On 10 December 2014, EPA placed on its website its long-awaited, 507 page final definition of the solid waste (DSW) rule,1 which is the most recent chapter in the 30-year debate of how to regulate the recycling of hazardous secondary materials under the Resource Conservation and Recovery Act (RCRA).2 Under the new 2014 DSW rule, EPA has chosen to regulate heavily. The rule will almost surely be challenged in court on the grounds that EPA does not have statutory authority under RCRA to regulate materials that are not discarded. The uncertainty that the expected litigation will create and the many new conditions EPA has placed on qualifying for a DSW recycle exclusion will likely discourage resource conservation and recovery, key goals of its namesake, the Resource Conservation and Recovery Act.

This 2014 DSW rule is EPA’s latest response to the 2000 ruling of United States Court of Appeals for the District of Columbia Circuit in the Association of Battery Recyclers v. EPA,3 where that court overturned EPA’s attempt to regulate as hazardous waste the characteristic byproducts and sludges destined for reclamation in the mineral processing industry that were stored on the ground prior to reclamation. The court made clear that EPA only has authority under RCRA to regulate “materials that are discarded by virtue of being disposed of, abandoned, or thrown away.”4 The court said that materials reused within an ongoing industrial process are not discarded, even if stored on the ground, and therefore cannot be regulated by EPA as solid or hazardous wastes.5

Under the Bush administration, EPA responded to the court’s ruling by issuing in 2008 a DSW rule that conditionally excluded from regulation as solid and hazardous wastes those hazardous secondary materials that are reclaimed and reused under the generator’s control, or that are transferred to a third party for reclamation and reuse. These exclusions provided new flexibility to reclaim hazardous spent materials and listed hazardous by-products and sludges that up to that time had been regulated as hazardous wastes, and to reclaim hazardous spent materials that had been regulated as hazardous wastes except when reclaimed in a “closed loop”, i.e., using only tanks and enclosed piping. The 2008 DSW rule conditioned these new exclusions on the generator satisfying two “legitimate recycling criteria”: (1) that the reclaimed secondary material provides a useful contribution to the recycling process or to the product or intermediate created by the recycling; and (2) that the recycled product or intermediate has value. The 2008 DSW rule also left intact all other existing DSW exclusions and exemptions.6

Claiming the 2008 DSW rule to be a Bush-era assault on the environment, within two months of President Obama’s election, the Sierra Club petitioned EPA to reconsider the rule and also filed a lawsuit in court challenging the rule.7 On 7 September 2010, EPA signed a settlement agreement with the Sierra Club under which EPA agreed to propose changes to the DSW rule on topics that the Sierra Club felt had gone too far;  in exchange, the Sierra Club agreed to withdraw its administrative petition and hold in abeyance its lawsuit. The settlement agreement was to have EPA complete the rulemaking by December of 2012, but it has taken EPA until now to complete it.

This Hogan Lovells environment alert will summarize the major components of the 2014 DSW rule, explain how it has changed the prior 2008 DSW rule, and discuss its effect on industrial recycling. As you will see, EPA has decided to regulate recycling by establishing numerous conditions that must be met before the hazardous secondary materials are excluded from regulation as solid and hazardous wastes.

Note that the new 2014 DSW rule will take effect within 180 days of its publication in the Federal Register in the the two states (Alaska and Iowa) that are not authorized by EPA to administer the base RCRA program. In all other states, which are RCRA-authorized, the 2014 DSW rule will not take effect until the state adopts the rule. Thus, generators and recyclers of secondary materials will need to confer with the environmental agencies of the authorized states where the secondary materials are generated and recycled to determine if and when the new rule will take effect in those states.8

Legitimacy criteria

In order for a recycled hazardous secondary material to be excluded or exempted from EPA’s solid and hazardous waste regulation, the 2014 DSW rule requires that the recycling be legitimate instead of a sham form of disposal, and that legitimacy be shown by meeting all four legitimacy criteria, not just the first two criteria that the 2008 DSW rule required. If when inspected or challenged in an enforcement action, a generator cannot support his/her conclusions that the recycling is legitimate under these four legitimacy criteria, the recycled hazardous secondary material would be a solid and hazardous waste and subject to full RCRA regulation.

The four legitimacy criteria are: (1) the hazardous secondary material being recycled provides a useful contribution to the recycling process or to the product or intermediate of the recycling process; (2) the recycling process produces a valuable product or intermediate; (3) the hazardous secondary material is managed as a valuable commodity; and (4) the product or intermediate resulting from the recycling process using the secondary material is comparable to the product or intermediate made from virgin materials (or alternatively, that the secondary materials are comparable to the virgin materials being replaced).9

The purpose of this fourth legitimacy criterion is to ensure that the product that is made from the recycled secondary material does not contain toxic constituents from the secondary material that are “along for the ride,” i.e., that perform no useful function in the product and are instead being disposed of. To ensure that there are “no toxics along for the ride,” the generator must be able to demonstrate one of the following: The generator must first show that the product of the recycling does not exhibit a hazardous waste characteristic. Where there is an analogous virgin material that the secondary material is replacing, the generator must also show that the product of the recycling either does not have concentrations of any hazardous constituents at levels that are significantly above those found in the analogous virgin–produced product, or that it meets commodity specifications for the constituents in the recycled product. Where there is no analogous virgin material to compare to, the generator must show that the recycled product meets the commodity specifications or is returned to the original process or processes from which it was generated for reuse, such as through closed-loop recycling. If the generator cannot make these showings, alternatively, the generator must demonstrate, document, certify and notify EPA that the toxic constituents do not create undue risk.

Effect of 2014 DSW rule on existing DSW exclusions

The 2008 DSW rule did not alter the existing numerous DSW exclusions. For example, the existing exclusions allow hazardous secondary materials to be recycled and reused directly without reclamation.10 Spent materials can be reclaimed in a closed-loop system on-site.11 Characteristic byproducts, characteristic sludges, and all forms of scrap metal and commercial chemical products can be directly reused or reclaimed.13 There are also about 20 exclusions relating to specific manufacturing operations, such as the regeneration of spent sulfuric acid into a sulfuric acid product. The 2014 DSW rule has altered the existing exclusions in two significant ways. First, EPA intends to require the generator to demonstrate for all of the existing exclusions that the four legitimacy criteria are met or the recycled hazardous secondary materials will be subject to hazardous waste regulation.14 This demonstration may be especially burdensome for companies that routinely recycle secondary materials within a production process. Such generators, who have normally considered such recycling to be an integral part of the production process, will now have to demonstrate that there are “no toxics along for the ride.” Second, many of these existing exclusions require that there be no “speculative accumulation” of the hazardous secondary material before they are reclaimed or recycled, which means that 75% of the secondary material awaiting reclamation or recycling on 1 January of each year must be reclaimed/recycled or sent off-site for reclamation/recycling by the end of the year. The 2014 DSW rule amends the speculative accumulation condition by now requiring that the generator mark the storage containers or have a log showing when the accumulation begins.

Generator-controlled exclusion

In the 2008 DSW rule, EPA adopted a new DSW exclusion, called the “generator-controlled” exclusion, for any one of the following three situations: First, the secondary material is generated and reclaimed on-site at the generating facility, defined as all contiguous property owned, leased, or otherwise controlled by the generator. Second, the secondary material is generated within the same corporate family or by two companies under the same ownership or control. Third, the secondary material is reclaimed pursuant to a written agreement with a tolling contractor.15 These three generator-controlled exclusions provided new, important flexibility by not regulating as solid and hazardous wastes most listed byproducts and sludges that are reclaimed and most spent materials that are reclaimed, in an open loop, i.e., with container storage, as long as such reclamation is under the control of the generator.16

Under the 2014 DSW rule, EPA retained these three generator-controlled exclusions, but added several additional conditions that must be met in order to take advantage of them. As noted above, all four legitimacy criteria must now be demonstrated, and EPA is now also requiring the generator to document support for his/her conclusion that the four legitimacy criteria are met. Again, this requirement is especially problematic for generators who routinely recycle secondary materials in an ongoing manufacturing process. In addition, storage of the secondary material prior to reclamation must be “contained” in units that prevent unpermitted releases into the environment. This condition may be especially difficult to meet by generators who store on the land hazardous secondary materials prior to reclamation. The generator must have a RCRA emergency preparedness and response plan and must also meet the new speculative accumulation requirement discussed above that requires either marking the storage units or logging when the accumulation begins. EPA also added recordkeeping requirements for generator-controlled reclamation by entities within the same corporate family or by a tolling contractor. Finally, the 2014 DSW rule requires the generator to notify the Agency that it is relying on this exclusion so that the Agency is better able to identify which facilities need to be inspected for compliance.

Transfer exclusion – verified recycler exclusion

Under the 2008 DSW rule, EPA adopted two conditional exclusions, known as the “transfer” exclusions for secondary materials that are transferred directly or through an intermediate facility for reclamation by a U.S. third party or non-U.S. third party.17 EPA says that it became concerned that third party reclaimers could rely on these exclusions without the Agency having to formally review and approve the reclaimer’s activities. Consequently, in the 2014 DSW rule, EPA has decided to replace these exclusions entirely with a single new exclusion for hazardous secondary materials sent for reclamation to a U.S. third party reclaimer that has been reviewed and verified by EPA or the authorized-state agency as conducting legitimate recycling in conformance with the many conditions of this so-called “verified recycler” exclusion.

Specifically, EPA or the state agency will verify the third party reclaimer under an amended 40 CFR § 260.31(d) process where the reclaimer (or any intermediate facility): (1) must demonstrate and document that the reclamation is legitimate; (2) must demonstrate RCRA financial assurance for closure; (3) has not been subject to an enforcement action in the last three years or is not a “significant non-complier,” or if either, demonstrates that the hazardous secondary materials will be properly managed; (4) has all necessary equipment, trained personnel, and meets the RCRA emergency preparedness and response requirements; (5) manages the residue from the reclamation as required by RCRA rules; and (6) addresses potential cumulative risks to nearby populations of releases from the reclamation activities. In addition, this “verified recycler” exclusion is available only if numerous other conditions are met, such as: (1) no speculative accumulation; (2) no handling of the secondary material except by the generator, transporter, verified reclaimer, and verified intermediate facility; (3) the secondary material must be contained, i.e., no unpermitted releases to the environment; (4) the generator, reclaimer, and intermediate facility must keep records of all shipments; (5) the generator must meet the RCRA emergency preparedness and response conditions; (6) the generator, reclaimer, and intermediate facility must notify EPA; and (7) shipping paper records must be maintained.18

The numerous requirements above resemble in most respects how hazardous wastes are regulated. The only significant difference is that a hazardous waste recycling facility that has a RCRA permit would also be evaluated for corrective action for releases from solid waste management units at the facility. If that is not a significant concern to a particular third party reclaimer, the third party reclaimers may find it easier and more certain to obtain a RCRA TSD permit and receive, store and reclaim the secondary material as a hazardous waste. Although challenging, this route is likely no more burdensome and certainly less uncharted than becoming a “verified recycler” under this new rule. Thus, although EPA has adopted a new DSW exclusion for a “verified recycler,” the “exclusion” is so prescriptive and so much like hazardous waste regulation that it is a stretch to call it an exclusion at all.

Remanufacturing exclusion

Under the 2014 DSW rule, EPA also adopted a new exclusion from solid and hazardous waste regulation for a limited subset of hazardous secondary materials that are generated and reused in four industries and that meet numerous conditions that would otherwise apply to hazardous waste.19 This exclusion applies only to 18 spent solvents;20 they must be used only for reacting, extracting, purifying or blending chemicals or for rinsing out the process lines associated with these functions; and they must be generated in the pharmaceutical, basic organic chemical, plastics and resins, and paint and coatings manufacturing sectors. The specific spent solvents used as noted from these four industries can be sent to a remanufacturer, i.e., a reclaimer, who must also be in one of those four industries. After the reclamation, the “remanufactured solvent” must be used for one of the same functions (reacting, extracting, purifying, blending, and process line rinsing), and specifically cannot be used for any other cleaning and degreasing. To rely on this exclusion, both the generator and the remanufacturer must notify EPA every two years of the remanufacturing activity, have an up-to-date remanufacturing plan that identifies all of the activities and the streams that are being remanufactured, must certify that the remanufacturing meets the above noted conditions, maintain records of all shipments, have tanks and containers that meet the hazardous waste regulations, and control air emissions in compliance with the Clean Air Act or the RCRA hazardous waste subparts AA, BB, and CC air emission controls. This remanufacturing exclusion is another example of EPA's highly prescriptive regulation of recycling in a manner that closely resembles how it regulates hazardous wastes.

DSW variances and non-waste determination

For recycled hazardous secondary materials that do not meet the criteria of a specific DSW exclusion, through a variance petition process, EPA will consider on a case-by-case basis whether to exclude from the DSW a specific recycled secondary material that: (1) exceeds the speculative accumulation limits; (2) is reclaimed in a non-closed loop; (3) is reclaimed multiple times; (4) is recycled as part of a continuous industrial process and not involving waste treatment; or (5) are indistinguishable from a product or intermediate.21 The 2014 DSW rule places more procedural burdens on these so-called “non-waste” or “variance” determinations. The most important changes are the requirement to re-apply for a variance or non-waste determination every ten years, or sooner if circumstances change materially, and a requirement to notify and re-notify the Agency of the generator’s reliance on the variance or non-waste determination. In addition, a secondary material that must be reclaimed more than once must meet the four legitimacy criteria.22


Since in the 1980s, the U.S. Court of Appeals for the District of Columbia Circuit, which is the court that will decide whether this new 2014 DSW rule is legal, has overturned several EPA rules that over-regulated recycling because, as the court explained, “Congress clearly and unambiguously expressed its intent that ‘solid waste’ (and therefore EPA's regulatory authority) be limited to materials that are ‘discarded’ by virtue of being disposed of, abandoned, or thrown away."23 Indeed, in EPA's first major DSW rulemaking in 1985, EPA seemed to recognize this when it said:

We do not believe our authority extends to certain types of recycling activities that are shown to be very similar to normal production operations or to normal uses of commercial products. We also do not accept the argument that a potentially harmful recycling practice is invariably subject to regulation under subtitle C [hazardous waste regulation], since potential environmental harm is not always a determinative indicator of how closely a recycling activity resembles waste management."24

Notwithstanding what Congress and an earlier EPA said, the current EPA has adopted new 2014 DSW rules that are very prescriptive, burdensome, and complex. In many cases, the rules regulate recycling that is part of an ongoing manufacturing process where the secondary materials have not been discarded. The unfortunate effect is that the recycling and reuse of valuable secondary materials in manufacturing operations will be discouraged.