0
                                       4
                                       0
                                      333
                                      333
                                    -1,748
                                       3
                                       5
                                       0
                                       0
                                     2,602
                                     2,602
                                       0
                                       5
                                       0
                                      352
                                      352
                                    -2,250
                                       4
                                       5
                                       0
                                       0
                                     2,602
                                     2,602
                                       0
                                       5
                                       0
                                      352
                                      352
                                    -2,250
                                       5
                                       6
                                       0
                                       0
                                     3,122
                                     3,122
                                       0
                                       6
                                      20
                                      371
                                      391
                                    -2,731
                                       6
                                       6
                                       0
                                       0
                                     3,122
                                     3,122
                                       0
                                       6
                                       0
                                      371
                                      371
                                    -2,751
                                       7
                                       7
                                       0
                                       0
                                     3,643
                                     3,643
                                       0
                                       7
                                       0
                                      648
                                      648
                                    -2,995
                                       8
                                       8
                                       0
                                       0
                                     4,163
                                     4,163
                                       0
                                       8
                                       0
                                      667
                                      667
                                    -3,496
                                       9
                                       9
                                       0
                                       0
                                     4,683
                                     4,683
                                       0
                                       9
                                       0
                                      686
                                      686
                                    -3,998
                                      10
                                       9
                                       0
                                       0
                                     4,683
                                     4,683
                                       0
                                       9
                                      20
                                      686
                                      706
                                    -3,978
                                     Total
                                      63
                                       0
                                       0
                                    32,784
                                    32,784
                                       0
                                      63
                                      120
                                     4,800
                                     4,920
                                    -27,864
                                    Average
                                       6
                                       0
                                       0
                                     3,278
                                     3,278
                                       0
                                       6
                                      12
                                      480
                                      492
                                    -2,786

Sources: The industry burden in Year 1 is derived in Table 4-15. Values may not sum due to rounding. Appendix A derives the burdens for all other years and displays unrounded estimates.

Table 4-18: Base Case and Change in Industry Cost in Thousands of Dollars ($2018) (All Years)
                                     Year
                                 Baseline Case
                                   Rule Case
                         Total Change Industry in Cost

                               MCAN Submissions
                          TIER I & II Submissions
                           Rule Familiarization Cost
            Report Preparation, Submission, and Recordkeeping Cost
                             Total Industry Cost
                               MCAN Submissions
                          TIER I & II Submissions
                          Rule Familiarization Cost
            Report Preparation, Submission, and Recordkeeping  Cost
                             Total Industry Cost

                                       1
                                       4
                                       0
                                      $0
                                     $194
                                     $194
                                       0
                                       4
                                      $6
                                     $30
                                     $36
                                     -$158
                                       2
                                       4
                                       0
                                      $0
                                     $194
                                     $194
                                       0
                                       4
                                      $0
                                     $30
                                     $30
                                     -$164
                                       3
                                       5
                                       0
                                      $0
                                     $249
                                     $249
                                       0
                                       5
                                      $0
                                     $31
                                     $31
                                     -$218
                                       4
                                       5
                                       0
                                      $0
                                     $249
                                     $249
                                       0
                                       5
                                      $0
                                     $31
                                     $31
                                     -$218
                                       5
                                       6
                                       0
                                      $0
                                     $291
                                     $291
                                       0
                                       6
                                      $2
                                     $33
                                     $34
                                     -$257
                                       6
                                       6
                                       0
                                      $0
                                     $291
                                     $291
                                       0
                                       6
                                      $0
                                     $33
                                     $33
                                     -$258
                                       7
                                       7
                                       0
                                      $0
                                     $346
                                     $346
                                       0
                                       7
                                      $0
                                     $55
                                     $55
                                     -$292
                                       8
                                       8
                                       0
                                      $0
                                     $388
                                     $388
                                       0
                                       8
                                      $0
                                     $56
                                     $56
                                     -$332
                                       9
                                       9
                                       0
                                      $0
                                     $443
                                     $443
                                       0
                                       9
                                      $0
                                     $57
                                     $57
                                     -$386
                                      10
                                       9
                                       0
                                      $0
                                     $443
                                     $443
                                       0
                                       9
                                      $2
                                     $57
                                     $59
                                     -$384
                                     Total
                                      63
                                       0
                                      $0
                                    $3,088
                                    $3,088
                                       0
                                      63
                                     $10
                                     $414
                                     $423
                                    -$2,665
                                Annualized 3%*
                                       -
                                       -
                                    $0.00
                                     $302
                                     $302
                                       -
                                       -
                                      $1
                                     $40
                                     $41
                                     -$260
                                Annualized 7%*
                                       -
                                       -
                                    $0.00
                                     $292
                                     $292
                                       -
                                       -
                                      $1
                                     $39
                                     $40
                                     -$252

Sources: The industry burden in Year 1 is derived in Table 4-16. Calculations are with the unrounded numbers Appendix A: derive the burden for all other years and displays unrounded estimates
Note: Yearly, total, and average costs are calculated before discounting. Values may not sum due to rounding.
Average Cost per Company
To estimate the average cost per company, EPA first calculated the average number of submissions per company under both the baseline and the rule cases. To do this, EPA divided the total number of submissions expected each year as listed in Table 4-13 with the estimated number of companies submitting a biotechnological notice to EPA as presented in Table 4-12. Table 4-19 presents the average number of submission per company for the first ten years of the potential regulation.
Table 4-20 presents the average cost per company annualized over the ten year period. To calculate this cost, EPA divided total industry costs, which can be found in Table 4-16 and Tables A-10 to A-18, by six, which is the number of companies anticipated to report each year during the ten-year period. Overall, EPA estimates the annualized average savings per company to be $43,344 thousand with a three percent discount rate and $41,983 thousand with a seven percent discount rate.

Table 4-19: Average Number of Submissions per Company (All Years)
                                     Year
                           Total Number of Companies
                                 Baseline Case
                                   Rule Case

                                     MCANs
                               MCANs Per Company
                             Rule Familiarizations
                       Rule Familiarization per Company
                              Tier I Submissions
                              Tier II Submissions
                        Tier I Submissions per Company
                        Tier II Submissions per Company
                             Rule Familiarizations
                       Rule Familiarization per Company
                                       1
                                       6
                                       4
                                     0.67
                                       0
                                       0
                                       3
                                       1
                                      0.5
                                     0.17
                                       4
                                     0.67
                                       2
                                       6
                                       4
                                     0.67
                                       0
                                       0
                                       3
                                       1
                                     0.50
                                     0.17
                                       0
                                       0
                                       3
                                       6
                                       5
                                     0.83
                                       0
                                       0
                                       4
                                       1
                                     0.67
                                     0.17
                                       0
                                       0
                                       4
                                       6
                                       5
                                     0.83
                                       0
                                       0
                                       4
                                       1
                                     0.67
                                     0.17
                                       0
                                       0
                                       5
                                       6
                                       6
                                     1.00
                                       0
                                       0
                                       5
                                       1
                                     0.83
                                     0.17
                                       1
                                     0.17
                                       6
                                       6
                                       6
                                     1.00
                                       0
                                       0
                                       5
                                       1
                                     0.83
                                     0.17
                                       0
                                       0
                                       7
                                       6
                                       7
                                     1.17
                                       0
                                       0
                                       5
                                       2
                                     0.83
                                     0.33
                                       0
                                       0
                                       8
                                       6
                                       8
                                     1.33
                                       0
                                       0
                                       6
                                       2
                                     1.00
                                     0.33
                                       0
                                       0
                                       9
                                       6
                                       9
                                     1.50
                                       0
                                       0
                                       7
                                       2
                                     1.17
                                     0.33
                                       0
                                       0
                                      10
                                       6
                                       9
                                     1.50
                                       0
                                       0
                                       7
                                       2
                                     1.17
                                     0.33
                                       1
                                     0.17
Note: Assumes 44 percent of companies are small businesses, and 44 percent of submissions are from small businesses.

Table 4-20: Average Cost per Company (All Years)
                                     Year
                           Total Number of Companies
                        Base Case Total Industry Costs
                        Base Case Average Cost Per Firm
                         Rule Case Total Industry Cost
                        Rule Case Average Cost Per Firm
                            Average Change in Cost

                                      (a)
                                      (b)
                                    (c=b/a)
                                      (d)
                                    (e=d/a)
                                    (f=c-e)
                                       1
                                       6
                                   $193,999
                                   $32,333
                                   $36,289
                                    $6,048
                                   -$26,285
                                       2
                                       6
                                   $193,999
                                   $32,333
                                   $29,881
                                    $4,980
                                   -$27,353
                                       3
                                       6
                                   $249,099
                                   $41,516
                                   $31,378
                                    $5,230
                                   -$36,287
                                       4
                                       6
                                   $249,099
                                   $41,516
                                   $31,378
                                    $5,230
                                   -$36,287
                                       5
                                       6
                                   $290,998
                                   $48,500
                                   $34,476
                                    $5,746
                                   -$42,754
                                       6
                                       6
                                   $290,998
                                   $48,500
                                   $32,874
                                    $5,479
                                   -$43,021
                                       7
                                       6
                                   $346,098
                                   $57,683
                                   $54,505
                                    $9,084
                                   -$48,599
                                       8
                                       6
                                   $387,998
                                   $64,666
                                   $56,002
                                    $9,334
                                   -$55,333
                                       9
                                       6
                                   $443,097
                                   $73,850
                                   $57,499
                                    $9,583
                                   -$64,266
                                      10
                                       6
                                   $443,097
                                   $73,850
                                   $59,100
                                    $9,850
                                   -$63,999
                                     Total
                                       -
                                  $3,088,482
                                   $514,747
                                   $423,382
                                   $70,564
                                   -$444,183
                                 Annualized 3%
                                       -
                                   $301,542
                                   $50,257
                                   $41,480
                                    $6,913
                                   -$43,344
                                 Annualized 7%
                                       -
                                   $292,319
                                   $48,720
                                   $40,422
                                    $6,737
                                   -$41,983
Source: Column (a) from Table 4-19. Columns (b) and (d) from Table 4-18.
Note: Values may not sum due to rounding.
Limitations of the Analysis
Estimates of the number of potentially affected companies, the numbers of submissions, the cost per submission, and rule familiarization costs are very uncertain. In some cases, a more extensive analysis would not be able to remove much uncertainty. For example, impacts on the pace and type of innovation, and the health and environmental benefits of enhanced innovation, are extremely difficult to predict. In other cases, such as per-submission costs or numbers of submissions, a larger study might reduce uncertainty, but it is unlikely that the added information would have changed the rule decision. For example, an industry survey might show that per submission costs are higher or that there might be more submissions than estimated here. However, Tier I/Tier II per-submission costs will almost certainly continue to be lower than per submission costs for MCANs. Any change in submission numbers might be large percentage-wise but will be small absolutely, as will the change in quantified rule costs.
Uncertainties in the Number of Tier I and Tier II Submissions
Growth in Submissions
The analysis assumes that the number of submissions will be relatively small for the foreseeable future: several submissions per year for the 2 microorganisms combined, rather than dozens or hundreds. However, it is difficult to forecast future submissions for intergeneric T. reesei and B. amyloliquefaciens, especially beyond the first few years. The year-to-year innovative activity leading to submissions depends on business decisions of a handful of firms, and can be affected by both internal technical success and external economic factors. Errors in assumed submission numbers would tend to affect benefits and costs in the same direction.
Rule Case versus Base Case Total Submissions
This analysis assumes that total T. reesei and B. amyloliquefaciens submissions will not be affected by the rule, and that the rule will merely result in some MCANs being replaced by Tier I/Tier II submissions, for a savings in submission costs. However, this might not be true. Instead, the lower Tier I/II submission costs could increase the total number of submissions for T. reesei and B. amyloliquefaciens.
The number of Tier I submissions could be higher than estimated if companies are encouraged to submit a large number of low-cost Tier I notices, including companies who might not have submitted an MCAN in the base case. A review of past submitters of Tier I/Tier II notices reveals that while many Tier I/Tier II submissions are by past MCAN submitters, some have been submitted by companies that have never submitted an MCAN. It is not known whether any companies have been deterred from developing or using intergeneric T. reesei or B. amyloliquefaciens for TSCA applications because of the MCAN cost, but if so, they could enter some TSCA markets because of the rule.
For large markets, such as T. reesei enzymes for ethanol manufacturing, it is unlikely that the MCAN cost will deter entry. However, it is possible that the rule will create a surge of Tier I submissions for small markets where it might not be profitable to submit MCANs. For example, a firm may develop a microorganism for non-TSCA uses, but there might also be potential TSCA uses. The firm might consider the profits from minor TSCA uses to be too low to justify an MCAN, but high enough to justify the simpler Tier I notice. Industry and agency costs for the extra submissions will be low on a per-submission basis. A surge of Tier I notices could increase submission costs, but will tend to increase the innovation benefits even more.
The total number of notices could also be higher for the rule case than for the base case because companies must submit a new Tier I or Tier II notice (or amendment) for each new site using the same microorganism, while they submit only one MCAN per microorganism. These supplementary notices will be relatively inexpensive but will slightly increase rule case submission costs.
For example, there may be potential T. reesei applications which are so different from historic uses of other microorganisms eligible for Tier I/Tier II exemptions that EPA's history of receiving only one Tier II submission is irrelevant. For example, a company might wish to provide the eligible microorganisms to toll manufacturers (for example, firms that manufacture the enzymes under contract with the submitter) or to customer sites that may not meet the Tier I containment requirements, and use a Tier II exemption for each site. This could increase both the Tier II exemptions and total exemption notices beyond the number assumed in the analysis.
Rule Case MCAN Mix
The analysis assumes that if the intergeneric microorganism qualifies for an exemption, manufacturers will submit a Tier I or a Tier II notice, not an MCAN. However, it is possible that firms would make an MCAN submission even though the microorganism itself would qualify for an exemption. This could happen, for example, if the submitter believes that manufacturing conditions may not always meet the containment requirements for either exemption.
For example, in one case, an MCAN submitter believed that the microorganism itself would qualify for a Tier I exemption, but did not know whether customer sites receiving the live microbe would meet Tier I containment criteria. The submitter stated that it would be burdensome to make this determination on a site-by-site basis. They also thought that Tier I regulatory requirements might make the commercial use less attractive to customers. As a result, they did not want to impose containment requirements beyond the normal for customer facilities (MCAN, 2010, p.7).
In addition, microorganisms associated with Tier I or Tier II exemptions are not added to the TSCA inventory, so they remain "new." A company might decide to submit an MCAN once rather than repeatedly submit a Tier I or Tier II notification for each site where the organism is used. By contrast with exemption notices, with MCANs, once the company begins commercial manufacturing and submits an NOC, the specific microbial strain would be added to the TSCA inventory. At that point, the microorganism would be no longer "new" and would not require a submission if more sites manufacture the microorganism or the method of containment changes (unless the organism is subject to a Consent Order under TSCA section 5(e) or to a SNUR).
Tier II Submissions
The analysis assumes that firms not meeting Tier I containment requirements will prefer a Tier II submission to an MCAN. However, some firms may perceive the cost of a Tier II submission to be only slightly lower than the cost of an MCAN. Because there is more flexibility post-EPA review with MCAN submissions, a company may believe the cost savings from submitting a Tier II rather than an MCAN do not justify the future costs of repeated Tier II submissions. This will tend to reduce quantified cost savings from the Rule.
EPA has received 19 Tier II submission (with amendments) since 1998.The analysis assumes that there will be 14 Tier II notices over a ten-year period. However, the actual number and timing of Tier II notices could be quite different. As with the Tier I assumptions, the assumed number of Tier II submissions may be too high or too low.

If the total number of exemption notices stays the same, but more Tier I notices and fewer Tier II notices are submitted, the cost savings generated by the rule may be higher than estimated here, because Tier I submissions have much lower costs than Tier II submissions. Conversely, if more Tier II notices are submitted, the relatively small burden difference between MCANs and Tier II submissions will yield a smaller but still positive cost savings.
Firms Incurring Rule Familiarization Costs
The analysis assumes that a few firms will incur rule familiarization costs over ten years, and that the numbers of submitting firms will be the same in the base and rule cases. However, the advantages of Tier I and Tier II exemptions could induce firms to make T. reesei or B. amyloliquefaciens submissions under the rule case that would not have done so under the base case. For firms who would not have submitted MCANs under the base case, there will be rule familiarization costs associated with the Tier I or Tier II submission under the rule case. However, the expected profits should outweigh the costs associated with the additional Tier I and Tier II submissions -- otherwise firms will not make the additional submissions.
Uncertainties in Cost Estimates
The analysis assumes that the costs estimated for the 1997 biotechnology rule are a good basis for estimating costs of current submissions, after updating for inflation and the advent of electronic submissions. Resources were not available to update the 1997 MCAN submission costs, except to reflect inflation and electronic reporting. There is therefore uncertainty surrounding the cost estimates associated with MCAN, Tier I, and Tier II submissions. However, it is highly likely that at least some firms will find the cost savings sufficient to take advantage of the Tier I and possibly also the Tier II exemptions, resulting in a cost savings associated with the rule.
Submission Costs
MCAN burden estimates may be underestimates if preparing a submission requires the development of more new information than was assumed in the original 1997 RIA, or if existing information was more difficult to compile than was originally estimated.
In addition, these cost estimates may be understated if they do not adequately reflect pre-notice consultations with EPA, as well as phone calls with EPA and responding to EPA inquiries during submission review. EPA encourages, but does not require, pre-notice consultations. An industry consultant has recommended such consultations well in advance of the expected commercial start date (Glass, 2010), and firms have often availed themselves of this opportunity. Some consultations involve travel by senior staff to EPA's headquarters in Washington DC. In addition, industry staff may spend time compiling additional information to respond to inquiries by EPA staff during the review period.
If costs of planning and preparing MCANs are higher than those estimated, it is unclear how this will affect cost savings due to the Tier II exemption, since the Tier II costs might also be higher than estimated. Compared to the Tier I exemption, however, higher MCAN costs will likely increase the cost savings from the rule.
On the other hand, MCAN submission costs may be lower than those estimated, if firms make more than one submission for the same species. If the firm and EPA are familiar with the species, the firm may save time preparing the submission, have less need to consult with EPA, and spend less time answering EPA questions. This could reduce the advantages of a Tier II or Tier I exemption compared to an MCAN.
In addition to the cost savings from electronic submissions to EPA, advances in information technology may have reduced the costs of some steps in preparing a submission.
The analysis assumes that the cost of determining whether containment qualifies for the Tier I exemption is negligible. This may not be true for some firms, such as those supplying live microorganisms to customers. Higher Tier I costs will tend to somewhat reduce the net benefits of the rule.
The analysis assumes that cost savings to industry and the Agency from electronic reporting are similar to savings estimated by EPA for conventional chemicals. However, biotechnology submissions are quite different from submissions for conventional chemicals, with less reliance on EPA forms and more pages in a typical submission. It is not clear whether the savings associated with electronic biotechnology submissions will be higher or lower than for conventional chemical submissions.
Recordkeeping and Rule Familiarization
The analysis assumes that MCAN recordkeeping costs are the same as Tier I and Tier II recordkeeping costs (1 hour). However, because MCANs are far larger and more complex than Tier I notices, and somewhat more complex than Tier II submissions, it is unlikely that the recordkeeping burden is truly the same for all types of notices. A more tailored estimate of MCAN, Tier I and Tier II recordkeeping costs may slightly increase the cost-savings from the rule.
The rule familiarization cost of 20 hours per firm may be an over- or underestimate. Such costs will be company-specific. For example, instead of a cost, there might be a cost savings (negative rule familiarization cost) for Tier I/II submitters who otherwise would have had to learn about the more complex MCANs. The rule familiarization cost may be an overestimate for Danisco/Genencor and Novozymes since they are likely to be familiar with the rule concepts as a result of their roles as submitters of the applications that triggered the current rulemaking. By contrast, if firms enter the TSCA biotechnology market with Tier I notices solely due to the potential T. reesei or B. amyloliquefaciens exemptions, their rule familiarization costs attributable to the rule could be higher, since they might have to learn about TSCA biotechnology regulation in general as well as about the rule. In any case, even if rule familiarization costs are somewhat different than estimated, they are low, one-time costs and unlikely to be major costs for any submitter.
The analysis assumes that only firms making submissions have rule familiarization costs. It is possible that some firms working with T. reesei or B. amyloliquefaciens for non-TSCA uses will consider making a submission as a result of the rule, learn about the rule, and then decide not to make a submission of any kind. If such firms exist, it will increase rule familiarization costs without the subsequent benefits of a submission.
Industry Overhead Rates
The industry cost estimates rely on loaded wage rates. The wages and fringe benefits are based on Bureau of Labor Statistics data and should be reasonably accurate. However, the authors of this analysis are not aware of any similarly reliable data for industry overhead rates. This analysis assumes that the overhead for General and Administrative costs is 17 percent of wages, which is consistent with the overhead rate used in other economic reports supporting TSCA rules. The actual overhead rate may vary by industry, by company, by the process within the company, and by accounting methods; no single rate will be correct for all submitters.
Health, Environmental, Consumer and Other Benefits
The rule will decrease the burden to industry of developing new intergeneric strains of T. reesei and B. amyloliquefaciens. However, the main benefits of the rule could well be the reduced delay in developing and bringing to market products from the modified T. reesei and B. amyloliquefaciens organisms (which may be the organisms themselves), and the environmental and consumer benefits that are generated by the use of these products. Some of these benefits will be captured by industry through revenues, some will be enjoyed by consumers in the form of reduced prices or enhanced product performance, and some will accrue to the general public in the form of improved health or environmental quality, relative to the situation in the absence of the rule.
It was not feasible to quantify these innovation and environmental benefits for this analysis, but they could very well be greater in magnitude than the quantified cost savings. Section 5.1 qualitatively describes the potential benefits to industry and consumers of increases in innovation and reduced delays of bringing a product to market. The potential environmental, health, and consumer benefits of new intergeneric strains are described in Sections 5.2 and 5.3.
Benefits of Reduced Delays in Bringing Products to Market and Increased Market Entry
The rule is expected to reduce delays and costs resulting from the MCAN submission lead time and cost. The most dramatic differences are between the MCAN and the Tier I notice, due to differences in advance notification (90 days for the MCAN versus 10 days for the Tier I) and submission content (often just 2-3 simple pages for a Tier I notice, compared to possibly hundreds of pages for the MCAN, many of them containing scientific and engineering information tailored to the microorganism and its specific use).
Reduced Delays in Marketing a Product
Under the base case, if a company identifies a promising strain of an organism, it must prepare an MCAN, file it, and wait for the review period and determination before it can commercialize the new strain or, in some cases, before it begins full pilot-scale testing in a bio-refinery. The actual review period for an MCAN can take more than 90 days, if the submitter voluntarily suspends the review clock and/or if EPA extends the review period. EPA may extend the review period for up to 90 days for an MCAN and 45 days for a Tier II notice (EPA, 1997b, § 725.54 and § 725.56).
Because of the shorter regulatory review period for a Tier I or Tier II notice, compared to an MCAN, industry may avoid costs in the form of lost or delayed profits that result from the postponement of product commercialization under the base case. If companies can plan well ahead, they may build the MCAN lead times into product development schedules, and their delay may be less than the review time (however, there may be costs to such planning, such as more internal coordination and more pre-notice consultations with EPA which may involve time and travel for submitter senior staff). Some markets for microbial products may be seasonal, so that a 90-day review period or an unexpected extension of the review period may delay manufacturing by several additional months if the submitter misses a seasonal market. Decreasing the delays in manufacturing and profit-making increases the company's incentive to develop new intergeneric strains.
Industry trade associations called the current MCAN system "an obstacle to innovation and implementation" for bio-based products and biofuels (BIO and EPA, 2009, slide 8). The 2010 industry letter supporting the T. reesei application described the current process as cumbersome and emphasized that the eligibility for exemption will allow companies to test multiple strains in parallel. It asserted that listing T. reesei as a candidate for exemption "will enhance the rate of innovation by allowing companies to create and test a number of strains in parallel rather than the current, cumbersome, step-by-step process in which a company assembles a promising candidate strain, prepares and then files an MCAN, waits for the 90-day notification period/`dropped from review' status, and then goes for full-scale, in-biorefinery testing. The ability to test multiple candidates will allow the industry to reach full potential in shorter time..." (BIO and ETA, 2010, p.7).
Use of Tiered exemptions could expedite the process of identifying the best strains. The industry letter stated that the Tiered exemptions would reduce the time interval from innovation to implementation, and allow for smoother project planning and execution (BIO and ETA, 2010, p.7).
Reduced Delays in Large Scale Testing
As indicated in the 2010 industry letter (BIO and ETA, 2010), the MCAN review period may delay not only bringing a product to market, but also large scale testing before commercialization. Microorganisms often must be tested in larger fermentation facilities, often called "pilot scale" or "demonstration scale" plants, to determine whether they will be cost-competitive at commercial scale. TSCA section 5(h)(3) provides an exemption from notification for R&D uses. However, such a use would have to meet the requirements in the 1997 biotechnology rule, section 725.234, to qualify for the R&D exemption. For example, the use must be "solely for R&D" and must be contained within a structure. Microorganism modifications not meeting the requirements must go through the submission process for a commercial product even though, for the purpose of determining commercial viability, they are still in a testing stage.
In the absence of the rule, a company could opt to file multiple MCANs simultaneously, thereby incurring the costs of multiple MCANs but minimizing delays of manufacturing, since it will be clear within one review period whether one or more of the genetic modifications being submitted are commercially viable. Alternatively, the company could file only one MCAN at a time. This will reduce the potential costs of submission, since the company will be able to stop submitting MCANs as soon as a viable intergeneric product was found, but it could slow down innovation, since the company might not file the next MCAN until they know the results of large scale testing of the prior MCAN microorganism (BIO and ETA, 2010).
Effects of Submission Costs on Market Entry
Some potential TSCA markets may be too small or uncertain to justify the expense of an MCAN. In some cases, in the absence of Tier I/Tier II exemptions, biotechnology companies may choose to not develop an intergeneric product due to the burden associated with preparing an MCAN. For example, a company may choose to use a naturally-occurring microorganism or a company may modify how it develops and applies a microorganism (EPA, 1997a).
In some cases, firms may focus intergeneric research on other host microbes that are already listed as candidates for Tiered exemptions. For example, it is possible that companies have chosen to emphasize developing intergeneric strains of the B. amyloliquefaciens substitutes, B. licheniformis and B. subtilis, which are currently eligible for Tier I and Tier II exemptions, instead of B. amyloliquefaciens. This may have slowed industry development of intergeneric B. amyloliquefaciens below what it otherwise might have been. Tier I certifications have been submitted for both B. licheniformis, and B. subtilis in recent years. However, no MCAN has been submitted for B. amyloliquefaciens since FY1998.
Any benefits of new intergeneric T. reesei or B. amyloliquefaciens are likely to come sooner if the organism qualifies for an exemption, especially a Tier I exemption. In addition, it is possible that, due to the exemptions, some improved microorganisms would be developed that otherwise would not be developed at all.
Rule Case Benefits
Under the rule case, the shorter review periods (45 days for the Tier II exemption and 10 days for the Tier I exemption) could have reduced delay costs. This is especially true for Tier I notices which, unlike MCAN and Tier II notices, are not subject to suspensions or extensions of the review period.
The eligibility for Tier I/Tier II exemptions shortens the notice period for T. reesei QM6a and B. amyloliquefaciens. The Tier I notice requires only a 10-day advance notification and does not require EPA approval before commercial manufacturing. Using the Tier I exemption will potentially allow companies to test multiple strains at once, expediting the testing process and allowing for the product to enter the market more quickly. The Tier II notice also decreases the review period, to 45 days (extendable to 90 days), but requires EPA approval prior to commercial manufacturing. Thus, the Tier II exemption may be somewhat less important than the Tier I option in encouraging innovation.
Although the Tier II exemption has seldom been used historically (see Table 4-9), this exemption still has a role in encouraging innovation, if the microorganisms are likely to be used in containment that does not meet the Tier I conditions. Overall, due to shorter notice or review periods, and simpler submissions, the rule is expected to increase the rate of innovation in the industry.
Innovation delay costs are not quantified for this report. The 1997 RIA stated that it was not feasible to quantify the impact of these costs as part of aggregate industry costs (EPA, 1997a). The 2007 New Chemical ICR (EPA, 2007) presents a cost for delayed receipt of profits, but this cost was based on calculations for conventional chemicals originally made in 1983 (ICF, 1983), and may be quite different for microorganisms.
Benefits to Consumers
Reduced delays in the marketing of products, and increased innovation will positively impact both downstream users and end consumers of the genetically modified microbes and products manufactured using these microbes. Reduced delays in bringing products to market bring value to potential consumers. Consumers will be able to start using the improved products sooner, and potentially start sooner to reap the direct and indirect environmental and health benefits of the rule discussed in Sections 5.2 and 5.3. The lower costs and reduced lead times for Tier I/Tier II exemptions are expected to encourage the development of new intergeneric microbe strains. Successful innovation will lead to reduced cost and/or improved performance of enzymes and other products made using the microbes, relative to the base case. Ultimately there will be relatively lower prices and/or improved performance for end products such as fuel ethanol, textiles, and detergents.
Health, Environmental and Other Benefits of Improved Microbe Strains
Benefits of Improved T. reesei Strains
The rule could lead to more cost-effective manufacturing of enzymes by T. reesei hosts, including manufacturing of enzymes native to other microbial genera. In cases where enzyme costs are reduced, the industry may realize some of the savings in the form of profits and some savings may be passed on to industrial customers, and to institutional, and household consumers.
Reduced enzyme cost would tend to expand the use of enzymes and thus their environmental and other benefits. Depending on the application, enzymes may replace harsher chemicals, allow use of lower temperatures (less energy), allow recycling of waste biomass, and have other environmental benefits. For example, cellulases from T. reesei are used in the pretreatment and finishing of textiles. The use of enzymes in textile pretreatment may reduce the amount of wastewater generated, and the amount of energy and water used by textile plants that use traditional methods of treating garments (Blackburn, 2009). Cellulases may be used instead of sludge-producing pumice stones in denim finishing to create a stonewashed affect. The enzymes may also be used as substitutes for hydrogen peroxide in bleach clean-up, reducing the amount of wastewater produced, and/or the amount of energy and water used in fabric pretreatment (Blackburn, 2009).
The 2010 industry letter supplementing the original T. reesei petition highlights the conversion of biomass to sugars as an area of innovation. "One can ferment these saccharides/oligosaccharides to ethanol, acids and other metabolites or use them directly in organic synthesis" (BIO and ETA, 2010, p.7). Faster development of new T. reesei strains due to the Tiered exemptions -- especially Tier I -- could reduce the costs of enzymes used to degrade biomass, and thus promote use of biomass as a feedstock for the manufacturing of ethanol and other chemicals. The cost reductions will result from increases in enzyme yields and development of more effective enzyme complexes using genetically modified T. reesei strains (BIO and ETA, 2010, p.8).
An important use for T. reesei enzymes is in ethanol manufacturing. Other things being equal, more cost-effective enzymes from T. reesei may reduce the cost of manufacturing corn-based and cellulosic ethanol. The benefits of cellulosic ethanol are discussed in the next section.
Benefits of Cellulosic Ethanol
T. reesei enzymes are used in the manufacturing of cellulosic ethanol. For example, Genencor's Accelerase(R) 1500 enzyme complex hydrolyzes biomass into fermentable sugars (Genencor, 2009).
Cellulosic ethanol is a second-generation biofuel that is made from cellulosic biomass that comes from feedstocks like corncobs, switch grass, woodchips, and other inedible plant fibers. Tiered exemptions for T. reesei are expected to encourage the development of new T. reesei strains and thus indirectly reduce the costs of manufacturing cellulosic ethanol and expand manufacturing, compared to the current biotechnology regulations. Use of cellulosic ethanol in place of gasoline and corn-based ethanol is expected to lead to relatively lower greenhouse gas emissions. (As elsewhere in this analysis, the benefits of the rule case are relative to the base case in which T. reesei is not listed as a candidate for exemption. Other factors could overwhelm the effects of changed EPA biotechnology regulations on cellulosic ethanol manufacturing volume or price.)
A US Department of Energy life cycle assessment found that greenhouse gas emissions from the use of cellulosic ethanol are 87 percent lower than emissions from gasoline (DOE, 2007). In comparison, corn-based ethanol has emissions reduction between 18 and 28 percent when compared to gasoline (DOE, 2007). A 2010 US EPA report expects a 21 percent reduction greenhouse gas emissions if corn-based ethanol is used as opposed to gasoline (EPA, 2010a). The same report estimates a 72 to 110 percent reduction if switchgrass-based ethanol is used instead of gasoline and a 92 to 129 percent reduction in greenhouse gas emissions if corn stover (stalks, leaves etc.) is used (EPA, 2010a). Increased use of cellulosic ethanol is expected to result in benefits, since greenhouse gas emissions are known to contribute to global climate change, which has many potential environmental and health risks.
It was not feasible for this report to quantify the extent to which greenhouse gas emissions might be abated by the commercial use of cellulosic ethanol, and the associated risk reduction. However, some potential health and environmental benefits are discussed qualitatively in the next section. Other benefits of substituting cellulosic ethanol for other fuels are mentioned in section 7.
Environmental and Health Impacts of Global Climate Change
If innovations in T. reesei strains used in cellulosic ethanol manufacturing lead indirectly to a reduction in greenhouse gas emissions, relative to the base case, this would tend to mitigate global climate change and thus reduce the environmental and health impacts associated with global climate change.
A significant benefit of the Tier I/Tier II exemptions to health and safety could occur if innovations in T. reesei strains used in ethanol manufacturing lead indirectly to a reduction in greenhouse gas emissions. The relative reduction in greenhouse gas emissions would be due to increased replacement of conventional gasoline and corn-based ethanol by cellulosic ethanol. Many factors other than biotechnology regulation affect energy markets, and it is not possible to forecast the extent to which making T. reesei QM6a eligible for the exemptions might lead to greater use of cellulosic ethanol, compared to the base case. However, the summary below indicates the potential importance of health and environmental benefits if cellulosic ethanol does become more competitive in part as a result of Tier I/Tier II exemptions.
It is difficult to assess the human health and environmental risks associated with global warming because of the interdependency and complexity of the associated factors. However, the following text briefly summarizes information found in the October 2018 report from the International Panel on Climate Change (IPCC) concerning the environmental impacts of climate change. Warming from anthropogenic emissions up to the present will persist for centuries to millennia to come, leading to long-term changes in the climate system (IPCC, 2018). Risks include sea level rise, droughts and precipitation deficits, species loss, extreme weather events, and ocean acidification. Populations with a higher likelihood of experiencing negative effects include disadvantaged and vulnerable populations, some indigenous peoples, and localities that depend on agricultural or coastal livelihoods (IPCC, 2018).
Other Benefits of Cellulosic Ethanol
Domestic cellulosic ethanol manufacturing may decrease US dependency on foreign oil supplies. Unlike corn ethanol, the feedstocks used in cellulosic ethanol manufacturing (for example corncobs, or crops grown for specifically for ethanol manufacturing, such as grasses or wood) are not human food crops (DOE, 2009b), so increased demand for cellulosic ethanol feedstock may put less upward pressure on food prices. These crops may be grown on land that is unsuitable for growing other crops and it generally takes less energy to manufacture cellulosic ethanol biomass than sugar and starch based biomass (DOE, 2009b). In addition, the rule may contribute to US progress toward meeting the goals of the Energy Independence & Security Act (EISA) of 2007 which include US consumption of 17 million gallons of cellulosic ethanol in 2014 and 3 billion gallons of cellulosic ethanol in 2015 (EPA, 2013 and EPA, 2010b).
Benefits of Improved B. Amyloliquefaciens Strains
As with T. reesei, the lower costs and reduced lead times for Tier I/Tier II exemptions are expected to encourage the development of new intergeneric B. amyloliquefaciens strains. The Rule could lead to more cost-effective manufacturing of enzymes by B. amyloliquefaciens hosts, including the manufacturing of enzymes native to other microbial genera. Ultimately there could be relatively lower prices and/or improved performance for end products such as laundry detergents. There could also be indirect benefits to health and the environment. For example, B. amyloliquefaciens is used to manufacture amylases and proteases for commercial laundry detergents (LSBU, 2004; Aehle, 2007, p.186). Novozymes asserts that the use of enzymes in laundry detergents as opposed to traditional chemicals (such as surfactants) has several environmental benefits including energy savings by enabling lower wash temperatures and the compaction of the product, reducing the amount of packaging used (Novozymes, 2010b). It also asserts that enzymes are biodegradable, have no negative environmental impact on sewage treatment processes, and do not present a risk to aquatic life (Novozymes, 2010b).
Uncertainties Regarding Innovation Benefits
The analysis does not quantify innovation benefits, but does suggest that they will be significant. However, technological change is also advancing in competing biotechnology and non-biotechnology areas. It is possible that other technical progress will make genetically modified T. reesei and B. amyloliquefaciens commercially less important than is implied in this analysis. For example, advances in non-biological ways of converting biomass to fuel or in the use of algae to manufacture biofuels might make T. reesei use in ethanol manufacturing less important. On the other hand, the 2 microorganisms might find uses in areas not explored for this analysis. In an uncertain world, the rule opens the door to faster development of new technologies but does not guarantee technical or commercial success.

Agency Cost
This chapter analyzes the changes in Agency processing cost associated with listing T. reesei QM6a derivatives and B. amyloliquefaciens at 40 CFR 725.420 as eligible for Tier I and Tier II exemptions. EPA calculates the incremental cost, or savings, of the exemptions by comparing the cost of processing a Tier I or Tier II submission with the cost of processing an MCAN.
Agency Cost per Submission
EPA utilizes estimates of the change in Agency cost from the Fees for the Administration of the Toxic Substances Control Act Rule. Specifically, EPA's cost to review and process MCAN, Tier I, and Tier II submissions is assumed to be represented by its costs for a larger category of similar TSCA section 5 notices that includes these three submission types. EPA estimated its total annual costs for processing, reviewing, and making determinations under TSCA section 5 between fiscal years 2019 and 2021.
EPA estimated its direct and indirect costs for reviewing PMNs, SNUNs, and MCANs to be $18,934,659 (2016$) per year during this period, and assumed that an average of 462 PMNs, SNUNs, and MCANs will be submitted per year (EPA, 2017). This yields an average Agency cost of approximately $41,000 apiece for reviewing and processing PMNs, SNUNs and MCANs. EPA estimated its direct and indirect cost for reviewing section 5 Exemptions, including Tier I and Tier II submissions, as $3,148,566 ($2016) over the same period. During this period, EPA assumed an average of 560 exemptions notices would be submitted per annum, yielding a cost of $5,622 ($2016) per exemption.
This analysis updates these figures to $2018 using an employment cost index from BLS for professional and related occupations (BLS, 2019b). After indexing, EPA estimates the agency cost of processing and reviewing an MCAN to be approximately $44,000 ($2018) and the cost of processing and reviewing Tier I and Tier II Exemptions to be approximately $6,000 ($2018).
Table 6-1 presents the average agency cost per submission for MCAN, Tier I, and Tier II submissions as the estimated cost of processing and reviewing less the user fee paid by industry for submission.
Table 6-1: Agency MCAN and Tier I/Tier II Total Cost per Submission
                              Type of Submission
                          Agency Cost Per Submission
                                User Fee Income
                           Total Cost per Submission
                            MCAN - Large Businesses
                                   $44,000
                                   $16,000
                                   $28,000
                            MCAN - Small Businesses
                                   $44,000
                                    $2,800
                                   $41,200
                          Tier II - Large Businesses
                                    $6,000
                                    $4,700
                                    $1,300
                          Tier II - Small Businesses
                                    $6,000
                                     $940
                                    $5,060
                                    Tier I
                                    $6,000
                                      $0
                                    $6,000

Agency Total Cost
This analysis estimates total agency cost by combining the agency cost per submission figures presented in the previous section with the figures estimating number of anticipated submissions presented in Chapter 4 (specifically in Table 4-13) for the baseline and rule cases, respectively.
As discussed in Section 4.5.3 and presented in Table 4-13, EPA anticipated a total of 63 MCAN/Tier I/Tier II submissions will be filed over the next 10 years. In the baseline scenario, EPA anticipates 34 MCAN submissions from large businesses and 29 MCAN submissions from small businesses for T. reesei QM6a derivatives and B. amyloliquefaciens. In the rule scenario, EPA anticipates 49 Tier I submissions, 10 Tier II submissions from large businesses and 4 Tier II submissions from small businesses. As detailed in Section 4.5, these projections reflect a 10 percent assumed annual increase in the combined total of MCAN, Tier I, and Tier II submissions.
Table 6-2 gives the expected number of submissions and agency cost associated with both the baseline (no rule) and rule scenarios, projected over ten years. The total ten-year savings to Agency attributable to the rule is estimated to be $1.8 million before discounting. Annualized cost savings range from $178 thousand with a three percent discount rate to $173 thousand with a seven percent discount rate.

Table 6-2: Agency Cost Reduction due to Rule - Thousands of Dollars ($2018) (All Years)
                                     Year
                                   Base Case
                                   Rule Case
                          Total Change in Agency Cost

                               MCAN Sub-missions
                          Tier I & II Submissions
                                   MCAN Cost
                             Tier I & II Cost
                               Total Agency Cost
                               MCAN Sub-missions
                          Tier I & II Submissions
                                   MCAN Cost
                             Tier I & II Cost
                               Total Agency Cost

                                       1
                                       4
                                       0
                                     $138
                                      $0
                                     $138
                                       0
                                       4
                                      $0
                                     $19
                                     $19
                                     -$119
                                       2
                                       4
                                       0
                                     $138
                                      $0
                                     $138
                                       0
                                       4
                                      $0
                                     $19
                                     $19
                                     -$119
                                       3
                                       5
                                       0
                                     $166
                                      $0
                                     $166
                                       0
                                       5
                                      $0
                                     $25
                                     $25
                                     -$141
                                       4
                                       5
                                       0
                                     $166
                                      $0
                                     $166
                                       0
                                       5
                                      $0
                                     $25
                                     $25
                                     -$141
                                       5
                                       6
                                       0
                                     $208
                                      $0
                                     $208
                                       0
                                       6
                                      $0
                                     $31
                                     $31
                                     -$176
                                       6
                                       6
                                       0
                                     $208
                                      $0
                                     $208
                                       0
                                       6
                                      $0
                                     $31
                                     $31
                                     -$176
                                       7
                                       7
                                       0
                                     $236
                                      $0
                                     $236
                                       0
                                       7
                                      $0
                                     $36
                                     $36
                                     -$199
                                       8
                                       8
                                       0
                                     $277
                                      $0
                                     $277
                                       0
                                       8
                                      $0
                                     $42
                                     $42
                                     -$234
                                       9
                                       9
                                       0
                                     $305
                                      $0
                                     $305
                                       0
                                       9
                                      $0
                                     $48
                                     $48
                                     -$256
                                      10
                                       9
                                       0
                                     $305
                                      $0
                                     $305
                                       0
                                       9
                                      $0
                                     $48
                                     $48
                                     -$256
                                     Total
                                      63
                                       0
                                    $2,147
                                      $0
                                    $2,147
                                       0
                                      63
                                       0
                                     $327
                                     $327
                                    -$1,820
                                 Annualized 3%
                                       -
                                       -
                                     $210
                                      $0
                                     $210
                                       -
                                       -
                                      $0
                                     $32
                                    $31.87
                                     -$178
                                 Annualized 7%
                                       -
                                       -
                                     $203
                                      $0
                                     $203
                                       -
                                       -
                                      $0
                                     $31
                                    $30.78
                                     -$173

Source: Number of submissions, Number of submissions Table 4-13. Dollars per submission, Table 6-1.
Note: Yearly, total, and average costs are calculated before discounting

Uncertainties in Agency Cost Estimates
Uncertainties about the number and mix of future submissions were discussed in 4.8.1. Changes in estimated submissions could cause year-to-year Agency cost-savings to be higher or lower than estimated here.
Cost estimates associated with the administration of TSCA section 5 are based on administrative cost estimates from the Fees for the Administration of the Toxic Substances Control Act Rule and on best professional judgement. To the extent that the Agency could pull data from its various systems to help inform cost estimates, the Agency did so. However, it is possible that future time burden and labor costs may not align with the agency's projections.
But, given that MCANs will be replaced by exemption notices, which are for low-risk, relatively familiar organisms; these MCANs are likely to have below-average review costs. Depending on the mix of future submission, the Agency cost-savings could be lower than estimated, especially for MCANs as compared to Tier I notices.

Summary of Social Costs and Benefits
Social Costs and Benefits
This chapter summarizes the social costs and benefits generated by the rule that will list T. reesei QM6a derivatives and B. amyloliquefaciens at 40 CFR 725.420 as eligible for Tier I and Tier II exemptions. The rule is expected to generate a cost savings for organizations that, in the absence of the rule, would submit MCANs for new intergeneric T. reesei or B. amyloliquefaciens strains.
As was shown in Table 4-17 and Table 4-18, EPA expects the rule to result in a reduced industry burden of  27,864 hours but a cost savings of $2.7 million (before discounting) over the ten-year period. In addition to the immediate cost savings from submitting a Tier I or Tier II notice as opposed to an MCAN, the reduced cost and review times may increase innovation in the biotechnology industry. Ways in which reporting costs and lead times may affect the industry R&D process and the potential benefits of enhanced innovation are discussed in Chapter 5 of this report. There may also be environmental and health benefits resulting from improved innovation affecting areas such as cellulosic ethanol manufacturing. As discussed in Section 2.4 of this report, costs savings generated by the rule may be passed on to customers, reducing the cost of end products. The rule is expected to reduce Agency cost by $1.8 million (before discounting) over the ten-year period, as calculated in Chapter 6.
Quantified Social Costs
This section summarizes the quantified costs savings to society.
As detailed in Table 7-1, over the ten-year period the total burden to both industry and EPA under the baseline scenario would be $5.2 million. In the rule scenario, total burden would be $751 thousand, leading to $4.5 million in cost savings to society. The annualized cost savings to society are estimated to be approximately $438 thousand and $424 thousand per year at three percent and seven percent discount rates, respectively.
Table 7-1: Change in Total Costs to Society Due to Rule
Year
Base Case Burden
(Thousands of $2018)
Rule Case Burden
(Thousands of $2018)
Change from Base Case
(Thousands of $2018)
Year 1
$332
$56
-$277
Year 2
$332
$49
-$283
Year 3
$415
$57
-$359
Year 4
$415
$57
-$359
Year 5
$499
$66
-$433
Year 6
$499
$64
-$434
Year 7
$582
$91
-$491
Year 8
$665
$98
-$566
Year 9
$748
$106
-$642
Year 10
$748
$107
-$640
Total
$5,235
$751
-$4,485
Annualized at 3%
$511
$73
-$438
Annualized at 7%
$493
$71
-$424
   Source: Table 4-18 and Table 6-2
   Note: Annual, total and average costs are taken before discounting

Health, Safety, and Environmental Costs and Benefits
Benefits of New Intergeneric T. reesei and B. amyloliquefaciens
Increased market entry and reduced delays in bringing products to market are expected to reduce the costs and/or improve the performance of enzymes made using intergeneric T. reesei and B. amyloliquefaciens, in areas such as ethanol manufacturing, the pretreatment and finishing of textiles, and in detergents. As stated in Section 5.2, there are several environmental benefits to using enzymes in these applications as opposed to traditional chemicals. The use of cellulose T. reesei enzymes in textile pretreatment may reduce the amount of waste water generated, and the amount of energy and water used by textile plants that use traditional methods of treating garments (Blackburn, 2009). The use of enzymes from B. amyloliquefaciens in laundry detergents as opposed to traditional chemicals (such as surfactants) has several environmental benefits including energy savings by enabling lower wash temperatures and the compaction of the product reducing the amount of packaging used (Novozymes, 2010b). In addition, enzymes are biodegradable, and are said by their suppliers to have no negative environmental impact on sewage treatment processes and to present no risk to aquatic life (Novozymes, 2010b). To the extent that intergeneric T. reesei and B. amyloliquefaciens are more efficient at producing certain enzymes than other microorganisms, the cost of some enzymes will decrease. Decreased cost and/or enhanced enzyme performance make it more likely that companies will use enzymes as opposed to more environmentally harmful substitutes. T. reesei has particular promise in the area of cellulosic ethanol manufacturing, discussed below.
Benefits of Reducing the Cost of Cellulosic Ethanol
Innovation resulting from the rule is likely to decrease the cost of enzymes manufactured with T. reesei, and therefore reduce the cost of cellulosic ethanol, compared to the base case. Because cellulosic ethanol has lower greenhouse gas emissions than gasoline and corn-based ethanol, more use of cellulosic ethanol may lead to a reduction in greenhouse gas emissions relative to the base case. The potential negative environmental and health impacts of global warming are discussed in detail in Section 5.2. While it is well beyond the scope of this report to quantify the potential benefits of greenhouse gas reductions as a result of the rule, manufacturing and use of cellulosic ethanol appears to generate significantly less greenhouse gas emissions than manufacturing and use of gasoline and corn-based ethanol. Cellulosic ethanol is also thought to have additional benefits to society compared to both gasoline and corn-based ethanol, such as possibly decreased dependence on foreign oil, and less pressure on food prices versus corn ethanol.
Rule Costs and Risks
There is not expected to be any increase in health or environmental risk associated with the rule, as discussed in Chapter 3. EPA's risk assessments show that both T. reesei strain QM6a and its derivatives and B. Amyloliquefaciens microorganisms are not pathogenic or toxigenic and that they pose little risk to human health or the environment. On the contrary, as discussed earlier in this chapter, there may be health and environmental benefits from faster development of these microorganisms to better manufacture enzymes and other chemicals.
There are no net quantified rule costs because the rule is expected to be cost-savings for both industry and EPA, as described earlier in this chapter.
Additional Analyses
Regulatory Flexibility Act (RFA)
The RFA of 1980, as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, requires regulators to assess the effects of regulations on small entities. The RFA requires agencies to prepare an initial and final regulatory flexibility analysis for each rule unless the Agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.
The RFA relies on the definition of "small business" found in the Small Business Act, which authorizes the Small Business Administration (SBA) to develop definitions for "small business" for industries in each North American Industry Classification System (NAICS) code. These definitions can be based either on a company's number of employees or its sales, depending on SBA's criteria for that industry. For this analysis, EPA used the SBA definitions published in February 2016.
To identify the potential universe of companies that may be impacted by this rule, EPA included any firm that has made a non-confidential MCAN, Tier I, or Tier II submission as listed in Table 4-10 and on EPA's website, for a list of 22 unique firms. From this list, EPA relied on Dunn and Bradstreet's Hoover's database to identify the ultimate parent company of each firm, as well as the parent company's revenue and the number of workers employed by the ultimate parent. These 20 companies had a total of 17 unique parent companies in 13 unique NAICS codes.  Table 8-1 presents the 13 NAICS codes and the SBA size thresholds for a small business.
Table 8-1: Ultimate Parent NAICS codes and 2016 SBA definitions for all Companies
                          Ultimate Parent NAICS Code
                                  Description
                                Number of Firms
                           Small Business Threshold
                         (Sales, Millions of Dollars)
                           Small Business Threshold
                             (Number of Employees)
                                    311221
                               Wet Corn Milling
                                       1

                                     1,250
                                    311999
                  All Other Miscellaneous Food Manufacturing
                                       2

                                      500
                                    325193
                          Ethyl Alcohol Manufacturing
                                       1

                                     1,000
                                    325199
               All Other Basic Organic Chemical Manufacturing
                                       2

                                     1,250
                                    325320
            Pesticide and Other Agricultural Chemical Manufacturing
                                       1

                                     1,000
                                    325411
                     Medicinal and Botanical Manufacturing
                                       1

                                     1,000
                                    325412
                   Pharmaceutical Preparation Manufacturing
                                       2

                                     1,250
                                    325520
                            Adhesive Manufacturing
                                       1

                                      500
                                    334510
         Electromedical and Electrotherapeutic Apparatus Manufacturing
                                       1

                                     1,250
                                    334511
Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
                                       1

                                     1,250
                                    541611
     Administrative Management and General Management Consulting Services
                                       1
                                      15

                                    541711
                   Research and Development in Biotechnology
                                       2

                                     1,000
                                    551112
                      Offices of Other Holding Companies
                                       1
                                     20.5

To size the 17 parent companies, EPA compared the revenue and employment data in Hoovers with the SBA small business definitions for each company's respective NAICS code. Of the 17 firms, a total of 9 (53%) were found to be small.
The rule is expected to result in an overall cost-savings to industry. Small businesses that are able to submit one Tier II notice instead of an MCAN will realize a cost savings. MCANs for small businesses are anticipated to cost $41,900 while Tier II notices for small businesses are anticipated to cost $21,631. These savings are expected to exceed additional rule familiarization costs associated with this rulemaking ($1,602 per firm). Savings are larger for small businesses that can submit a Tier I notice ($1,497) in lieu of an MCAN. Therefore, EPA does not anticipate any small businesses will face any net increases in costs from the rule.
Table 8-2 summarizes the estimated cost impacts on the 9 small firms anticipated to be affected by the rule. Since EPA does not anticipate any small businesses will face any net increases in costs from the rule, there are no impacts that exceed 1 percent of sales.
Table 8-2: Estimate of Impacts on Small Businesses
                             Economic Impact Type
                           Cost-to-Sales Percentage
                               3% Discount Rate
                               7% Discount Rate

                                    Number
                                    Percent
                                    Number
                                    Percent
                                 Higher Impact
                                    > 3%
                                       0
                                      0%
                                       0
                                      0%
                                 Lower Impact
                                   1% to 3%
                                       0
                                      0%
                                       0
                                      0%
                              Less than 1% Impact
                                    < 1%
                                       9
                                     100%
                                       9
                                     100%
                                     Total
                                      --
                                       9
                                    100%
                                       9
                                    100%

 Unfunded Mandates Reform Act (UMRA)
Federal agencies are required to assess the effects of federal regulations on state, local, or tribal governments, and on the private sector under Title II of the UMRA of 1995. In particular, UMRA requires that agencies prepare a written statement to accompany any rulemaking that "includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or to the private sector, of $100 million or more (annually adjusted for inflation) in any one year" (Section 202(a)).
This report estimates that the rule will not cost the private or public sectors $100 million or more in any one year. As shown in Table 4-18, this report estimates that a total saving to industry of $2.67 million (before discounting) will be generated by the rule over a ten year period. Assuming a seven percent discount rate, the annualized saving for industry over the ten years is approximately $252 thousand per year.
Furthermore, a search of submissions received by EPA through September 30, 2019, demonstrated that state, local, or tribal governments have never submitted an MCAN, Tier I or Tier II notification. However, in the future such governments might make submissions or use live microorganisms covered by the rule. An example could be used in cellulosic ethanol manufacturing. In such case, the rule will benefit the governments by improving the cost/effectiveness of the microorganisms.
Paperwork Reduction Act (PRA)
According to the PRA, 44 USC 3501 et seq., an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information that requires Office of Management and Budget (OMB) approval under the PRA, unless it has been approved by OMB and displays a valid OMB control number. The information collection requirements related to the submission of Tier I and Tier II notices are already approved by OMB under the PRA, 44 USC. 3501 et seq. Those ICR documents have been assigned OMB control numbers 2070-0012 and 2070-0038, according to information on the EPA Biotech Form used for electronic submissions (EPA, 2009c). This rule will not impose any new requirements. Rather, it reduces the amount of required reporting by allowing firms to submit less information for qualifying microorganisms.
The PRA mandates that federal agencies estimate the recordkeeping and submitting burden of a rule. In this context, the term "burden" is interpreted as the total time, effort, or financial resources expended by people to generate, maintain, retain, disclose, or provide information to or for a federal agency. This includes the time needed by regulated entities to review instructions and to develop, acquire, install, and use technology and systems to collect, validate, verify, and disclose information. Time taken to adjust existing ways to comply with any previously applicable instructions and requirements and to train personnel to respond to the information collection task is also included. In this section, burden hours for both industry respondents and the government are estimated.
Industry Burden
In this report, total industry burden hours represent the sum of time spent on preparing submissions and on other administrative activities. Industry respondents will spend time on the following activities associated with the biotechnology rule: rule familiarization, preparation and submission of certifications, and recordkeeping.
As derived in Chapter 4 of this report, the rule will result in a reduction of industry burden by 2,362 hours over ten years.
Government Burden
The government will also spend time processing, reviewing, and analyzing the information that will be collected. As derived in Chapter 6 of this report, the rule will cause a total incremental Agency savings of $1.8 million before discounting.
Executive Order 13132  -  Federalism
Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999), requires EPA to develop an accountable process to ensure "meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications." "Policies that have federalism implications" are defined in the Executive Order to include regulations that have "substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government."
EPA has no information to indicate that any state or local government commercially manufactures or processes the microorganisms covered by this action. No MCANs, Tier I, or Tier II notifications have been submitted by state or local governments. If a state or local government were to use live microorganisms covered by this rule, they will likely benefit from reduced submission cost and/or improved cost-effectiveness of the microorganisms.
Executive Order 13045  -  Children's Health
Executive Order 13045, "Protection of Children from Environmental Health Risks and Safety Risks" (62 FR 19885, April 23, 1997), requires that federal agencies examine the impacts of each regulatory action on children for any economically significant regulation that the Agency has reason to believe may disproportionately affect children.
The rule is not "economically significant;" it does not establish an environmental standard intended to mitigate health or safety risks and will not have an annual effect on the economy of $100 million or more. It is not expected to have any direct environmental or health impacts, and any indirect effects are expected to be beneficial.
Executive Order 13175  -  Consultation and Coordination with Indian Tribal Governments
In the development of Federal policies that may have tribal implications, Agencies must establish regular and meaningful consultation and collaboration with tribal officials to strengthen the US government-to-government relationships with Indian tribes, and to reduce the imposition of unfunded mandates upon Indian tribes.
A search of past submissions to EPA demonstrated that tribal governments have never submitted an MCAN, Tier I or Tier II notification. Thus, EPA has no information to indicate that any tribal government commercially manufactures the microorganisms covered by this action. If in the future tribal organizations use intergeneric microorganisms covered by the rule, or their enzyme products, to manufacture ethanol, the rule is likely to provide benefits in the form of more cost-effective microorganisms or enzymes.
Executive Order 13211  -  Energy Supply, Distribution, or Use
Executive Order 13211, entitled Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001) requires Agencies to prepare a Statement of Energy Effects for any action that is likely to have a significant adverse effect on the supply, distribution, or use of energy.
The Agency expects that if there is any effect of this rule on the Nation's energy supply, distribution, and use, it will be modest and positive; the rule may encourage development of more cost-effective technologies for fuel ethanol manufacturing.
National Technology Transfer Advancement Act (NTTAA)
Section 12(d) of the NTTAA of 1995, Public Law No. 104-113, 12(d) (15 USC. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.
This action does not involve any technical standards that will require Agency consideration of voluntary consensus standards pursuant to the NTTAA. It does not add any new regulatory requirements. Rather, it lists additional microorganisms eligible for exemptions under an existing biotechnology rule promulgated in 1997.
Executive Order 13563  -  Improving Regulation and Regulatory Review
Executive Order 13563, Improving Regulation and Regulatory Review (76 FR 3821, January 21, 2011), requires EPA to base regulations on the best available science, allow for public participation and the open exchange of ideas, promote predictability and reduce uncertainty, identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends, consider both the costs and benefits qualitatively and quantitatively and ensure regulations are accessible, consistent, written in plain language, and easy to understand.
The rule establishes reporting and recordkeeping requirements that apply to manufacturers (including importers) of certain genetically modified microorganisms. Consistent with Executive Order 13563, this document qualitatively and quantitatively describes both the costs and benefits of the rule as well as the underlying data used in the analyses. EPA chose the best available data to analyze the costs and benefits described in this document and the best analytic approaches given the available data and other constraints.
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Industry Burden and Cost in Years Two through Ten
Industry Burden Hours
This appendix contains tables that derive the industry burden for years 2 through 10 of the rule. (The Year 1 burden is presented in Table 4-15.) Burden estimates are calculated following the method outlined for year 1 in Section 4.6 of this report. EPA assumed that companies will send more Tier I submissions than Tier II submissions, as well as 29 MCANs in year 1 and year 2. This analysis assumed 23 percent of Tier I and Tier II submissions each year for T. reesei and B. amyloliquefaciens will be Tier II submissions. It assumes that there will be four new Tier I and Tier II submissions for T. reesei and B. amyloliquefaciens in year 1, and that the rate of annual submissions will grow at 10 percent per year. Table 4-17 presented the change in burden hours for all ten years. Table A -1 through Table A- 9 present the change in burden hours for years 2 through 10.

Table A- 1: Base Case and Change in Industry Burden Hours (Year 2)
                                Submission Type
                     Baseline Number of Annual Submissions
                                Baseline Burden
                  Post Exemption Number of Annual Submissions
                        Post Exemption Industry Burden
                        Total Change in Industry Burden

                           Burden per Report (Hours)
                             Total Burden (hours)

                           Burden per Report (Hours)
                             Total Burden (hours)

                         Submissions and Recordkeeping
                            MCAN  -  large business
                                       2
                                    520.38
                                   1,040.76
                                       0
                                    520.38
                                       0
                                   1,040.76
                            MCAN  -  small business
                                       2
                                    520.38
                                   1,040.76
                                       0
                                    520.38
                                       0
                                   1,040.76
                          TIER II  -  large business
                                       0
                                    276.38
                                       0
                                       1
                                    276.38
                                    276.38
                                    276.38
                          TIER II  -  small business
                                       0
                                    276.38
                                       0
                                       0
                                    276.38
                                       0
                                       0
                                    TIER I
                                       0
                                     19.00
                                       0
                                       3
                                     19.00
                                     57.00
                                     57.00
                                     Total
                                       4
                                       -
                                   2,081.52
                                       4
                                       -
                                    333.38
                                   -1,748.14
                           Rule Familiarization Cost
                                     Total
                                       0
                                      20
                                       0
                                       0
                                      20
                                       0
                                       0
                              Total Industry Cost
                                     Total
                                       -
                                       -
                                   2,081.52
                                       -

                                    333.38
                                   -1,748.14

Source: Number of submissions Table 4-13. Hours per submission, Table 4-6.
Table A- 2: Base Case and Change in Industry Burden Hours (Year 3)
                                Submission Type
                     Baseline Number of Annual Submissions
                                Baseline Burden
                  Post Exemption Number of Annual Submissions
                        Post Exemption Industry Burden
                        Total Change in Industry Burden

                           Burden per Report (Hours)
                             Total Burden (hours)

                           Burden per Report (Hours)
                             Total Burden (hours)

                         Submissions and Recordkeeping
                            MCAN  -  large business
                                       3
                                    520.38
                                   1,561.14
                                       0
                                    520.38
                                       0
                                   -1,561.14
                            MCAN  -  small business
                                       2
                                    520.38
                                   1,040.76
                                       0
                                    520.38
                                       0
                                   -1,040.76
                          TIER II  -  large business
                                       0
                                    276.38
                                       0
                                       1
                                    276.38
                                    276.38
                                    276.38
                          TIER II  -  small business
                                       0
                                    276.38
                                       0
                                       0
                                    276.38
                                       0
                                       0
                                    TIER I
                                       0
                                     19.00
                                       0
                                       4
                                     19.00
                                     76.00
                                     76.00
                                     Total
                                       5
                                       -
                                   2,601.90
                                       5
                                       -
                                    352.38
                                   -2,249.52
                           Rule Familiarization Cost
                                     Total
                                       0
                                      20
                                       0
                                       0
                                      20
                                       0
                                       0
                              Total Industry Cost
                                     Total
                                       -
                                       -
                                   2,601.90
                                       -

                                    352.38
                                   -2,249.52

Source: Number of submissions Table 4-13. Hours per submission, Table 4-6.

Table A- 3: Base Case and Change in Industry Burden Hours (Year 4)
                                Submission Type
                     Baseline Number of Annual Submissions
                                Baseline Burden
                  Post Exemption Number of Annual Submissions
                        Post Exemption Industry Burden
                        Total Change in Industry Burden

                           Burden per Report (Hours)
                             Total Burden (hours)

                           Burden per Report (Hours)
                             Total Burden (hours)

                         Submissions and Recordkeeping
                            MCAN  -  large business
                                       3
                                    520.38
                                   1,561.14
                                       0
                                    520.38
                                       0
                                   -1,561.14
                            MCAN  -  small business
                                       2
                                    520.38
                                   1,040.76
                                       0
                                    520.38
                                       0
                                   -1,040.76
                          TIER II  -  large business
                                       0
                                    276.38
                                       0
                                       1
                                    276.38
                                    276.38
                                    276.38
                          TIER II  -  small business
                                       0
                                    276.38
                                       0
                                       0
                                    276.38
                                       0
                                       0
                                    TIER I
                                       0
                                     19.00
                                       0
                                       4
                                     19.00
                                     76.00
                                     76.00
                                     Total
                                       5
                                       -
                                    2,601.9
                                       5
                                       -
                                    352.38
                                   -2,249.52
                           Rule Familiarization Cost
                                     Total
                                       0
                                      20
                                       0
                                       0
                                      20
                                       0
                                       0
                              Total Industry Cost
                                     Total
                                       -
                                       -
                                   2,601.90
                                       -

                                    352.38
                                   -2,249.52

Source: Number of submissions Table 4-13. Hours per submission, Table 4-6.

Table A- 4: Base Case and Change in Industry Burden Hours (Year 5)
                                Submission Type
                     Baseline Number of Annual Submissions
                                Baseline Burden
                  Post Exemption Number of Annual Submissions
                        Post Exemption Industry Burden
                        Total Change in Industry Burden

                           Burden per Report (Hours)
                             Total Burden (hours)

                           Burden per Report (Hours)
                             Total Burden (hours)

                         Submissions and Recordkeeping
                            MCAN  -  large business
                                       3
                                    520.38
                                   1,561.14
                                       0
                                    520.38
                                       0
                                   -1,561.14
                            MCAN  -  small business
                                       3
                                    520.38
                                   1,561.14
                                       0
                                    520.38
                                       0
                                   -1,561.14
                          TIER II  -  large business
                                       0
                                    276.38
                                       0
                                       1
                                    276.38
                                    276.38
                                    276.38
                          TIER II  -  small business
                                       0
                                    276.38
                                       0
                                       0
                                    276.38
                                       0
                                       0
                                    TIER I
                                       0
                                     19.00
                                       0
                                       5
                                     19.00
                                     95.00
                                     95.00
                                     Total
                                       6
                                       -
                                   3,122.28
                                       6
                                       -
                                    371.38
                                   -2,750.90
                           Rule Familiarization Cost
                                     Total
                                       0
                                      20
                                       0
                                       1
                                      20
                                      20
                                      20
                              Total Industry Cost
                                     Total