In follow-up to our blog earlier this week on the EPA’s January 13, 2015 new Final Rule on the Definition of Solid Waste (DSW rule), this is to discuss the new “remanufacturing exclusion” as it relates to certain solvents under 40 CFR § 261.4(a)(27).

The  § 261.4(a)(27) exclusion is specifically addressed at certain “higher value solvents” transferred from one company to another for the purpose of “extending the useful life of the solvent,” and provides that when “remanufactured” the solvents are excluded from the definition of “Solid Waste.”  According to the EPA, the purpose of the remanufacturing exemption is to encourage the intercompany transfer of spent solvents, because once remanufactured to commercial grade, the solvents can be used as replacements for virgin commercial grade solvents.

EPA discusses in the preamble to the DSW rule that instead of a generator company paying disposal costs for a solvent, the company which will remanufacture the solvent will not be paid a fee, but will realize its profit from the sale or reuse of the remanufactured solvent it received from the generator.  (It should be noted that there are no provisions in the regulations discussing which party (generator or remanufacturer) would pay or be paid for the remanufacturing; the issue is raised only in the preamble).

Under now new Resource Conservation and Recovery Act (RCRA) definitions of 40 CFR § 260.10, the term “remanufacturing” is defined as “processing a higher-value hazardous secondary material to manufacture a product that serves a similar function as the original commercial-grade material.”  As applied to certain solvents under 261.4(a)(27), when solvents are “remanufactured” under specific conditions and in compliance with explicit regulatory requirements, they are not “solid wastes,” and, thus, are not hazardous wastes.  The exclusion does not apply to solvents which are “discarded”; it applies only to solvents “remanufactured,” and, therefore, solvents which are discarded are regulated as solid wastes.

There are, of course, considerable limits on and conditions to the 261.4(a)(27) exemption: (i) the exclusion only applies to certain solvents; (ii) the exclusion only applies to certain industries; (iii) there are limits on how solvents can be used, post-remanufacture; (iv) there are notification, and recordkeeping and reporting requirements; (v) the generator and remanufacture must develop and maintain a “Remanufacturing Plan”; (vi) there are limits on and standards for the types of containers that can be used in the remanufacturing; (vii) there are standards applicable to processing equipment used in remanufacturing; and finally, (viii) there are limits on speculative accumulation.

Solvents and Industries Entitled to the Exclusion.  The solvents entitled to the exemption are toluene, xylene, ethylbenzene, 1,2,4 trimethylbenzene, chlorobenzene, n-hexane, cyclohexane, methyl tert-butyl ether, acetonitrile, chloroform, chloromethane, dichloromethane, methyl isobutyl ketone, nn-dimethylformamide, tetrahydrofuran, n-butyl alcohol, ethanol, and/or methanol.  Only certain manufacturing sectors are entitled to the exclusion; those are: pharmaceutical manufacturing (NAICS 325412), basic organic chemical manufacturing (NAICS 325199), plastics and resins manufacturing (NAICS 325211), and paints and coatings manufacturing (NAICS 325510).

Use Limits.  The designated hazardous spent solvents are only eligible for the exclusion if they are remanufactured to serve certain types of post-remanufacture chemical functions, including the use of the solvents for: (i) reacting; (ii) extracting; (iii) purifying; (iv) blending chemicals, rinsing out process lines associated with the previously described functions; or (v) using them as an ingredient in a product in the pharmaceutical, organic chemical, plastics and resins manufacturing sectors, or the paint and coating sector.  EPA has specified that the continuing use of the solvents after remanufacturing cannot involve cleaning or degreasing oil, grease or similar materials from textiles, glassware, metal surfaces or other articles.  If remanufactured for those uses, the solvents will not be considered excluded from the definition of solid waste under the remanufacturing exemption.

Notification, Recordkeeping and Reporting Requirements.  In order to be entitled to exclusion, both the generator and the remanufacturer must submit notification to EPA prior to operating.  Further, there are, of course, recordkeeping reporting requirementsShipping records must be maintained for three years and must include the name of the generator, dates of shipment, the transporter, and the type and quantity of solvents involved in the shipment.  Manifests are not required; the records requirement associated with shipping can be satisfied by ordinary business records such as bills of lading.  Similar to manifesting requirements, however, generators must maintain records of confirmation of receipt for all offsite shipments to a remanufacturer to verify that the spent solvent was actually remanufactured and not discarded.  As with the shipping records, there is no specific template for the confirmation of the remanufacturing records; normal business records such as financial records, bills of lading and electronic confirmation of receipt are sufficient to satisfy the exclusion.

Remanufacturing Plan.  Both the generator and the remanufacturer must prepare a “Remanufacturing Plan” identifying the types and quantities of the excluded spent solvents confirming the process and industry sectors involved, and confirming the specific future uses for the remanufactured solvents.  The generator is required to work with the remanufacturer in developing a plan to verify the appropriateness of the spent solvent remanufacturing before claiming the exclusion, to ensure the spent solvents aren’t discarded.  The plan must include a lengthy certification by the remanufacturer certifying the remanufacturer is within one of the manufacturing sectors entitled to the exclusion, and is accepting the solvents for the sole purpose of remanufacturing them into commercial grade solvents that would be used for reacting, extracting, purifying, blending chemicals, rinsing out process lines or by-producting ingredients.

Required Containers.  Because of the history of spent solvent mismanagement, EPA has an explicit condition in the rule that solvents being managed under the remanufacturing exclusion must be stored prior to remanufacturing in tanks or containers meeting the RCRA technical standards set forth in 40 CFR Part 261, Subparts I and J, and must be properly labeled.  Thus, going forward, the 264 Subparts I and J are applicable to containers and tanks involved in remanufacturing of solvents as non-solid waste, in the same manner as those standards apply to use of containers managing “Hazardous Wastes.”

Process Equipment Standards.  Not only are there container requirements applicable to the generator and the remanufacturer as part of remanufacturing, the Remanufacturing Plan must include a discussion of good management practices, specifying that the remanufacturing equipment vents and tanks are equipped with applicable air emission controls in compliance with the New Source Performance Standards and the NESHAPs, in particular, 40 CFR Parts 261, Subparts AA (Vents), BB (Equipment), and CC (Tank Storage).

Speculative Accumulation.  Finally, in addition to all the other conditions applicable to the remanufacturing exemption, the exclusion is subject to the speculative accumulation requirements of 40 CFR 261.1(c)(8) to ensure that hazardous spent solvents are remanufactured and not ultimately discarded.

While these specifically covered solvents are explicitly excluded under 261.4(a)(27), there are other provisions in the new rule that open the door to obtaining an exclusion from the Definition of Solid Waste for additional solvents or other waste streams.  The new rules provide for “non-waste determinations” and variances from classification as a solid waste (§ 260.30), and there are specific exclusions for “generator-controlled recycling” (§ 261.4(a)(23)), and there is a “verified recycler exemption” (§ 261.4(a)(24)).  Each of these options are potentially applicable to other solvents and industries, or other “hazardous secondary materials.”