D.C. Circuit Eases Recycling Restrictions

In a July 7, 2017 opinion, the U.S. Court of Appeals for the District of Columbia vacated portions of the U.S. Environmental Protection Agency’s 2015 rule on the definition of solid waste (2015 Rule), which the Agency promulgated under the Nation’s hazardous waste law – the Resource Conservation and Recovery Act (RCRA). See American Petroleum Institute v. EPA, No. 09-1038 (D.C. Cir. 2017) (API). There are many significant rulings in the D.C. Circuit’s decision. This client alert, however, focuses on several key rulings that we believe make it simpler to recycle hazardous secondary materials.

Background

The definition of solid waste, found in 40 C.F.R. § 261.2, is the entry point to RCRA hazardous waste jurisdiction: to be subject to hazardous waste management standards, a material must first be a solid waste. Conceptually, one might assume that if you intend to recycle a material it would not be a solid waste. EPA regulations, however, treat recycled materials as solid waste, which may qualify for an exclusion from the definition of solid waste if rigorous requirements are met. EPA took this approach to distinguish legitimate recycling from “sham” recycling. The concept of sham recycling refers to an attempt by a party who generates a hazardous waste to transfer it to a third-party facility under the guise of recycling when the true intent is to dispose of the material. 

2008 Rule. In 2008, EPA promulgated a rule that was intended to facilitate recycling of hazardous secondary materials (such as spent materials, byproducts, and sludges from industrial operations). Under the 2008 rule, EPA excluded hazardous secondary materials from the definition of solid waste in two circumstances: (1) where a generator controls the recycling of those materials (Generator-Controlled Exclusion); and (2) where a generator transfers the materials to an off-site recycler it has audited to ensure compliance with proper recycling practices (Transfer-Based Exclusion). 73 Fed. Reg. 64668, 64669-64670 (Oct. 30, 2008). To qualify for either exclusion, secondary materials had to be recycled “legitimately,” a term EPA defined by reference to four “legitimacy factors,” which are aimed at distinguishing true recycling from sham recycling: (1) hazardous secondary materials must provide a useful contribution to the recycling process or to a product or intermediate; (2) recycling must produce a valuable product or intermediate;
(3) hazardous secondary material must be managed as a valuable commodity; and (4) the type and concentration of hazardous constituents in a product of recycling must be comparable to a legitimate product or intermediate. Id. at 64700-64706. The first two factors had to be “met” whereas the third and fourth factors merely had to be “considered.”

2015 Rule. In 2015, EPA promulgated various changes to the 2008 rule, two of which were challenged and partially vacated in the API case. First, EPA revised the definition of “legitimate recycling” by among other things requiring that all four legitimacy factors be met (as opposed to allowing mere “consideration” of the third and fourth factors) and providing new ways for a facility to meet the third and fourth factors. 80 Fed. Reg. 1694, 1719 (Jan. 13, 2015). Second, EPA replaced the Transfer-Based Exclusion with the “Verified Recycler Exclusion” as the standard for excluding from the definition of solid waste secondary hazardous materials sent to a recycler. One of the main differences between the predecessor Transfer-Based Exclusion and the new Verified Recycler Exclusion is that under the new exclusion the facility to which secondary materials are sent for reclamation must have either a RCRA permit or a RCRA variance. By contrast, under the Transfer-Based Exclusion a generator merely had to audit the recycler, i.e., make a reasonable effort to make sure that the recycler intended to properly and legitimately reclaim the material.

Key Rulings in API

Both industry and environmental groups challenged the 2015 changes. Although the D.C. Circuit upheld most of the 2015 changes in API, the Court vacated the requirement to meet the Fourth Factor, stating that it was an “unreasonable” requirement, both overbroad and imprecise. The Court also considered the notice and record-keeping requirements associated with the Fourth Factor to be “draconian,” reasoning that “a legitimate product will not morph into waste if its producer fails to file a form (or loses a copy two years later).” (Slip op. at 16.) The Court also vacated most of the Verified Recycler Exclusion and reinstated the 2008 Transfer-Based Exclusion. The Court reasoned that EPA had failed to explain “why the risk that purported third-party recyclers will in reality ‘discard’ the materials is so high that reclamation under the Verified Recycler Exclusion may only proceed on the basis of prior agency approval.” (Slip op. at 32-33.) Two of the requirements of the Verified Recycler Exclusion were left in place by the Court, namely, (1) the new requirement that generators and recyclers meet emergency preparedness requirements that minimize the possibility of accidental releases; and (2) expanded requirements for generators and recyclers to adequately “contain” hazardous secondary materials intended to be recycled. (Id. at 42.) Thus, these two requirements will now become part of the reinstated Transfer-Based Exclusion.

The Future

Many questions remain in the wake of the API decision. For example, how does the decision in API affect recycling in states that have authorized RCRA programs, particularly in authorized states that have not fully adopted the 2008 and 2015 changes to the definition of solid waste? Entities who recycle hazardous secondary material must carefully analyze the requirements of their state hazardous waste program in order to determine whether and how the API decision affects their recycling practices and, if so, the timetable for modifying those practices. Implementation issues at the federal and state level could take years to sort out. 

On the bright side, the API decision expands opportunities for recycling secondary hazardous materials. By vacating the Verified Recycler Exclusion and its mandate to recycle such materials only at RCRA-permitted facilities or those with a RCRA variance, there should be more vendors who can perform recycling, which in turn should lower the cost. The same can be said for the vacatur of the Fourth Factor. The added procedures and testing required for determining if the product of recycling is “comparable” to a legitimate product or intermediate raised costs and thus curtailed legitimate recycling. The elimination of the Fourth Factor both expands the universe of hazardous secondary products that can be considered beneficially recycled (and therefore not wastes) and allows for generators and recyclers to make this determination without the need for agency notice.