier sections
into a benefit/cost framework and to report the results of the overall
analysis as required by the Executive Order.
This analysis is conducted pursuant to EPA's interim guidance on
conducting regulatory impact analyses (late November 1981 version) as well as
the interim OMB guidance (June 1981 version) and the Executive Order itself.
The analysis follows format and analytical framework guidance to the extent
feasible at this time. The EPA guidance does recognize that the
comprehensive framework called for under Executive Order 12291 is not
completely achievable at this time, but that programs should work towards the
goal of being fully responsive to the guidance in the longer term.
In the foregoing sections containing the impact analyses, estimates were
made of benefit and cost outcomes of the five alternative pesticide regulatory
approaches. In this section of the report, the results of those analyses are
summarized in matrix form. Numerical or quantitative estimates of outcomes
are presented where available. The results in other instances are summarized
with the use of keywords or phrases reflecting the results of the analyses.
The results of the analyses are highly impacted by outcomes of a
qualitative nature. Relatively few factors were capable of being fully
quantified and/or monetized as is suggested by Executive Order 12291 and
OMB/EPA Guidance. This makes it impossible to estimate "net benefits"
directly as one would do if outcomes could be fully quantified and monetized,
utilizing the standard cost/benefit framework. In order to bring the results
of the analysis into "net benefit terms", a "cost/benefit rating technique"
was developed for application to the analysis.
The cost-benefit analysis rating technique may be summarized as follows:
1. A total of 100 points is allocated to benefit factors.
2. A total of 100 points is allocated to cost factors.
3. The points within the benefit and cost areas are allocated to the
various benefit and cost factors in proportion to the importance
attached to the items by the management of the program. The more
important the cost or benefit factor, the more points it receives and
1 vice versa.
118
-------
4. The points for each factor are allocated to the regulatory options in
accordance with the quantitative and/or qualitative outcomes of the
impact analyses as reported in earlier sections of the report.
5. The points allocated to each of the alternatives in each row are
assigned independently from row to row with respect to benefits and
costs.
6. The benefit ratings and the cost ratings are totalled giving an
overall benefit rating and cost rating for each alternative. These
ratings in turn are substracted to give a net benefit rating and are
divided to give a benefit/cost rating ratio.
7. Intuitively, the alternative having the highest net benefit rating or
highest cost/benefit rating ratio would be the preferred alternative
and vice versa.
This framework is not to be confused with a true cost/benefit analysis.
However, it seems to be a reasonable method of summarizing the various
quantitative and qualitative benefit and cost factors and in arriving at an
overall conclusion as to benefits and costs, taking into account the relative
importance of various factors or criteria to the management of the program.
A key point, is that the assignment of 100 points to benefits and 100
points to costs, is done only for the sake of convenience in performing a
comparative analysis of the alternatives with respect to benefits and costs.
It is not to imply that benefits exactly equal costs on the average for the
five options. Neither do the net benefit ratings nor the benefit/cost rating
ratios of the individual alternatives necessarily reflect the true parameters
which would obtain if the true benefit and cost values were known. However,
these indicators are useful for purposes of comparing the relative merit of
the alternatives, taking into account cost and benefit factors.
B. Costs
The results of the various cost analyses from the impact studies
discussed earlier in this report are summarized in Table IX-1. For the five
alternative approaches, program costs are taken directly from the earlier
analyses, as are industry compliance costs, impacts on pesticide users and
impacts on agricultural commodities and food prices. Estimates of dollar
impacts were generated for each of these cost factors. In addition, impacts
on the pesticide industry, including small firms, losses of pesticide products
by users and other economic effects are also summarized in Table IX-1. These
cost impacts are reduced to numerical ratings in Table IX-2 where the 100
points allocated to costs are distributed among the alternatives and the
various cost factors. In that table, program costs are the highest ranking
row item with 35 points, followed by industry costs of 30 points and by other
long-term impacts on the pesticide industry, including small firms which
received 20 points. In the ratings, pesticide user costs in dollar terms are
afforded no points because this would amount to double counting of industry
compliance costs (which are assumed to be passed on to users as add-ons to
their costs of using pesticides).
119
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Table tt-1
Summary of Costs of Alternative Approaches for Generating Hazard
Testing Information on Pesticide Products
#1
Reference
Guidelines
#2
Regulatory
Requirements
#3
Self-Certification
by Registrants
#4
Comprehensive
Requirements
#5
Provisional
Registration
Program Costs ($ ndllion/Yr.)
Industry Costs
Direct and Indirect
Compliance
($ Million/Yr.)
Other/Long-Term
a. Producer Structure
b. Producer Competititve
Behavior
c. Producer Performance
d. Small Firm/Impacts
$62.1
84-134
medium to high
concentration/
entry barriers
oligopolistic,
with occasional
rivalry, especially
during periods of
declining dennnd
medium to high
profits, R&D and
product choice
moderate cost
Impacts, except
where waivers are
disallowed
$58.0
84-D4
to high
concentration/
entry barriers
increased slightly
oligopolistic, with
some proprietary
products dominating
markets
medium to high
profits and R&D;
some loss in product
choice possible
moderate cost
impacts, except
where waivers are
disallowed
$61.8
64-138
medium concentration/
entry barriers
oligopolistic, but with
increased competitive
rivalry especially on
non-patented products
medium profits; R&D
would suffer; product
quality could suffer.
Reduced time for
registration.
minimum impacts
$62.2
104-177
high concentration/
entry barriers
oligopolistic, with
powerful firms
dominating competitive
interaction
very high profits;
reduced product choices
with abandonment of
small value products
major impacts due to
no waivers
$65.5
79-127
medium concentration/
reduced entry barriers
oligopolistic, with
some increased rivalry
of new products with
old ones
Medium to high profits;
R&D incentives improved
for new active ingredi-
ents due to earlier
commercialization
moderate cost impacts,
except where waivers
are disallowed
-------
Thble IX-1—continued
Summary of the Costs of Regulatory Guidelines and Alternative Approaches for
Generating Information on Pesticide Products
Pesticide User Costs
($ Million Annually)
a. Non-Ag Users (38%)
b. Ag. Users (62%)
c. Loss of A.I.'s/Products
Macroeconomic Impacts
Ag Commodities/
Net Welfare Effects
Other prices
#1
Reference
Guidelines
32-51
52-83
Few
Slight-Moderate
#2
Regulatory
Requirements
32-51
52-83
Relatively low
Slight-Moderate
#3
Self-Certification
by Registrants
24-52
40-86
Very few
Slight
#4
Comprehensive
Requirements
40-67
64-110
Many
Moderate
#5
Provisional
Registration
30-48
49 - 79
Few
Slight
-------
•Bible IX-2
Cost Ratings of Alternative Approaches for Generating Hazard Testing Information on Pesticide Products
#1 91
Reference Regulatory
QuidelInes Requirements
//a #4 m
Self-Certification Comprehensive Provisional Total Rating
by Registrants Requirements Registration Points
to
KJ
Programs ($ Mtllion/Yr.)
Industry Costs
Compliance
($ MLQion/Yr.)
Other /Long-Tern
a. Producer Structure
b. Producer Competitive
5.9
1.0
6.5
5.9
1.3
5.0
0.4
8.5
1.6
7.5
4.7
0.7
35
30
Behavior 1.0 1.3 0.4
c. Producer Performance 1.0 0.7 1.3
d. Small Firms/Impacts 1.3 1.0 0.3
Pesticide User Costs
($ Millions Annually)
a. Non-Ag Users (30%) - -
b. Ag. Users (62%) -
c. Loss of Products 0.7 1.3 0.4
Ag. Commodities/
Net Welfare Effects 2.6 2.0 0.8
Other prices - -
Employment - -
Total 20.5 20 15.6
1.6 0.7 5
1.6 0.4 5
1.7 0.7 5
0
- 0
1.6 1.0 5
3.2 1.4 10
- 0
0
26.8 17.1 100
-------
Option #4, Comprehensive Requirements, has the highest cost rating of
26.8 points followed rather closely by reference and regulatory requirements
with about 20 points each. Self-certification received the lowest point
rating of 15.6 points and provisional registration received a somewhat higher
rating of 17.1 points. The key factor affecting the cost ratings was the cost
of industry compliance, particularly with respect to comprehensive data
requirements.
C. Benefits
The key word summary of benefits is presented in Table IX-3. Benefits
are summarized in the terms of pesticide program benefits related to the long
term certainty of registerability of pesticide products, time to obtain
registrations, coordination problems, reduction in human health effects and
reduction in environmental effects.
Generally, the options each affected the various benefit row items in the
table. The only factor that was not particularly sensitive to shifting
regulatory options was that of acute human hazards. Generally, program
benefits increased with shifts from reference guidelines to regulatory
requirements to comprehensive requirements. Benefits from provisional
registration were in about the same range as for reference guidelines. Lowest
benefits tended to be from self-certification by registrants, as certainty of
registerability of products declined, coordination problems would emerge,
(particularly between state and federal agencies), chronic health hazards
increased and environmental hazards increased. On the other hand,
self-certification would significantly improve program benefits in the area of
reduced time to obtain pesticide registrations. This would benefit both
producers and users of pesticides.
Significant program benefits are generated by the current program,
generally operating as specified under the reference guideline option.
Benefits are particularly important in the areas of human hazard reduction and
environmental effects reductions from the use of pesticides. Significant
benefits also are generated in the area of reduced acute human hazards even
though each of the regulatory options is capable of generating about the same
amount of benefits in that area.
The numerical ratings of the benefit factors for the five options are
presented in Table IX-4. The most important program benefit area is that of
reducing chronic human hazards which was accorded 50 of the 100 points
allocated to benefits. Each of the other areas of benefits was assigned 10
points. The option receiving the lowest benefits rating was
self-certification with 10 points followed by provisional registration and
reference guidelines which each had about 20 points. Comprehensive data
requirements and regulatory requirements had the highest benefit ratings of
about 25 points. Thus, in terms of the benefits ratings, there are
essentially three groupings as indicated by these point spreads.
123
-------
Table IX-3
Suomary of Benefits of Alternative Approaches for Generating
Hazard Testing Information on Pesticide Products
#1
Reference
Guidelines
#2
Regulatory
Requirements
#3
Self-Certification
by Registrants
#4
Comprehensive
Requirements
#5
Provisional
Registration
Pesticide Program Benefits
a. Certainty of Long-Term
Registerability of
Products
b. Time to Obtain
Registration for
tfew AI
c. Coordination with
Other Programs
Health Effects
a. Acute Human Hazards
Occasional problem
chemicals obtain
registrations; need
to be withdrawn from
market
85-95 months from
chemical discovery
Few problem
chemicals
registered
80-90 months
Occasional problems Few problems
52 deaths
2,800 hospital-
izations.
52 deaths
2,800 hospital-
izations.
b. Chronic Hunan Hazards
(Relative Order for Cancer/
Oncognicity Cases Avoided) 3
-Other Effects . Some problems
-(Genetic, Reprod.,
Terata, etc.)
Few problems
Environmental Effects Occasional Infrequent problems
unacceptable problems
Many problem
chemicals
registered
potentially
60-80 months due to
less time required to
review data within
EPA and less testing
time
Very severe problems
State/Federal
relations.
Possible increase
over other options
tore frequent
problems, including
major ones
Frequent problems,
including some major
Imparts
Very seldom would
problem chemicals
be registered
100-120 months
Major problems -
States want exemptions.
52 deaths
2,800 hospLtal-
izatlons
Infrequent problems
Infrequent problems
Few problem chemicals
registered; sometimes
chemicals would need
to be removed after
completion of data
bases.
60-80 months
Moderate problems.
52 deaths
2,800 hospLtalizatlons
problems,
including a few short
term
Some problems,
including a few short
term
-------
Ul
Table IX"4
Benefit Ratings and Cost/Benefit Rating Comparison for Regulatory Guidelines and
Alternative Approaches Generating Information on Pesticide Products
Pecticide Program Benefits
a. Certainty of Register-
ability of Products
b. Ttmp to Obtain
Registration
c. Coordination with
Other Programs
Haalth Effects
a. Acute Hjman Hazard
b. Chronic Hjman Hazard
Environmental Effects
Total Benefit Rating
Total Cost Rating
Net Benefit Rating
Benefit/Cost Rating Ratio
ft
Reference
2
1
3
2
11
2.3
21.3
20.5
0.8
1.04
#2
Regulatory
Requirements
3
2
3.5
2
11
2.7
24.2
20
4.2
1.21
#3
Self -Certification
by Registrants
0
4
0
2
4
0
10
15.6
- 5.6
0.64
#4
Comprehensive
Requirements
4
0
1
2
15
3
25
26.8
- 1.8
0.93
#5
Provisional
Registration
1
3
2.5
2
9
2
19.5
17.1
2.4
1.14
Total Rating
Points
10
10
10
10
50
10
100
100
-
1.00
-------
D. Benefit/Cost Evaluation
Computations of the net benefit ratings and the benefit/cost rating
ratios are presented in Table IX-4 along with the benefit ratings. The net
benefits ratings are negative for two of the options (-5.6 for
self-certification and -1.8 for comprehensive requirements). Provisional
registration had a positive net benefit rating of 2.4 and regulatory
requirements had the highest net benefit rating of 4.2 points. Reference
guidelines had a small net benefit rating of 0.8 points. The net benefits
ratings are particularly significant for regulatory requirements and
self-certification, suggesting that these alternatives are considerably better
and worse respectively, than the alternatives.
Possibly a more important or meaningful comparison is among the benefit/
cost rating ratios which vary much more significantly across the alternative
approaches. For example, the regulatory requirements ratio is 1.21, nearly
twice that of self-certification by registrants. The reference guidelines
option is slightly above 1.0 and the comprehensive requirement option is
slightly below 1.0. Provisional registration is a close second to regulatory
requirements with a 1.14 benefit/cost rating ratio.
The benefit/cost rating ratio, of course, does not represent a true
benefit/cost ratio for the alternatives. However, it is an indication of the
relative merit of the five options considering cost and benefit factors.
Quite clearly regulatory requirements and provisional registration are the
preferred alternatives taking into account both benefit and cost factors.
Similarly, the self-certification alternative is the worst choice and the
other two options of reference guidelines and comprehensive requirements are
in the mid-range of overall desirability in terms of benefit and cost
considerations.
E. Benefit/Cost Sensitivity
The benefit/cost rating ratios are dependent on subjective weightings
assigned to the various categories of costs and benefits analyzed in this
paper. Given the outcome is based on subjective measures, a sensitivity
analysis using different weightening assumptions was prepared. Appendix 2
contains a summary of the sensitivity analysis. Three different sets of
assumptions were made for both cost effects and benefit effects. For costs,
emphasis was varied on program costs, industry costs, and a middle-of-the-road
assumption. For benefits, emphasis was varied on environmental effects,
health effects, and a middle-of-the-road approach. In each case, the middle-
of-the-road option is the same as the ratings presented on costs and benefits
in tables IX-2 and IX-4 respectively. The emphasis changes are reflected by
changing the weights assigned to the effects categories. In all nine sets of
ratios from Appendix 2, the preferred alternative approach was #2, regulatory
requirements. The order of the other approaches varied only slightly as the
interested reader can see in Appendix 2. The weighting factors used in this
sensitivity analysis are also presented in Appendix 2.
-------
F. Cost/Effectiveness
Absent a formal benefit/cost comparison, a cost/effectiveness analysis
might be considered. Unfortunately the lack of quantifiable data on health
and environmental effects from pesticides which limits the benefit/cost
analysis prevents a formal cost/effectiveness evaluation also. Some
information is available that do allow for some evaluation of relative
effectiveness of the alternative approaches in achieving protection of health
and the environment. Appendix 3 contains a discussion of this material.
127
-------
X. SUMMARY OF IMPACTS ON SMALL BUSINESSES OR OTHER UNITS
The purpose of this section is to summarize and highlight the
economic impacts on small businesses or other units. The profile and
impact analysis for units of all sizes were presented in earlier
sections of this report while only small business impacts are
summarized in this section. Focus is upon pesticide registrants
(primarily producers and formulators), governmental units and pesticide
users.
The available EPA statistical data on registrants does not
differentiate well between the various components of the pesticide
industry, e.g., producers and formulators. However, EPA has gathered
some Dun and Bradstreet data on registrants to facilitate disaggregated
analysis of the producers and formulators.
A. Pesticide Producers
The primary industry impact of the alternatives is on the cost of
data to support registrations. These costs are now borne primarily by
the larger pesticide producing firms in the industry. As can be seen
from Table X-l, firms with sales of less than $15 million (9 firms)
accounted for only 5 percent of the total R&D expenditures in 1980.
Similarly, they accounted for only 6 percent of personnel involved in
pesticide R&D and 3 percent of the compounds screened for pesticidal
potential. These data indicate that of the major producers (34 reporting
in 1980), the smallest firms account for rather limited pesticide R&D
efforts and therefore would tend to be less impacted with the regulatory
options than would the larger firms.
The smallest category of major producers participating in the NACA
survey (under $15 million in sales) however, had two of the seven new
chemicals registered as pesticides in 1980. The regulatory options
which affect the time to obtain registrations (such as alternative #4
which could lengthen the time to obtain registrations significantly)
could adversely affect the smaller firms as well as the larger ones.
There are about 100 additional pesticide producing firms, generally
smaller ones in terms of pesticide production, which probably are not
covered by the NACA reports!/. The Agency has very limited economic
profile information about these firms in particular. It is likely that
cost impacts of the regulatory options on these smaller producers would
be minimal. This would be true if the tendency for smaller firms to
conduct relatively limited R&D applies to these firms as it does to the
larger categories of firms in the industry. As with the larger
producers, time delays in the registration process could adversely affect
such firms.
T7The names of firms responding to NACA's annual surveys are not
identified.
128
-------
Table X-l
Pesticide Research and Development Activities,
by Size of Firm (Sales Volume), 1980
Item
Firms Reporting (No.)
Total Compounds Screened (No.)
Percent
R&D Expenditures ($1,000,000)
New Product Development
Product Expansion
Reregistration & Product Defense
Total R&D Expenditures
Percent
Personnel in Pesticide R&D (No.)
Percent
New Product Registrations (No.)
Full Registration
Conditional Registration
Under
$15
9
2,540
3
14
4
2
20
5
360
6
0
2
1980 Sales Volume
Between
$15 to $100
12
11,365
13
53
22
9
84
21
1,244 4
21
0
1
($1
Over
$100
13
,000,000)
All
Companies
34
75,438 89,343
85
186
78
27
291
74
,226
72
0
4
100
253
104
38
395
100
5,830
100
0
7
Source: NACA Report, 1981
129
-------
As was discussed in Section IV, under the current program (Option
about 85 to 95 months of elapsed time are required to obtain a
full commercial registration. Regulatory guidelines would reduce this
time nominally by about 5 months on the average or by as much as 15
months over a significant number of cases depending on the firm's mode of
operations and the types of registration involved. Self-certification #3
would reduce time to obtain registrations by 20 to 35 months.
Provisional registration #5 would save a similar amount of time, but only
for limited distribution of new chemicals, until all needed data were
generated. These options (#3 and #5) do offer significant reductions in
time required of up to two to three years. This could be particularly
significant for smaller firms. On the other hand, comprehensive data
requirements (Option #4) would increase time required for registration
significantly over the current program, i.e., by 2 to 3 years. This
would be significant to all firms, large and small.
B. Formulators
Formulators of pesticides can be classified into two types of
firms.
a. Producer/formulators
b. Non-producing formulators
The pesticide producers as an aggregate of firms also account for
most of the pesticide formulation. About three-fourths of the
formulated pesticide products (80% according to one estimate) is
accounted for by the formulation operations of the firms which also
produce basic active ingredients of pesticides.
Implementation of any of the five options would tend to have
limited impacts upon non-producing formulators because of the
"horizontal line exemption". This exemption applies to the formulation
of end-use products from other products which have registrations as
specified in Subsection 3(c)(2)(D) of FIFRA. Specifically, that
subsection of of FIFRA reads:
"No applicant for registration of a pesticide who proposes to
purchase a registered pesticide from another producer in order to
formulate such purchased pesticide into an end-use product shall be
required to -
i) submit or cite data pertaining to the safety of such
purchased product; or
ii) offer to pay reasonable compensation otherwise required by
paragraph (1)(D) of this subsection for the use of any
such data."
130
-------
„ ...
to Incur data costs on the active ingredients used in products which
they formulate unless they are also the basic producers of the active
ingredients. The price of the basic active ingredient or other
manufacturing-use product with a registration by its producer, is
assumed under the "horizontal line exemption" to reflect any data costs
that would be passed on to the forraulator by the producer. Most firms
which are fortnulators (approximately 3,300 firms in the industry) would
not be required to incur the substantial additional data costs on
active ingredients under Option #4, comprehensive data requirements.
Neither would they be positively impacted by self-certification which
could reduce data costs dramatically on active ingredients. However,
all of the formulating firms (whether or not they are also basic
producers) would be directly impacted by data costs for formulated
products (as opposed to the active ingredient) regardless of whether
they were large or small firms. These costs are much less than the
costs for active ingredients, and often are minimal or non-significant.
Under the Agency proposal, regulatory requirements, data cost to the
formulators on both active ingredients and formulated end-use products
would remain unchanged and are generally minimal at this time under the
current program in any case.
As with the basic producers, firms could be negatively or
positively impacted by the time required for obtaining registrations of
products under the various options. Under the Agency proposal, time
requirements would decline to a degree whereas they could be increased
significantly or decreased with the other options.
Formulators of small volume active ingredients could be negatively
impacted particularly by Option #4, comprehensive data requirements,
in instances where the basic producer chooses not to meet data
requirements for the active ingredient or other manufacturing use
product. In that instance, the firm would need to shift its
formulating operations to other active ingredients and formulated
products. As indicated in the analysis in Section VI of this report,
the number of active ingredients to be lost by the Agency's proposal
would be minimal, thus precluding major impacts of this type on
formulators large or small.
C. Governmental Units
No significant impacts are anticipated on small governmental units
from implementing the Agency's proposed option, regulatory
requirements, or any of the other alternatives to the guidelines.
Small governmental units, such as at the county, city or local level,
are generally not involved in any of pesticide registration functions
under FIFRA. .
131
-------
D. Pesticide Users
The proposed action by the Agency, regulatory requirements, would
not produce a significant impact on users of pesticides, in general,
either due to the cost of pesticide products or loss of current
products. Pesticides are a relatively small component of cost for most
firms in their operations regardless of the industry or the size of
firm involved. Nevertheless, the pesticide using sectors are composed
primarily of small business units or other entities as defined under
the Regulatory Flexibility Act. There are more than a million small
scale farms in the United States, 75 million households and millions of
small businesses which utilize pesticides each year. These units would
be affected to some degree by the regulatory options, particularly the
most restrictive option, Comprehensive Data Requirements. The effects,
even in those instances, would be minor in most cases. Some industries
which use pesticides very intensively could be significantly impacted
such as wood preserving firms where pesticides are a very significant
part of their cost structure, i.e., 16% of total inputs. However, the
Agency's proposal is to not significantly affect cost of pesticides or
negatively affect the time it takes to obtain registrations.
In conclusion, the Agency's proposal to implement the regulatory
requirements option (#2) rather than to maintain the current program as
implemented nominally as the reference guidelines option (//I), would
not produce a significant economic impact on a substantial number of
small businesses or other entities. Although large numbers of such
units are in affected industries, impacts would be insignificant,
imperceptible in most instances. The major group affected is that of
the pesticide producing industry which accounts for the bulk of data
cost to support current registrations. Even this group would not be
adversely affected by implementing the Agency's proposal.
132
-------
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Public Expenditure. Brookings Institution. Washington, D.C.
Scherer, P.M. 1980. Industrial Market Structure and Economic
Performance, 2nd Ed.
Smith, R.S. 1979. Compensating Wage Differentials and Public Policy:
A Review. Industrial and Labor Relations Review. Vol. 32, No. 3.
April
Thaler, R.H. 1974. The Value of Saving a Life: A Market Estimate.
Ph.D. Dissertation. University of Rochester. Rochester, N.Y.
USDA. 1980. Agricultural Statistics. Washington, D.C.
USDA. Science and Education Administration. 1981. A Statistical Report
on the Pesticide Applicator Training Program Conducted with Support
of EPA. May.
USDA. 1981. Agricultural Outlook.
USDA. 1982. Agricultural Outlook.
U.S. Dept. of Commerce. 1978. Employment "Agriculture Chemicals Not
Elsewhere Classified". 1978.
U.S. Dept. of Commerce. 1979. The Detail Input-Output Structure of
the U.S. Economy: 1972. Volume I. Washington, D.C.
U.S. Dept. of Commerce. 1981. Survey of Current Business. Bureau of
Economic Analysis. Vol. 61. No. 4. Washington, D.C. April.
U.S. Dept. of HEW. 1978. Health-United States Public Health Service.
Washington, D.C. December.
U.S. Fish and Wildlife Services. 1970. "National Survey of Hunting and
Fishing". U.S. Deparment of the Interior. Research publication 95.
U.S. Forest Service. 1979. "Revision of the 1980 RPA Values". USDA.
October 23.
Viscusi, W.K. 1978. Labor Market Valuations of Life and Limb:
Empirical Evidence and Policy Implications. Public Policy. Vol. 26,
No. 3. Summer.
Walsh, R.G. 1977. "Recreational User Benefits from Water Quality
Improvement", in Outdoor Recreation; Advances in the Application of
Economics. GTR WO-2. U.S. Forest Service,. USDA, March.
Walsh. R.G., D.A. Greenley, R.A. Young, J.P. McKean and A.A. Prato.
1978. "Option Values, Preservation Values and Recreational Values of
Improved Water Quality: A Case Study of the South Platte River
Basin." USEPA. January.
Zeckhauser, R. 1975. Procedures for Valuing Lives. Public Policy. Vol.
23, No. 4. Fall.
Zechhauser, R. and Shepard, D. 1976. Where Now for Saving Lives? Law
and Contemporary Problems. Vol. 40. No. 4. Autumn.
137
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APPENDIX L
Unit Cost Estimates
138
-------
Chemistry Requirements
Product Chemistry
Unit Costs
Section Cost
Range in Dollars
Product Identity and Composition
Product identity and disclosure
of ingredients Neg.l/
Description of manufacturing process 500-2,000
Discussion of formation of impurities 1,000-2,000 MUP
100-200 FP
Analysis and Certification of Product Ingredient
Analysis of product samples 5,000-7,000 MUP
1,000-2,000 FP
Certification of ingredient limits 100-200
Analytical methods 200,000-300,000 MUP
Biological Screening for Toxic Components
Ames test 500-700
DNA repair in E. Coli 500-700
Prophage induction 750-1,000
Mitotic recombination 1,000-1,500
Sample analysis following
positive results in battery
of genotoxicity screening tests 20,000-30,000
Physical/Chemical Properities 2,000-3,000 MUP
1,500-2,000 FP
Other product chemistry requirements
Submittal of samples 100-200.1/
TJPart of application, based on data developed in other sections.
2j Samples other than of technical material may be required on a
case-by-case basis.
139
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Hazard Evaluation:
Wildlife and Aquatic Organisms
Unit Costs
Section Cost
Range in Dollars
Avian and Mammalian Testing
Avian single-dose oral LD50 1,500-2,500
Avian dietary LC50 2,800-4, OOOl/
Wild mammal toxicity 1,000-15,OOO!/
Avian reproduction 25,000-30,OOO.L/
Simulated and actual field
testing for mammals and birds 20, 000-100, OOO^./
Aquatic Organism Testing
Acute toxicity test for freshwater fish 1,000-1,500.L/
Acute toxicity test for freshwater
aquatic invetebrates 500-1,000
Acute toxicity test for estuarine and
marine organisms 1,500-2,000
Fish early life-stage and aquatic
invertebrate life-cycle 10,000-15,000
Life-cycle tests of fish 45,000-95,000
Aquatic organism accumulation 20,000-30,000
Simulated on actual field testing
for aquatic organisms 100,000-250,000
Jiy Two species.
2J Depends on test species.
3/ Requirements range from small pen stu dies to large pen studies, and to
field studies.
140
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Hazard Evaluation:
Humans and Domestic Animals
Unit Costs
Section
Cost
Range in Dollars
Acute Delayed Heurotoxicity MUP
Acute Dermal Toxicity MUP, FP
Acute Inhalation Toxicity MUP, FP
Acute Oral Toxicity MUP, FP
Repeated Dose Dermal MUP, FP
Toxicity (21/28 Day)
Subchronic 90-Day Dermal FP, MUP
Toxicity
Subchronic 90-Day Inhalation MUP
Toxicity
Subchronic Neurotoxicity Study Tech
Subchronic Oral Toxicity Study Tech
(2 species)
Dermal Sensitization Study MUP, FP
Primary Eye Irritation
Primary Dermal Irritation MUP, FP
Teratology (2 species) Tech
Reproduction and Fertility Tech
Chronic Toxicity Study Tech
(2 species)
Carcinogenicity Study Tech
(2 species)
Mutagenicity
9,000-12,000
2,000-3,000
7,500-12,000
1,200-2,000
28,000-32,000
60,000-90,000
60,000-120,000
40,000-50,000
125,000-195,000
1,000-1,500
750-1,000
500-700
40,000-48,000
90,000-110,000
575,000-700,OOOl/
375,000-425,OOOl/
40,000-60,000
I/ Assumes $375-450 thousand for rat.
$200-250 thousand for dog.
2/ Assumes $250-300 thousand for mouse
plus $125 thousand in addition
to cost of chronic study for rat,
141
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Exposure Data Requirements:
Reentry Protection
Unit Cost
Section Cost
Range in Dollars
Description of Sites and Human
Reentry Activitity
Description and Selection 500-1,000
of Human Activities
Sample Collection and Chemical Analyses
of Residues and Volatiles
Residue Dissipation Data on Surfaces 40,000-60,000
Dissipation of Airborne Pesticides \_l
Exposure Information
Measurement of Respiratory Exposure 50,000-100,000
Measurement of Dermal Exposure 2/
I] Combined with Section 163.132-1
21 Combined with Section 163.133-2
142
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Hazard Evaluation:
Nontarget Insects
Unit Costs
Section Cost
Range in Dollars
Nontarget Insect Testing - Pollinators
Honey Bee Contact LD50 400-500
Honey Bee - Toxicity of Residues 400-500
on Foliage
Wild Bees...Toxicity of Residues 600-800
on Foliage
Honey Bee Subacute Feeding Study 10,000-15,000
Field Testing for Pollinators 4,000-6,000
Nontarget Insect Testing - Aquatic Insects
Acute Toxicity to Aquatic Insects 800-1,000
Aquatic Insect Life-Cycle Study 10,000-14,000
Simulated or Actual Field Testing for
Aquatic Insects
Nontarget Insect Testing - Predators and Parasites
[Reserved. Data requirements have not yet been
specified]
I/ Protocols and Agenc will be established upon consultation between
registrant and Agency.
143
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Chemistry Requirements:
Environmental Fate
Unit Costs
Section
Cost
Range in Dollars
Degradation
hydrolysis
Photodegradation - Water
Photodegradation - Soil
Photodegradation - Air
Metabolism
Aerobic Soil
Anaerobic Soil
Anaerobic Aquatic
Aerobic Aquatic
Mobility
Leaching
Volatility
Dissipation
Field Dissipation/Terrestial
Field Dissipation/Aquatic
Field Dissipation/Special Aquatic
Field Dissipation/Forest
Dissipation/Combination/Tank Mix
Longer-Term Soil Dissipation
Accumulation
Rotational Crops
Irrigated Crops
Accumulation in Fish
Accumulation/Aquatic Non-Targets
15,600-20,000
18,000-20,000
15,000-17,500
18,000-25,000
25,000-35,000
I/
25,000-30,000
25,000-30,000
10,000-20,000
8,500-12,000
75,000-100,000
75,000-120,000
18,000-25,000
120,000-200,000
25,000-35,000
100,000-120,000
40,000-60,000
35,000-50,000
20,000-30,000
30,000-50,000
I/ Combined with aerobic metabolism.
144
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APPENDIX 2
Benefit/Cost Sensitivity
145
-------
Appendix "Bible 2-1
Benefit/Cost Sensitivity Analysis
Alternative
Industry Cost versus
Environmental Bnphasis
Middle-of-the-Road
Health Emphasis
Middle of the Road Cost versus
Environmental Emphasis
Middle-of-the-Koad
Health Emphasis
Program Cost versus
Environmental Emphasis
Mtddle-of-the-itoad
Health Emphasis
B
21.1
21.3
20.3
21.1
21.3
20.3
21.1
21.3
20.3
#1
C
20.5
20.5
20.5
20.5
20.5
20.5
20.2
20.2
20.2
#2
R
1.03
1.04
0.99
1.03
1.04
0.99
1.04
1.05
1.01
B
25.4
24.2
24.6
25.4
24.2
24.6
25.4
24.2
24.6
C
20.2
20.2
20.2
20.0
20.0
20.0
19.8
19.8
19.8
R
1.26
1.20
1.22
1.27
1.21
1.23
1.28
1.22
1.24
B
7.2
10.0
9.2
7.2
10.0
9.2
7.2
10.0
9.2
#3
C
15.1
15.1
15.1
15.6
15.6
15.6
16.5
16.5
16.5
R
0.48
0.66
0.61
0.46
0.64
0.59
0.44
0.61
0.56
B
27.0
25.0
27.0
27.0
25.0
27.0
27.0
25.0
27.0
#4
C
23.1
28.1
28.1
26.8
26.8
26.8
25.4
25.4
25.4
R
0.96
0.89
0.96
1.01
0.93
1.01
1.06
0.98
1.06
B
19.5
19.5
19.0
19.5
19.5
19.0
19.5
19.5
19.0
#5
C
16.2
16.3
16.3
17.1
17.1
17.1
18.0
18.0
18.0
R
1.20
1.20
1.17
1.14
1.14
1.11
1.08
1.08
1.06
C = Cost Rating
B = Benefit Rating
NOTE: For factor weightings, used in analysis, see Appendix Tables 2-2 and 2-3.
-------
Appendix Table 2-2
Weightings Used For Benefit Factors in
Benefit/Cost Sensitivity Analysis
Program Policy Emphasis
Benefit Factors:
Environmental
Emphasis
Middle-of-the-
Road
Health
Emphasis
Program Benefits-
Certainty of
Registerability of
Products
Time to Obtain
Registration
Coordination with
Other Programs
Health Effect-
Acute
Chronic
Environmental Effects
10
40
35
100
10
10
10
10
50
10
100
10
65
10
100
147
-------
Appendix Table 2-3
Weightings Used for Cost Factors in
Benefit/Cost Ratio Sensitivity Analysis
Program Policy Emphasis
Cost Factors:
Program Costs
Industry Compliance Costs
Producer Structure
Producer Competitive
Behavior
Producer Performance
Small Firm Impacts
Pesticide Users Costs
(Ag.)
Pesticide Users Costs
( Non-Ag . )
Loss of Products
Major Ag. Commodity/
Food Prices
Other Prices
Employment
*
Industry
Oriented
20
45
5
5
5
5
0
0
5
10
0
0
100
Middle-of-the-
Road
35
30
5
5
5
5
0
0
5
10
0
0
100
Program Cost
Emphasis
50
20
5
5
5
5
0
0 '
5
5
0
0
100
148
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APPENDIX 3
Cost-Effectiveness Analysis in Reducing Hazards
149
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COST-EFFECTIVENESS ANALYSIS IN REDUCING HAZARDS
A. Human Health
1. Willingness-to-Pay Approach
Data requirements pertaining only to human hazard total about
$76 million.^/ If one assumes that the WTP value of a life is $300,000
as has been estimated in some studies, then the information derived from
$65 million worth of testing must yield 253 lives saved to be cost
effective. If one accepts a higher value of $1.5 million per life, then
51 lives need to be saved in order for the testing to be cost effective.
At the extreme, if one accepts a value of $600 million per life, then
less than one life need be saved in order for the tests to be cost
effective.
It can be seen from these estimates that the cost
effectiveness of data requirements is highly sensitive to the value
placed on lives saved. However, it seems reasonable to assert that the
hazard testing data would be cost effective if they are expected to save
at least 150-200 lives per year by not allowing dangerous substances to
be registered for pesticidal use.
2. Human Capital Approach
In Section IV, the human capital approach (HC) was used to
estimate the cost to society of poisonings and cancer. If we compare
these estimates to the cost of testing, we can determine the number of
effects which must be avoided to justify the testing requirements.
a.) Acute Testing
The acute testing requirements would cost approximately $3.3
million annually. On average, each death due to pesticide poisoning
costs $112,000 and each non-fatal poisoning costs $200.
In order to make the testing requirements cost effecitve and if
one accepts these HC units costs, 30 fatal poisonings or 16,500
non-fatal poisonings, or some combination of the two would have to be
avoided annually.
b.) Chronic Testing
Reliable estimates of HC unit costs could not be developed for all
chronic effects caused by pesticides. However, a unit cost for cancer
of $52,000 was estimated. In order to make the annual chronic testing
cost of $61.9 million effective, approximately 1,190 cases of cancer
would have to be avoided annually.
ITThis total is an approximate long-term annual average based on the
direct cost estimates developed for Option #2 in Section V of this
report. The assumptions made are 25 Registration Standards
developed each year and Data Call-in in effect. The estimate of
$1.4-4.2 million for ecological testing presented later has the same
basis.
150
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If we go one step further and adopt the assumption that other
chronic effects, which may be in part caused by pesticides, occur at
the same rate as cancer cases, we can develop hypothetical unit costs
for the remaining effects. It should be noted that this assumption is
very tenuous and allows us to develop estimates which are extremely
crude at best.
Table 1 presents the unit costs derived using the above
assumption. These units costs could then be used to determine the
threshhold levels of each effect or combination of effects which must
be avoided to make the chronic testing portion of the regulatory
requirements cost effective. Supportable estimates cannot be made as
to the current underlying actual rates of chronic health effects
resulting from pesticides nor what the rate might be under the
alternative regulatory approaches. Thus, true cost-effectiveness
measure cannot be estimated.
3. Effectiveness of Chronic Tests on a Per Chemical Basis
This section will explore the question of effectiveness of chronic
studies. That is, for those chemicals that will be subjected to
chronic studies (particularly onco studies), what is the relative
effectiveness among the alternative approached?
After reviewing the Agency RPAR record, the findings were that of
about 85 chemicals referred to the RPAR review process, 23 chemicals
were issued an RPAR. Of these 23 chemicals, 17 had an oncogencity
trigger. If one assumes that these 17 chemicals suspected of being
oncogens under RPAR comprise all the oncogens in the 85 chemicals
referred and that for all 600 currently registered chemicals this same
rate (17 out of 85), holds then up to 20% of all pesticides currently
registered might be oncogens. On the otherhand, if the 17 suspected
oncogens comprise all oncogens out of the 600 currently registered
chemicals, the rate would be reduced to about 3%. Furthermore, the
average suspected oncogen reviewed in the RPAR process was estimated to
create at lifetime risk of lxlO~^ or about one case per million
persons exposed. From these assumptions, we can deduce that of 15 new
chemicals offered for registration annually, 0.45 to 3.0 or a rounded
average of 2 oncogens might occur. The scientific basis for projecting
the expected rates of adverse chronic health effects under the five
regulatory options is tenuous. The best that can be done is to make
crude estimates of the relative outcomes under the 5 approaches.
Generally, the higher the proportion of chemicals tested the
higher the probability of identifying suspected oncogens and hence
regulating in a manner that would avoid the occurence of the highest
number of potential cases. Option 4, comprehensive requirements where
all chemicals are tested, would thus result in the outcome where
virtually all oncogens would be identified. Conversely, Option 3,
151
-------
Table 1
Estimated Unit Costs for Selected
Chronic Effects
Disease Category Unit Cost3./
($)
Complications of pregnancy,
childbirth, and puerperium 8,636.
Congenital anomalies 3,463.
Certain causes of perinatal
morbidity and mortality 2,356.
£/ For a complete discussion of estimate derivation see the
detailed cost-benefit report.
152
-------
self-certification would result in the testing of the fewest chemicals
and hence would be the least likely to result in cancer cases avoided.
Options 1 and 2, reference guidelines and regulatory requirements
respectively, would result in testing of not all chemicals but all
where potential exposure is of concern. Hence, these options would
result in avoiding almost as many cancer cases as Option 1. Regulatory
requirements would be slightly more effective than reference guidelines
since testing would be done using consistent methods. Option 5,
provisional registration, would appear to fall somewhere below Options
1 and 2 since some limited exposure to an unknown oncogen might occur
before the result of the animal feeding studies indicated the potential
hazard. Option 5 would also likely be a significant improvement over
self-certification in terms of potential ill effects avoided. Table 2
summarizes this ordering of alternative approaches.
A similar relative ranking of the alternative approaches can be
made for chronic health effects other than cancer. There is even a
smaller amount of information on the rate that these other chronic
effects might be triggered as a result of pesticide exposure.
Table 2 also provides estimates that on an annual basis $10-30
million would be expended on oncogenicity/chronic effects testing
depending on the alternative approach selected. These figures include
a proportion of the cost of data generated by product and environmental
chemistry necessary to support a cancer risk assessment. To the
testing costs would be added a share of the program resources used in
regulating pesticides (reviews and decision-making support) as
potential carcinogens. The total annual projected costs of discovering
and regulating potential pesticide carcinogens is shown in Table 2 to
be $21-42 million depending on the approach taken.
If one puts aside the controversial subject of discounting future
deaths, the conclusion drawn is that chronic testing is highly cost
effective. Alternative 2 (regulatory requirements) provides the most
favorable outcome of the alternative approaches analyzed. As one moves
to the case of a more potent carcinogen, the argument becomes even
stronger. For a chemical unknowingly approved with a risk factor of
10~5 (from 10~6), the number of cancer cases avoided would be
10 times higher and the unit costs of cases avoided inversely
proportionately less.
B. Environmental Hazards
While it is not possible to estimate an average unit cost of
environmental effects, it has been estimated earlier in the document
that closing the Central and Pacific Flyway to waterfowl hunting would
cost $47.6 million annually. While this is a relatively large
environmental effect, it demonstrates the high value society places on
environmental and recreational resources relative to the $1.4-$4.2
million annual'.cost of the ecological testing portion of the
guidelines.
153
-------
Ul
Table 2. Relative Cost-Effectiveness Measures of Alternative
Approaches with Respect to Oncogenicity
Option
Reference Regulatory Self-
Guidelines Requirements Certification
Comprehensive Provisional
Requirements Registration
Oncogenicity Effects
-Testing Costs 21 21 10
-Other Costs (Programs) 12 12 11
-Total Costs 33 33 21
Relative Ordering for
Potential Cases Avoided a/ 2 2 5
30 16
12 13
42 29
1 4
a/ Options are ranked in descending order, i.e. 1 = most cases avoided and 5 = least cases avoided.
-------
In order to get a perspective on the magnitude of the benefits
necessary to make a social investment in non-target species and
attendant environmental fate and product chemistry testing worthwhile,
assume that waterfowl hunting days are representative of all of the
different types of ecological benefits to society. As indicated in
Table 3, these tests are anticipated to cost between $1.4 and $4.2
million per annum under the regulatory requirements (under the
reference guidelines and provisional registration options as well). At
a social value of $9 per day, the non-target species and attendant
tests only have to preserve or generate between 156,000 to 467,000 days
of waterfowl hunting before they have paid for themselves. This
represents a very small proportion, 1.2 to 3.6 percent, of the total
stock of waterfowl hunting days Americans enjoy nationally each year.
On the other hand, the comprehensive data requirements option, which
would probably cost from $13.8 to $15.2 million for these tests, would
have to generate or preserve many more waterfowl hunting days, some
1,530,000 - 1,690,000, or 11.8 to 13 percent of the total stock. In
contrast to this, the self-certification option with testing costs of
$0.8 to $2.3 million requires generation or preservation of only 89,000
to 256,000 hunting days before it has paid for itself. This is a 0.6
to 1.9 percent change in the total of waterfowl hunting days.
155
-------
Table 3 Annual Implicit Value of Non-Target Species Testing
Cost of Non-Target Species
Testing (Subpart E) and
Attendant Environmental
Fate and Product Chemistry
Tests
Reference
Guidelines
$1.4 mil-
$4.2 mil
Regulatory
Requirements
$1.4 mil-
$4.2 mil
Option
Self-
Certification
$0.8 mil-
$2.3 mil
Comprehensive
Data
Requirements
$13.8 mil-
$15.2 mil
Provisional
Registration
$1.4 mil-
$4.2 mil
Value of a Waterfowl
Hunting Lay
Savings in Number of
Waterfowl Uniting Days
Required to Offset
These Costs
Percent These Represent
of Total Waterfowl Hinting
Days In US
(12.93 mil per annum*)
$9
.156 mil-
.467 mil
1.2 - 3.6
$9
.156 mil-
.467 mil
1.2 - 3.6
$9
.089 inil-
.256 mil
0.6 - 1.9
$9
1.53 mil-
1.69 mil
11.8 - 13.0
$9
.156 mil-
.467 mil
1.2 - 3.6
*G.M. Brown, Jr., J.J. Charbonneau and M. J. May, "The Value of Wildlife Estimated by the Hedonic Approach" Working Paper #6,
Division of Program Plans, U.S. Fish and Wildlife Services, March, 1979, pg. 23.
**0ffioe of Migratory Bird Management, Annual Migratory Bird Hunting Regulations: Final Regulatory Impact Analysis, Fish and
Wildlife Service, U.S. Department of the Interior, June, 1981, pp. 29-4.
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