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Regulatory Impact Analysis for the Regulation of Microbial Products of Biotechnology: Benefits of the Final Rule


This chapter discusses the ways in which the regulation of microorganisms under TSCA will result in the realization of certain societal benefits. Specifically, EPA regulation of such products, as set forth in therule, is expected to reduce risks to health and the environment whileconcurrently resulting in greater regulatory efficiency and possibly improvingthe pace of product commercialization. This is accomplished by reducingregulatory burdens associated with microorganisms that pose the leastlikelihood of exhibiting new behaviors or new phenotypic traits. Thus, therisk reduction potential of EPA's rules under TSCA will be concentrated onthose microorganisms posing the greatest uncertainty concerning risk to humanhealth or the environment.

Unfortunately, risks to human health and the environment associated withmicroorganisms cannot be quantified accurately with information currentlyavailable or, in some cases, even identified with confidence. This chapter,therefore, provides a qualitative and necessarily incomplete assessment ofpossible risk reduction due to microbial regulation under TSCA. The chapteris organized as follows:

Section A provides an overview of possible adverse impacts of

genetically modified, novel microorganisms;

Section B presents an assessment of the risk reduction potentialof the rule; and

Section C presents a qualitative assessment of the benefitsassociated with the rule.

A. Overview of Risks of Novel Microorganisms

There has been much discussion of whether possible hazards areassociated with the use of certain genetically modified organisms, includingreports such as those from the Ecological Society of America (Tiedje 1989),

the National Academy of Sciences (NAS 1987 and National Research Council1989), and the Office of Technology Assessment (OTA 1988).

A number of important features distinguish microorganisms fromtraditional chemicals and under some circumstances could contribute touncertainty concerning their risk. These features include the potential formicroorganisms to spread and multiply in the environment (sometimes from verysmall initial populations), the ability to evolve, the ability to exchangegenetic information with other microorganisms, the ability to continuallyproduce proteins that may be ecologically disruptive or toxic to plants oranimals, the ability to interact with other organisms through competition forresources within an ecosystem, and the possible displacement of members ofnatural microbial communities.

Possible adverse impacts could include health effects on humans,animals, and plants; increased costs or decreased productivity in farming andother areas of the economy; and ecological impacts whose long run health oreconomic effects may not be immediately apparent. At present, there isuncertainty as to the likelihood of these adverse impacts and theirrelationship to the use of microorganisms reportable under the rule.

Potential risks of environmental use of microorganisms must be assessedthrough consideration of characteristics of the microorganisms, theenvironment into which they will be released, and the environments into whichthey are capable of spreading (OTA 1988, NAS 1987, NAS 1989, Tiedje 1989). The Ecological Society of America identified examples of some potentialoutcomes associated with the development of engineered organisms that are tobe avoided (Tiedje 1989):

The creation of new pests.

Enhancement of the effects of existing pests through transfer ofan introduced trait.

Disruptive effects on biotic communities. For example, theintroduction into certain agricultural fields of the highlycompetitive non-indigenous nitrogen-fixing bacterium,Bradyrhizobium serogroup 123, has made it difficult to introducepotentially more effective rhizobia in those fields.

Adverse effects on ecosystem processes. For example, theincreased expression of microbial ligninase or constitutivedenitrification could alter nutrient cycling adversely.

Incomplete degradation of hazardous chemicals leading to theproduction of even more toxic by-products. For example, themicrobial degradation of trichloroethylene (TCE) andtetrachloroethylene (or perchloroethylene, PCE) produces the moretoxic substance vinyl chloride.

Squandering of valuable biological resources. For example, genesfor toxins produced by strains of certain bacteria have beeninserted into crop plants and trees, conferring resistance againstsome pests. However, the genetically engineered crops as well asthe unaltered bacteria could be rendered ineffective by creatingconditions that accelerate the evolution of pest resistance.

B. Risk Reduction from Microbial Regulation

The principal benefits of the rule accrue through the avoidance of coststhat would be borne by society in the event that regulatory oversight asoutlined in the rule is not instituted. Such costs would result from damageto human health and the environment. To avoid these costs, the provisions of the rule have been designed to reduce risks associated with the introductionof new microorganisms into the environment.

This section first presents a qualitative assessment of the riskreduction potential of the requirements of the rule and then summarizes thepoints in the product development and regulatory process at which actionstaken in response to regulatory oversight may be triggered, thereby directlyreducing risk.

1. Risk Reduction Potential of Informational Requirements

In order for EPA to make a determination as to whether aparticular microorganism may present risks to society, certain data regardingthe identity, genetic makeup, and behavior of the new microorganisms are

necessary. Thus, the rule contains provisions asking for the submission ofdata that describe:

the recipient microorganism and the new microorganism;

the genetic construction of the new microorganism; and

phenotypic and ecological characteristics associated with the newmicroorganism.

In addition to the microbiological data necessary to identify themicroorganisms involved in a project, EPA requires researchers/manufacturersto submit information describing the activity for which the microorganism wasdeveloped. In the case of environmental releases for research anddevelopment, informational requirements include:

a detailed description of the research and development activity,including rationale, number of cells and application method, andcharacteristics of the test site; and

information on monitoring, confinement, mitigation, and emergencytermination procedures.

In the case of releases associated with the general commercial use of a newmicroorganism subject to reporting under the rule, informational requirementsinclude:

total production volume;

a description of the intended categories of use; and

information describing worker exposure and environmental releases.

The availability of these data will ensure that EPA is well informed onthe potential fate of microorganisms and able to quickly evaluate theconsequences of an environmental release and identify potential untowardeffects that might result. The Agency and/or the submitter may then act toensure that the use of the microorganisms presents no unreasonable risks.

It should be noted that EPA recognizes that the incremental benefitsrealized in connection with reporting via the two main reporting vehicles

established in the rule (the MCAN and the TERA) will not be of similarmagnitude in all cases. For example, exemptions from full reporting will begranted for contained structure uses under certain conditions. Theseexemptions reduce costs where incremental benefits of full reporting wereestimated to be somewhat lower than in unfamiliar cases or cases where controlmechanisms are judged to be adequate to ensure that unreasonable risks havebeen mitigated. Also, since these exemptions generally apply to widely usedmicroorganisms, the overall reporting burden will be minimized under the rule. Thus, the rule has been designed to allow flexibility.

Finally, EPA requires the submission of all reasonably ascertainabledata pertaining to subject microorganisms' effects on health and theenvironment. These data are of obvious value to the Agency in its efforts toprevent unreasonable risk. Also, since the microorganisms in question are"new", not all data on health and environmental effects would be expected toexist in the public domain.

It is not possible to estimate the proportion of overall benefitprovided by each of the categories of information described above. Each,however, is essential if the rule is to maximize overall risk reductionbenefits.

2. Risk Reduction Associated with Documentation and Recordkeeping


In addition to reporting requirements, the rule containsprovisions requiring that certain records be maintained. All persons filingnotices and applications in connection with the general commercial use of amicroorganism will be required to maintain records of all data included in thesubmission. Those persons commencing work will be required to maintainrecords that document the date of commencement and, if manufacturing,

importing, or processing, the production volumes generated or used duringthree years of operations.

Records would also need to be maintained in support of certainexemptions (such as the exemption for "small quantities" of microorganismsintended for R&D use in a contained structure).

These requirements contribute to overall risk reduction by requiringresearchers to address risk considerations in the planning and execution ofresearch, by ensuring that a responsible official also addresses theseconsiderations, and by enabling EPA to perform more meaningful inspections. Inmany cases, approvals for commencement of work may be granted without Agencyimposed restrictions being placed on the activity in question. However, inother cases, approvals or exemptions may be granted based on specificinformation that the submitter has provided to Agency reviewers. In caseswhere a determination was made that risk would be maintained at reasonablelevels based on certain containment and/or control mechanisms described by thesubmitter, on-site verification by EPA field staff that precautions wereindeed being properly implemented would be possible. Similarly, on-siteverification in association with work being performed by submitters operatingunder a consent order or TERA agreement is only possible if a record of thesubmission and agreement or order is available to the inspector.

3. Risk Reduction Potential of Consent Orders and TERA Agreements

Once EPA has ascertained the potential risk posed by a particularmicrobiological product, action may be taken under TSCA to preventunreasonable risk. If, prior to granting approval for the general commercialuse of a microorganism, the Agency concludes that risks are unreasonable, itcould prevent the activity altogether. However, if the Agency has some riskconcerns following review at this stage, it can reduce risks by placing

conditions on the activity or by requiring additional testing. For example,EPA may require the company to monitor the fate of the microorganism, so as toensure that no unanticipated consequences occur. The Agency could alsorequire engineering or procedural controls to limit incidental releases of themicroorganism. The Agency also may impose restrictions such as limitingproduction or import volumes or confining a field test to a certain area.

4. Risk Reduction due to Action Taken in Response to Regulatory


The risk reduction potential of the rule as discussed above may berealized through a number of different actions taken during the review processby both EPA and the regulated community.

For example, some important risk reduction may begin during laboratoryresearch, as some researchers could be encouraged to design microorganismsthat are less likely to exhibit novel behaviors of concern in an attempt toreduce the level of review and thereby avoid costs. Researchers may beencouraged to develop microorganisms that do not exhibit novel patterns ofsurvival or dissemination in the environment.

Similarly, changes that reduce risk may occur during Agency review. With regard to an environmental application of a new microorganism, aresearcher could revise a planned field test to accommodate Agency riskconcerns. For fermentation-system activities, risk reduction also may beginprior to or during formal EPA review if companies revise procedures to allowfor higher levels of containment or control in response to Agency concerns. Companies also may develop the information that will reduce uncertainty abouta microorganisms' behavior and include the information in their submission. These actions directly serve to reduce risk by reducing the probability that anew microorganism exhibiting a phenotypic trait injurious to human health orthe environment will become established outside of its controlled site.

C. Qualitative Assessment of Incremental Benefits

The incremental benefits associated with the requirements contained inthe rule arise in connection with the risk reduction potential of the rule(with risk reduction achieved as detailed above). By reducing risk, socialcosts associated with remediation of damages to health and the environment canbe avoided. The rule also contributes to greater regulatory efficiency, as itis estimated that the rule will provide the public with more risk reductionper dollar expended. Finally, the pace of commercialization of certainproducts could be enhanced.

The remainder of this section will present the rationale behind EPA'squalitative incremental benefits assessment and provide further insight intothe characterization of the benefits of the rule's requirements.

1. Sources of Incremental Benefits

In its oversight of microorganisms under TSCA, EPA intends tofocus on those microorganisms that are most likely to pose the greatestuncertainty regarding risk to human health and the environment. To achievethis focus, the Agency will regulate only intergeneric or "new" microorganismsand will use its authority under TSCA section 5(h)(4) to reduce reportingrequirements for some microorganisms that are determined to pose nounreasonable risk to human health or the environment.

With regard to reporting exemptions, EPA stated in its Policy Statementas part of the "1986 Coordinated Framework," that certain contained uses of microorganisms may also warrant a TSCA section 5(h)(4) exemption. This rulewill exempt certain microorganisms that are used in a manner minimizing theirrelease to the environment from full reporting requirements. Moreover, therule describes an exemption for two species of Rhizobia and Bradyrhizobia whentested in the environment under certain conditions.

Thus, as a result of these exemptions from reporting under section5(h)(4) of TSCA for certain microorganisms and uses which present lessuncertainty, reporting burden for such products under the rule will be reducedcompared to current policy. Further, since reporting requirements for thebalance of potentially regulated products under the rule would be no moreburdensome than under current oversight policies, it is clear that the rulewill increase the efficiency of EPA's regulatory program under TSCA.

In addition to enhanced regulatory efficiency, the rule would also makereporting in connection with R&D conducted outside of a contained structuremandatory. The effect of this change in policy (such reporting is nowvoluntary) should enhance EPA's regulatory program by allowing proposals forfield trials to be reviewed by the Agency prior to receiving trial data at thegeneral commercial use stage of a microorganism, thus allowing any potentialuntoward effects of the microorganism to be identified sooner (i.e., before afield trial). Since the Agency strongly encourages and has received voluntarysubmissions in connection with field trials under the current policy, thispolicy change is not expected to be associated with significant impacts;however, to the extent that voluntary submissions have not been submitted, thechange would provide for an increase in social benefits.

2. Characterization of Benefits

The incremental risk reduction benefits expected to accrue inassociation with the requirements of the rule are principally due to theavoidance of potential costs of damage to health and the environment. To theextent that adverse effects are irreversible or only partially reversible,resulting costs may be quite large. Thus, although the magnitude of potentialcosts were not quantifiable, EPA judges the ability of the rule to minimizethe probability of such a burden on society to be of substantial value.

Further, to the extent that these costs are transferred from society atlarge back to the biotechnology sector through compliance with EPA oversightmechanisms, equity is enhanced.

Also, issuance of EPA's rule is likely to avoid a patchwork of state andlocal regulations that have begun to develop in the absence of a comprehensivefederal rule; thus, businesses will have a level playing field and may find itmuch easier to comply. Inconsistent and uneven regulations across regionscould raise rule familiarization costs and reporting costs dramatically, anddistort choices of locations for research and production. They also couldnarrow the potential market for biotechnology products, thereby dampeningprofit expectations and innovative activities. If a uniform federal rule isput in place, the industry may avoid many of these problems.(Footnote 1)

The industry also should benefit from the rule through the "seal ofapproval" that the public may perceive to be attached to microorganismsreviewed by the Agency. This benefit is already available for many productsunder the current policy framework. This would be a benefit to society as awhole to the extent that it increases public confidence and removes publicopposition to the development of safe and useful products, thus creating amore favorable environment for biotechnology innovators. (This benefit wouldresult from any federal rule that allayed public concerns and is notnecessarily a unique benefit of one particular option.)

One type of evidence that this benefit is real lies in the fact thatmanufacturers are now willing to make voluntary PMN submissions in connectionwith R&D. This may indicate that they feel that the public relations benefits

of the submissions outweigh their costs, though it could also be thatvoluntary submissions are made for liability reasons or to help preventregulatory delays in the future.

The rule could also benefit the industry by reducing uncertainty aboutfuture regulations. Uncertainty has been mentioned as an industry concern inseveral sources, including the ICF 1988 survey of the biotechnology industry(ICF 1988) and the 1991 survey update (see Appendix B), a study by Ann Vidaver(Biotechnology 1990), and "Biotechnology: Delays in and Status of EPA'sEfforts to Issue a TSCA Regulation" (GAO 1992).

The General Accounting Office (GAO) interviewed officials from threebiotechnology associations - The Association of Biotechnology Companies (ABC),The Industrial Biotechnology Association (IBA) (which together now constitutethe Biotechnology Industry Association (BIO)), and The Applied BioTreatmentAssociation (ABTA). Representatives from these associations indicated to GAOthat the lack of a final TSCA biotechnology regulation has caused uncertaintyand is hindering the industry's ability to conduct long-term planning andraise capital for new product research because researchers and investorsnormally consider the costs of meeting regulatory criteria in investmentdecisions. The GAO report also cited an official from the Office ofTechnology Assessment (OTA) who testified that "the failure to promulgatefinal regulations has led to complaints by industry representatives that theregulatory approval process is unclear and inhibits investment" (GAO 1992).

In addition, an EPA researcher in the area of bioremediation suggestedthat benefits from increased certainty depend strongly on whether regulationsare very specific as to what is permitted, or if the regulators (includingthose charged with implementing statutes other than TSCA) proceed on a case-

by-case basis. The former approach may reduce delays in product development,but the latter would not significantly reduce uncertainty (Shields 1990).

Finally, unless there is coordination among federal, state, and localagencies regarding notification and other regulatory requirements, uncertaintywill remain. For example, there could be duplication and overlapping ofregulations without a coordinated framework. As a result, companies may beunable to decide to which agency to submit information for review. Thisuncertainty may lead to additional costs and delays in the development ofcommercial products.

1. If the federal rule is viewed as an alternative to a collection ofstate and local regulations, the federal rule's costs and risk-reductionbenefits would be measured incrementally to the costs and benefits of stateand local regulations.

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