oversight hearings. It was also evident that legislative consideration beyond an extension of the act would be needed.

Senator Talmadge, the chairman of our full committee, at that time requested that EPA work with the committee staff in developing draft legislation to deal with the issues of contention. Principal among these issues is the area of registration and reregistration, and the very difficult questions of data compensation and trade secrets. There are a host of other problem areas, including minor use registration; labeling questions; cancellation procedures; the need for classification of pesticides; the interpretation of section 9 (A), as well as other areas.

The Environmental Protection Agency has worked in the intervening period to develop some of these materials. In reviewing the materials I have the feeling that they have been a bit hesitant in looking for solutions. Now, we have scheduled these hearings because the Senate Committee on Agriculture realizes that we need your counsel to find the solutions that will permit us to implement this law.

We have a lengthy list of witnesses, representing nearly all aspects of the industry as well as other interested groups. I am going to really have to limit the time of each witness if we are going to cover the issues in the time available. We have a certain amount of time, and any witnesses that go over their time, that extra time is going to be taken out of the time available to the following witnesses. I suspect that may create enough peer pressure that we will all be very brief in what we have to say.

I read any testimony submitted in advance. The testimony that we have here, your prepared statements, will be placed in the record. We will go immediately to questions. I will ask the staff to set the timer, so the bell will ring when the time is up on each witness. We will go immediately to questions and will make sure, if there is time following any questions, for any additional statement they might want to make concerning anything that has not been covered.

Senator Lugar, do you have a statement you would like to make? Senator LUGAR. NO.

Senator LEAHY. We have prepared statements from Senators Bartlett and Packwood, which will be inserted in the record.*

Our first witness is Robert J. Alikonis, executive secretary and general counsel, Pesticide Formulators Association.

I understand that you gentlemen had a chance to see the spectacular sight of the Sun coming up over the city of Washington this morning, by the time you finished the statement you have for us. Is that correct?

STATEMENT OF ROBERT J. ALIKONIS, EXECUTIVE SECRETARY AND GENERAL COUNSEL, PESTICIDE FORMULATORS ASSOCIATION, ACCOMPANIED BY J. S. SKAPTASON

Mr. ALIKONIS. That is correct, Mr. Chairman. There have been some recent developments regarding the formulation of data in the area of data compensation and trade secrets. Our written testimony, which we will have available later today, addresses these issues.

*See p. 98 for the prepared statement of Senator Bartlett and p. 99 for the prepared statement of Senator Packwood.

Senator LEAHY. That, when it is available in final form will be, without objection, placed in the record.*

I would like to ask on the question of data compensation and trade secrets, as I understand, your association is dealing primarily with small companies.

Mr. ALIKONIS. That is correct.

Senator LEAHY. Is there uniformity of thinking among the companies that you represent on data compensation?

Mr. ALIKONIS. Yes. We represent two types of companies. Most of our members are small pesticide formulators. We also have basic pesticide manufacturers that produce the technical grade material. Ordinarily those are, again, small to medium-size companies; they do not ordinarily do the basic research and development. They do some research on new uses, research of that type, but not the basis R. & D., the screening of compounds and development of new compounds. Now, there has been basic agreement among our members

Senator LEAHY. You are going to have to speak up so this young lady can hear everything that is being said.

Mr. ALIKONIS. There has been general agreement among our membership regarding the matter of compensation and trade secrets. We have in the past supported the concept of mandatory licensing. We have had very recent discussions with the National Agricultural Chemicals Association, which generally represents the larger producers that do the basic research and development. I believe the NACA will present their proposed principles today, or tomorrow, during the hearings. Our written testimony addresses our understanding of the proposed principles, which we can generally accept.

Senator LEAHY. Has there been a fair amount of pressure from them to get you all to agree to the same thing, or which way has the thinking gone?

Mr. SKAPTASON. My name is J. S. Skaptason and I am a member of the board of directors of the Pesticide Formulators Association. I could perhaps best answer your question by saying that the pressure has been about equal in both directions.

Senator LEAHY. I see.

Mr. SKAPTASON. So that we could, as an industry, speak with one voice, so that we can have regulations which we can live with, and under which we can perform our functions of developing pesticides and providing pesticides economically to the agricultural community. Senator LEAHY. And have you worked, for example, with EPA in trying to reach that agreement, or has it been exclusively an industry dialog?

Mr. SKAPTASON. The Environmental Protection Agency has not been involved in our discussions within the industry. However, I think both NACA and PFA are in contact with the EPA; and what we have attempted to do is to organize our approach, the concept, which would basically leave to EPA the job of evaluating and regulating the industry and the protection of the environment, and leaving in the hands of the industry the negotiations between companies, regarding data. We are in agreement, definite agreement, on the fact that the problems have arisen over the fact of trade secrets and the data

*See p. 109 for the prepared statement of Mr. Skaptason.

compensation. So, we agree within ACA that the data compensation clause should be dropped.

Senator LEAHY. Dropped entirely?

Mr. SKAPTASON. Dropped entirely. That would eliminate the problem, we feel, with the EPA which is really not, we feel, designed or capable of dealing with these economic problems.

Senator LEAHY. What about the area of trade secrets, is there uniformity of thinking between your two association on that?

Mr. SKAPTASON. Yes; generally there is uniformity of thinking. We recognize, formulators recognize a very, very high cost of research, and we feel there must be a way by which the companies that are performing it are able to recover those costs. Rather than set a dollar value on what a test costs, which is very, very erroneous, considering an overall company cost, it would be better to allow exclusive use of that data for new users, for new formulators, for a limited period of time; and during that period of time they can enjoy a market where they can recover their costs. We feel this is a very equitable thing.

Senator LEAHY. Data compensation, trade secrets, as I mentioned before, are really about the most difficult questions that this committee will have to reach. If there is uniformity or near uniformity between your group, that certainly will help.

Senator, do you have questions?

Senator LUGAR. You are going to make available your testimony, I gather.

Mr. SKAPTASON. Yes, sir.

Senator LUGAR. I am intrigued by what might be in that. What can you reveal to us at this point about the data compensation question? Mr. SKAPTASON. Well, on the data compensation question we will recommend, and NACA will also recommend, that the 3(c) (1) (D), the data compensation clause, will simply be dropped, eliminated. In place of that, the company that originates data for the purpose of registering a new use, or a new formulation, has the exclusive use of that data, proprietary rights to that data, so that there will not be competition for a limited period of time. During that period of time they can then recover their research costs.

In the area of defensive data, where the Environmental Protection Agency requires that additional data be submitted on old products, we have general agreement that anyone who has a label and is selling that product; anyone who has a technical label and is selling the technical product, is entitled to be in what might be called a data pool. The cost of generating the data in that data pool would be shared by those companies in that group.

Now, we are suggesting that if it is not possible for the companies to agree on that share, how the cost should be shared, that it be submitted to binding arbitration outside of the EPA, not have the Administrator involved in the arbitration.

Senator LEAHY. If the Senator would yield at this point. Who would do the arbitration?

Mr. SKAPTASON. Arbitration mechanisms do exist. It could be an accounting firm, or legal firm.

Senator LEAHY. But not a governmental agency.

Mr. SKAPTASON. Not a governmental agency, no, sir. We feel that the economics should be handled outside of the Government.

Senator LUGAR. So, just to restate this again-without being tedious you are attempting to remove the EPA from the commercial transactions that are involved.

Mr. SKAPTASON. Absolutely.

Senator LUGER. Dispensing with the 3(c) (1) (D) clause, and providing for compulsory arbitration of disputes that you may have in terms of the defense of research questions.

Mr. SKAPTASON. Yes, sir.

Senator LUGAR. And then establishing the fact that the firm that brings the data forth be given proprietary use or ownership for a period of time.

What would be your answer to a group of people that would say that the sort of data that we are talking about may have great safety and health implications, quite apart from the commercial transaction between firms; that there is some public interest in knowing what is involved in this formulation generally? Can you address that question at all, quite apart from negotiations you might have commercially, which might take place outside the purview of EPA or anybody else? What about the oversight of this whole area?

Mr. SKAPTASON. Yes, sir, that question has been addressed. The members of NACA are prepared-and there are a number of points I would like to make to give up their data, proprietary data after the period of time has elapsed, as we understand it. Now, much of the data relative to safety and toxicology, and the environment, producers of that data are prepared to create very detailed and accurate summaries of that data; and in addition are quite prepared to have qualified scientists go into the files-perhaps with some type of protective cover-so that any qualified person can look at all the data, all of the methods, just the whole story, to satisfy themselves that the summary is accurate and really does protect the environment and man.

Senator LUGAR. Now, from your standpoint as one with a relatively small firm, this is a satisfactory situation. I think you represented yourself as looking after the interests of smaller firms.

Mr. SKAPTASON. Yes, sir, and the shares of A.T. & T. will probably go up today because of the hours we spent on the telephone last night, discussing this with the members of our board of directors.

Mr. ALIKONIS. Your current concern is small companies with trade secret data, and in the past there has been a problem of exemption for mandatory licensing under the current law. Under the NACA proposal data can be used by EPA internally, except for the data that is subject to this exclusive period, which is limited. But any of the defensive data or trade secret data can be used internally by EPA, but not disclosed. I think the NACA has struck a reasonable compromise between the commercial interests and the interests of the public regarding the public scrutiny of the data. There will be prepared summaries of the data. There is the opportunity for qualified scientists; for example scientists within environmental groups, to actually see the raw data in the fields of EPA under some protective coverage. In other words, they cannot copy the data and take it out, but they can review the data and determine the accuracy of it. We think that is a reasonable compromise.

Senator LUGAR. Thank you.

Mr. SKAPTASON. I might make one brief comment. Anyone who is within the industry and is knowledgeable of the mechanisms and the work within the industry fully appreciates that the directors of NACA have made a very, very large financial sacrifice in coming to this conclusion. Having said that to them individually, I would like it to be a part of the record that they have done a very good thing, and I am proud of that fact that they have arrived at this because the agricultural community needs these pesticides; and I think they have given up a very great financial interest in order that we could revise the law and get back to the job of developing new pesticides and new uses, and get labeled through Washington, so that we can go back to work and do our job.

Senator LEAHY. Based on my own observation I am very much aware of the compromise you are preparing to reach, and I suspect that not every one of those telephone conversations you have had was without some heat.

We have been joined by Senator James Allen of Alabama, who was the chairman of this subcommittee until he was moved up to chairman of a larger subcommittee. He is a man that is a lot more knowledgeable in this area than I am. He conducted the hearings in this area last year and I had the easy task of just sitting there and listening to him ask all the right questions, and then I would come along with some others following.

I turn it over to Senator Allen.

Senator Allen. Thank you, Mr. Chairman. I think you have covered the ground so well that there is no necessity for other questions. Senator LEAHY. Thank you, Senator.

We will look forward to your statement Mr. Skaptason. I am well aware of the enormous amount of time you have spent on it, and I am aware of the fact that both of you would probably like to have some sleep after spending nearly the whole night on it.

I must point out that it makes it much, much easier, obviously, for this subcommittee and for the whole committee when you are able to reach a consensus of opinion, I appreciate it. I would note for the record that once the statements come in and all members of the subcommittee have had a chance to look at them, we may have further questions which we will send to you in writing. We will appreciate your cooperation in responding.

Mr. SKAPTASON. Be assured we will look forward to it.

Senator LEAHY. Thank you very much.

Mr. SKAPTASON. Thank you.

Senator LEAHY. The next witness is Cal Stephenson, the secretary of the United Pesticide Formulators & Distributors Association of College Park, Ga.

STATEMENT OF DAVID JAHN, UNITED PESTICIDE FORMULATORS & DISTRIBUTORS ASSOCIATION

Mr. JAHN. Mr. Chairman, my name is David Jahn, Mr. Stephenson was unable to be here. I represent UPFDA in the matter of public affairs here in Washington. You received our testimony also late this morning, and probably have not had a chance to look through it.