*As seen on Environmental Law360.

On December 29, 2008 the USEPA began a new regulatory scheme under the Resource Conservation and Recovery Act ("RCRA") targeting what was thought by industry to be unregulated recycling practices. For a number of years industry has had an ongoing dispute with USEPA over the definition of "solid waste" in connection with materials destined for recycling or reclamation. A number of decisions by the U.S. Court of Appeals for the DC Circuit clearly have indicated that for USEPA to regulate these materials they must first meet the definition of solid waste. That starts with what would seem like a simple question of whether that material has been "discarded". Industry believed that the Court of Appeals for the DC Circuit was quite clear in mandating that until there was an element of "discard" with respect to the materials in question there could be no regulation of it as a solid waste. After almost eight years of trying to determine what it should do about these decisions, USEPA has pronounced "not so fast" to industry thinking that its recycling activities are not regulated.

In a Federal Register Notice published October 30, 2008 and running some 120 pages long, USEPA proclaimed its intention to "revise" the definition of solid waste to exempt hazardous secondary materials from the definition of solid waste as required by the Court of Appeals. However, instead of ending the story there, USEPA also proclaimed that it was going to institute a new regulatory program covering those materials. While the USEPA contends that the new exemption provides net cost savings to impacted industries, there are new costs to industry associated with the new regulatory scheme. Had USEPA closed the book on hazardous secondary material by simply exempting such material from RCRA, industry would have accrued additional substantial cost savings. But USEPA did not do so. Rather, the USEPA's estimated cost saving is misleading as the approach allegedly implements cost saving for industry on the one hand while imposing new regulatory costs on the other.

Moreover, this unprecedented new scheme for the first time creates a RCRA regulatory program for materials not first defined as "solid waste." The new definitions specify the material is not a solid waste if certain conditions are met (and these conditions make up the new "regulatory scheme"). The new program deals with two types of recycling activity, recycling conducted on-site (in land and non- land based units) and recycling conducted off-site. For recycling conducted on-site, the conditions for the exemption include containment, no speculative accumulation (a timing issue), notification to USEPA and that the recycling be legitimate (as discussed below). For recycling off-site, the conditions for exemption include no speculative accumulation, handling and storage restrictions while in transit to the off-site recycler, legitimate recycling, containerization, all appropriate inquiry (due diligence) by the generator to ensure the recycler does not discard the material and will manage it in a manner protective of human health and the environment, notification to USEPA, recordkeeping and satisfaction of additional conditions by the recycler and intermediate facilities (transporters, brokers).

Those in the recycling business (who do not generate the recyclable materials) must not only meet the conditions applicable to them, but also must post financial assurance and carry liability insurance. The details of those financial assurance conditions are strikingly similar to those imposed on traditional solid waste management facilities.

USEPA has also instituted a formal procedure to request a non- waste determination for materials that are reclaimed and then reused in the original production process, hazardous secondary materials that are reclaimed in a continuous industrial process, and hazardous secondary materials that are indistinguishable from a product or intermediate. Again, certain conditions must be met in order to obtain this formal determination from USEPA. This may result in the same regulatory scheme being imposed upon materials eligible for the non-waste determination process as for those materials eligible for the exemption if the full set of conditions are met.

Since meeting all of the conditions is a predicate for taking advantage of the solid waste exemption, a new regulatory scheme is in place even though USEPA specifically indicates in the Federal Register preamble that "this action is not intended to bring new wastes into the RCRA hazardous waste regulatory system and it does not do so." I suspect industry will beg to differ on that point.

Not unexpectedly, USEPA dealt very creatively with the existing case law and comments submitted to justify its authority to develop this new regulatory system. Perhaps its strongest argument is that it views the third party recycling industry as part of the "waste disposal problem". Unfortunately for USEPA, its authority to regulate materials that are not "solid waste" is simply not authorized by RCRA. USEPA argues that in its opinion Congress intended to give it "authority to regulate hazardous waste recycling". That may be so but the key word in that phrase is "waste". RCRA is designed to deal with "waste" and Congress could have easily drafted it to expressly regulate recycling activity. But Congress did not do so. To overcome Congress's failure to provide the authority that USEPA desires, USEPA is now attempting to deputize generators of secondary material being recycled by a third party as USEPA's policemen or risk the full wrath of the RCRA program for failing to do so. A "Hobson's Choice" if there ever was one for those engaging in a beneficial activity that should not be regulated by RCRA in the first place.

It is not as if this recycled material is completely outside a regulatory program designed to ensure its safe handling. There are OSHA and DOT programs in place to deal with this material on site and in transit. If a person ever discards the material, then RCRA clearly applies. For these reasons, many commentators view USEPA's new program as just another example of regulatory overkill.

With respect to the recycling activity itself, the new regulatory scheme also defines what legitimate recycling is (as mentioned above) and requires that it be demonstrated by any person desiring to take advantage of the non-waste exclusion. The regulation defines "legitimate recycling" as involving a hazardous secondary material that provides a useful contribution to the recycling process (or to a product or intermediate) and that the recycling process produce a valuable product or intermediate. "Useful contribution" and "valuable" are also defined. Once that hurdle is crossed the "overall legitimacy" of the recycling process must also be examined as spelled out in the regulation. Another potential regulatory "quagmire" that may cause a generator to throw up its hands and just take the discard option.

The issue of industrial recycling has been a contentious area for years. It has taken USEPA many years to develop this new regulatory scheme which will no doubt be challenged once again in the courts. Although the effective date of this new rule is December 29, 2008, it only becomes effective in states authorized to administer RCRA once those states formally adopt it. In the meantime it would be advisable to begin setting up your recycling program now as part of your overall RCRA compliance as it will take some practice to get it right, just like the rest of RCRA.