The U. S. Environmental Protection Agency ("EPA") published its proposed changes to the definition of "solid waste" on October 28, 2003.2 While the proposal is intended to encourage recycling and resource conservation and will do so to a limited extent, significant constraints will remain if the proposal is adopted. Specifically, EPA has not recognized the potential for reuse of secondary materials within industries other than those in which the material is generated. This opportunity for "by-product" synergy between different industries is significant. This article reviews the scope of the proposed changes, their limitations, and the various options which EPA continues to consider. The primary objective of the article is to encourage stakeholders to comment on the proposed rules and options and urge EPA to adopt a broader more flexible approach to the reclamation and recycling of hazardous secondary materials. Notwithstanding the encouragement of federal court decisions, this rulemaking has taken years to emerge and may well be the last opportunity to effect meaningful change in the agency’s approach to these issues for the foreseeable future. This is the time to redirect the Resource Conservation and Recovery Act in a manner consistent with its name.
On October 28, 2003, the U.S. Environmental Protection Agency ("EPA") proposed the long-awaited revisions to the definition of "Solid Waste." The stated intent of the rule is to revise and clarify the definition of "Solid Waste" under the Resource Conservation and Recovery Act as it relates to certain types of hazardous secondary materials that are not considered to be discarded and thus are not considered waste subject to regulation. EPA characterizes the proposal as "deregulatory," thereby suggesting that it imposes no new restrictions on the management of hazardous waste but rather relaxes existing restrictions. Many in regulated industry would say this rulemaking is long overdue and does not go nearly far enough in light of prior court decisions. The proposal will leave constraints that will continue to thwart bona fide resource recovery efforts, yet EPA characterizes the proposal as being consistent with the agency’s "long-standing policy of encouraging the recovery and reuse of valuable resources…"3
EPA states that the new rule is consistent with the primary goals of the Resource Conservation and Recovery Act reflected in the Act’s name. Ironically, only now does the Act hold the promise of living up to the name it has had since 1976. EPA has a published vision of how the RCRA program should evolve over the longer term.4 This vision, commonly referred to as the RCRA Vision 2020, predicts a system that promotes sustainability and more efficient use of resources. The changes in the rules proposed on October 28 are but a small step toward that vision. The agency also cites its recent Re source Conservation Challenge, which is designed to encourage and provide new incentives for increased reuse and recycling of materials, including hazardous wastes and hazardous secondary materials5; but in weighing the agency’s stated intentions against the actual scope of the proposal, one must question why so many challenges still confront resource conservation.
From the beginning of rulemaking under RCRA, EPA has been persistent in its efforts to regulate not only the disposal, but also the recycling of a large portion of the universe of hazardous secondary materials. EPA proposes to deregulate only a small subset of those hazardous secondary materials – those generated and reclaimed within the same industry. The proposed rule would not relax the regulation of materials generated and then reclaimed and recycled in a different industry. Further, the proposed rule does not affect the current restriction on materials EPA considers to be "inherently waste- like" materials. EPA defines such wastes to include those used in a manner constituting disposal, waste burned for energy recovery, and materials classified as inherently waste- like under the rules.6 The agency does solicit comments, not only on the proposed rule but also on a number of alternatives.
The scope of EPA’s regulation of recycling was first called into question by the decision of the D.C. Circuit in American Mining Congress v. EPA, 824 F.2d 1177 (D.C. Cir. 1987) ("AMC I"). AMC I held that EPA exceeded its authority in seeking to bring materials that are not discarded or otherwise disposed of within the definition of waste. The court held that Congress used the term "discarded" in its ordinary sense, to mean "disposed of," "abandoned," or "thrown away." Thus, the court concluded that the term "discarded materials" could not include materials that were destined for beneficial use or recycling by the generating industry in a continuous process. The court observed that such materials are not yet part of the waste disposal problem.7 In the intervening years, other court decisions have clouded the picture of what is "discarded." For example, the court in American Petroleum Institute v. EPA held that emission control dust from steelmaking operations listed as hazardous waste "KO61" is a solid waste even when it is destined for a metals reclamation facility. This result was influenced by the fact that metals reclamation was the designated treatment method required by EPA’s land disposal restrictions.8 EPA also points to the Fourth Circuit decision regarding steel slag, in which the court concluded that slag stored on the ground untouched for six months could be a solid waste.9 Ironically, the intended use of the slag was road base material.
Finally, in 2000, the D.C. Circuit restated its position regarding the meaning of the term "discarded." In Association of Battery Recyclers v. EPA ("ABR"), the D.C. Circuit reminded the agency that it had already addressed the issue of when a material is "discarded" in AMC I. The court reiterated that the Congressional intent on this issue was clear – "solid waste" is limited to materials that are "discarded" by virtue of being disposed of, abandoned, or thrown away." The court noted that materials reused within an ongoing industrial process are neither disposed of nor abandoned.10
The Scope of the Proposal
The October 28 proposed rule is largely in response to the court’s decision in ABR. EPA now proposes that any material which is generated and reclaimed in a continuous process within the same industry (as defined in the proposal) is not "discarded" for purposes of Subtitle C, provided that the recycling process is "legitimate." As is evident from the underscoring added here for emphasis, the proposed exclusion has a number of qualifying conditions. Under this approach, when generation and reclamation occur on a continuous basis within a single industry (as those terms are defined in the proposal), secondary materials will not be regulated as solid waste.
The agency notes that most comments from industry stakeholders during the development of the proposal focused on the definition of "discarded material." The stakeholders encouraged EPA to go farther and remove recycling from the definition of discarded material altogether.
Existing rules state that materials are not solid waste when they are recycled by being (1) used or reused as ingredients in an industrial process to make a product, provided the materials are not being reclaimed; or (2) used or reused as effective substitutes for commercial products; or (3) returned to the original process from which they are generated, without first being reclaimed or land disposed.11 EPA has imposed the restriction on prior reclamation on all three of these recycling exclusions. A primary impact of the proposal is to allow prior reclamation so long as the reclamation of excluded materials occurs within the generating industry and produces a product or ingredient that can be used or reused without further reclamation. Material is "reclaimed" if it is processed to recover a usable product, or if it is regenerated. Examples are recovery of lead values from spent batteries and regeneration of spent solvents.12
The premise of the proposal, therefore, is that materials that are generated and reclaimed in a continuous process within the same industry will not be considered waste for Subtitle C purposes because the materials remain useful to that industry, and the industry is not finished with the material. Rather than a RCRA Vision 2020, this is indeed a myopic vision of what recycling can and should be. EPA’s rationale for limiting the proposal to reclamation within the same industry is that only the same industry can understand and safely handle the materials. EPA points out that the same industry is likely to use the same raw materials, process them in a similar way, and have expertise in appropriate practices for managing the materials. All this is true. What the proposal neglects to observe is that the highest and best use for these materials may in fact be in other industries where reclamation and management of similar materials as raw materials are commonplace.
Continuous Process Within the Same Industry
The proposal requires that the secondary materials be used in a "continuous process within the same industry." The proposal offers two counterproposals defining this phrase for consideration and comment. First, EPA proposes that while the material must have been generated and reclaimed within a single industry, the generation and reclamation could occur at different locations or facilities. The second option would stipulate that the material would not be eligible if it was reclaimed at a facility that also recycles regulated hazardous waste generated in a different industry. This, of course, would exclude commercial recyclers from participating in the exclusion. The agency solicits comments on these two alternatives. As described below, the adoption of a broader exclusion which does not limit the reclamation to the generating industry would be a far better solution and would render the comparison of these two alternatives moot. Commenters should address the options but encourage the broader exclusion. 13
Same Industry – Use of the NAICS14 Codes15
One of the most troubling aspects of the proposal is the manner in which EPA proposes to define the "same industry." EPA is proposing to identify "same industry" at the industrial group level or the fourth digit of the NAICS code. Two establishments will be considered within the same industry if they share the same NAICS code to the fourth digit. The problem with this approach is that many industrial complexes are comprised of activities which, even if owned by the same company and integrated at the process level, are classified differently at the fourth digit under the NAICS. This would preclude recycling involving reclamation between facilities at the same complex. EPA is proposing to leave in place a number of industry definitions that have developed over time, including, for example, the definitions for primary mineral processing and petroleum industry.
One example of a dilemma that arises from the use of the NAICS code to define industry is when reclamation starts as a sideline process to a particular industry and then grows to a certain level of independence. At some point, the facility becomes a distinct establishment with a different NAICS code. The facility would also risk losing its exclusion should it receive recyclable materials for reclamation from an off-site source from a different industry.
Possible Same Site Exception16
EPA is soliciting comments on the possibility of allowing inter- industry recycling at the same site. Again, this is a logical result, but stakeholders should not take that outcome for granted. Commenters need to provide examples of how the NAICS classification will thwart existing recycling or limit possible future projects. EPA’s rationale for considering the possible exclusion of inter- industry transfers for reclamation at the same site is that the material is unlikely to be discarded, likely to be closely managed and monitored by a single entity familiar with generation and reclamation, and there is no off- site transportation. The agency is laboring too hard to justify retaining jurisdiction over something that should be outside its jurisdiction – the legitimate use of a material that is not discarded. If materials can be legitimately recycled between different industries at the same site, why not between different industries owned by the same company regardless of location or between different industries regardless of company or location? Again, the broader exclusion described below will eliminate the need for agonizing over such distinctions.
Another concept embedded in the proposed exclusion is the concept of cont inuous process. EPA addresses this by requiring that the material be handled exclusively by facilities or entities (excluding transporters) that are within the generating industry, and that the materials not be "speculatively accumulated." The agency will use the existing rules on speculative accumulation that are set forth at 40 C.F.R. 261.1(c)(8).18
The regulations would require a generator seeking to qualify for the exclusion to submit a one-time notice to EPA or to an authorized state of a desire to use the exclusions. This notification requirement would apply only to those facilities which propose to exclude activities from regulation using the new rule.
There are a number of transition issues raised by the proposed deregulation. One interesting aspect of the rule is how EPA proposes to deal with corrective action obligations. If a permitted facility manages materials that are no longer regulated and therefore the facility no longer requires a permit, EPA proposes to keep the permit in place for purposes of corrective action. This presents the interesting outcome in which a facility which should never have been a permitted facility (AMC I and ABR) must now address solid waste management units through the RCRA corrective action process, an obligation which arises only at permitted facilities. While EPA’s approach promotes an important policy objective, the legal rationale seems circular at best.
Criteria for Legitimate Recycling20
Another significant aspect of the proposal is the list of criteria for "legitimate recycling." EPA describes its past efforts to define legitimate recycling starting with the preamble to the 1985 regulations establishing the current definition of solid waste. This was followed by a similar discussion addressing legitimacy as it pertained to burning materials for energy recovery in 1988. Finally, in April of 1989, the Office of Solid Waste consolidated the prior statements into a memorandum identifying a single list of criteria to be considered in evaluating legitimacy. 21 EPA proposes to revise and consolidate the criteria for legitimacy into four criteria. Should EPA or an authorized state determine that a process is not legitimate recycling, the activity is considered waste treatment or disposal and is thus subject to full regulation under Subtitle C of RCRA. If the activity has already commenced, the generator of the recycled material may be subject to enforcement. EPA proposes to use the following four criteria in determining whether recycling of hazardous secondary materials is legitimate:
"Criterion #1: The secondary material to be recycled is managed as a valuable commodity. Where there is an analogous raw material, the secondary material should be managed in a manner consistent with the management of the raw material. Where there is no analogous raw material, the secondary material should be managed to minimize the potential for releases into the environment.
Criterion #2: The secondary material provides a useful contribution to the recycling process or to a product of the recycling process and evaluating this criterion should include consideration of the economics of the recycling transaction. The recycling process itself may involve reclamation, or direct reuse without reclamation.
Criterion #3: The recycling process yields a valuable product or intermediate that is: (i) Sold to a third party; or (ii) Used by the recycler or the generator as an effective substitute for a commercial product or as a useful ingredient in an industrial process.
Criterion #4: The product of the recycling process:
(i) Does not contain significant amounts of hazardous constituents that are not found in analogous products; and
(ii) Does not contain significantly elevated levels of any hazardous constituents that are found in analogous products; and
(iii)Does not exhibit a hazardous characteristic that analogous products do not exhibit."
The first three criteria are familiar and largely self-explanatory. EPA does offer examples of each and a comparison to existing guidance within the preamble to the rule. The fourth criterion should be carefully considered. This criterion continues the long-standing agency preoccupation with "toxics along for the ride." This has always been a troublesome concept in that it assumes that any material that is somehow different from a virgin raw material is suspect and less desirable as a raw material. In many cases, the presence of the additional materials makes no difference to the end product or to the safety or effectiveness of the substitute. In other cases, processes changes can accommodate for the differences with no adverse health or environmental consequence.
EPA has used the subjective concept of "significance" to qualify the fourth criterion. To apply the fourth criterion, one must answer the questions – what amount is a significant amount and what is a significantly elevated level? EPA is not proposing a formula and suggests that this will best be addressed on a case-by-case basis. EPA suggests that evaluating "significance" of levels of hazardous constituents in recycled products for the purpose of this criterion may involve taking into account several factors such as the type of the product, how it is used, and by whom. Specifically, one might consider whether or not the elevated levels of a hazardous constituent compromise in any way the quality of the product.
EPA rejected any kind of numeric limit or bright line test. Likewise, EPA rejected a quantitative risk-based approach due to the potential complexity of such an approach. 22 EPA adds a troubling statement in support of the proposed criterion: "it can be argued that the legitimacy of a recycling process relates more directly to how it compares to normal industrial production rather than the risks that may be posed by recycled products." Many industries have seen the benefits derived from a different paradigm. Process changes designed to accommodate recycled materials are already a reality in many industries, and the true potential for use and reuse of secondary materials in industry rests upon the process innovation. This potential has yet to be adequately explored. A comparison to a normal industrial production process prior to the introduction of recycled materials ignores the possibility of a process change. One must assume that such changes would be labeled "changes along for the ride." Comments should be directed to these points as well.
As proposed, EPA envisions a subjective evaluation and balancing of the criteria. EPA notes that, while in most if not all cases legitimate recycling will conform to each of the four criteria, there may be situations when a recycling activity does not conform to one or more of the criteria but could still be considered legitimate. EPA uses as an example a situation in whic h a secondary material is managed differently from an analogous raw material but satisfies the other three criteria, and management of the material is reasonable and appropriate under the circumstances. EPA envisions that these criteria, if finalized, will be used in the same manner that the current guidance is used. Members of the regulated community are to reach their own conclusions without prior approval of an agency. EPA observes that such conclusions would, of course, be subject to review (second guessed) by EPA or a delegated state.
EPA seeks comments on whether the criteria should be structured in the form of mandatory requirements that must all be met, or perhaps in a system where certain criteria are mandatory and others are not. This is a critical aspect of the proposed regulations for stakeholders. Commenters should emphasize the importance of flexibility in the application of these criteria. EPA cannot anticipate the myriad of possibilities for the reuse of secondary materials. Therefore, the criteria should not be made mandatory but rather should be applied subjectively and subject to an appropriate balancing in appropriate circumstances.
Possible Broader Exclusion – The Right Path Forward23
One of the most significant aspects of the rule package is not in the proposal but rather in the preamble. EPA announces that it is considering and might adopt a broader exclusion. EPA requests comments on this broader exclusion, and stakeholders need to address this issue directly. Under a broader exclusion, EPA would exclude essentially all materials that are legitimately recycled by reclamation, whether the recycling is done within the generating industry or between industries. This would eliminate the NAICS code dilemma and concerns about when a sideline reclamation facility suddenly becomes a separate industry with a new code. It would eliminate the debate over whether activities should be allowed on site between different industries or within the same company. All of these issues would be subsumed within the broader exclusion which EPA states, "if properly crafted, could encourage additional recycling and reuse while protecting human health and the environment."24 Given this acknowledgment, EPA should pursue this option.
The United States Business Council for Sustainable Development 25 presented this case in a recent meeting with Robert Springer, the Director of the Office of Solid Waste. One of the purposes of the meeting was to describe the Council’s efforts to promote by-product synergy projects which involve a number of companies from different industries. In this structured program, companies work together to raise the level of understanding about process differences to develop synergies between by-products or secondary materials and raw material needs. Some of these synergies are actually dependent upon process refinements or changes that are necessary to accommodate a slightly different composition or slate of raw materials or to eliminate unwanted consequences of their use.
In seeking comment on the broader exclusion, EPA notes that it would consider adopting the criteria for legitimate recycling as part of the regulatory exclusion. Without explanation, EPA suggests that it would be necessary to make the definition of legitimate recycling more rigid and confining if the broader exclusion is adopted. For the reasons noted above, stakeholders should encourage EPA to maintain the flexibility envisioned in the discussion of the legitimacy criteria and not convert the criteria into mandatory individual regulatory requirements. Further, EPA notes that the broader exclusion also (1) would include the requirement for notification, (2) would include the prohibition on speculative accumulation, and (3) might require additional reporting and recordkeeping. The potential scope of such reporting and recordkeeping is not defined. If imposed, such a requirement should have a finite timeframe. The objective of the rule is to recognize that materials that are legitimately recycled are not discarded and therefore not wastes. EPA should resist the urge to regulate secondary materials which are being legitimately recycled. These materials are no longer waste. There are other laws and other agencies that address these activities.26 Such laws and agencies already deal with countless daily transactions involving raw materials. The agency encourages stakeholders to comment on the increased recycling and reuse that could result from broadening the exclusion in this way. Those companies engaged in inter-industry recycling or by-product synergy projects aimed at identifying possible synergies must describe the possibilities and encourage EPA to adopt the broader exclusion.
The proposed regulations offer an exciting opportunity to move along the path toward the RCRA Vision for 2020. The agency must be encouraged to use this opportunity to effect the changes necessary to make the Vision a reality. Stakeholders should direct their comments toward this objective.
1 James Morriss is a partner in the Austin Office of Thompson & Knight where he heads the firm’s environmental practice. Jim is the firm’s representative to the United States Business Council for Sustainable Development and has supported that organization’s by-product synergy initiative. He als o has been actively engaged in supporting the legitimate recycling efforts of the firm’s clients since the beginning of hazardous waste regulation.
2 68 Fed. Reg. 61558-61599 (2003).
3 68 Fed. Reg. 61560 (2003).
4 Beyond RCRA: Prospects for Waste & Materials Management in the Year 2020, which is available at EPA’s website at http://www.epa.gov/epaoswer/osw/vision.htm.
5 68 Fed. Reg. 61560 (2003).
6 There remains significant controversy over whether the restrictions on burning secondary materials for energy recovery should be relaxed. The limited comparable fuels exemption continues to frustrate opportunities for sound energy recovery projects.
7 Id. at 1190.
8 American Petroleum Institute v. EPA, 906 F.2d 729 (D.C. Cir. 1990).
9 Owen Electric Steel Co. v. EPA, 37 F.3d 146, 150 (4th Cir. 1994).
10 208 F.3d at 1051-52.
11 40 C.F.R. § 261.2(e).
12 40 C.F.R. 261.1(c)(4).
13 68 Fed. Reg. 61565-61566 (2003).
14 North American Industry Classification System.
15 Id. at 61567-61575.
16 Id. at 61575.
17 Id. at 61575.
18 "A material is ‘accumulated speculatively’ if it is accumulated before being recycled. A material is not accumulated speculatively, however, if the person accumulating it can show that the material is potentially recyclable and has a feasible means of being recycled; and that -- during the calendar year (commencing on January 1) -- the amount of material that is recycled, or transferred to a different site for recycling, equals at least 75 percent by weight or volume of the amount of that material accumulated at the beginning of the period. In calculating the percentage of turnover, the 75 percent requirement is to be applied to each material of the same type (e.g., slags from a single smelting process) that is recycled in the same way (i.e., from which the same material is recovered or that is used in the same way). Materials accumulating in units that would be exempt from regulation under § 261.4(c) are not to be included in making the calculation. (Materials that are already defined as solid wastes also are not to be included in making the calculation.) Materials are no longer in this category once they are removed from accumulation for recycling, however." 40 C.F.R. 261.1(c)(8).
19 68 Fed. Reg. 61580 (2003).
20 Id. at 61581-61588.
21 The criteria from the guidance memorandum are as follows:
§ Is the secondary material similar to an analogous raw material or product?
§ What degree of processing is required to produce a finished product?
§ What is the value of the secondary material?
§ Is there a guaranteed market for the end product?
§ Is the secondary material handled in a manner consistent with the raw material/product it replaces?
§ Other relevant factors (e.g., economics of the recycling process, toxic constituents "along for the ride")?
22 Answering the two questions regarding significance is a rudimentary risk analysis. Companies should have the opportunity to provide a risk analysis if necessary to justify the use of recycled materials in their processes.
23 68 Fed. Reg. 61588-61589 (2003).
24 68 Fed. Reg. 61588 (2003).
25 United States Business Council for Sustainable Development is a non-profit association of businesses whose purpose is to create and deliver value driven sustainable development projects in the United States. See http://www.usbcsd.org.
26 Examples include the U.S. Department of Transportation, the U.S. Consumer Products Safety Commission, state and federal labeling laws and tort laws.
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