Waste Not, Want Not: The EPA has revised the definition of solid waste and its recycling exemptions

Saturday, November 28, 2015 - 15:28

On January 13, 2015, the U.S. Environmental Protection Agency (EPA) published its final rule revising the definition of solid waste under Subtitle C of the federal Resource Conservation and Recovery Act (RCRA). (80 Fed. Reg. 1694.) This rule revises the EPA’s previous 2008 definition of the solid waste (DSW) rule, which provided for certain exemptions from the definition of waste for hazardous secondary materials that were recycled or destined for recycling, in order to provide additional requirements that the EPA contends fill the gaps created by the 2008 DSW rule. The 2015 DSW rule became effective federally on July 13, 2015; however, most states have been delegated the authority to implement the federal hazardous waste program and will have until July 13, 2016, to incorporate the new requirements, or otherwise adopt regulations that are as stringent as the 2015 rule, for the rule to become effective in those states.

This 2015 DSW rule (upon implementation by individual states) has significant bearing on how hazardous secondary materials are recycled and excluded from hazardous waste regulation, and it complicates the recycling process for manufacturers, scrap dealers and reclaimers alike with additional notifications, certifications and record keeping. More important for manufacturers who use third parties for recycling of hazardous secondary materials, it seemingly opens the door to potential claims of improper disposal of hazardous waste in the event that the recycler fails to follow the strict letter of the regulation.

What is Solid Waste?

Initially, the definition of solid waste is important because materials that are not solid wastes are not subject to regulation as hazardous wastes under RCRA. That is, a material first must be a solid waste before it can be considered a hazardous waste subject to RCRA’s cradle-to-grave management system. Hazardous secondary materials (any materials that are not the primary product of a manufacturing or commercial process, e.g., spent materials, by-products or sludges) would be identified as hazardous waste under the RCRA regulations (i.e., they have the characteristics of hazardous wastes or have been expressly listed as hazardous wastes). The most common of these materials for recycling are metal-bearing secondary materials and solvents, but certainly other categories exist.

The issue of what constitutes a solid waste and the effect of recycling has been the subject of debate and litigation almost from the outset. The original RCRA regulations were promulgated in 1980 and established the basic framework that survives today. But since 1985, when the EPA substantially revised the definition of solid waste and included multiple categories of hazardous secondary materials to be regulated as hazardous wastes even when recycled, the definition has been an almost constant source of litigation and (very long) rule-making processes. The 2008 DSW rule included a conditional exclusion from the definition of solid waste for certain types of hazardous secondary materials when reclaimed. The Sierra Club challenged the rule, alleging, among other things, that it would result in adverse environmental and health impacts to minority and low-income communities, where many third-party recyclers are located. The EPA entered into a settlement with the Sierra Club, agreeing to address the main issues raised in the petition and promptly commencing an environmental justice analysis of the rule.

The 2015 DSW rule is the result of that settlement and the environmental justice review. The EPA found that the 2008 rule contained significant regulatory gaps that ultimately promoted the accumulation (and not recycling) of hazardous materials and posed disproportionate potential impacts to lower-income and minority communities. As a result, the EPA has implemented a series of changes that may significantly impact companies utilizing the recycling exclusions under the 2008 DSW rule and may even provide disincentive for recycling hazardous secondary materials.

Probably the most significant changes presented by the 2015 rule and those likely to have the most widespread impact are the mandatory requirement that all recycling be legitimate and the prohibition against sham recycling. The 2008 DSW rule included the same basic legitimacy requirements contained in the 2015 DSW rule (discussed below), but only the first two factors were mandatory, and the legitimacy requirements applied only to exemptions promulgated in the 2008 rule (and not to exemptions promulgated prior to 2008 that resulted from the extensive litigation and rule making between 1985 and 2008). The 2015 rule applies the legitimacy criteria to all recycling exclusions and exemptions. It expressly prohibits sham recycling and provides that failure to meet all of the legitimate recycling requirements will deem the material to be solid waste. The 2015 rule also, for the first time, defines what is required to contain hazardous secondary materials during storage by generators and recyclers, which also significantly contributes to the definition of legitimate recycling.

The Four-Part Test

While RCRA has always (rightly) been intended to prohibit sham recycling, the four-part test for determining whether recycling is legitimate goes beyond simply protecting against illegal disposal. In order to be legitimate recycling, it must meet all of the following requirements:

1) It involves a hazardous secondary material that provides a useful contribution to the recycling process or to a product of the recycling process; this is met only if it (a) contributes valuable ingredients to a product, (b) replaces a catalyst or carrier in the recycling process, (c) is the source of a valuable constituent recovered in the recycling process, (d) is recovered or regenerated as part of the process or (e) is used as an effective substitute for a commercial product.

2) It produces a valuable product or intermediate; this requirement is established if the product or intermediate is (a) sold to a third party or (b) used by the recycler or generator as an effective substitute for a commercial product or intermediate or as an ingredient in an industrial process.

3) The generator and recycler must manage the material as a valuable commodity when it is under their control, or where there is no analogous raw material, it must be contained. The EPA established a definition for “contained” for the first time in the 2015 rule to address concerns with on-site mismanagement, which provides that the material be held in a unit in good condition, meeting very specific criteria (generally avoiding any on-the-ground storage); be labeled appropriately; and be designed to avoid any unpermitted releases, including air emissions, dust, storm water, etc., in addition to spilling.

4) The product of the recycling process must be comparable to a legitimate product or intermediate, or the person performing the recycling must conduct an assessment and document why the recycling is nonetheless legitimate.

As noted above, these criteria apply to all recycling exclusions from the DSW, not just those initially implemented in the 2008 rule. This means that the legitimate recycling requirement applies to all hazardous secondary materials that are excluded or exempted from RCRA hazardous waste regulation because they are recycled (e.g., includes scrap metal). The EPA has at least attempted to provide assurances, in that the pre-2008 exclusions are deemed legitimate (e.g., scrap metal, shredded circuit boards) and remain unchanged. The examples given in the Preamble, however, suggest that even those assurances have conditions. Given the history of aggressive litigation surrounding the DSW and the potential for EPA enforcement, those exclusions may still be subject to narrowing and limitation. The full impact of the legitimate recycling criteria on pre-existing exemptions will not be fully known for some time.

For materials sent by a generator to a third-party recycler, the 2015 rule also requires the generator to ensure that the materials are transported to a verified recycler for the waste exclusion to apply. Under the 2008 rule, generators were subject to a transfer-based exclusion that attached when materials were transferred for the purpose of legitimate reclamation, provided due diligence was performed to ensure that recycling was occurring. The new verified recycler exclusion provides that the secondary material is excluded from regulation as a hazardous waste only if sent to a verified reclamation facility for the purpose of reclamation and the reclamation of the material is legitimate. A recycler can be verified by either obtaining a variance from the EPA/delegated states or operating under a RCRA permit.

The 2015 rule also imposes new requirements on both generators and recyclers prohibiting “speculative accumulation,” requiring demonstration that the quantities of such material on hand can and will be recyclable. Both generators and recyclers are subject to new and extensive record-keeping requirements, and both are now subject to new emergency response and preparedness conditions.

For materials shipped to a third-party reclamation facility, adherence to all of these requirements is mandatory for the exclusion to apply. Failure to meet any of these requirements could result in the hazardous secondary material constituting a waste. Generators of hazardous secondary materials are also required to provide notification to the EPA/the state of the intent to recycle – whether recycling is generator controlled or performed by a third-party recycler – as a condition of application of the exclusion.

Looking at these components together, a generator of hazardous secondary material that ships the material to a third-party recycler is potentially at risk if the reclamation facility fails at some point to meet any of its requirements. Rather than focusing on the intent of the generator in shipping the material and general assurance that the recycling facility is, in fact, recycling, the rule seemingly puts the generator at risk of being deemed to have improperly disposed of hazardous waste should the reclamation facility fall short of its regulatory responsibilities despite all due diligence to the contrary. Presumably, the generator is now required to ensure not only that the reclamation facility is verified and performing recycling that results in a marketable material but also that all of the reclamation facilities’ operations meet the legitimate recycling criteria (including containment), that it is not speculatively accumulating hazardous secondary material, that it is maintaining the required records, and that it meets the new emergency response and preparedness conditions.

At a minimum the rule raises serious questions regarding generator liability in the event of some failure on the part of the reclamation facility to meet one or more of the myriad of requirements imposed by the new rule because the exclusion is expressly conditioned on generators and reclaimers meeting all of those requirements.

In addition to the third-party recycling issues, the rule also revises the requirements for generator-controlled recycling (implementing the notification, “contained,” speculative accumulation, record-keeping, and emergency preparedness requirements discussed above), provides a new remanufacturing exclusion for certain high-value solvents, and revises requirements for nonwaste determinations and solid waste variances to conduct recycling (and become verified).

As noted above, the requirements of the 2015 DSW rule will, in most instances, require state implementation to become effective. Only two states (Alaska and Iowa) and two territories are subject to direct federal regulation, and only four states (Pennsylvania, Illinois, New Jersey and Idaho) fully adopted the 2008 rule and will now have to implement the 2015 rule. Nevertheless, all other states will have to implement a definition of solid waste that is at least as stringent as the federal regulations. Manufacturers and recyclers alike will need to be aware of these requirements as they are implemented by state. For instance, in Pennsylvania, the rule was adopted by reference and became applicable on July 13, 2015. Those manufacturers intending to recycle were required to give notification, and record-keeping and other requirements are now applicable.

Of course, consistent with the past 22 years of solid waste regulation, the 2015 DSW rule is the subject of petitions for review filed by both environmental groups and industry groups. So the future of the definition of solid waste remains subject to continuing review and scrutiny, and manufacturing and recycling operations will need to pay close attention to these regulatory issues moving forward.

 

Scott GouldChair of the Environmental Law and Toxic Tort Group at McNees Wallace & Nurick LLCsgould@mwn.com