• July 20, 2017
  • Administrative Watch

    The U.S. Court of Appeals for the District of Columbia Circuit (“the Court”) has vacated parts of the U.S. Environmental Protection Agency (EPA) Definition of Solid Waste Rule (“the Rule”) under the Resource Conservation and Recovery Act (RCRA). The decision will have a significant impact on generators of hazardous secondary materials (HSMs) and facilities that store or recycle them. Although the Court’s decision relaxed some of the requirements of the Rule, facilities still will need to carefully evaluate how to handle and manage HSMs both onsite and offsite.


    In 2015, EPA revised the Rule governing the recycling of certain HSMs (e.g., spent materials, listed by-products, listed sludges) in an effort to cut down on “sham recycling.” The rulemaking required generators of HSMs that were destined for recycling to demonstrate that the recycling of such material is legitimate pursuant to certain “Legitimacy Criteria.” The 2015 rulemaking also required generators that shipped HSMs offsite for recycling to send such materials to RCRA-permitted facilities or to EPA- or state agency-approved “verified recyclers” pursuant to the so-called “Verified Recycler Exclusion.” This exclusion allowed certain HSMs to be considered “reclaimed” and thus not subject to solid waste regulation.

    Industry and environmental groups filed petitions challenging the 2015 rulemaking. On July 7, 2017, in a 2-1 decision, the Court in American Petroleum Institute, et al. v. EPA, ruled largely in favor of industry groups as it vacated parts of the Legitimacy Criteria and the Verified Recycler Exclusion.

    Legitimacy Criteria

    EPA’s 2015 rulemaking required companies to meet four (4) factors (the Legitimacy Criteria) to distinguish legitimate recycling of HSMs from sham recycling:

    1. The HSM 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 HSM must be handled as a valuable commodity; and
    4. The product of the recycling process must be comparable to a legitimate product or intermediate.

    See 80 Fed. Reg. 1,694, 1,719-20 (Jan. 13, 2015).

    The Court addressed Factors 3 and 4 of the Legitimacy Criteria. In challenging Factor 3, industry petitioners argued that EPA did not have the authority to regulate how HSMs are handled prior to entering the recycling process. The Court concluded that EPA indeed had that authority and upheld Factor 3.

    In contrast, the Court struck down Factor 4, referred to as the “Toxics Along for the Ride” Criterion. Factor 4 was intended to prevent recyclers from producing illegitimate recycling products by, for example, incorporating excessively hazardous constituents into a final recycling product to avoid proper disposal of that material. As promulgated by EPA, Factor 4 mandated that the final product contain levels of toxic hazardous constituents comparable to or lower than the original raw material, unless the recycler showed such hazardous constituents were not harmful or the final product of recycling met widely-recognized commodity standards. See 80 Fed. Reg. at 1,725-26. The Court found this standard unreasonable because EPA had failed to articulate when such “contaminated” final products were harmful and acknowledged circumstances in which final products of recycling could contain high levels of toxic contaminants but still be part of a legitimate recycling process.

    Verified Recycler Exclusion

    The 2015 rulemaking also introduced the Verified Recycler Exclusion that allowed certain HSMs to be exempt from the solid waste definition if reclaimed by a “verified recycler.” The exclusion required generators to meet certain requirements if they intended to ship HSMs to a third-party off-site reclaimer. First, the generator was obligated to send its HSMs to off-site reclaimers who either: 1) possessed a RCRA permit; or 2) had applied to EPA or a state agency to obtain a RCRA “variance.” See 80 Fed. Reg. at 1,737. Second, the generator was required to meet “emergency preparedness” standards before shipping materials offsite. See 80 Fed. Reg. at 1,737. Third, HSMs were to be “contained” in units that are in good condition to prevent releases of HSM during storage. See 80 Fed. Reg. at 1,738.

    The Court vacated the Verified Recycler Exclusion’s first condition that limited generators to off-site reclaimers with a RCRA permit or variance. The Court stated that requiring off-site reclaimers to seek agency approval in advance (in the form of a RCRA variance) was not justified by EPA’s assertion that such reclaimers present an increased risk of illegitimate recycling. With this ruling, the Court revived a previously promulgated “Transfer-Based Exclusion.” The Transfer-Based Exclusion allows generators to send HSMs to RCRA-permitted reclaimers as well as to non-RCRA permitted reclaimers, so long as the generator makes reasonable efforts to ensure that the reclaimer intends to legitimately recycle the HSM and not discard it. See 73 Fed. Reg. 64,668, 64,669-70 (Oct. 30, 2008). However, the Court’s decision leaves intact the obligations for generators to meet certain emergency preparedness and containment standards prior to shipping HSMs offsite.