Environmental Appeals Board Narrows The Scope Of Legitimate Recycling of Used Materials

July 25, 2008

In two lengthy decisions, the first issued late last spring and the second late last month, the Environmental Appeals Board (EAB) narrowed the scope of legitimate recycling arrangements, holding that reuse of a material in a downstream process or by a downstream manufacturer must involve the same, or very similar, use as the first use of the material, or otherwise the material will be considered “spent” under the federal hazardous waste rules.

In hazardous waste parlance, a material becomes “spent,” and thus potentially subject to regulation as a hazardous waste, when it is used and becomes contaminated such that it “can no longer serve the purpose for which it was produced” without some type of processing step. However, employing the adage “One man’s garbage is another man’s treasure,” many manufacturers have avoided regulation of their used materials by, for example, piping the material for use in a downstream process, or shipping it to another manufacturer for use in an independent manufacturing process. Typical recycling arrangements include (1) using solvent to dissolve ingredients in a chemical batch process, then separating and reusing the solvent in a later wash up step to remove impurities, and (2) using acids to clean, etch or pickle metal, then shipping the acid solution to a downstream manufacturer to use as an ingredient to make a different product.

These “recycling” arrangements must now be carefully reconsidered in light of the holdings in In re Howmet Corporation, RCRA Appeal No. 05-04, March 24, 2007, and In re General Motors Automotive, NA, RCRA Appeal No. 06-02, June 20, 2008. In Howmet, the EAB ruled that the corporation’s use of potassium hydroxide (KOH) solution to clean castings, and then shipping the used KOH solution to a downstream manufacturer to use as an ingredient to make commercial fertilizer, was not a legitimate recycling arrangement because the downstream use of the KOH solution was too dissimilar to the original use of the KOH solution. In so holding, the EAB narrowly interpreted the phrase “can no longer serve the purpose for which it was produced” in the definition of “spent material.” The EAB held that when dealing with a virgin material that has several potential applications the particular use of the material when initially deployed governs the subsequent determination of when it is spent. The Howmet decision is currently under appeal to the U.S. District Court in D.C.

Recycling material in a manner that “looks too much like disposal” (ex. spraying used oil as a “dust suppressant” or burning it as a fuel) has always been closely scrutinized by U.S. EPA. However, the possibility that the narrow decision in Howmet was influenced by the fact that the end product was a fertilizer to be land applied was eliminated when the EAB issued the General Motors decision last month. That case involved GM’s use of virgin solvents in automotive painting applications, then reusing the solvents to keep the waste paint/resin from clogging downstream piping before sending the solution off-site for disposal or reclamation. Employing the rationale from the Howmet decision, U.S. EPA’s regional enforcement staff argued that GM’s initial use of solvent as a “carrier” for paint pigment/resin was too dissimilar to the solvent’s subsequent use as a “mobilizer,” and thus the solvent was spent and subject to regulation while being transported in the downstream piping. The staff also contested the effectiveness of the solvent as a mobilizer and the quantity of solvent used.

In a decision that exemplifies the fact-intensive, “slippery slope” established in the Howmet decision, the EAB reaffirmed its strict interpretation of the term “spent material,” but then took over 100 pages to decide that it could not determine on the facts presented whether GM’s subsequent use of solvent was sufficiently similar to avoid regulation as a spent material. Instead, the EAB remanded the case back to the administrative law judge for further fact-finding on the similarity between the two uses, the effectiveness of the subsequent use, and the necessity of the amount of solvent used.

In the Howmet and General Motors decisions, the EAB’s narrow focus on the similarity between the initial and subsequent use of a material misses the point. In terms of protecting human health and the environment, it makes no difference whether the subsequent use of a material is the same as, similar to, or even completely unrelated to, its initial use. As long as the subsequent use constitutes the legitimate reuse of a valuable material, and not “reclamation” of the material as a whole or of one of its hazardous constituents, the material is not “spent” and the hazardous waste rules should not apply. Unfortunately, instead of focusing on, for example, the role that Howmet’s KOH solution played as ingredients in the manufacture of fertilizer, the EAB entangles itself in a fact intensive inquiry regarding how closely related initial and subsequent uses of a material are to one another, thus leaving the regulated community uncertain about the continued legitimacy of many traditional recycling arrangements.

Until the federal courts weigh in, the two administrative law decisions will guide U.S. EPA’s enforcement staff during hazardous waste inspections. Prudent manufacturers should therefore re-evaluate their internal manufacturing processes and outside recycling arrangements to focus on the similarity between initial and subsequent uses of materials and the effectiveness and efficiency of the subsequent uses. Clarifying the language of internal process manuals and recycling contracts may also help to minimize the risk of enforcement.

The lawyers and professional staff of the Frost Brown Todd Environmental Department are available to consult with manufacturers to evaluate their internal and external recycling arrangements in light of the new decisions.

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