are currently excluded from the definition of solid waste according to
other, existing provisions of 40 CFR part 261. For example, the wood
preserving exclusion in 40 CFR 261.4(a)(9) includes conditions for
managing materials on drip pads. Today's proposed exclusion, if
finalized, would not supersede or otherwise affect this conditional
exclusion; such hazardous secondary materials would need to continue
being managed in accordance with that existing exclusion.
    Today's proposed exclusion specifies three restrictions, in
addition to conditions for both generators and the reclaimers to whom
excluded materials would be transferred. One restriction is that
materials that are speculatively accumulated would not be eligible for
the exclusion. Restrictions on speculative accumulation (see 40 CFR
261.1(c)(8)) have been an important element of the RCRA recycling
regulations since they were promulgated on January 4, 1985. According
to this regulatory provision, a hazardous secondary material is
accumulated speculatively if the person accumulating it cannot show
that the material is

potentially recyclable; further, the person accumulating the hazardous
secondary material must show that during a calendar year (beginning
January 1) the amount of such material that is recycled, or transferred
to a different site for recycling, must equal at least 75% by weight or
volume of the amount of that material at the beginning of the period.
This provision already applies to hazardous secondary materials that
are not otherwise considered to be wastes when recycled, such as
materials used as ingredients or commercial product substitutes,
materials that are recycled in a closed-loop production process, or
unlisted sludges and byproducts being reclaimed.
    A second restriction or pre-condition specified in the proposed
exclusion is that excluded hazardous secondary materials would need to
be transferred directly from the generator to the reclaimer, and not be
handled by anyone else other than a transporter. Thus, a generator who
wished to maintain the excluded status of his hazardous secondary
materials would not be able to ship those materials to a ``middleman,''
such as a broker. This restriction is consistent with a premise
underlying this proposed exclusion--that is, in order to ensure that
unregulated materials will not be discarded, generators should have a
reasonable understanding of who will be reclaiming the materials and
how they will be managed and reclaimed, and a reasonable assurance that
the recycling practice is safe and legitimate (see the following
discussion of the proposed condition for ``reasonable efforts''). A
generator who ships materials to a middleman such as a broker typically
does not know who will ultimately manage and reclaim them, or how they
will be reclaimed. Thus, we believe that this restriction helps ensure
that materials that become unregulated under the terms of this
conditional exclusion will not be discarded by the generator. The
Agency requests comment on this aspect of the proposed exclusion.
    The Agency recognizes that, in some cases, recycling of an excluded
hazardous secondary material may involve more than one reclamation
step. For example, a recyclable hazardous secondary material such as an
electroplating waste might have a relatively high moisture content, and
a somewhat variable chemical composition. Such materials might thus
need to be dried and blended to a suitable, consistent specification
before they are amenable to a ``final'' reclamation process (e.g.,
metals smelting). In this example, the two different reclamation
processes might be conducted by different companies and/or at different
facilities. The Agency sees no reason to discourage this kind of
recycling, and we are thus proposing that today's transfer-based
exclusion would be available for materials that are recycled by means
of one or more reclamation processes. Note, however, that the condition
for generators to make ``reasonable efforts'' under the terms of this
exclusion would apply in the same way, regardless of how many
reclamation steps were involved with recycling of an excluded material.
In other words, if the excluded hazardous secondary material were
reclaimed by more than one facility or company, the generator of such
material would need to make ``reasonable efforts'' to examine each
facility or company in order to ensure that the hazardous secondary
materials will be safely and legitimately recycled. We believe that
this is a consistent application of the idea of requiring ``reasonable
efforts'' as a condition of this proposed exclusion; where recycling of
a hazardous secondary material involves more than one reclamation step
at more than one facility, generators should nevertheless be well
informed as to how the materials will be reclaimed, and by whom,
throughout the recycling process.
    The third specified pre-condition is that, for all hazardous
secondary materials that would be excluded under 40 CFR 261.4(a)(24),
generators and reclaimers that are currently subject to the hazardous
waste regulations would need to submit a one-time notice to EPA or the
authorized state. The notice would need to identify the name, address,
and EPA ID number (if applicable) of the generator or reclaimer, the
name and phone number of a contact person, the type of hazardous
secondary material that would be managed according to the exclusion,
and when the hazardous secondary materials would begin to be managed in
accordance with the exclusion. A revised notice would be required to be
submitted in the event of a change to the name, address, or EPA ID
number of the generator or reclaimer or a change in the type of
material recycled.
    The intent of this proposed notification requirement is to provide
basic information to regulatory agencies about who would be managing
hazardous secondary materials under the exclusion, and the types of
materials that would be recycled. We believe our authority to request
such information is inherent in our authority to determine whether a
material is discarded, and we consider this to be the minimum
information needed to enable credible evaluation of the status of a
material under section 3007 of RCRA. We also note after EPA promulgates
regulations listing a material as a hazardous waste or identifying it
by its characteristics, section 3010 of RCRA requires generators of
such materials to submit a notification to EPA within 90 days. Since
the changes proposed today could substantially affect this universe of
facilities in the Subtitle C system, we believe the notifications are
appropriate and useful.
    The Agency requests comment on alternative notification
requirements for this exclusion. One such alternative would be to
require that more detailed information be provided in the notice, such
as identification of the reclamation facility to which it will be
shipped, how it will be stored at the generator's facility, and/or a
detailed characterization of the hazardous secondary material and of
the recycling process.
    Another option being considered with regard to notification would
be a requirement that it be signed by an authorized representative. In
addition, we are considering the option of requiring persons using this
exclusion to submit periodic (e.g., annual) reports detailing their
recycling activities, to provide information on the types of volumes of
hazardous secondary materials recycled, to whom the materials were sent
for reclamation, the types of products that were produced from the
reclamation processes, or other relevant information. We are also
considering (and soliciting comment on) the option of requiring the
information to be submitted in a particular format, or submitted
electronically, and whether, in lieu of sending it to the implementing
agency, it should be maintained at the facility.
    EPA notes that the information discussed above can be difficult for
regulatory authorities to retrieve and use if it is not placed into a
data management system. Similarly, using different notification
procedures and data management systems for different regulated
materials can be confusing and time-consuming for the regulated
community. For these reasons, the Agency requests comment on whether
the Subtitle C Site Identification Form (EPA Form 8700-12) or the
comparable state form should be used to provide the information
required in this supplemental proposal. This form is used to enter data
into the RCRAInfo data management system managed by the states and EPA.
To implement use of this form for the notification

requirements proposed today, we would revise the form to include a
section for materials covered by this exclusion, with spaces for the
appropriate data elements.

C. Conditions

    Today's proposed conditional exclusion for transferred materials
specifies conditions for generators, as well as the reclaimers to whom
generators transfer their hazardous secondary materials.
1. Conditions for Generators
    In addition to the three pre-conditions described above, EPA is
proposing that generators who wish to avail themselves of the exclusion
for transferred materials must satisfy two basic conditions: record
keeping, which includes export notification, and ``reasonable
efforts,'' which in effect would require the generator to make an
assessment of the reclaimer so as to ensure that the hazardous
secondary materials he or she generates will be recycled legitimately
and would allow the Agency to determine that the materials are not
discarded.
    Recordkeeping. In order to allow for adequate oversight of
generators who manage hazardous secondary materials in accordance with
this exclusion, we are proposing that such generators maintain for a
period of three years certain records that document shipments (i.e.,
transfers) of excluded hazardous secondary materials to reclamation
facilities. Specifically, the generator would need to maintain, for
each shipment of excluded material, documentation of when the shipment
occurred, who the transporter was, the name and address of the
destination reclamation facility, and the type and quantity of the
hazardous secondary material in the shipment. We are not proposing to
prescribe any specific template for these records, or require that they
be maintained in a particular format (e.g., paper vs. electronic
records).
    It is our understanding, supported by the information in the study
of current good recycling practices, that generators who are concerned
about potential environmental liability maintain these types of records
as a routine business matter. Thus, we expect that this record-keeping
condition will impose a minimal additional paperwork burden for those
facilities. We also believe that this recordkeeping condition will help
to clarify what ``appropriate documentation'' the generator would need
to provide in the event of some type of RCRA enforcement action (see 40
CFR 261.2(f)). This proposed condition is also very similar to the
recordkeeping condition that currently applies to excluded hazardous
secondary materials used to make zinc fertilizer (see 40 CFR
261.4(a)(20)(ii)(D)). We are also requesting comment on whether to
require the generator to maintain a copy of a confirmation of the
receipt of the hazardous secondary material by the reclaimer. Based on
our conversations with commercial recycling facilities, they routinely
issue receipt confirmations or ``recycling certificates'' as a way of
helping the generator verify that the hazardous secondary material
reached its intended destination. The Agency solicits comment on this
proposed condition for recordkeeping, including whether retention of
confirmation of receipt is a normal business practice.
    We considered additional record keeping conditions for generators
who would operate under this proposed exclusion, but are not proposing
them today, primarily because we are committed to limiting such
conditions to those we believe are essential to allowing proper
oversight of hazardous secondary materials that are managed outside of
the existing RCRA hazardous waste regulatory system. Examples of such
additional conditions would include more thorough characterization of
the materials that are transferred for reclamation, the types of units
in which they were accumulated at the generating facility, how they
were transported (e.g., by truck), whether or not the hazardous
secondary materials were transported as a DOT hazardous material, the
date the hazardous secondary materials were generated, the quantity of
hazardous secondary materials generated, and other similar conditions.
We request comment on whether such additional record keeping conditions
or others not mentioned here are warranted for generators who would
manage materials under this proposed exclusion.
    Similarly, under today's supplemental proposal, exporters of
hazardous secondary materials that are excluded under 40 CFR
261.4(a)(24) would be required to notify the receiving country through
EPA and obtain consent from that country before shipment of the
hazardous secondary materials could take place (see 40 CFR
261.4(a)(25)). This requirement would serve as a notification to the
receiving country so that it can ensure that the hazardous secondary
materials are recycled rather than disposed. As an additional benefit,
the receiving country has the opportunity to consent or not based on
its analysis of whether the recycling facility can properly recycle the
hazardous secondary materials and manage process residuals in an
environmentally sound manner within its borders. EPA believes that
sections 2002, 3002, 3007, and 3017 of RCRA provide authority to impose
this condition because such notice and consent help determine that the
materials are not discarded.
    Under today's supplemental proposal, hazardous secondary materials
that are exported from the United States and recycled at a reclamation
facility located in a foreign country are not solid wastes, provided
that the exporter complies with the requirements of 40 CFR
261.4(a)(24)(i)-(iv) and notifies EPA and obtains a subsequent written
consent forwarded by EPA from the receiving country. The provisions
that we are proposing today in 40 CFR 261.4(a)(25) require exporters to
notify EPA of an intended export 60 days before the initial shipment is
intended to be shipped off-site. The notification may cover export
activities extending over a 12 month or shorter period. The
notification must include contact information about the exporter and
the recycler, including any alternate recycler. The notification must
include a description of the manner in which the hazardous secondary
materials will be recycled. It must also include the frequency and rate
at which they will be exported, the period of time over which they will
be exported, the means of transport, the estimated total quantity of
hazardous secondary materials to be exported, and information about
transit countries through which such materials will pass. Notifications
must be sent to EPA's Office of Enforcement and Compliance Assurance,
which will notify the receiving country and any transit countries. When
the receiving country consents in writing to the receipt of the
hazardous secondary materials, EPA will forward the written consent to
the exporter. The exporter may proceed with shipment only after it has
received a copy of the written consent from EPA. If the receiving
country does not consent to receipt of the hazardous secondary
materials or withdraws a prior consent, EPA will notify the exporter in
writing. EPA also will notify the exporter of any responses from
transit countries. Exporters must keep copies of notifications and
consents for a period of three years following receipt of the consent.
These procedures are similar to those required for exports of hazardous
waste under 40 CFR Subpart E, except for the use of the hazardous waste
manifest.
    Reasonable Efforts. Today's supplemental proposal would require
generators to make ``reasonable efforts'' to ensure that their
materials are safely

and legitimately recycled, before shipping or otherwise transferring
them to a reclamation facility. In effect, this would require the
generator to perform a type of ``environmental due diligence'' of the
reclaimer in advance of transferring the hazardous secondary materials.
We believe that today's proposed condition for reasonable efforts
reflects, and would perhaps reinforce, the methods, such as audits,
that many generators of hazardous secondary materials now use to
maintain their commitment to sound environmental stewardship, and to
minimize their potential regulatory and liability exposures.
    Some generators, particularly those who generate relatively large
volumes of hazardous secondary materials, audit recyclers before
shipping such materials to them. EPA's study of good practices for
recycling quotes one large recycling and disposal vendor as stating
that of its new customers, sixty percent of the large customers and
thirty to fifty percent of the smaller customers now perform audits on
them. Under current practices, such audits can involve a site visit to
the recycling facility, and an examination of the company's finances,
technical capability, environmental compliance record, and housekeeping
practices. (Note: Audits that are currently conducted may or may not
cover all of these areas.) According to those interviewed as part of
our recycling study, auditing a recycler typically costs the generator
from two to five thousand dollars, and in some cases more, depending on
how thorough the audit is, and whether it is conducted by the
generator's own personnel, or by an outside consultant. The study also
identified at least one organization which conducts audits at several
hundred recycling and other waste handling facilities per year. This
organization audits overseas facilities, as well as domestic recyclers,
and re-audits facilities on a more or less ongoing basis. Membership in
this and similar organizations, by spreading the expense of conducting
audits among a number of companies, gives a generator a means of
reducing the cost of this type of ``environmental due diligence'' even
further. Such auditing ``consortiums'' also reduce costs for the
facilities that are audited, since fewer audits need to be conducted by
individual generators. Note, however, that third-party auditors do not
generally draw any conclusions based on their audits or provide a
``certification'' with respect to reclaimer operations, so the
generator would still be expected to decide if the reclaimer is
acceptable.
    Today's proposed condition that addresses ``reasonable efforts'' is
intended to reflect and capture in a regulatory context how many
generators currently inquire and make decisions about whom they should
do business with, and how they manage their potential liability and
regulatory non-compliance risks.
    Currently, under 40 CFR 262, a generator must make a hazardous
waste determination and thus, already has an obligation to determine
whether the waste is subject to regulation. EPA believes that to make a
parallel determination that hazardous secondary materials are not solid
wastes because they are destined for reclamation and are not discarded,
the generator must make a reasonable effort to ensure that the
reclaimer intends to legitimately recycle the material pursuant to 40
CFR 261.2(g) and not discard it, and that the reclaimer will manage the
material in a manner that is protective of human health and the
environment.
    EPA is also proposing that the generator can use any credible
evidence available in making his reasonable efforts, including
information gathered by the generator, provided by the reclaimer, and/
or provided by a third party, in lieu of personally performing an
environmental audit. (In fact, in some cases, the generator may not be
an expert in different aspects of recycling, and reliable third-party
information or judgment would play an important part in the generator's
conclusion.) For example, the generator might hire an independent
auditor to review the operations of a recycler. Also, the generator
might rely on third-party certifying bodies to provide a reasonable
level of confidence that a recycler would safely manage his materials.
Trade associations might make available to their members information on
specific facilities that could be used to determine that the facility
is safely and legitimately recycling the hazardous secondary material.
Likewise, a parent corporation might perform an environmental audit of
a recycler, and the audit could then be used by several of the
company's facilities. In fact, EPA believes that many reputable third
party auditors, and trade associations that might make available to
their members information on specific facilities, already assemble the
types of information that would be needed for a generator to determine,
based on credible evidence, that the hazardous secondary material is
being legitimately recycled. EPA would encourage this type of pooling
of information in order to reduce the burden and take advantage of
specialized technical expertise.
    This proposed provision requiring reasonable efforts by generators
would only apply to generators who send hazardous secondary materials
to recyclers that are not operating under RCRA Part B permits or
interim status standards. RCRA permitted facilities and interim status
facilities are already subject to stringent design and operating
standards, must demonstrate financial assurance, are subject to
corrective action requirements in the event of environmental problems,
and are typically given more thorough oversight than facilities without
RCRA Part B permits. Thus, the Agency believes that permitted and
interim status recycling facilities provide generators with
environmental assurances that would ensure the hazardous secondary
materials sent to such a facility are not discarded. Not requiring
reasonable efforts for generators who ship hazardous secondary
materials to RCRA permitted or interim status recycling facilities
would likely be of particular benefit to relatively smaller volume
generators who may not have the resources required to undertake
``reasonable efforts.''
    EPA requests comment on whether to require generators to maintain
at the generating facility documentation showing the reasonable efforts
made before transferring the hazardous secondary materials to the
reclamation facility. Such records would presumably include copies of
audit reports, and/or other relevant information that was used as the
basis for the generator's determination that the reclamation facilities
to which the hazardous secondary materials were sent would legitimately
recycle the hazardous secondary material in a protective manner.
Requiring specific documentation would help EPA or the authorized state
to determine whether the generator did make reasonable efforts to
ensure that his hazardous secondary material was not discarded.
    In addition, EPA requests comment on whether, as part of the
documentation, the generator should also be required to maintain at the
generating facility a certification statement, signed and dated by an
authorized representative of the generator company, that for each
reclamation facility to which the generator transferred excluded
hazardous secondary materials, that the generator made reasonable
efforts that the hazardous secondary material was legitimately
recycled. Such certification statement could, for example, be worded as
follows:

    ``I hereby certify in good faith and to the best of my knowledge
that, prior to arranging for transport of excluded hazardous
secondary materials to [insert name of reclamation facility],
reasonable efforts were made to ensure that the hazardous secondary
materials would be recycled legitimately, and otherwise managed in a
manner that is protective of human health and the environment, and
that such efforts were based on current and accurate information.''

    Today's proposed condition for reasonable efforts is in effect a
general standard; we are not proposing specific questions that
generators would need to assess in satisfying this condition of the
exclusion. However, we acknowledge that specifying in more explicit
terms the questions that should be examined in making such reasonable
efforts could provide more certainty to generators, as well as
overseeing agencies. On the other hand, more explicit provisions for
defining reasonable efforts in this context could also limit a
generator's flexibility. The Agency requests comment on whether more
specific provisions to define reasonable efforts for the purpose of
this exclusion should be specified in the final rule.
    If EPA were to specify in more explicit terms how generators should
perform reasonable efforts with respect to this regulatory exclusion,
one approach could be to identify specific questions that generators
would need to address in satisfying this condition. Such questions
would be focused on ensuring that the hazardous secondary material will
not be discarded. The following are examples of possible questions that
EPA could specify in the final regulatory condition for determining
reasonable efforts, with an explanation of how each question could
potentially assist in determining that the hazardous secondary material
is not discarded. EPA then outlines two options for how to determine
``reasonable efforts;'' the first option would use the broader list of
questions (A through F) and the second option would use a subset of
questions (A and F) that some believe have a more bright-line nature.
EPA requests comment on whether any or all of these questions should be
included in the regulation (including the advantages and disadvantages
of the various questions, as well as of the two options outlined
below), and if there are other questions that should be also be
considered.
    (A) Has the reclaimer notified the appropriate authorities pursuant
to Sec.  261.4(a)(24)(iii) and does he have financial assurance as
required under Sec.  261.4(a)(24)(v)(D)?
    (B) Does the reclamation facility have the equipment and trained
personnel to safely recycle the hazardous secondary material?
    (C) Are there any unresolved significant violations of
environmental regulations at the reclamation facility, or any formal
enforcement actions taken against the facility in the previous three
years for violations of environmental regulations? If yes, then the
generator must have credible evidence that the reclaimer will manage
the materials safely.
    (D) Does the material being recycled provide a useful component
that will be reused in the product of the recycling process or aid in
the recycling process itself?
    (E) Is the product (or intermediate) of recycling at the
reclamation facility a generally traded commodity meeting applicable
specifications? If not, is there other available information, such as
sales records or long-term contracts, demonstrating that there is a
reliable market for the product (or intermediate)? If not, then the
generator must have credible evidence that the recycling at the
reclamation facility will produce a valuable product or intermediate.
    (F) Does the reclamation facility have the permits required (if
any) to manage the residuals (if any) generated from reclamation of the
excluded hazardous secondary material? If not, does the reclaimer have
a contract with an appropriately permitted facility to dispose of the
residuals (if any) generated from the reclamation of the excluded
hazardous secondary material? If not, then the generator must have
credible evidence that the residuals generated from the recycling of
the excluded secondary hazardous material will be managed in a manner
that is protective of human health and the environment.
    The first possible question (A) focuses on whether the recycler has
met two of the requirements he must fulfill before accepting excluded
hazardous secondary materials for reclamation: notification of the
appropriate regulatory authority that he plans to reclaim excluded
hazardous secondary material (see Section X.B of today's proposal), and
establishment of financial assurance to cover the costs of managing any
hazardous secondary materials that remain if the facility closes (see
Section X.C.2 of today's proposal). If a recycler were found to have
failed to meet these requirements then he will have also failed to show
a good faith effort towards demonstrating that he intends to recycle
the material and not discard it, and will manage the material in a
manner that is not protective of human health and the environment.
    The second possible question (B) focuses on the technical
capability of the recycler, the most basic of requirements for ensuring
safe recycling of hazardous secondary material. If a reclamation
facility were found to not have adequate equipment or trained
personnel, it raises serious questions as to whether the facility would
be engaged in safe recycling.
    The third set of possible questions (C) focuses on the compliance
history of the recycler. Although compliance data are an imperfect tool
for determining whether a recycler would safely manage the hazardous
secondary material, EPA believes that they are a reasonable starting
point. Facility-specific enforcement data on unresolved alleged
significant violations and on formal enforcement actions (by both EPA
and states) and specific case information for the formal enforcement
actions are readily available on EPA's public Web site at http://www.epa.gov/echo/.
 While the presence of a violation does not

automatically mean that the facility would not recycle the hazardous
secondary material safely, it would raise questions and would likely
require additional information from the facility. If the generator
provides reasonable documentation that the enforcement data are
unrelated to the facility's commitment to manage the hazardous
secondary material safely or that the violation has been corrected and
the facility is back in compliance, then that would satisfy this aspect
of the reasonable efforts determination.
    The fourth possible question (D) focuses on the usefulness of the
secondary material to the recycling process. EPA's study of the
potential effect of market forces on the recycling of hazardous
secondary materials shows that there is a particular incentive for
materials to be recycled when it can be done at a lower cost than
disposing of the material. In some cases, however, a hazardous
secondary material with little value can be put into a ``recycling''
process, but not add anything of value either to the end product or to
the process itself. In such cases, the hazardous secondary material is
effectively being discarded rather than recycled. A material being
legitimately recycled can contribute value to the process in two ways.
The recycled material can contain a constituent that is being reused
and which also appears in the final product. Alternatively, the
material being recycled can aid in the process itself, such as by
replacing a raw material that would otherwise be needed. For example, a
hazardous

secondary material may act as an important catalyst or a carrier in a
process, but not end up in the final product. To ensure that its
hazardous secondary material is being properly recycled, a generator
would need to ensure that his material contributes to the process in
one of these ways.
    The fifth set of possible questions (E) focuses on the products of
recycling. According to EPA's study of the potential effect of market
forces on the management of recyclable hazardous secondary materials,
there is a relationship between the value of the product from recycling
and the likelihood of successful recycling. Products with little or no
value can result in recyclable materials being over-accumulated and
mismanaged. Mismanagement of recyclable materials was a major cause of
environmental damage in forty percent of the cases that EPA has
studied. To provide assurance that the products created from the
hazardous secondary materials are in fact valuable, the generator would
need to determine if the products are general commodities that meet
applicable standards, or that there is a reliable market based on sales
records or long-term contracts.
    For most recycled products, this determination would be
straightforward and the product specifications are well known. Metals
reclamation and solvents, for example, results in the production of
valuable products that are readily traded on the open market. Other
products, however, may be unique or recycled in a different manner and
may require a closer look to determine if they meet minimum standards.
For example, in one of the damage cases, the reclamation facility used
spent plastic blast media to make certain construction materials, which
are a generally traded commodity with rigorous standards. However, in
this case, the ``recycling'' process resulted in cinder blocks that
would crumble on contact, and concrete slabs that would not support the
weight of a person. In some cases, there may be no formal standard for
a product, but a commonsense informal standard would still apply,
particularly in regards to toxic constituents. For example, in another
of the damage cases, children's play sand was made from foundry sands
highly contaminated with lead, which, in this situation would not meet
such a commonsense standard. There are also other instances in the
damage cases of recyclers marketing their product as appropriate for
``fill'' despite high levels of toxic constituents. In one case, a
battery recycler distributed material from old battery casings to a
community to be used as fill and driveway paving material, resulting in
elevated levels of lead at 96 of the 109 properties. In order to
determine whether a reclamation facility is legitimately recycling, the
generator will need to check to make sure that the recycling results in
a valuable product or intermediate.
    Although a typical audit of a recycling facility would include an
examination of the facility's finances, EPA does not have information
on whether this financial evaluation would include an investigation as
to whether the recycling process results in a valuable product. EPA
requests comment on how including such a question might affect the
scope of a typical audit.
    The sixth set of possible questions (F) focuses on another major
cause of environmental problems from hazardous secondary material
recycling: the management of the residuals. Roughly one-third of the
damage cases that EPA documented were caused by mismanagement of the
residuals from recycling. Because the residuals from recycling can
contain the hazardous constituents that originated with the hazardous
secondary materials, it is important that the generator understands how
those residuals will be disposed. These residuals may or may not be
regulated hazardous wastes, but in either case, the generator would
need to determine that they are managed in units that have the
necessary permits (either solid waste permits or hazardous waste
permits) or otherwise comply with applicable environmental standards
(whether federal or state), such that the material is being managed in
a manner that is protective of human health and the environment.
    In drafting these possible questions to establish reasonable
efforts, we have attempted to write them in as an objective a manner as
possible, but we recognize that answering these questions still
requires a certain amount of judgment. We understand that generators
might prefer more definitive criteria. Therefore, we ask for
suggestions on how the possible reasonable efforts questions (if they
are included in the regulation) could be more objective, yet provide
the necessary information, or any other information that should be
required for making a reasonable efforts determination.
    In particular, as noted at the beginning of this discussion, EPA
requests comment on the alternative option of focusing ``reasonable
efforts'' only on questions A and F above. This second of the two
options would limit the generator's reasonable efforts requirement to
determining whether the reclaimer has notified EPA or the authorized
state that he is engaged in recycling excluded hazardous secondary
material; whether the recycler complies with the financial requirements
of this part; and whether the reclaimer has obtained the appropriate
permits for managing residuals onsite or, alternatively, ships the
material offsite under a contract with an appropriately permitted
facility. These requirements would assure the generator that the
reclaimer's operations are known to the regulatory authority and
therefore can be inspected for compliance, that residuals would be
properly managed (thus addressing the second most common environmental
problem in the recycling case studies EPA has analyzed), and that
financial assurance would cover the cost of facility closure and other
potential environmental liabilities. While this list would not be as
comprehensive, this option of focusing on a set of criteria that some
believe is of a more bright-line nature could make it easier for the
generator to determine whether the criteria have been met and thereby
make, in good faith, a certification that would demonstrate
``reasonable efforts.''
    In addition, EPA requests comment on how difficult it would be for
a generator to address and certify in good faith the responses to
questions B through E. In this regard, EPA requests comment on whether
generators already possess, or would be able to acquire through
reasonable efforts, the information and ability necessary to evaluate
the relevant aspects of the recycling industry, especially in
situations where the generator does not work in that industry or
otherwise have a reason to be familiar with it. For example, under
question (B), to what extent do generators already posses, or would be
able to acquire readily, the information and ability needed to evaluate
the adequacy of ``the equipment and trained personnel'' in a different
industry than the one in which the generator operates? Similarly, under
question (E), to what extent do generators already possess, or would be
able to acquire readily, the required knowledge of markets (in which
they might not participate) for purposes of determining whether
something constitutes a ``valuable product or intermediate''?
    EPA also requests comment on whether, if the final regulation does
include specific questions for the generator to consider when making
reasonable efforts, (1) should all generators be required to answer
those questions and document their responses to each of them--that is,
this

documentation would be a condition of the exclusion, or (2) should
generators have the option of choosing to answer and document their
response to these sets of questions or not. Under the latter approach,
if a generator chooses to meet his burden of an objectively reasonable
belief that his materials would not be discarded and would be managed
in a manner that is protective of human health and the environment by
answering these sets of questions, then the generator would have met
his obligation under the regulations. Alternatively, the generator
under the latter approach could meet his burden of proof based on other
considerations, but without any assurance that a court, if the Agency
were to undertake an enforcement action, would not later decide that
the information he relied on did not support an objectively reasonable
belief that his materials would not be discarded or would be managed in
a manner that is protective of human health and the environment.
However, under both approaches, if a generator meets the burden of
proof that his decision to send his materials to a reclaimer was based
on an objectively reasonable belief that the hazardous secondary
materials would not be discarded and would be managed in a manner that
is protective of human health and the environment, then the Agency
would consider that the generator met his obligation under the
regulations.
    Note that codifying ``reasonable efforts'' standards that the
generator would certify have been met would have the effect of placing
on the generator the responsibility of assessing the recycler and
ensuring that the hazardous secondary materials would not be discarded.
EPA is seeking comment on this aspect of the proposal. Further, the
Agency seeks comment on whether any or all of the questions are
appropriate for the generator to answer in making reasonable efforts to
ensure that the reclaimer intends to legitimately recycle the material
and will not discard it pursuant to the criteria in 261.2(g), and that
the reclaimer will manage the material in a manner that is protective
of human health and the environment.
    Of course, regardless of the type of information/questions EPA may
include in the final rule, if any, the generator could choose to seek
additional information or ask additional questions, and as shown in
EPA's study of good recycling practices, many generators already do so.
EPA anticipates generators may seek additional information in
determining that their hazardous secondary materials will not be
discarded due to concerns about CERCLA liability (which is unaffected
by today's proposal, see Section XIII.D. of today's proposal).
    EPA also requests comment on the relationship between the
reasonable efforts questions and legitimacy (discussed in more detail
in section XI of today's preamble). Two of the questions identified
above, questions D and E, are related to the two factors that EPA is
proposing today to be the ``core'' considerations for determining
whether a recycling operation is legitimate, rather than sham recycling
(i.e., whether the hazardous secondary material makes a useful
contribution, and whether the recycling process results in a valuable
product). EPA believes that it is appropriate to include these concepts
in ``reasonable efforts,'' thus allowing the generator to make only one
determination before sending hazardous secondary material for
recycling. In other words, if these reasonable efforts questions are
codified in the regulations, EPA is proposing that by satisfying
reasonable efforts, the generator would have also satisfied the
obligation to determine his hazardous secondary material would be
legitimately recycled per proposed 40 CFR 261.2(g). However, because
EPA is also requesting comment on recordkeeping and certification
requirements related to reasonable efforts, incorporating questions D
and E could alter the implementation of the legitimacy determination
for materials excluded under this provision. EPA requests comment on
whether to keep the legitimacy determination an independent requirement
for generators who would claim today's proposed exclusion and not
directly link it to ``reasonable efforts.''
    Finally, EPA also solicits comment on whether the frequency of
periodic updates of the ``reasonable efforts'' should be identified in
the regulations, or whether that question should be left to individual
situations applying an objectively reasonable belief standard.
Information on industry standards for facility audits of off-site
activities, including how frequently they are conducted, would be
especially helpful.
    Storage conditions. As with the proposed exclusion for hazardous
secondary materials reclaimed under the control of the generator, if
the generator manages the hazardous secondary material in a land-based
unit under the transfer-based exclusion, the material must be
contained. For further discussion of how to determine if a material in
a land-based unit is contained, see section IX of today's preamble.
    However, the Agency is also considering several other conditions
for generators under this exclusion. One option would be a condition
addressing storage of accumulated recyclable hazardous secondary
materials by the generator prior to shipping them to a reclamation
facility. For example, we are proposing today a condition that
specifies a general performance standard for storage of excluded
hazardous secondary materials at reclamation facilities. Arguably, the
same or a similar standard could be required for generators who take
advantage of the exclusion. The Agency requests comment as to whether a
storage condition (beyond the requirement that material in land-based
units be contained) should be imposed on generators as part of this
exclusion, and if so, what type of condition(s) it should be.
2. Conditions for Reclaimers
    EPA is proposing that reclaimers of conditionally excluded
materials will have to satisfy four general conditions, which pertain
to record keeping, storage of recyclable hazardous secondary materials,
management of the residuals from reclamation processes, and financial
assurance.
    Recordkeeping. Today's supplemental proposal would require
reclaimers who operate under this conditional exclusion for transferred
materials to maintain certain records, similar to the records we are
proposing to require for generators. Specifically, such reclaimers
would need to maintain for at least three years records of each
shipment of materials received at the reclamation facility that were
excluded from regulation under the terms of this exclusion. Such
records would need to document the name and address of the generator of
the hazardous secondary materials, the name of the transporter and the
date such materials were received, and the type and quantity of
hazardous secondary materials received. The Agency believes that this
information is the minimum needed to enable effective oversight of
recycling activities that would no longer be subject to the existing
hazardous waste regulations.
    In addition to these proposed record keeping provisions, the Agency
is considering additional records that would more thoroughly document
excluded recycling activities by reclaimers. Examples of such
additional records would include more thorough characterization of the
hazardous secondary materials that are received for reclamation, the
types of units in which they were stored at the reclamation

facility, how they were transported (e.g., by truck), whether or not
the hazardous secondary material was transported as a DOT hazardous
material, and other similar conditions. We request comment on whether
such additional record keeping conditions are warranted for reclaimers.
    Storage of Recyclable Hazardous Secondary Materials. We are
proposing today a general performance standard for storage of excluded
hazardous secondary materials at reclamation facilities that operate
under this proposed exclusion. Specifically, the hazardous secondary
materials must be managed in a manner that is at least as protective as
that employed for analogous raw materials. An ``analogous raw
material'' is a raw material for which a hazardous secondary material
is a substitute and serves the same function and has similar physical
and chemical properties as the hazardous secondary material. A raw
material that has significantly different physical or chemical
properties would not be considered analogous even if it serves the same
function. For example, a metal-bearing ore might serve the same
function as a metal-bearing air pollution control dust, but because the
physical properties of the dust would make it more susceptible to wind
dispersal, the two would not be considered analogous. Similarly, a
hazardous secondary material with high levels of toxic volatile
chemicals would not be considered analogous to a raw material without
these volatile chemicals. Where there is no analogous raw material, or
if the hazardous secondary material is managed in a land-based unit,
the material must be contained. For example, in the case of the metal-
bearing air pollution control dust, dust suppression measures would
likely be needed to contain the hazardous secondary materials. For the
hazardous secondary material with high levels of toxic volatile
chemicals, a closed tank or container would probably be needed to
contain the volatile chemicals. For further discussion of how to
determine if a material is contained, see section IX of today's
preamble.
    Storage conditions for reclamation facilities that operate under
today's proposed exclusion would allow the Agency to determine that the
recyclable materials are not discarded. The great majority of damages
documented in the study of recent recycling-related damage incidents
occurred at commercial reclamation facilities, and mismanagement of
hazardous secondary materials was found to be a cause of environmental
problems in 35% of the incidents. Accordingly, EPA believes that this
proposed condition for storage, or some similar condition, is necessary
and appropriate for reclamation facilities that take advantage of this
exclusion, and will establish an expectation for the owner/operators of
such facilities; i.e., that they must manage hazardous secondary
materials in at least as protective a manner as they would an analogous
raw material, and in such a way that materials would not be released
into the environment.
    The Agency considered a number of alternatives to this proposed
storage condition, including specifying a much more rigorous set of
conditions equivalent to current Subtitle C regulatory requirements for
storage (see, for example, the requirements for tanks and containers,
which are specified in subparts I and J of 40 CFR Part 264), or to a
similar, but less stringent set of storage conditions (e.g., requiring
the hazardous secondary material to be stored in an engineered unit).
However, we do not believe that an elaborate set of conditions for
storage are necessary for the purpose of this exclusion. For one thing,
we are proposing today that generators who wish to take advantage of
this exclusion must make ``reasonable efforts'' to evaluate the
reclamation facilities they ship materials to, to ensure that the
hazardous secondary materials will be legitimately and safely recycled.
In making such reasonable efforts, we expect that generators will make
an assessment of the reclamation facilities' material storage practices
and equipment. Thus, we believe generators will themselves evaluate the
storage and handling practices of hazardous secondary materials at the
reclamation facilities they do business with. We request comment on
whether or not the condition should be written in more specific terms,
that is, in a way that would provide greater clarity with regard to how
storage units should be designed and operated.
    Management of recycling residuals. We are today proposing a
condition pertaining to management of residuals that are generated from
reclamation of hazardous secondary materials excluded from regulation
under this proposal. The proposed condition specifies that ``any
residuals that are generated from reclamation processes will be managed
in a manner that is protective of human health and the environment. If
any residuals exhibit a hazardous characteristic according to subpart C
of 40 CFR part 261, or themselves are listed hazardous wastes, they are
hazardous wastes (if discarded) and must be managed according to the
applicable requirements of 40 CFR parts 260 through 272.''
    The purpose of this condition is primarily to clarify the
regulatory status of these waste materials, and to emphasize in
explicit terms that recycling residuals must be managed properly. The
study of recent (i.e., post-CERCLA, post-RCRA) recycling-related
environmental problems revealed that mismanagement of residuals was the
cause of such problems in one third of the incidents that were
documented. Some common examples of these mismanaged residuals were
acids and casings from processing of lead-acid batteries, solvents and
other liquids generated from cleaning drums at drum reconditioning
facilities, and PCBs and other oils generated from disassembled
transformers. In many of these damage incidents, the residuals were
simply disposed in on-site landfills or piles, with little apparent
regard for the environmental consequences of such mismanagement, or
possible CERCLA liabilities associated with cleanup of these releases.
    One issue that the Agency considered with respect to this proposed
condition was the regulatory status of wastes generated from the
reclamation of hazardous secondary materials that would be listed
hazardous wastes if they were not recycled. One argument could be that
these residuals should be regulated as listed hazardous wastes, since
they were derived from materials that were physically and chemically
identical to listed hazardous wastes, and could contain hazardous
constituents that might pose significant threats to human health and
the environment if the residuals were mismanaged. A different argument
would be that such a regulatory construct is unwarranted, since the
recycled hazardous secondary materials are not wastes, provided they
meet the conditions of the exclusion, and therefore the ``derived
from'' concept as articulated in Sec.  261.3(c)(2) should not be
applied to these wastes. Further, such waste residuals from reclamation
processes often do not resemble the hazardous secondary materials that
were reclaimed, and thus, the argument goes, it should not be assumed
that they would always need to be managed as hazardous wastes.
    The Agency does not believe it is necessary to apply the ``derived-
from'' principle to the residuals generated from the reclamation of
excluded hazardous secondary materials. If the residuals exhibited a
hazardous characteristic, or they themselves were a listed hazardous
waste, they would be considered hazardous wastes, and would have to be
managed accordingly. If they did not exhibit a hazardous
characteristic, or were not themselves a

listed hazardous waste, they would need to be managed in accordance
with applicable state or federal requirements for non-hazardous wastes.
Thus, they would be subject to the same regulatory system that applies
to wastes that are not hazardous wastes. The Agency does not see a
compelling reason to establish as part of this rulemaking a different
regulatory system based on the ``derived-from'' principle for
reclamation residuals. We solicit comment on this aspect of today's
supplemental proposal.
    Financial Assurance. EPA is proposing today the condition that
owner/operators of reclamation facilities that would operate under the
terms of this exclusion for transferred materials demonstrate financial
assurance, in accordance with the current requirements of Subpart H of
40 CFR Part 265. Under Part 265 Subpart H, owners and operators must
demonstrate that resources will be available to pay for closure, and
post-closure care at their facilities. They also must meet liability
coverage requirements for sudden and accidental occurrences at their
facilities. The requirements found in Subpart H of 40 CFR 265 also
outline how owners and operators should determine cost estimates,
provide the acceptable mechanisms for demonstrating financial
assurance, and set the minimum amounts of liability coverage required.
    We believe that requiring financial assurance for these reclamation
facilities is necessary for the Agency to determine that the materials
managed at these facilities are not discarded, and is supported by the
findings of the recycling studies we conducted as part of this
rulemaking effort.
    For example, the study of current good recycling practices
indicated that one of the main reasons that generators audit recyclers
is to evaluate their financial health and resources to respond to
accidents or other problems that could cause adverse environmental or
human health consequences. This is primarily because of the joint-and-
several liability provisions of CERCLA, under which a generator can
become a ``responsible party'' obligated to help pay for remediation
expenses if (in this example) a recycler to whom he sent recyclable
hazardous secondary materials were to create contamination problems,
but lacked the resources to pay for their cleanup. Because American
manufacturers have considerable experience with these types of CERCLA
liability issues, evaluating the financial health of the reclamation
facility before shipping recyclable materials to them has become a
standard business precaution for many generators. Today's proposed
condition for financial assurance thus can be seen as a regulatory
precaution against the same concern, ensuring that the reclamation
facility owner/operators who would operate under the terms of this
proposed exclusion are financially sound.
    The need for some type of financial assurance for recyclers in this
context also is supported by the study of recycling-related
environmental problems. The study indicates that business failure is a
primary causative factor associated with these damage incidents. For
example, of the 208 damage incidents that were documented, at least 138
of the recyclers are no longer in business. While there may not be a
clear cause-and-effect relationship in all of these cases, we believe
that this clearly suggests a correlation between the financial health
of recycling companies and the probability that their recycling
activities will result in some form of environmental damage. In our
view, this further supports the need for some type of financial
assurance condition for this exclusion.
    As proposed, reclaimers of excluded hazardous secondary materials
would need to have financial assurance in accordance with the
applicable financial assurance requirements for hazardous waste
treatment storage and disposal facilities (cited above). We believe
that these financial assurance requirements are appropriate for
reclamation facilities that would be managing excluded hazardous
secondary materials, since such management will typically involve some
type of storage, and reclamation, which is defined as ``treatment''
under the existing RCRA regulations. If a reclamation facility were to
manage excluded materials in land-based units (e.g., piles), it would
be subject to the additional Subpart H financial assurance requirements
for land disposal facilities.
    The Agency currently has underway a review of the Subpart H
financial assurance regulations now in effect for hazardous waste
treatment, storage and disposal facilities. The Agency does not intend
to address general issues related to the financial assurance mechanisms
as a part of today's rulemaking, since these issues are being addressed
in the broader review. However, in the context of this rulemaking, the
Agency is interested in receiving comments as to whether or not the
existing Subpart H requirements need to be modified in some way
specifically for reclamation facility owner/operators that would be
affected by today's proposed exclusion. EPA also solicits comment on
whether we should adopt the financial assurance requirements that were
promulgated as part of the standardized permit rule (see 70 FR 53419,
September 8, 2005), which are EPA's most recently issued RCRA financial
assurance requirements.
    We are also interested in options that would involve tailoring the
costing requirements associated with Subpart H requirements for today's
rulemaking. For example, the Subpart H financial obligations are tied
in large part to the estimated future cost of closing the hazardous
waste facility. Closure costs can be difficult to estimate, or subject
to disagreement, and failure to close might not be the problem at a
given facility. For example, closure cost estimates might not address
the kind of releases identified in the recycling study. Thus, a simpler
alternative might be to set a standard, fixed amount of financial
assurance that would need to be demonstrated. For example, EPA's study
of environmental problems associated with hazardous material recycling
was able to identify actual or estimated cleanup costs associated with
89 of the damage cases that were documented. Of these cases, 71 (80%)
involved cleanup costs of $5 million or less, while 81 cases (91%) cost
$10 million or less. It should be noted that there are important
uncertainties associated with these cost data, as explained in our
study report. With these uncertainties in mind, these findings might be
used as the basis for identifying a specific, minimum amount of
financial assurance that reclamation facility owner/operators would
need to demonstrate. Such funds would thus be available for any
environmental damage associated with the reclamation operations at such
facilities.
    This type of approach to establishing financial assurance
requirements for reclamation facilities would be less flexible than the
current regulations, but it would have the virtue of simplicity and
transparency. Similarly, the regulatory language of individual
financial assurance mechanisms might need to be modified slightly, to
make it clear that funds would be available for environmental damages
beyond closure. The Agency solicits comment on such alternative
approaches to financial assurance requirements for reclamation
facilities that would operate under today's proposed exclusion.
    Finally, the Agency anticipates that, when and if today's proposed
exclusion for transferred materials is promulgated and becomes
effective, there are likely to be some generators of recyclable
hazardous wastes that will choose not to use the exclusion, and thus
will continue to manage their wastes under the current hazardous waste
regulatory

system. These generators may nevertheless wish to ship their hazardous
waste to a reclamation facility that is operating under this exclusion.
In such situations, it is possible that questions could arise as to the
regulatory status of the hazardous waste materials that are sent to
such reclamation facilities. Today's proposed exclusion includes a
provision (Sec.  261.4(a)(24)(vi)) that is intended to clarify that the
reclamation facilities may still claim the exclusion in these types of
situations. The Agency requests comment on this provision.

D. Enforcement

    Under today's proposal, hazardous secondary materials transferred
for the purpose of reclamation would be excluded from RCRA subtitle C
regulation, but would be subject to certain conditions and
restrictions. If a generator fails to meet any of the above-described
conditions or restrictions on the management of hazardous secondary
materials that are applicable to the generator, then the materials
would be considered discarded by the generator and would be subject to
RCRA subtitle C regulations from the point at which the material was
used and could not be reused without reclamation. If a reclaimer were
to fail to meet any of the above-described pre-conditions or
restrictions on the management of hazardous secondary materials that
are applicable to the reclaimer, then the materials would be considered
discarded by the reclaimer and would be subject to RCRA subtitle C
regulation from the point at which the reclaimer failed to meet a
condition or restriction, thereby discarding the material.
    Please note that the failure of the reclaimer to meet conditions or
restrictions does not mean the material was considered waste when
handled by the generator, as long as the generator can adequately
demonstrate that he has met his obligations, including the obligation
under proposed 40 CFR 261.4(a)(24)(iv)(A) to make reasonable efforts to
ensure that the material will be recycled legitimately and otherwise
managed in a manner that is protective of human health and the
environment. A generator who met his reasonable efforts obligations
could in good faith ship his excluded materials to a reclamation
facility where, due to circumstances beyond his control, they were
released and caused environmental problems at that facility. In such
situations, and where the generator's decision to ship to that
reclaimer is based on an objectively reasonable belief that the
hazardous secondary materials would be recycled legitimately and
otherwise managed in a manner consistent with this regulation, the
generator would not have violated the terms of the exclusion.

XI. Legitimacy: Proposed 40 CFR 261.2(g)

A. What Is the Purpose of Distinguishing Legitimate Recycling From Sham
Recycling?

    Under the RCRA Subtitle C definition of solid waste, many existing
hazardous secondary materials are not solid wastes and thus, not
subject to RCRA's ``cradle to grave'' management system if they are
recycled. The basic idea behind this construct is that recycling of
such materials often closely resembles normal industrial manufacturing,
rather than waste management. However, since there can be significant
economic incentive to manage hazardous secondary materials outside the
RCRA regulatory system, there is a clear potential for some handlers to
claim that they are recycling, when in fact they are conducting waste
treatment and/or disposal in the guise of recycling. To guard against
this, EPA has long articulated the need to distinguish between
``legitimate'' (i.e., true) recycling and ``sham'' recycling, beginning
with the preamble to the 1985 regulations that established the
definition of solid waste (50 FR 638, January 4, 1985) and continuing
with the 2003 proposed codification of criteria for identifying
legitimate recycling.
    On October 28, 2003 (68 FR 61581-61588), EPA extensively discussed
our position on the relevance of legitimate recycling to hazardous
secondary materials recycling in general and to the redefinition of
solid waste specifically. We proposed to codify in the RCRA hazardous
waste regulations four general criteria to be used in determining
whether recycling of hazardous secondary materials is legitimate. In
today's action, we are proposing two changes to the proposed legitimacy
criteria and asking for public comment on those changes. The changes
are (1) a restructuring of the proposed criteria, called factors in
this proposal, to make two of them mandatory, while leaving the rest as
factors to be considered, and (2) additional guidance on how the
economics of the recycling activity should be considered in a
legitimate recycling determination.
    As we explained in the 2003 proposal, it is the Agency's
longstanding policy that, for activities to qualify as recycling of
hazardous secondary materials, they must be legitimate. This principle
applies to both recycling of excluded hazardous secondary materials and
recycling of regulated hazardous secondary materials. The definition of
legitimate recycling is intended to apply to all recycling of hazardous
secondary materials, including:
     Recyclable hazardous secondary materials that would be
excluded from Subtitle C regulation as wastes under today's proposed
exclusion from the definition of solid waste.
     Hazardous secondary materials that, because they are
recycled, are excluded or exempted from Subtitle C regulation under
other regulatory provisions (e.g., see the exclusions in 40 CFR
261.2(e) and 261.4).
     Recyclable hazardous wastes that are regulated under
Subtitle C prior to recycling.
    Apart from the definition of solid waste implications, the concept
of legitimate recycling also is used to determine if a recycling unit
is exempt from RCRA Subtitle C permitting (except for certain air
emission standards) or a regulated waste treatment or disposal unit,
subject to full RCRA Subtitle C permitting.
    The concept of legitimate recycling is designed to be used in
addition to and in concert with more specific criteria or requirements
when they have been established in the regulations for specific
recycling activities or recycled hazardous secondary materials.
Affected parties should look to those regulatory provisions, in
addition to the definition of legitimate recycling, to ensure
compliance. For example, for a zinc micronutrient fertilizer
manufacturer who uses hazardous secondary materials as a feedstock, the
consideration of hazardous constituents in the final product would
involve an analysis of whether the operation is legitimate recycling
and an analysis of whether the fertilizer meets the contaminant limits
specified in 40 CFR 261.4(a)(21).
    By ensuring that use of hazardous secondary materials in an
industrial process is legitimate recycling, the Agency seeks to ensure
that when a facility claims that it is recycling, the hazardous
secondary material is in fact being recycled and is contributing to a
valuable product and is not being treated or disposed of in the guise
of recycling.

B. Definition of Legitimate Recycling in the 2003 Proposal

    In the 2003 proposed rule (68 FR 61581-61588), EPA proposed
codifying specific regulatory provisions for determining when hazardous
secondary materials are recycled legitimately. Previously, the criteria
considered in

evaluating legitimate recycling have been discussed extensively in
preambles to definition of solid waste rulemakings and, notably, in a
1989 memorandum that laid out a single list of criteria to be
considered in evaluating legitimacy (the ``Lowrance Memo''; OSWER
directive 9441.1989(19), dated April 26, 1989).
    The 2003 proposal consolidated the criteria in that memorandum into
four criteria. EPA was clear in its expectation that most, if not all,
legitimate recycling would conform with all four of the criteria, but
stated that the application of those criteria would require some
subjective evaluation of the criteria in each specific situation to
which they are being applied. In those cases where a legitimate
recycling operation does not meet all four criteria, the structure of
the definition of legitimacy was designed to be flexible enough to
allow those situations to be deemed legitimate.
    In general, the proposed regulatory language stated that legitimacy
determinations must be made by considering whether:
     The hazardous secondary material to be recycled is managed
as a valuable commodity;
     The hazardous secondary material provides a useful
contribution to the recycling process or to a product of the recycling
process;
     The recycling process yields a valuable product or
intermediate;
     The product of the recycling process does not contain
significant amounts of hazardous constituents that are not found in the
analogous products or exhibit a hazardous characteristic not exhibited
by the analogous product.
    The full proposed regulatory text can be found in the proposed rule
(68 FR 61596).
    It is the Agency's opinion that the concept of legitimate recycling
proposed in the October 2003 proposal and in today's supplemental
proposal is not substantively different than our longstanding policy,
as expressed in earlier preamble and guidance statements. As part of
proposing regulatory provisions on the legitimacy of recycling, we are
simply reorganizing, streamlining, and clarifying the existing
legitimacy principles. We believe that the regulatory definition of
legitimate recycling, when applied to specific recycling scenarios,
will result in determinations that are consistent with the earlier
policy. Therefore, we generally do not see the need for the regulated
community or overseeing agencies to revisit previous determinations and
expect any written determinations from these agencies to, in effect, be
grandfathered. For a more detailed analysis on how the definition of
legitimacy has evolved from earlier preamble and guidance statements,
see the October 28, 2003 proposal (68 FR 61581-61588), where we
provided a thorough explanation of how the proposed criteria related to
existing guidance. The Agency does not intend to reiterate that
analysis in today's supplemental proposed rule, but will explain below
the changes we are proposing to make from the 2003 proposal.
    The 2003 proposal did result in comments on the Agency's proposal
to codify legitimacy and we are requesting further comment on this
issue. The Agency believes that there are many benefits to codifying
the legitimacy factors, as discussed in the 2003 proposal. Many
commenters, particularly the state regulatory agencies, but some
members of industry as well, agreed with EPA's rationale for codifying
the legitimacy in part 261. However, some commenters urged EPA to
retain the existing legitimacy guidance instead of codifying it in the
regulations. These commenters stated that the existing guidance
provides a more flexible way to assess whether an activity constitutes
legitimate recycling and raised several concerns with the codification
of legitimacy. The commenters expressed concern that codification could
alter the application of legitimacy. Although EPA intends to preserve
current interpretations of legitimacy, the commenters raised the
concern that putting legitimacy in the regulations could eliminate the
flexibility in the existing guidance for subjective evaluation and
balancing of the factors when making a determination. EPA is requesting
comment on this issue.
    In addition, the commenters raised the concern that codification of
legitimacy would place too much burden on the regulated entity to make
a showing that it is engaged in legitimate recycling. The Agency
believes that it has always been the responsibility of the regulated
entity to ensure, and if requested, to show that its recycling is
legitimate. EPA expects that regulated entities have evaluated and will
continue to evaluate their recycling operations using these factors and
will reach their conclusions about legitimacy without prior approval by
an overseeing agency. However, EPA is requesting comment on whether
codifying the factors in today's proposal would place increased burden
on the regulated entity and, if so, what the reasons are for such
increased burden. Finally, the concern has been expressed that
codification would fix into place a specific formulation of EPA's
legitimacy factors, and therefore would limit future evolution of them.
Future changes to the factors could become more difficult if they have
been codified. The Agency believes there are many benefits to codifying
the legitimacy factors, as discussed in the 2003 proposal, but is
requesting comment on this issue.
    EPA is interested in comments about the benefits and drawbacks of
codifying legitimacy. In particular, EPA solicits comments on current
practices for assessing legitimacy, on any problems with current
practices that may be alleviated by codifying the factors, and on
alternative means of addressing any such problems.

C. Changes Proposed in This Action

1. New Structure of Legitimacy Factors
    a. Design of the new structure. For the reasons discussed below,
EPA is proposing a new structure for the definition of legitimate
recycling. The proposed design of the definition has two basic parts.
The first part is considered the core of legitimacy, which includes a
requirement that the hazardous secondary material being recycled
provides a useful contribution to the recycling process or to the
product of the recycling process and a requirement that the product of
the recycling process is valuable. These two factors are fundamental to
the definition of legitimacy and, therefore, an industrial process that
does not conform to them would be considered sham recycling (i.e.,
treatment or disposal in lieu of recycling).
    The second part of the proposed structure for legitimacy is a list
of two factors that must be considered, but not necessarily met, when a
recycler is making a legitimacy determination. EPA believes that these
factors are important in determining legitimacy, but has not proposed
to make them mandatory because the Agency believes that there may be
some situations in which a legitimate recycling process does not
conform to one of these factors. Therefore, EPA is proposing that the
management of the hazardous secondary material and the presence of
hazardous constituents in the product of the recycling activity be
factors that must be considered in the overall legitimacy
determination, but not mandatory requirements that must be met as part
of a definition of legitimacy. The full proposed regulatory text for
the legitimacy portion of this supplemental proposal is found in 40 CFR
261.2(g).
    b. Why EPA is proposing this change. In the 2003 proposed rule, the
regulatory text for legitimacy was made

up of paragraph (g) of proposed section 261.2, which stated that
hazardous secondary materials that are not legitimately recycled are
discarded and, therefore, solid wastes. Paragraphs (1) through (4) then
listed the four proposed legitimacy criteria after a statement that
legitimacy determinations must be made by considering them. Proposed
criteria 1 and 2 focused on the hazardous secondary material being
recycled and criteria 3 and 4 focused on the product of the recycling
process.
    In the 2003 proposed rule, the application of the four criteria to
a recycling process was proposed to require some evaluation and
balancing. That is, although the Agency expected that most legitimate
recycling practices would conform to all the pieces of legitimacy, it
was aware that there would be some cases in which legitimate recycling
may not conform to one or more of the criteria. As in the Lowrance
Memo, the structure of legitimacy allowed circumstances in which
certain criteria weighed more heavily than others in the final
legitimacy determination.
    Analysis of public comment on the 2003 proposal shows that there
was general agreement from industry, states, and other commenters that
recycling cannot be legitimate if the hazardous secondary material
being recycled does not provide a useful contribution to the process or
to the product and if the recycling process does not yield a product or
intermediate that is valuable to someone. Certain commenters requested
that EPA provide more information on how it defines the terms used in
the regulation and there was some disagreement with the specifics laid
out in the preamble. Some commenters, particularly several states, felt
that all four criteria should be mandatory requirements. However,
almost all commenters agreed that proposed criteria 2 and 3 should be
met in order for recycling to be considered legitimate.
    EPA agrees with the importance of criteria 2 and 3 and, for this
proposal, has decided that these two concepts are, in fact, at the very
core of what it means to recycle legitimately. Therefore, today's
proposed regulatory language states in 40 CFR 261.2(g)(2) that
``Legitimate recycling must involve a hazardous secondary material that
provides a useful contribution to the recycling process or to a product
of the recycling process and the recycling process must produce a
valuable product or intermediate.'' This statement is followed by
paragraphs (i) and (ii) to give more details on how the Agency defines
these critical concepts.
    EPA has determined that the other criteria in the 2003 proposal,
criterion 1 and criterion 4, are still important concepts in making
legitimacy determinations, but should not be mandatory. Instead,
today's proposed regulations state these two factors need to be
considered in making a determination as to the overall legitimacy,
which are found in 261.2(g)(3). In stating these factors need to be
considered, EPA expects that anyone making a legitimacy determination
will look carefully at how their hazardous secondary materials are
managed as compared to analogous raw materials and at the hazardous
constituents in their products.
    However, these two factors would not be mandatory because EPA and
commenters were able to identify situations in which a recycling
scenario appears to be legitimate, but one of these factors was not met
in the way EPA described because that factor is not applicable or
relevant to the materials being recycled or to the particulars of the
recycling process. For example, it is possible that a solid, powdery
hazardous secondary material could be shipped to a recycling facility
in flexible, woven ``supersack'' containers, where the supersacks are
then stored at the facility in a well-designed, designated indoor
containment area and then legitimately recycled. If, however, an
analogous raw material (i.e., with similar physical and chemical
characteristics) was typically received and stored at the same facility
in sealed steel drums, one could conclude that the hazardous secondary
material was not managed ``in a manner consistent with the analogous
raw material.'' In this case, therefore, a strict finding could be made
that this factor was not met, even though the differences in storage
practices do not affect protectiveness. In evaluating the legitimacy of
a recycling process in situations like this, EPA does not believe that
such a strict finding should necessarily be the determining factor. We
are proposing that this factor not be mandatory in making legitimacy
determinations in order to allow flexibility for these types of
situations.
    For similar reasons, the Agency is also proposing that the factor
which addresses ``toxics along for the ride'' be a consideration in
making legitimacy determinations, rather than a mandatory requirement.
One illustration as to why some flexibility may be needed in assessing
this proposed factor could be a hypothetical situation in which a
pharmaceutical manufacturer uses a ``virgin'' solvent (``Solvent X'')
as a process ingredient, and generates a spent solvent that is
identical to the virgin solvent, except that it has become contaminated
with a relatively small amount of a different solvent (``Solvent Y'').
Solvents X and Y are assumed to have essentially the same toxicity and
solvent properties, and both chemicals would be considered ``hazardous
constituents'' under RCRA for waste identification purposes. In this
example, the spent material (i.e., the mixture of solvents ``X'' and
``Y'') is no longer useful to the generator in making pharmaceuticals.
It would potentially be useful, however, to a manufacturer of oil-based
paints, as a substitute for virgin Solvent X. If the spent material was
used in this manner by the paint manufacturer, the resulting paint
products could contain significant concentrations of a hazardous
constituent (i.e., ``Solvent Y'') not found in analogous products made
from virgin Solvent X. Thus, this recycling practice could be
determined as not meeting today's proposed legitimacy factor that
addresses ``toxics along for the ride.''
    Given that the paint products made from spent (i.e., secondary)
materials would essentially have the same solvent properties and
potential environmental hazards as paint made from virgin solvents, it
might be reasonable to determine that the overall recycling practice
was legitimate. Again, because of situations like this, we believe that
this factor is best expressed as a consideration in making legitimacy
determinations, rather than as a mandatory requirement.
    At the same time, it should be noted that ``toxics along for the
ride'' is an important consideration when the toxic constituents affect
either the performance of the product or cause adverse environmental or
health effects. For example, elevated levels of lead in foundry sand
would not be a problem when the sand is re-used in the foundry molds,
but it has been a significant problem when the sand was sold as
children's play sand.\4\ In such a case, the high levels of lead would
disqualify this use from being considered legitimate recycling.
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    \4\ One of the profiles in the docket for today's proposal shows
that from 1997-1998, a horticultural nursery purchased approximately
375 tons of foundry sand which contained lead above the regulatory
limits, that was then bagged and sold as play sand to approximately
40 different retailers. (U.S. EPA, An Assessment of Environmental
Problems Associated with Recycling of Hazardous Secondary Materials,
Appendix 2).
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    Under this proposed structure, if a facility making a legitimacy
determination decides that one of these

two factors to be considered is, in fact, not applicable to the
recycling process, we recommend that the facility document why the
recycling process is legitimate, even though it may not meet one or
more of the factors to be considered.
    EPA believes that the new structure for the definition of
legitimacy will clarify what the Agency believes are the most important
elements of legitimacy and requests comment on this structure for
making legitimacy determinations related to hazardous secondary
material recycling.
2. Consideration of Economics in Legitimate Recycling
    EPA also notes that the economics of the recycling activity may be
relevant to legitimate recycling determinations. Consideration of
economics has long been a part of the Agency's concept of legitimacy,
as evident in the Lowrance Memo and earlier preamble text (50 FR 638,
January 4, 1985 and 53 FR 522, January 8, 1988) [see also American
Petroleum Institute v. EPA (``API II''), 216 F.3d 50, 57-58 (DC Cir.
2000)]. In addition, in our October 2003 proposal, EPA proposed that
consideration of economics be part of the second legitimacy criterion
(i.e., whether the hazardous secondary material provides a useful
contribution). In their comments to the October 2003 proposal, states
and some other stakeholders supported including a consideration of
economics when making legitimacy determinations, although they also
expressed a need for clarification of how economics should inform
legitimacy determinations. Today's proposal, unlike the October 2003
proposal, does not codify specific regulatory language on economics,
but offers further guidance and clarification on how economics may be
considered in making legitimacy determinations. The Agency believes
that we are clarifying how economics has traditionally been implemented
via the Lowrance Memo guidance, and therefore, does not believe the
consideration of economics as explained below impacts existing
legitimacy determinations.\5\
---------------------------------------------------------------------------

    \5\ Today's supplemental proposal would make the ``useful
contribution'' factor a central, or mandatory, part of the
definition of legitimacy (along with the ``valuable product''
factor). However, we do not believe that consideration of economics
should also be considered a mandatory factor. Nevertheless, the
economics of a recycling activity is a consideration because it can
assist in informing the useful contribution and valuable product
factors of the definition of legitimate recycling.
---------------------------------------------------------------------------

    Specifically, EPA believes that consideration of the economics of a
recycling activity can be used to inform and help determine whether the
recycling operation is legitimate. Positive economic factors would be a
strong indication of legitimate recycling, whereas negative economic
factors would be an indication that a further look at the recycling
operation may be warranted in assessing its legitimacy. While not
specifically addressed in the proposed regulations, consideration of
economics could be a factor in informing whether the hazardous
secondary material input provides a useful contribution and whether the
product of the recycling operation is of value.
    Consideration of the economics of a particular recycling operation
can greatly assist in making legitimacy determinations. Appropriate
information for this consideration could include an understanding of
the major costs, revenues, and economic flows for a recycling
operation. Information that may be useful could include (1) the amount
paid or revenue generated by the recycler for recycling hazardous
secondary materials; (2) the revenue generated from the sale of
recycled products; (3) the future cost of processing existing
inventories of hazardous secondary materials and (4) other costs and
revenues associated with the recycling operation. The economics of the
recycling transaction may be more of an issue when hazardous secondary
materials are sent to a third-party recycler, although where the
hazardous secondary material being recycled is under the control of the
generator, the generator must still be able to show that the hazardous
secondary material is, at a minimum, providing a useful contribution
and producing a valuable product.
    The basic economic flows can suggest whether the recycling
operation will process inputs, including hazardous secondary materials,
and produce products over a reasonable period of time, recognizing that
there will be lean and slow times.\6\ Thus, processing inputs that
produce legitimate products is a threshold for legitimate recycling. A
general accounting of the major costs, revenues, and economic flows for
a recycling operation over a reasonable period of time \7\ can provide
information to consider whether recycling is likely to continue at a
reasonable rate, compared to the rate at which inputs are received, or
whether it is likely that significant amounts of unrecycled material
are likely to be accumulated and then abandoned when the facility
closes.\8\ Any bona fide sources of revenues would be included in this
consideration, such as payments by generators to recyclers for
accepting hazardous secondary materials and subsidies supporting
recycling. However, in order to have some level of confidence that
beneficial products are or will be produced; we believe that at least
some portion of the revenues should be from product sales (or savings
due to avoided purchases of products if the hazardous secondary
materials are used directly by the recycler), consistent with the
hazardous secondary material being recycled to make a useful product.
---------------------------------------------------------------------------

    \6\ As an example, metal prices fluctuate and at times are below
the cost of processing. However, recovery of metals is usually
legitimate recycling.
    \7\ Where the hazardous secondary material being reclaimed is
under the control of the generator, the recycling operation is
generally part of an overall manufacturing operation, which would be
part of the evaluation.
    \8\ In general, overaccumulation of hazardous secondary
materials is subject to the speculative accumulation provisions, as
defined in 40 CFR 261.1(c) (8).
---------------------------------------------------------------------------

    Two examples illustrate this concept. A recycling operation that
generates revenues from sales of recycled products that greatly exceed
the costs of the operation is likely to quickly process the hazardous
secondary materials it receives into useful products. A very different
example is an operation that has, relative to its revenues, large
inventories of unsold product and large future liabilities in terms of
stocks of unprocessed hazardous secondary material. This operation
would draw closer attention to determine whether it is engaged, in
essence, in treatment and/or abandonment in the guise of recycling.
    When the economics of a recycling operation is similar to that of
manufacturing using raw materials, the Agency believes that such an
operation is likely to be legitimate. That is, the recycler pays for
hazardous secondary materials as a manufacturer would pay for raw
materials, the recycler sells products from the recycling process as a
manufacturer would sell products of manufacturing, and revenues equal
or exceed costs. In this scenario, hazardous secondary materials are
valuable (i.e., the recycler is willing to pay for them) and make a
useful contribution to a valuable recycled product (otherwise the
recycler would not be willing to pay for them). In addition, the sale
of the products of recycling demonstrates their value.
    However, we also recognize that the economics of many legitimate
recycling operations that utilize hazardous secondary materials differs
from the economics of more traditional manufacturing operations. An
understanding of the economics of these

operations can be useful in evaluating the legitimacy of a recycling
operation. For example, many recyclers are paid by generators to accept
hazardous secondary materials. Generators may be willing to pay
recyclers because they can save money if the recycling is less
expensive than disposing of the hazardous secondary materials in
landfills or incinerators. Another example is a scenario where
recyclers receive subsidies which may be designed to develop recycling
infrastructure and markets, remove problematic materials from disposal,
or achieve other benefits of recycling. For example, the recycling of
electronic materials can be legitimate even though the recycler is
often subsidized for processing the material. Both of these examples
involve situations that are different from manufacturing using raw
materials, but as long as they are appropriately considered, an
analysis of the economics of these operations can assist in determining
the legitimacy of the recycling.
    Any analysis of the economics of a recycling operation should
recognize that a recycler may be able to charge generators and still be
a legitimate recycling operation properly excluded from regulation. In
short, because these hazardous secondary materials are hazardous wastes
if disposed of, typically the generators' other alternative management
option already carries a cost that is based on the existing market for
hazardous waste transportation and disposal. Hence, unless there is
strong competition in recycling markets or the hazardous secondary
materials are extremely valuable, a recycler may be able to charge
generators simply because alternative disposal options cost more. While
the generator's objective may be finding the least cost alternative for
getting rid of the hazardous secondary material, the recycling may well
be a legitimate recycling operation.
    Recognizing that such a dynamic exists can assist those making
determinations in evaluating legitimacy of the recycling operation. For
example, if a recycler is charging generators fees (or receiving
subsidies from elsewhere) for taking hazardous secondary material and
receives a far greater proportion of its revenue from acceptance fees
than from the sale of its products, both the useful contribution and
the valuable product factors may warrant further review, unless other
information would indicate that such recycling is legitimate. Fees and
subsidies could indicate that the economic situation allows the
recycler to charge high fees, regardless of the contribution provided
by the inputs, including hazardous secondary materials. In this
situation, recyclers may also have an increased economic incentive to
over-accumulate or overuse hazardous secondary materials, or to manage
them less carefully than one might manage more valuable inputs.
Additionally, if there is little competition in the recycling market,
and/or if acceptance fees seem to be set largely to compete with the
relative costs of alternative disposal options rather than to reflect
the quality or usefulness of the input to the recycling operation, this
may also suggest a closer look at ``useful contribution.''
    A relatively low proportion of revenues coming from sales of
recycled products compared to payments by generators may suggest the
need for more consideration of the ``valuable product'' criterion. It
is possible that it is appropriate for product sales revenues to be
dwarfed by acceptance fee revenues because markets for the particular
products are highly competitive or because high alternative disposal
costs allow for high acceptance fees. However, relatively low sales
revenues could also point to a review of product sales prices to see
whether they are lower than other comparable products, products are
being stockpiled rather than sold, or very little product is being
produced relative to the amount of inputs to the recycling operation.
These could be possible indicators that the recycled product may not be
valuable and, thus, sham recycling may be occurring.
    A consideration of the future cost of processing or alternatively
managing existing inventories of hazardous secondary material inputs
also can inform the legitimacy determination. When hazardous secondary
materials make a significant useful contribution to the recycling
activity, a recycler will have an economic incentive to process input
materials relatively quickly or efficiently, rather than to maintain
large inventories. While recyclers often need to acquire a sufficient
amount of a hazardous secondary material to make it economically
feasible to recycle, there should be little economic incentive to over-
accumulate such materials that make a useful contribution. Overly large
accumulations of input materials may indicate that the input materials
are not providing a useful contribution or that the recycler is
increasing its future costs of either processing or disposing of the
material, and hence may be faced with an unsound recycling operation in
the future. Again, it is important to weigh this factor against other
considerations. For example, it is possible that the recycler has
acquired a large stock of hazardous secondary material because the
price was unusually low or perhaps the material is generated
episodically and the recycler has few opportunities to collect it.
    When recycling is conducted under the control of the generator, the
recycler may not account formally for some of the costs and savings of
the operation. Still, when deciding whether to undertake or continue
the recycling operation or to utilize alternative outside recycling or
disposal options, the recycler will evaluate basic economic factors as
a part of doing business. Also, the recycler would be likely to account
for the costs of virgin materials avoided by using hazardous secondary
materials. Similarly, sales of recycled products under the control of
the generator that are sold to an external market may be used to
evaluate the valuable product criterion. Thus, the recycler should have
available the basic information necessary to consider the economics of
an on-site or internal recycling operation for purposes of making a
legitimacy determination. We recognize, however, that an evaluation of
the economic structure of a recycling operation under the control of
the generator is likely to be less rigorous than that of a typical
offsite commercial recycling operation.
    We request comment on how the economics of the recycling activity
should be considered in making overall legitimate recycling
determinations consistent with prior legitimacy determinations under
the Lowrance Memo. We are specifically interested in whether economics
should simply be a consideration that informs legitimacy overall or
whether the economics of recycling should be a separate factor,
including regulatory language, to consider. In addition, we are
interested in hearing from both the regulated community and the States
about other ways in which consideration of economics can inform and
support determinations of legitimate recycling for both on-site and
offsite recycling.

XII. Petitions for Non-Waste Classification: Proposed 40 CFR 260.30(d),
260.30(e), 260.30(f), 260.34

A. What Is the Intent of This Provision?

    The intent of the non-waste determination petition process is to
provide petitioners with an administrative procedure for receiving a
formal determination that their recycled hazardous secondary material
is not discarded. This process would be available in addition to the
solid waste exclusions proposed today. Once a non-

waste determination has been granted, the hazardous secondary material
would not be subject to the restrictions and conditions that the
exclusions discussed elsewhere in today's supplemental proposal would
include (e.g., prohibition on speculative accumulation, or, for the
transfer-based exclusion, recordkeeping, reasonable efforts, financial
assurance, storage standard and export notice and consent).
    The petition process would be voluntary. Facilities may choose to
continue to self-implement any applicable waste exclusions and, for the
vast majority of cases, where the regulatory status of the material is
evident, self-implementation will still be the most appropriate
approach. In addition, facilities may continue to contact EPA or the
authorized state asking for informal assistance in making these types
of waste determinations. However, for cases where there is ambiguity
about whether a hazardous secondary material is a solid waste, the
formal petition process will provide regulatory certainty for both the
facility and the implementing Agency
    EPA anticipates that most generators who recycle their hazardous
secondary materials would use either the self-implementing exclusions
proposed today or existing exclusions. We request comment on how
frequently the non-waste determination process is likely to be used and
how best to minimize the burden to the authorized states and to the
regulated community.
    The Agency is proposing three types of non-waste determinations:
(1) For hazardous secondary materials recycled in a continuous
industrial process, (2) for hazardous secondary materials
indistinguishable in all relevant aspects from a product or
intermediate, (3) for hazardous secondary materials that is recycled
under the control of the generator, such as through contracts similar
to the tolling arrangements proposed in section IX of today's preamble.

B. Non-Waste Determination for Hazardous Secondary Material Recycled in
a Continuous Industrial Process

    As discussed earlier in today's supplemental proposal, court
decisions have made it clear that hazardous secondary material that is
recycled in a continuous industrial process is not discarded and
therefore, not a solid waste. The October 2003 proposed rule attempted
to parse the language of some of those decisions in order to identify
when material destined for recycling is clearly not a solid waste. As
explained earlier, we are not finalizing that approach. Instead, the
Agency has decided to link the rulemaking more explicitly to the
concept of ``discard'' which underlie those decisions. EPA believes
that today's supplemental proposal excludes from the definition of
solid waste hazardous secondary materials recycled in a continuous
industrial process by virtue of the determination that such materials
that are legitimately recycled under the control of the generating
facility and not speculatively accumulated are not discarded and
therefore not solid waste.
    However, production processes can vary widely from industry to
industry. In the October 2003 proposal, we attempted to define
``recycled in a continuous industrial process'' using the NAICS codes.
Based on the comments we received, we determined that identifying which
hazardous secondary materials are recycled within a continuous
industrial process presents difficulties as courts have, at least
implicitly, acknowledged.\9\ Even if EPA had more specific information
on some hazardous secondary materials, it still would be impossible to
know if the Agency has addressed every possibility. Thus to determine
whether an individual hazardous secondary material is recycled in a
continuous industrial process, and therefore not a solid waste, EPA may
need to evaluate case-specific fact patterns, which is best done
through a case-by-case procedure. We are titling this procedure a
``non-waste determination'' to acknowledge that this procedure
constitutes an administrative process for formally recognizing that a
specific hazardous secondary material is not a solid waste.
---------------------------------------------------------------------------

    \9\ See, for example the ABR decision, where the Court
acknowledged that the term, ``discard,'' could be ``ambiguous as
applied to some situations, but not as applied to others,'' and
particularly cited the difficulty in examining the details of the
many processes in the mineral processing industry. 208 F.3d at 1056.
While the court overturned EPA's regulations for casting too wide a
net over continuous industrial processes, it acknowledged that there
are large number of processes, some of which may be continuous and
some of which may not. Determining what is a continuous process in
the mineral processing industry, according to the Court, would
require examination of the details of the processes and does not
lend itself, well, to broad abstraction. Specifically, the court
stated: Some mineral processing secondary materials covered under
the Phase IV Rule may not proceed directly to an ongoing recycling
process and may be analogous to the sludge in AMC II. The parties
have presented this aspect of the case in broad abstraction,
providing little detail about the many processes throughout the
industry that generate residual material of the sort EPA is
attempting to regulate under RCRA, 208 F.3d at 1056.
    In the case of today's supplemental proposal, which applies
across industries, there are far larger and more diverse processes.
While the Agency believes it is proposing a reasonable set of
principles, they must still be applied to the details of the
industrial processes in question.
---------------------------------------------------------------------------

    EPA is proposing four criteria for making this ``non-waste
determination'' that a specific hazardous secondary material is
reclaimed in a continuous industrial process. The first is the extent
that the management of the hazardous secondary material is part of the
continuous production process. At one end of the spectrum, if the
material is handled in a manner identical to virgin feedstock, then it
is fully integrated into the production process. At the other end of
the spectrum, materials indisputably discarded prior to being reclaimed
are not a part of the continuous primary production process. (``AMC
II''), 907 F. 2d 1179 (DC Cir. 1990) (listed wastes managed in units
that are part of wastewater treatment units are discarded materials
(and solid wastes), especially where it is not clear that the industry
actually reuses the materials). For cases that lie within the spectrum,
the petitioner would need to provide sufficient information about the
production process to demonstrate that the management of the hazardous
secondary material is an integral part of the production process and is
not waste treatment.
    The second criterion for making this non-waste determination is the
capacity of the production process to use the hazardous secondary
material in a reasonable timeframe and ensure that it will not be
abandoned (for example, based on past practices, market factors, the
nature of the material, and any contractual arrangements). Abandonment
of stockpiled recyclable hazardous secondary materials is one way that
discard can occur at recycling operations and is one of the major
causes of environmental problems. As indicated in the recycling
studies, 69 of the 208 incidents of environmental damage involve
abandonment of the hazardous secondary material as the primary cause of
damage. For today's proposed exclusions for hazardous secondary
materials recycled under the control of the generating facility and
hazardous secondary materials transferred to another facility for
recycling, EPA is proposing speculative accumulation (as defined in 40
CFR 261.1(a)(8)) as the method for determining when a material is
unlikely to be recycled and therefore may end up being discarded via
abandonment. For the non-waste determination, the petitioner would not
necessarily need to demonstrate that the material would not be
accumulated speculatively per 40 CFR 261.1(a)(8), but he must provide
sufficient information about the material and the process to
demonstrate that the

hazardous secondary material will in fact be reclaimed in a reasonable
timeframe and will not be abandoned. EPA is not proposing an explicit
definition of ``reasonable timeframe'' because such a timeframe would
vary according to the material and industry involved, and therefore
determining this timeframe should be made on a case-specific basis.
However, an applicant may still choose to use the speculative
accumulation timeframe as a default if it wishes.
    The third criterion for this non-waste determination is whether the
hazardous constituents in the hazardous secondary material are recycled
rather than released to the air, land or water at significantly higher
concentrations from either a statistical or from a health and
environmental risk perspective than would otherwise be released by the
primary production process. To the extent that the hazardous
constituents are a continuation of the original hazardous secondary
material, their release to the environment is an indicator of discard.
The Agency recognizes that normal production processes also result in a
certain level of releases and, in evaluating this criteria, would not
deny a petition if the increase in releases is not significantly
different from either a statistical or risk perspective. However, when
unacceptably high levels of the constituents that make the hazardous
secondary material of regulatory concern are released to the
environment rather than recycled, then that material (or at least the
portion of the material that is of most concern) is not in fact being
``reused within an ongoing industrial process.''
    The fourth and final criterion for this non-waste determination
includes any other relevant factors that demonstrate the hazardous
secondary material is not discarded. This ``catch-all'' criterion is
intended to allow the applicant to provide any case-specific
information it deems important in making the case that its material is
not discarded and therefore not a solid waste.
    EPA requests comment on these criteria, as well as any other
criteria that may be relevant for making this non-waste determination.

C. Non-Waste Determination for Hazardous Secondary Material
Indistinguishable in All Relevant Aspects From a Product or
Intermediate

    Although the courts have made clear that hazardous secondary
materials recycled within a continuous industrial process are not
discarded and therefore not solid waste, they have also said that
hazardous secondary materials destined for recycling in another
industry are not automatically discarded. In the Safe Foods case, the
Court stated ``Nobody questions that virgin * * * feedstocks are
products rather than wastes. Once one accepts that premise, it seems
eminently reasonable to treat [recycled] materials that are
indistinguishable in the relevant respects as products as well.'' 350
F.3d at 1269. In most cases, hazardous secondary materials that are
indistinguishable from products are unambiguously excluded from solid
waste regulation under 40 CFR 261.2(e). However, there may be some
instances which would benefit from a non-waste determination similar to
that proposed today for hazardous secondary materials reclaimed in a
continuous industrial process. EPA is proposing four criteria for
making a non-waste determination for hazardous secondary materials
indistinguishable in all relevant aspects from a product or
intermediate.
    The first criterion for this non-waste determination is
consideration of likely markets for the hazardous secondary material
(for example, based on the current positive value of the material,
stability of demand, and any contractual arrangements). This evaluation
of market participation is a key element for determining whether
companies view and handle these hazardous secondary materials like
products rather than like negatively-valued wastes. EPA's report on how
market incentives affect the management of hazardous secondary
materials indicates that both high value and stable markets are strong
incentives to refrain from over-accumulating recyclable materials, thus
maximizing the likelihood that the hazardous secondary materials will
be recycled and not abandoned.
    The second criterion for this non-waste determination is the
chemical and physical identity of the hazardous secondary material and
whether it is comparable to commercial products or intermediates. This
``identity principle'' is a second key factor that the Court in Safe
Food found useful in determining whether a material is
indistinguishable from a product. It is important to note that the
identity of a material can be ``comparable'' to a product without being
identical. However, to qualify for a non-waste determination, any
differences between the hazardous secondary material in question and
commercial products or intermediates must be insignificant from either
a statistical or from a health and environmental risk perspective.
    The third criterion for this non-waste determination is whether the
hazardous constituents in the hazardous secondary materials are
recycled rather than released to the air, land or water at
significantly higher concentrations from either a statistical or from a
health and environmental risk perspective than would otherwise be
released by the production process. The Agency believes that to the
extent that the hazardous constituents are a continuation of the
original hazardous secondary material, their release to the environment
is a possible indicator of discard. The Agency recognizes that normal
production processes also result in a certain level of releases and, in
evaluating this criteria, would not deny a petition if the increase in
releases is not significant from either a statistical or a health and
environmental risk perspective. However, when high concentrations of
the constituents that make the hazardous secondary material of
regulatory concern are released to the environment rather than
reclaimed, then that material (or at least the portion of the material
that is of most concern) is not being handled as a commercial product
or intermediate.
    As with the non-waste determination for hazardous secondary
materials reclaimed in a continuous industrial process, the fourth and
final criterion for this non-waste determination includes any other
relevant factors that demonstrate the material is not discarded. This
``catch-all'' criterion is intended to allow the applicant to provide
any case-specific information it deems important in making the case
that its material is not discarded.
    EPA requests comment on these criteria, as well as any other
criteria that may be relevant for making this non-waste determination.

D. Non-Waste Determination for Hazardous Secondary Material Reclaimed
Under the Control of the Generator Via a Tolling Arrangement or Similar
Contractual Arrangement

    As discussed earlier in today's preamble, EPA is proposing that
hazardous secondary materials recycled via a specific type of tolling
(or contractual) arrangement are not discarded and therefore are not
solid waste, and is requesting comment if other types of tolling
arrangements would also not involve discard. Because the generator
maintains control over the recycled hazardous secondary material and it
is legitimately recycled, the hazardous secondary material would not be
considered discarded. By maintaining control over, and potential
liability for, the recycling process, the generator ensures that the
materials are not discarded. See ABR 208 F.3d at 1051 (``Rather than
throwing these materials [destined for recycling] away,

the producers saves them; rather than abandoning them, the producer
reuses them.'').
    However, the large variety of contractual arrangements may preclude
EPA from identifying all possible arrangements that clearly do not
involve discard. For this reason, the Agency also is proposing that
generators may seek a non-waste determination for tolling or other
contractual arrangements not covered by the proposed exclusion
discussed in section IX of today's preamble.
    The first criterion for this non-waste determination would be
whether the generator retains ownership and responsibility via a
contract or other mechanism for the hazardous secondary materials and
the residuals that result from their recycling. Assumption of
responsibility of both the hazardous secondary materials and the
residuals that would result from their recycling is a key indication
that the generator is not abandoning the hazardous constituents that
would have caused the hazardous secondary materials to have been
hazardous waste had they been discarded.
    The second criterion for this non-waste determination is whether
the hazardous constituents in the hazardous secondary materials are
recycled rather than released to the air, land or water at
significantly higher concentrations from either a statistical or from a
health and environmental risk perspective than would otherwise be
released by the production process. The Agency believes that to the
extent that the hazardous constituents are a continuation of the
original hazardous secondary material, their release to the environment
is a possible indicator of discard. The Agency recognizes that normal
production processes also result in a certain level of releases and, in
evaluating this criteria, would not deny a petition if the increase in
releases is not significant from either a statistical or a health and
environmental risk perspective. However, when high concentrations of
the constituents that make the hazardous secondary material of
regulatory concern are released to the environment rather than
reclaimed, then that material (or at least the portion of the material
that is of most concern) is not being recycled under the control of the
generator.
    As with the other types of non-waste determinations, the final
criterion for this non-waste determination includes any other relevant
factors that demonstrate the material is not discarded. This ``catch-
all'' criterion is intended to allow the applicant to provide any case-
specific information it deems important in making the case that its
material is not discarded.
    EPA requests comment on these criteria, as well as any other
criteria that may be relevant for making this non-waste determination.

E. Scope and Eligibility

    As with any solid waste determination that involves recycling,
hazardous secondary materials presented for a non-waste determination
must be legitimately recycled. In other words, the hazardous secondary
material must provide a useful contribution to the recycling process or
to a product of the recycling process, and the recycling process must
produce a valuable product or intermediate. For further discussion of
legitimacy and the factors to be considered, see section XI of today's
preamble.
    In addition, non-waste determinations are limited to reclamation
activities and would not apply to recycling of ``inherently waste-
like'' materials (40 CFR 261.2(d)), recycling of materials that are
``used in a manner constituting disposal,'' or ``used to produce
products that are applied to or placed on the land,'' (40 CFR
261.2(c)(1)) and ``burning of materials for energy recovery'' or ``used
to produce a fuel or otherwise contained in fuels'' (40 CFR
261.2(c)(2)). Today's supplemental proposal is not intended to affect
how these recycling practices are regulated. However, we request
comment on whether such practices should be eligible for the case-
specific non-waste determinations.

F. Petition Process

    The petition process for the non-waste determination would be the
same as that for the solid waste variances found in 40 CFR 260.31. In
order to obtain a non-waste determination, a facility that manages a
hazardous secondary material that would otherwise be regulated under 40
CFR 261 as either a solid waste, or as a conditionally excluded waste,
must apply to the Administrator or the authorized state per the
procedures described in 40 CFR 260.33. EPA proposes to amend section
260.33 to apply to non-waste determinations also. The application must
address the relevant criteria (discussed in further detail above). The
Administrator would evaluate the petition and issue a draft notice
tentatively granting or denying the application. Notification of this
tentative decision will be provided by newspaper advertisement or radio
broadcast in the locality where the facility is located. The
Administrator would accept comment on the tentative decision for 30
days, and also may hold a public hearing. The Administrator would issue
a final decision after receipt of comments and after the hearing (if
any). If the application is denied, the facility may still pursue a
solid waste variance or exclusion (for example, one of the solid waste
variances under 40 CFR 260.31 or solid waste exclusions under 40 CFR
261.4). EPA also may choose to specify the Regional Administrator as
the appropriate level of review for this process.
    As discussed in more detail in section XV of today's supplemental
proposal, under section 3006 of RCRA, EPA would authorize states to
administer the non-waste determinations as part of their base RCRA
program. Because states are not required to implement Federal
requirements that are less stringent or narrower in scope than current
requirements, authorized states are not required to adopt the non-waste
determination process, and ordinarily the proposed provision could not
go into effect in an authorized state until it does choose to adopt it.
However, because the non-waste determination process is a formalization
of determinations that states may already perform on an ad hoc basis,
EPA is proposing to allow states that have not yet formally adopted the
proposed regulation in 40 CFR 260.34 to participate in non-waste
determinations if the following conditions are met: (1) The state
determines that the hazardous secondary material meets the criteria in
either paragraph (b), (c) or (d) of proposed section 40 CFR 260.34; (2)
the state requests EPA to review its determination; and (3) EPA
approves the state determination.

G. Enforcement

    If a regulatory authority determines that a hazardous secondary
material is not a solid waste via the proposed petition process, the
material is not subject to Subtitle C hazardous waste regulations.
However, as part of this process, the applicant has an obligation to
submit, to the best of its ability, complete and accurate information.
If the information in the application is found to be incomplete or
inaccurate and, as a result, the hazardous secondary material does not
meet the criteria for a non-waste determination, then the material may
be subject to RCRA Subtitle C regulation and EPA or the authorized
state could choose to bring an enforcement action under RCRA section
3008(a). Moreover, if the petitioner is found to have knowingly
submitted false information, then it also may be subject to criminal
penalties under RCRA section 3008(d).

    A special situation occurs when a material meets all the criteria
at the time the determination is made, but, as circumstances change,
ceases to meet the criteria. In particular, proposed criteria 40 CFR
260.34(b)(2) and 40 CFR 260.34(c)(1) depend at least in part on market
conditions, which can change over time. EPA requests comments on
whether there should be as part of the petition process an obligation
for the petitioner to inform the Agency when circumstances change, and
whether there should be a formal mechanism for the Agency to revoke a
determination if the change in circumstances results in the hazardous
secondary material no longer meeting the criteria for a non-waste
determination.

XIII. Effect of This Proposal on Other Programs

A. Other Exclusions

    In the October 2003 proposal, EPA proposed a number of specific
``conforming changes'' to existing exclusions (68 FR 61578-61580). The
purpose of these conforming changes was to simplify and clarify the
regulations. EPA did not intend to make any substantive changes as to
how currently excluded materials would need to be managed or regulated.
However, comments to the proposed changes were overwhelming in favor of
retaining the existing exclusions. These existing exclusions are
familiar to both the States and the regulated community, and making
wholesale adjustments appears to have had unintended consequences in
many cases.
    Thus in today's supplemental proposal, EPA is proposing to retain
the existing exclusions (for example, the scrap metal exclusion in 40
CFR 261.4(a)(13)) exactly as written. However, we request comment on
whether any specific regulatory exclusion would need revision in order
to avoid confusion or contradictions. EPA also is proposing that
hazardous secondary materials that are currently excluded with specific
requirements or conditions should be required to continue to meet those
requirements (e.g., the drip pad requirements for the wood preserving
exclusion in 40 CFR 261.4(a) (9)). In addition, recycling of such
materials at new facilities, or at existing facilities that are not
currently operating under the terms of an existing exclusion, would
also be subject to the existing applicable regulatory exclusion, rather
than today's proposed exclusions.
    We request comment on the option of allowing a regulated entity to
choose which exclusion the person is subject to in those cases where
more than one exclusion could apply and, if so, whether that entity
should be required to document the choice made.

B. Permitted Facilities

    Facilities that currently have RCRA permits or interim status, and
are managing hazardous wastes that would become excluded under this
rule, could be affected by today's supplemental proposal in a number of
ways. Under one scenario, a facility that manages a variety of
hazardous waste materials, including some hazardous secondary materials
that would become excluded under this rule, would be affected only to
the extent that certain units or processes at the facility would no