Regulatory Developments

Solid Waste Definition Rule Trimmed by D.C. Circuit

In a ruling that may significantly change the way hazardous waste and hazardous materials are recycled and who recycles them under the Resource Conservation and Recovery Act (RCRA), a panel of the U.S. Court of Appeals for the D.C. Circuit upheld in part and vacated in part EPA’s Definition of Solid Waste final rule (January 13, 2015, FR).

The 2-to-1 opinion vacates one of four factors in the test criteria the EPA codified in the final rule to differentiate between legitimate and sham recycling of hazardous secondary materials. Sham recycling is simply explained as disposal disguised as recycling. Also vacated is the final rule’s verified recycler exclusion.

The majority upheld another legitimacy factor, which requires that hazardous secondary materials intended for recycling be handled as valuable commodities.

The ruling responds to a petition by industry, which challenged the legitimacy criteria in the final rule, the verified recycler exclusion, and other requirements affecting spent catalysts and commercial chemical products. The majority said the spent catalyst issue is rendered moot under the majority’s order that the verified recycler exclusion be replaced by the transfer-based exclusion issued in 2008 by the G.W. Bush EPA. The court said it could not rule on the part of the petition addressing commercial chemical products because the EPA had not taken final action on that matter.

The majority’s opinion is densely worded and technical—too technical, according to Judge David Tatel, who dissented from the majority. Entities subject to the rule will need to wait for EPA guidance and rule amendments to fully understand the regulatory impact and how they may amend their handling of hazardous secondary materials. The reasoning behind the two central vacaturs is summarized below.

Factor 4

Factor 4 states that the “product of the recycling process must be comparable to a legitimate product or intermediate.” In the final rule, the EPA stated that this test is needed to prevent recyclers from loading products with hazardous secondary materials that provide no recognizable benefit to the product and are simply “along for the ride.” Under the test, if the recycled product has an analogue—i.e., the actual product it is similar to—the recycled product must exhibit no hazardous characteristic that is absent from the analogue product. Furthermore, says the rule, even if the recycled product and its analogue share the same hazardous characteristics, the amount or levels of hazardous constituents in the product must be comparable to or lower than its analogue’s. If the product fails that test, the EPA grants an exception if the recycler can demonstrate that the product meets widely recognized commodity standards and specifications.

According to the majority, Factor 4 suffers from imprecision.

“[E]ven if EPA could technically say that some small excess of hazardous constituents has been left in the final product, the mere fact of their presence would not constitute a reasonable basis for dubbing the product or the process a sham,” states the majority. “After all, it can be costly to extract tiny amounts of hazardous constituents—potentially on the order of ‘parts per million’—from secondary materials destined for recycling, and no statute has given EPA authority to compel firms to engage in such extraction where failing to do so imposes no health or environmental risk. To rule otherwise would be to disregard [RCRA’s] stated ‘objective’ of ‘encouraging … properly conducted recycling.’”

Furthermore, the exception does not save Factor 4 because of “the draconian character of the procedures it imposes on recyclers,” states the majority.

Verified Recycler Exclusion

This provision requires that third-party reclaimers of hazardous materials possess a RCRA permit, interim permit, or RCRA variance, which is effectively an EPA (or state-level) approval for a firm to operate a third-party reclamation facility.

As noted, the verified recycler exclusion replaced the 2008 transfer-based exclusion. Under the earlier provision, the party off-loading the hazardous materials (the generator) could send them to a reclaimer that possessed a RCRA permit (or interim status). Alternatively, the generator could send materials to a reclaimer that lacked such a permit or status if the generator had made “reasonable efforts” to ensure that the chosen reclaimer intends to properly and legitimately reclaim the hazardous secondary material and not discard it. The reasonable efforts consist of investigating and affirmatively answering specific questions that the regulation posed about the reclaimer.

The verified recycler exclusion also included a new provision requiring the generator to meet special emergency preparedness standards for materials in its custody before shipment. The majority had no objection to the emergency preparedness part of the exclusion.

Elimination of the reasonable efforts provision was another matter. According to the majority, the EPA eliminated the provision because it found that smaller generators would misapply it. The majority found that to be an insufficient reason to eliminate the provision in its entirety.

“A risk that some smaller generators would misapply the reasonable efforts option does not explain why EPA should treat larger generators as prone to making inadequate assessments,” wrote the majority.

Dissent

In his dissent, Tatel calls attention to the “high level of technical expertise” on which the final rule was based. According to Tatel, the court’s task is to ask only whether the rule is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. By extension, courts are not to ask whether a regulatory decision is the best one possible or even whether it is better than the alternatives.

“Rather than substitute its own judgment for that of EPA, this court should defer to the agency’s technical and policy decisions,” concludes Tatel.

The D.C. Circuit’s majority opinion in American Petroleum Institute v. EPA is here.

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