EPA Revises Regulations Affecting Recycling of Hazardous Secondary Materials

On December 10, 2014, the United States Environmental Protection Agency (EPA) released its final rule amending the Resource Conservation and Recovery Act (RCRA) Definition of Solid Waste (DSW) rule, making significant revisions to the hazardous secondary materials definitions and exclusions. EPA drafted the revisions in response to a 2010 Settlement Agreement it entered into following an administrative petition by the Sierra Club requesting that EPA repeal its 2008 revisions to the DSW rule.

In particular, the December 2014 rule focuses on regulatory gaps that the Sierra Club had contended provided incentives for third-party hazardous materials recyclers to over-accumulate and mismanage the materials in such a way that could result in releases or dangerous accidents, particularly in locations close to minority or low-income populations.

First, the 2014 DSW rule withdraws the 2008 DSW rule’s exclusion for hazardous secondary materials transferred for legitimate reclamation and replaces it with a more restrictive exclusion for hazardous materials sent for reclamation to a verified recycler. All verified recyclers operating under this provision must have a RCRA permit or a variance, which will allow EPA to ensure that proper safety measures are implemented at those facilities and that the facilities are financially sound and able to fund corrective actions, should that become necessary. This verified recycler exclusion imposes additional community-focused requirements on the recyclers, including a public notice period and an assessment on whether their recycling operations add to the cumulative environmental impacts of their communities.

The verified-recycler exclusion also imposes requirements on the generator of those recycled materials. In particular, in order to take advantage of the verified-recycler exclusion, a generator is required to notify the regulating agency, ensure that hazardous secondary materials are properly contained, and maintain records of all shipments and transfers. Additionally, the rule imposes emergency preparedness requirements on both generators and recyclers of hazardous secondary materials.

Second, the December 2014 DSW rule strengthened EPA’s prohibition on so-called “sham recycling,” stating that materials found to be “sham recycled” are discarded solid wastes not subject to the exclusions. Additionally, EPA revised the definition of “legitimate recycling” to provide a more uniform standard, making it harder for sham recyclers to operate in the marketplace. Specifically, the four mandatory factors (as opposed to only two in the 2008 rule) for legitimate recycling include: (1) the hazardous material must provide a useful contribution to the recycling process or to a product or intermediate of the recycling process; (2) the recycling process must produce a valuable product or intermediate; (3) the generator and the recycler must manage the hazardous secondary material as a valuable commodity; and (4) the product of the recycling process must be comparable to a legitimate product or intermediate. Meeting all four of these criteria may be challenging for industry in many circumstances.

The 2014 DSW rule retains the existing exclusion for hazardous secondary material recycled under the control of the generator and affirms the legitimacy of pre-2008 exclusions such as the scrap metal exclusion. Additionally, the new DSW rule encourages in-process recycling by making the legitimacy determination fairly straightforward for those materials, and encourages remanufacturing by including a remanufacturing exclusion for certain high-value used solvents that are remanufactured back into the commercial grade solvent. These measures will reduce the need for raw materials, thereby reducing the potential adverse environmental impacts associated with their production.

The 2014 revisions to the DSW rule will go into effect 180 days after publication in the Federal Register. In states authorized to administer and enforce a state RCRA program, the individual states will have to adopt the 2014 DSW rule before it becomes effective in those states. The new revisions may well be challenged in court as an overreach of EPA’s authority to regulate only wastes that are actually “discarded,” so further developments in this area are likely in the next several years.

For now, industrial entities that engage in internal reuse of secondary materials, or offsite recycling using third-party recyclers, should review their internal processes and outside recycler relationships in anticipation of being compelled to comply with the new revised DSW rule fairly soon.

For more information, please contact any of the following: Larry Falbe at (312) 715-5223 / lawrence.falbe@quarles.com, Lauren Grahovac Harpke at (414) 277-5183 / lauren.harpke@quarles.com, or your Quarles & Brady attorney.