On March 26, 2007, the U.S. Environmental Protection Agency (EPA) proposed the most significant rules in nearly 25 years regarding recycling of secondary materials. If adopted, the rules should encourage more recycling and resource conservation by excluding new categories of recycled secondary materials from regulation under the Resource Conservation and Recovery Act (RCRA). This proposed rule can be found at 72 Fed. Reg. 14172 (March 26, 2007), and obtained at http://www.epa.gov/epaoswer/hazwaste/dsw/abr-rule/fr3-26-07.pdf. The deadline for submitting comments on the proposal has been extended to June 25, 2007. This Hogan & Hartson Update summarizes the proposed rule, and highlights how it may encourage recycling of hazardous secondary materials.

Under RCRA, secondary materials that are recycled are solid wastes unless a RCRA rule specifically excludes the material from the definition of solid waste (DSW). If a recycled secondary material is a solid waste, and it exhibits a hazardous waste characteristic or is a listed hazardous waste, it will generally be subject to extensive RCRA hazardous waste management rules. EPA’s March 26, 2007 proposal addresses whether certain broad categories of recycled secondary materials that would qualify as hazardous wastes, and which EPA calls “hazardous secondary materials,” should be regulated under RCRA. EPA proposes to expand significantly the universe of hazardous secondary materials that would not be regulated under RCRA, i.e., they would be excluded from EPA’s DSW rules. Specifically, EPA proposes to exclude from RCRA regulation hazardous secondary materials that are:

  •  generated and then reclaimed at the generating facility, among company affiliates, or by a tolling contractor; 
  • managed in land-based units that ensure containment; 
  • transferred to another entity for the purpose of reclamation; or 
  • determined to be a non-waste through a case-by-case petition process.

EPA has also proposed that recycled material may be excluded from the DSW rules only if two “legitimate recycling” conditions are met, and two other “legitimate recycling” criteria are considered.

Note that this proposal is a significant departure from EPA’s October 28, 2003 proposed revision to its DSW rules in that EPA is no longer looking to NAICS codes to determine whether a material is generated and reclaimed in a continuous process within the same industry.1 This March 26, 2007 proposal would provide broader exclusions, particularly for off-site recycling, and more faithfully heeds a long line of U.S. Court of Appeals cases directing EPA to regulate as solid wastes only materials that are truly discarded. The key proposals are discussed below.

Generator Control/Non-Land Unit Exclusion

EPA proposes a new exclusion from its DSW rules for “hazardous secondary material generated and reclaimed under the control of the generator.” To fit within this exclusion, any one of the following three criteria can be met: First, the secondary material must be generated and reclaimed at the generating facility, defined as all contiguous property owned by the generator. As a second alternative, the material must be generated and reclaimed by the same “person,” which can include two companies under the same ownership. The third alternative is that the secondary material must be reclaimed pursuant to a written agreement with a tolling contractor. Further, for all three alternatives, the hazardous secondary material cannot be managed in a land-based unit, must be reclaimed within the United States or its territories, and cannot be accumulated speculatively (i.e., 75% of the material awaiting recycle on January 1 of each year must be recycled or transferred for recycle within that year).

Generator Control/Land Unit Exclusion

EPA is proposing a separate conditional exclusion from its DSW rules for hazardous secondary materials that are managed in land-based units.2 To be excluded, the material must meet all of the requirements of the previous exclusion (i.e., must meet the definition of “hazardous secondary material generated and reclaimed under the control of the generator,” must be reclaimed within the United States or its territories, and no speculative accumulation). In addition, the secondary material must be managed in a land-based unit that ensures containment of the secondary materials within the unit. Containment will be determined on a case-by-case basis considering, for example, geological and metrological conditions, liners, leak detection measures, inventory control and tracking, control of releases, and/or monitoring and inspection during construction and operation of the unit. If a release were to occur, it would not necessarily negate the exclusion, unless the hazardous secondary material is not managed as a valuable product. A generator relying on this new exclusion must also notify the Agency of such reliance and provide some general information.

Transfer-Based Exclusion

Recognizing that third-party recycling has been successful, EPA has proposed a conditional exclusion for secondary materials sent to a third-party reclaimer. To use this exclusion, there are several conditions that must be met:

  • The generator must make “reasonable efforts” to ensure that hazardous secondary materials are safely and legitimately recycled by any recycler who is not operating under RCRA Part B permit or interim status standards. The generator must gather credible evidence of the recycler’s legitimate operations. EPA equates this to a type of “environmental due diligence” on the reclaimer, which EPA says most generators already do to minimize CERCLA liability; 
  • The reclaimer must demonstrate financial assurance in accordance with the RCRA financial responsibility rules at 40 CFR Part 265 Subpart H; 
  • If the secondary material is managed in a land-based unit, the unit must “contain” the material, as defined earlier; 
  • The hazardous secondary material must be managed by a reclaimer in a manner that is as protective as its management of an “analogous raw material;”3 
  • The hazardous secondary material must be transferred directly from the generator to the reclaimer, and not handled by anyone else other than the transporter. The use of a broker or other “middleman” would not be allowed; 
  • The reclaimer must submit a one-time notification to EPA; 
  • The generator and reclaimer must maintain records for three years documenting the secondary material that was transferred for reclamation; 
  • If the hazardous secondary material is going to be exported outside of the U.S. for recycling, the generator must notify the receiving country through EPA and receive consent from the country before shipment; and 
  • The hazardous secondary material may not be accumulated speculatively.

Petition for Non-Waste Determination

For recycled hazardous secondary materials that would not meet the criteria for any of the these foregoing proposed new DSW exclusions or any of the many current DSW exclusions, EPA has also proposed a petition process that would enable a generator to obtain a formal determination from the Agency that a material is not discarded, and therefore, is not a solid waste. EPA is proposing three types of non-waste determinations:

The first type would be for hazardous secondary material that is recycled in a continuous industrial process provided that the following criteria are met: 1) the secondary material is part of the continuous production process; 2) the production process will use the hazardous secondary material in a reasonable timeframe; 3) hazardous constituents in the secondary material are not released into the environment in statistically greater amounts than otherwise released by a primary production process; and 4) other relevant factors.

The second type of non-waste determination is for the hazardous secondary material that is indistinguishable in all relevant respects from a product or intermediate. The criteria that must be met for the determination are: 1) there are likely markets for the hazardous secondary material; 2) the chemical and physical identity of the hazardous secondary material is comparable to commercial products or intermediates; 3) hazardous constituents in the secondary material are not released into the environment in statistically greater amounts than are otherwise released by a primary production process; and 4) other relevant factors.

The third type of non-waste determination is for hazardous secondary material that is reclaimed under the control of the generator whereby: 1) the generator retains ownership and liability via a contract or other mechanism for the hazardous secondary material and the residuals that result from the recycling; 2) hazardous constituents in the secondary material are not released into the environment in statistically greater amounts than are otherwise released by a primary production process; and 3) other relevant factors.

Legitimacy Criteria

EPA is proposing to codify in its DSW rules four principles EPA first announced in 19894 that distinguish “legitimate” from “sham” recycling. The newly-codified rules would apply not only to the new proposed DSW exclusions, but also to all current DSW exclusions, i.e., all in 40 CFR §261.2, §261.4, §260.31 or §260.34. In other words, recycled secondary material would only be excluded from the DSW rules if the recycling meets one of the DSW rule exclusions and satisfies the new legitimacy rules.

EPA proposes to make two of the four legitimacy criteria mandatory, i.e., they must be met in order to satisfy a DSW exclusion. These two criteria are: 1) the hazardous secondary material being recycled must provide a useful contribution to the recycling process or to the product of the recycling process; and 2), the product of the recycling process must be valuable. EPA has also provided guidance on how various economic arrangements for the recycling should be considered when evaluating the “useful contribution” and “valuable product” factors in determining legitimate recycling.

The remaining two criteria are proposed as considerations, not criteria that must be met. The two criteria that must be considered are: 1) the hazardous secondary material is managed as a valuable commodity; and 2) the presence in the recycled product of significant levels of hazardous constituents that are not necessary, i.e., “toxics along for the ride.”

Miscellaneous

EPA says in the Federal Register notice preamble that the proposed new exclusions cannot be used for secondary materials that are recycled for energy recovery, including made into fuel products, for materials recycled into land applied products, or for inherently waste-like materials, as those terms are defined in current 40 CFR §261.2(c)(1) and (2) and §261.2(d). The proposed rule language, however, does not appear to include these important limitations. In any event, this should be an issue for comment by companies that recycle inherently waste-like materials, or who recycle secondary materials into fuel products or land-applied products.

In that regard, EPA has requested comment on nearly 100 issues, many of which inquire as to whether EPA should take a more restrictive approach than what it has proposed. Industrial companies need to submit comments in support of the options they like and against the ones they dislike in order to obtain a favorable final rule as well as to provide EPA with a record that it can stand on when it finalizes its rule and when it is challenged in court.

Finally, since this proposed rule is less stringent than the current DSW rules, states will not be required to adopt the rule when EPA finalizes it. Until states act to amend their rules, a patchwork of recycle regulations could result that could impede the interstate transfer of materials for recycling.