UPDATE 2-Monsanto fined $2.5 mln on pesticide/seed misbrand

* Sold cotton seeds without certain planting restrictions

* Seeds contained genetically engineered pesticides

* Largest settlement ever under U.S. insecticide act (Adds Monsanto comments, details)

KANSAS CITY, Missouri, July 8 (Reuters) - Monsanto Co MON.N has agreed to pay a $2.5 million fine for misbranding biotech cotton seeds in what regulators called the largest settlement of its kind for violating U.S. insecticide law.

Monsanto, the world’s largest seed company, violated the Federal Insecticide, Fungicide and Rodenticide Act when it sold and distributed some cotton seed products in a way that violated restrictions Monsanto had told the U.S. Environmental Protection Agency it would adhere to, the EPA said.

Between 2002 and 2007, more than 1,700 times nationwide, Monsanto distributed or sold Bollgard and Bollgard II cotton seed products containing genetically engineered pesticides without the planting restrictions required by the EPA to protect against pest resistance, the agency said.

“People who manufacture and distribute pesticide products must follow the federal registration requirements,” said Steve Owens, assistant administrator for EPA’s Office of Chemical Safety and Pollution Prevention. “These requirements are critical to preventing the development and spread of insect resistance.”

Monsanto said the problems occurred due to an oversight in issuing a grower guide that was supposed to contain a statement prohibiting planting the cotton in 10 specific counties in Texas where insect resistance management was a concern and Monsanto’s biotech cotton was not allowed. The grower guide did not contain the required language. Monsanto said it discovered the error in 2006 and reported it to EPA.

“As a result of this matter, we have implemented new internal review processes to prevent such errors in the future,” said Rob Nixon, who leads Monsanto’s stewardship program.

St. Louis-based Monsanto said subsequent evaluation determined that no resistance had occurred in the counties in question, and in 2008 the EPA lifted the restriction and authorized the planting of Bollgard II in those counties.

“This agreement shows that when a company violates the law by distributing misbranded pesticides, EPA will take action,” Cynthia Giles, assistant administrator for the agency’s Office of Enforcement and Compliance Assurance, said in a statement. (Reporting by Carey Gillam; Editing by Bernard Orr, Gary Hill)