Draft Environmental Justice Methodology

for the Definition of Solid Waste Final Rule

Proposed Methodology for Assessing Potential Disproportionate Impacts

From the Hazardous Secondary Material Recycling Regulations

On Minority, Low-Income, and Tribal Populations

Draft for Public Discussion

January 13, 2009

Office of Solid Waste and Emergency Response

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue

Washington D.C. 20460

Executive Summary

Background

On October 30, 2008, EPA published a change to the hazardous waste
regulations entitled Revisions to the Definition of Solid Waste, also
known as the “DSW rule.”   The DSW rule creates specific conditions
for recycling hazardous secondary materials under the Resource
Conservation and Recovery Act (RCRA). These conditions are different
from the hazardous waste requirements; as long as the conditions of the
DSW rule are met, the hazardous secondary material are not defined as
“solid waste” and therefore are not subject to hazardous waste
requirements.

For example, under the DSW rule, hazardous secondary material can be
stored for longer periods of time than fully regulated hazardous waste,
can be stored in units other than hazardous waste tanks and containers,
and can be transported to an off-site recycler without using a hazardous
waste manifest.  However, the hazardous secondary material must meet
other conditions; for example, 75% of the material must be recycled each
year, the material must be “contained” and not released to the
environment, and the company must notify EPA about its activities and
keep records of all shipments.  (See Table 1 in Section IX of this paper
for a complete description of the conditions and requirements that apply
under the DSW rule.)

EPA’s goal in promulgating the DSW rule was to make it more efficient
to safely recycle these materials instead of landfilling or incinerating
them, and to resolve uncertainty about when materials that are sent to
recycling are regulated “solid wastes,” and when they are more like
commodities.

On January 29, 2009, the Sierra Club submitted an administrative
petition requesting that EPA repeal the DSW rule. The petition argues
that the revised regulations are unlawful and that they increase threats
to public health and the environment without producing compensatory
benefits and, therefore, should be repealed.   In particular, the
petition disagrees with the Agency’s findings that the rule would have
no adverse environmental impacts, including no adverse impact to
minority or low-income communities.

On June 30, 2009, EPA held a public meeting to allow the public and
interested stakeholders to provide input to the decision-making process
in responding to Sierra Club’s administrative petition.  Many
commenters expressed strong concerns that the Agency did not adequately
address Environmental Justice in the rulemaking.  In response to these
concerns, EPA has committed to conducting an expanded analysis of the
Environmental Justice (EJ) impacts of the DSW rule.

Draft DSW EJ Analysis Methodology and Public Involvement

This document explains EPA’s draft methodology for the DSW EJ
analysis.  It was designed to present enough detail on the draft
methodology to allow the public to provide meaningful input, but to
still occur early enough in the process to allow for course corrections.

Involvement of stakeholders, particularly those potentially affected by
the DSW rule, will be a key part of the development of the revised DSW
EJ analysis.  EPA would like to begin a public dialogue about how best
to conduct the DSW EJ analysis.  Below is an overview of the draft
methodology.

Overview of Draft DSW Environmental Justice Methodology

Step 1: Hazard characterization

	Includes two phases:  (1) identifying potential hazards that could pose
risks to human health and the environment from the recycling of
hazardous secondary materials, including accidental releases of
hazardous constituents and (2) analyzing the likelihood of such hazards
occurring under the requirements of the DSW exclusions as compared to
the pre-2008 DSW hazardous waste regulations.

Step 2:	Identification of potentially affected communities	Modeling the
locations of facilities (including potential new facilities) that are
likely to choose to take advantage of the DSW rule.

Step 3:	Demographics of potentially affected communities	Mapping the
location of the facilities modeled in Step 2 and identifying the
demographics (i.e., minority population and income level) of the
surrounding communities.

Step 4: Identifying other factors that affect vulnerability in
potentially affected communities 	Identifying important vulnerability
factors. These include factors that may increase the likelihood of
“damages”, or the likelihood that a facility is sited within a
community, or the likelihood of health risks in the event of releases.
Examples include the presence of other pollution sources and any
information on public health of the surrounding population.

Step 5: Information synthesis: assessment of disproportional impact
Synthesizing all the information to characterize whether the DSW rule
will facilitate the occurrence of any adverse impacts and whether some
population groups (e.g., minority or low income populations) would be
overrepresented in the impacted communities.

Step 6: Identification of potential preventive and mitigation strategies
Identifying potential strategies to prevent non-compliance and releases
to the environment and also strategies to mitigate any impacts
identified under step 5.

EPA plans to brief the National Environmental Justice Advisory Council
(NEJAC) on the draft methodology at their next meeting, scheduled for
January 27–29, 2010, in New Orleans, Louisiana.  EPA will also hold a
public roundtable discussion of the approach concurrently with the NEJAC
meeting and is planning a second in person public roundtable in the
Washington D.C. area for February 23, 2010 and a web conference for
February 25, 2010.

Stakeholders are invited to provide feedback on any aspect of the
methodology, and EPA is particularly interested in the following
questions:

The primary data source EPA plans to use for Step 1: Hazard
Characterization is a summary of recycling damage cases that EPA
developed as part of the DSW rule.   EPA would be interested in any
other sources of data regarding demonstrated problems with hazardous
secondary materials reclamation, including any facilities that claimed
to be conducting such reclamation, but were sham operations.

In determining the likelihood of environmental problems (e.g., soil and
groundwater contamination, abandoned materials, accidental releases,
such as fires and accidents) occurring at such reclamation facilities,
EPA could take either a qualitative or quantitative approach.

A qualitative approach would involve examining the DSW rule
point-by-point and determining how the requirements of the DSW rule
compare to the hazardous waste requirements and explaining the potential
problems that would occur if the DSW requirements do not act as
intended.

A quantitative approach would require EPA to make certain assumptions
about a model facility (e.g., the amount and type of hazardous secondary
material, the type of neighborhood it is located in, the likelihood of a
leak or spill or accident) and to calculate the potential impact to
human health and the environment surrounding the facility.

Identifying a model facility will likely be a challenge given the
different types of industry sectors that could participate in the DSW
rule, and the outcome of the quantitative approach would depend greatly
on the specific assumptions.  The quantitative approach could yield more
specific information than the qualitative approach.  However, it would
likely take longer to conduct.  Would the quantitative information be
useful enough to stakeholders to be worth spending additional time?

(Note that regardless of whether the approach to the Hazard
Characterization step is qualitative or quantitative, the DSW
Environmental Justice analysis would still present quantitative
information on the number of minority or disadvantaged communities
potentially affected by the DSW rule.)

For Step 2: Identification of Potentially Affected Communities, EPA has
identified three main categories of communities potentially affected by
the DSW rule: (1) facilities that have already notified EPA that they
are operating under the DSW rule, (2) hazardous waste facilities likely
to begin accepting hazardous secondary materials and operating under the
DSW rule, and (3) new facilities reclaiming hazardous secondary
materials for the first time and operating under the DSW rule.

For the third category, EPA proposes to use the recycling damage case
information as a surrogate for the types of facilities that might begin
to reclaim hazardous secondary materials under the DSW rule.  However,
focusing on just facilities with environmental problems would likely
skew the dataset, so these facilities could also be supplemented with a
list of commercial non-hazardous industrial waste reclaimers who have no
reported environmental problems.  Are there other sources of information
for the location and size of potential new facilities?  Of particular
concern is the possibility of smaller facilities with fewer resources to
invest in environmental protection entering the business of hazardous
secondary materials reclamation.

In addition to the primary EJ analysis of the DSW rule, EPA also plans
to conduct a supplementary analysis of the other hazardous waste
recycling exclusions. In addition to the exclusions in the 2008 DSW
rule, there are dozens of other hazardous waste recycling exclusions
that have been in place for many years, many of which are also
associated with the recycling damage cases.

EPA is interested in any information stakeholders may have about
problems they have experienced with the existing hazardous waste
recycling regulations (beyond the DSW rule).  The supplementary analysis
of other recycling exclusions would be done in parallel with the main
analysis and would not delay preparation of the response to the Sierra
Club administrative petition.

After receiving input on the DSW EJ methodology via the public
roundtables, as well as any other information provided to EPA, the
methodology will be revised and EPA will conduct the DSW EJ analysis.

Once the draft DSW EJ analysis is complete, EPA plans to make it
available to the public for public comment and for peer review.  The
revised analysis will then be used as part of the information that will
be assessed in developing EPA’s proposed response to the Sierra Club
administrative petition.

TABLE OF CONTENTS

Part 1: Background

I.	What Is Environmental Justice?	1

II.  	Purpose of the Draft DSW Environmental Justice Methodology	2

III. 	Public Involvement	3

IV. 	Regulation of Hazardous Secondary Material Recycling	4

V.	DSW Rule and Environmental Justice	5

VI.	How Will the Results of the DSW Environmental Justice Analysis

	Be Used?	8

Part 2: Methodology

VII.	Baseline Assumptions for the DSW Environmental Justice Analysis	9

VIII.	Scope of the DSW Environmental Justice Analysis	9

IX.	Detailed Methodology Discussion	10

Step 1: Hazard characterization

Step 2: Identification of potentially affected communities

Step 3: Demographics of potentially affected communities

Step 4: Identifying other factors that affect vulnerability in
potentially affected communities

Step 5: Information synthesis:  assessment of disproportional impact

Step 6: Identification of potential preventive and mitigation strategies

X.	Supplementary EJ Analysis: Other Hazardous Waste Recycling Exclusions
21

Appendix A: Description of the DSW Rule Exclusions

Appendix B: Historical Causes of Industrial Recycling Damages Involving
Hazardous Secondary Materials and the Definition of Solid Waste (DSW)
Final Rule Conditions that Address Them

Appendix C: Summary of Information from DSW Notifications as of Nov 23,
2009

Draft Environmental Justice Methodology

for the Definition of Solid Waste Final Rule

Part 1: Background

I.	What is Environmental Justice?

The Environmental Protection Agency (EPA) considers Environmental
Justice to be the fair treatment and meaningful involvement of all
people regardless of race, color, national origin, or income with
respect to the development, implementation, and enforcement of
environmental laws, regulations, and policies.  More specifically:

Fair treatment means that no group of persons should bear a
disproportionate share of the negative environmental consequences
resulting from industrial, governmental and commercial operations or
policies.

Meaningful involvement means that: (1) people have an opportunity to
participate in decisions about activities that may affect their
environment and/or health; (2) the public’s contribution can influence
the regulatory agency's decision; (3) their concerns will be considered
in the decision making process; and (4) the decision makers seek out and
facilitate the involvement of those potentially affected.

Environmental Justice is specifically addressed through Executive Order
12898: Federal Actions to Address Environmental Justice in Minority
Populations and Low-Income Populations, which focuses federal attention
on the environmental and human health conditions of minority and
low-income populations with the goal of achieving environmental
protection for all communities. The Order directed federal agencies to
develop Environmental Justice strategies to address disproportionately
high and adverse human health or environmental effects of their programs
on minority and low-income populations. The order is also intended to
promote nondiscrimination in federal programs that affect human health
and the environment and aims to provide minority and low-income
communities with access to public information and opportunities for
meaningful public participation in matters relating to human health and
the environment.

II.	Purpose of the Draft DSW Environmental Justice Methodology

This document, entitled Draft Environmental Justice Methodology for the
Definition of Solid Waste Final Rule (“Draft DSW EJ Methodology”)
outlines EPA’s current thinking on the methodology for performing an
Environmental Justice (EJ) analysis of hazardous secondary material
recycling, particularly as it pertains to the Definition of Solid Waste
(DSW) final rule.

The DSW EJ analysis will serve as a pilot project for EPA’s EJ
Executive Steering Committee’s rulemaking workgroup as it develops a
systematic process to incorporate Environmental Justice considerations
within EPA’s rulemaking procedures.  While many of the issues
discussed in the Draft DSW EJ Methodology are unique to the DSW rule, to
the extent that the issues raised in the DSW EJ analysis relate to the
broader issues of Environmental Justice, any comments or information
obtained will be shared with other EPA Offices, including the Office of
Environmental Justice in the Office of Enforcement and Compliance
Assurance, the Office of Policy, Economics and Innovation and the EJ
Executive Steering Committee, so that this information can be considered
as the Agency develops guidance for conducting Environmental Justice
analyses.

At the same time, the Agency remains mindful that each Environmental
Justice analysis addresses a unique set of circumstances, and that the
DSW EJ analysis should not be used to create a “one-size-fits-all”
expectation for EPA’s approach to Environmental Justice analyses in
other contexts.

The Draft DSW EJ Methodology represents the problem-formulation stage of
the analysis, a critical early step in determining which types of
analytical approaches to use.  Problem-formulation means clearly
articulating the issues we are trying to address.  For example, EPA’s
Framework for Cumulative Risk Assessment delineates “Planning, Scoping
and Problem-Formulation” as the first phase in a cumulative risk
assessment.  Because there is limited precedent for how to conduct an
Environmental Justice analysis in the context of a national rulemaking,
thoughtful problem-formulation is critical for a meaningful analysis, as
well as for laying the foundation for future analyses.

Problem-formulation is informed by a scoping process, which should
involve robust stakeholder/community involvement.  It is critical that
scoping and stakeholder involvement are incorporated into the
Environmental Justice analysis/rulemaking effort very early in the
process.  Thus, this paper is intended to be a vehicle for engaging with
outside experts and interested stakeholders, particularly those located
in communities potentially affected by hazardous secondary materials
reclamation, about the most appropriate way of conducting an
Environmental Justice analysis for the DSW rule.

The DSW Environmental Justice analysis itself will, in turn, be used to
help EPA’s decision-making process regarding whether and, if so, how
the DSW rule should be revised.  As part of that decision process, the
public will have the opportunity to formally comment on both the DSW EJ
analysis and EPA’s tentative decision on revising the DSW rule.

III. Public Involvement

EPA plans to share this draft methodology with interested stakeholders,
particularly those potentially affected by the rulemaking, in order to
make improvements, as appropriate, to the approach before conducting the
analysis.  Specifically, EPA plans to present the methodology to the
National Environmental Justice Advisory Council (NEJAC) at their next
meeting, scheduled for January 27–29, 2010, in New Orleans, Louisiana.
 EPA will also hold a public roundtable discussion of the approach
concurrently with the NEJAC meeting and is planning a second in person
public roundtable in the Washington D.C. area for February 23, 2010 and
a web conference for February 25, 2010.  We will also reach out to
interested and impacted communities to identify effective ways to obtain
their input.  EPA will also reach out to state governments via state
associations and regularly scheduled meetings and conference calls.
Finally, a letter to Tribal leaders and Tribal Environmental Departments
also will be sent inviting them to a nationwide teleconference or web
conference to receive and discuss preliminary comments from Tribes.

Once the draft DSW EJ analysis is complete, EPA plans to make it
available to the public for public comment and for peer review.  Once
all of this is completed, the revised analysis will then be used as part
of the information that will be assessed in developing EPA’s proposed
response to the Sierra Club administrative petition.

IV. Regulation of Hazardous Secondary Material Recycling

The relationship between hazardous secondary material recycling and the
RCRA definition of solid waste is a complex one.  EPA’s authority to
regulate hazardous waste is dependent on the material first being a
“solid waste” under the Resource Conservation and Recovery Act
(RCRA).  A solid waste is any material that has been discarded, within
the plain meaning of the term.  In court decisions regarding the RCRA
definition of solid waste, the U.S. Court of Appeals for the D.C.
Circuit has consistently cited a plain language definition of discard as
meaning "disposing, abandoning or throwing away."

EPA’s definition of solid waste states that for hazardous secondary
materials that are recycled, one must evaluate both what the material is
and how it is recycled before determining whether or not it is a solid
waste subject to RCRA Subtitle C jurisdiction.  For some materials, such
as processed scrap metals, EPA made a determination that, after
processing, they are sufficiently like a commodity and, therefore, they
are not solid wastes: that is, these materials have not been “disposed
of, abandoned or thrown away” when recycled.  For other materials,
such as cathode ray tubes (CRTs), EPA has determined that they are not
solid wastes when they are recycled under certain conditions (for
example, the CRTs must either be intact or they must meet certain
storage and labeling conditions).  Failure to meet these conditions
means that these hazardous secondary materials are discarded and
therefore are solid and hazardous waste.  Other materials, such as
lead-acid batteries, remain solid and hazardous wastes, but are subject
to alternative management standards when they are recycled.  Still other
materials are fully regulated as hazardous wastes when recycled.

Despite various EPA rulemakings since the 1985 regulation was
promulgated, the regulatory status of hazardous secondary materials sent
to recycling has continued to raise questions.  These questions can and
have created uncertainty in the regulated community and with the public
and can potentially negatively affect enforcement actions involving the
recycling of hazardous secondary materials.

In an attempt to more definitively answer the question of when
reclamation of hazardous secondary material does not involve discard,
EPA promulgated the DSW rule on October 30, 2008, which became effective
on December 29, 2008.  (See later discussion on Scope of the DSW
Environmental Justice Analysis in Section VIII and Attachment A for a
more detailed description of the DSW rule.)

V. DSW Rule and Environmental Justice

As part of the DSW rule, EPA made a determination under Executive Order
12898: Environmental Justice that no disproportionate impacts to
minorities or low income communities are expected to result from the
rule.  However, as discussed below, EPA will re-evaluate these findings
as part of the larger re-evaluation of the DSW rule.

The 2008 Environmental Justice determination was based on EPA’s
assessment of potential countervailing risks of the final rule. As part
of the record supporting the rulemaking, EPA performed an assessment of
environmental problems associated with hazardous secondary materials
recycling.  To address commenters’ concerns that historic damages are
irrelevant to current practices, EPA only included cases where damages
occurred after 1982 (after the implementation of the RCRA and CERCLA
statutes).  In addition, the assessment only included those damages that
could clearly be attributed to some type of recycling activity,
including those involving the recycling of hazardous secondary materials
that are specifically excluded from the hazardous waste regulations.

Of the approximately 800 damage cases examined by EPA as part of the
environmental problems study, the study identifies 208 cases in which
environmental damages of some kind occurred from some type of recycling
activity and that otherwise fit the scope of the study. The remaining
cases either did not fit the scope of the study (i.e., did not involve
recycling or occurred prior to 1982) or there was not enough information
to make a determination.  These remaining cases are listed in an
appendix to the study, but are not included in the calculations of
damage cases.  The damage cases included both reclaimers and
intermediate storage facilities.

A detailed examination of the 208 cases revealed damages that included
leaks, spills, dumping, or other activities that caused a release to
occur that was serious enough to require some cleanup action. They also
included instances where materials were abandoned (e.g., in warehouses)
and which required removal actions overseen by a government agency and
expenditure of public funds.  Damages occurred in all parts of the
country and varied from relatively small incidents involving limited
contamination of soils and/or abandoned residuals, such as battery
casings, to much more substantial and expensive cases, with large-scale
soil and ground water contamination and remediation costs in the tens of
millions of dollars.

The most common types of secondary materials associated with the cases
were scrap metals, solvents, used oil, non-ferrous metals, lead-acid
batteries, and used drums sent for cleaning and reconditioning. Less
common were cases involving mercury, precious metals, and hazardous
foundry sands.  Thirteen (6%) of the 208 cases were determined to be
from reclamation that occurred on-site, while the remainder were
third-party commercial recyclers.

It should also be noted that many of these cases involved secondary
materials that were not regulated as hazardous waste or were subject to
reduced regulation, prior to the DSW rule. Thus, because these hazardous
secondary materials were not regulated as hazardous wastes, or were
subject to reduced requirements, the DSW rule did not, for all practical
purposes, change the regulations for these materials.  Also, we would
note that these cases were not subject to the types of requirements
included in the DSW rule, including notification, containment, financial
assurance, reasonable efforts audits and codified legitimacy criteria.

EPA’s assessment of potential countervailing risks looked at the
underlying causes of these damage cases and explained how each was
addressed by the regulatory conditions of the rule.  A summary table of
this assessment is found in Appendix B.  Because EPA determined, based
on the conditions, that there would be no adverse environmental impacts
in general, the Agency concluded in the 2008 DSW rule that there would
also be no disproportionate adverse impacts to low income or minority
communities.

On January 29, 2009, the Sierra Club submitted an administrative
petition requesting that EPA repeal the October 2008 revisions to the
DSW rule. The petition argues that the revised regulations are unlawful
and that they increase threats to public health and the environment
without producing compensatory benefits and, therefore, should be
repealed.  In particular, the petition disagrees with the Agency’s
findings that the rule would have no adverse environmental impacts,
including no adverse impacts to Environmental Justice communities.

Of particular note is the fact that studies of hazardous waste
treatment, storage and disposal facilities (of which hazardous waste
recycling facilities are a subset) have been shown to be located
disproportionately in minority communities, with over 56% of the
population within 3 kilometers of the facilities consisting of people of
color (African American, Hispanic or Latino, Asian or Pacific Islander
or Native American), as compared to approximately 30% of the population
in comparable areas without hazardous waste facilities.  Thus if the
facilities claiming the DSW exclusion were to have an adverse
environmental impact on the surrounding communities, and such facilities
follow the same location pattern as hazardous waste facilities in
general, a disproportionate impact on minority communities would be
likely.

On June 30, 2009, EPA held a public meeting to allow the public and
interested stakeholders to provide input to the decision-making process
in responding to Sierra Club’s administrative petition.  The
information presented at the meeting and through written submissions
will help the Agency decide whether to make revisions to the rule and,
if so, how such revisions would ensure that it appropriately and safely
encourages resource conservation.

At least two-thirds of the presenters at the public meeting expressed
strong concerns that the Agency did not adequately address Environmental
Justice in the rulemaking.  In response to these concerns, OSWER has
committed to using this opportunity to conduct a more rigorous and
thorough analysis of the Environmental Justice impacts of the rule.  In
addition, during the July 21, 2009, National Environmental Justice
Advisory Council Meeting, OSWER Assistant Administrator Mathy Stanislaus
explained that EPA will involve all interested stakeholders, and
particularly those who may be potentially impacted by the rulemaking, in
the development of this analysis.

VI. How Will the Results of the DSW Environmental Justice Analysis Be
Used?

As EPA moves forward with the initial response to the Sierra Club
petition, the revised Environmental Justice analysis will be one of the
analyses upon which the Agency will rely in determining whether and, if
so, how to revise the DSW regulations.

While the RCRA statute does not directly address Environmental Justice
concerns, one of its core purposes is to protect human health and the
environment from waste that “may cause, or significantly contribute to
an increase in mortality or an increase in serious irreversible, or
incapacitating reversible, illness; or pose a substantial present or
potential hazard to human health and the environment when improperly
treated, stored, transported, or disposed of, or otherwise managed.”

To the extent an Environmental Justice analysis reveals potential
disproportionate effects on minority or low-income communities from
discarded hazardous secondary material, this result could affect how EPA
uses its policy discretion in applying specific conditions or
encouraging public involvement in implementing the definition of solid
waste regulations.  For example, EPA could analyze some of the factors
associated with potentially affected communities, such as the ability to
participate in decision-making or receive information, and the resulting
environmental or public health impacts from discarded hazardous
secondary materials.

Part 2:  Methodology

VII. Baseline Assumptions for the DSW Environmental Justice Analysis

1.	The development of a hazardous secondary materials recycling
Environmental Justice analysis will be an iterative, collaborative
process with participation from experts both within and outside EPA and
from the interested public.

2. 	One of the most critical parts of the analysis is identifying the
scope of the analysis, including the location of potentially affected
communities.  Early public participation will be a key part of
appropriately characterizing the potentially affected communities.

At the same time that EPA is conducting the DSW Environmental Justice
analysis and evaluating public comments on the rule, the DSW rule is
also the subject of litigation with a wide range of parties involved.
EPA will take particular care to keep all stakeholders and parties
informed about the analyses and the litigation and any interaction
between them.

VIII. Scope of the DSW Environmental Justice Analysis

The DSW Environmental Justice analysis will primarily focus on the DSW
rule promulgated on the October 30, 2008, which created conditional
exclusions from the definition of solid waste.  Hazardous secondary
materials that meet the conditions and requirements of the rule are
excluded from the definition of solid waste and, therefore, are not
subject to RCRA hazardous waste regulations.  A comparison of the RCRA
hazardous waste requirements and the requirements of the revised DSW
rule is presented in Table 1 in Section IX, and a more detailed
description of the DSW rule can be found in Appendix A.

The DSW Environmental Justice analysis will also include a supplementary
analysis of potential Environmental Justice impacts of other
pre-existing hazardous waste exclusions for recyclable material.  Many
of these exclusions, which pre-date the 2008 DSW rule, are associated
with hazardous secondary materials found at many of the damage cases in
the record for the DSW rule.  The supplementary analysis is discussed in
more detail in Section X of this paper.

IX.  Detailed Methodology Discussion

The following detailed methodology for the DSW EJ analysis reflects
EPA’s current thinking on the analysis and is offered for the purpose
of discussion.  We plan to revise the methodology based on the feedback
we receive from stakeholders.

Stakeholders are welcome to provide feedback on any aspect of the
methodology, and EPA is particularly interested in obtaining information
on how best to characterize the potential hazards associated with
reclamation of hazardous secondary materials under the DSW rule (Step 1
of the methodology, below) and how best to identify and characterize
potentially affected communities (Step 2).

Step 1:   	Hazard characterization

The hazard characterization step of the DSW EJ methodology involves two
aspects:

Properly identifying what types of hazards are associated with hazardous
secondary materials.

Properly characterizing the likelihood of such hazards occurring under
the DSW rule.

Types of Hazards

The best source of information on the types of potential environmental
and public health hazards from the mismanagement of hazardous secondary
materials sent to reclamation is the study of environmental problems
associated with hazardous secondary materials discussed earlier.  This
study was prepared in support of the 2008 DSW rule.  The goal of the
environmental problems study was to identify and characterize
environmental problems that have been attributed to some types of
hazardous secondary material recycling activities that are relevant for
the purpose of the DSW rulemaking effort.

Based on the environmental problems study, the most likely hazards to
public health and the environment from hazardous materials recycling are
(1) soil and/or groundwater contamination (occurring at 77% of the
recycling damage cases), (2) abandoned materials (occurring at 33% of
the recycling damage cases), (3) sediment and/or surface water
contamination (occurring at 17% of the recycling damage cases), (4) air
releases (occurring at 11% of the recycling damage cases), and (5) fires
or industrial accidents (occurring at 5% of the recycling damage cases).

Stakeholders have suggested that one of the environmental hazards that
the environmental problems study may under-report is releases of
hazardous constituents to the air.  The DSW Rule may result in exempting
some facilities and generators from the hazardous waste facility air
emission requirements.  While these facilities would still potentially
be subject to Clean Air Act regulations, it is possible that air
emissions would increase as a result.  Thus, the DSW EJ analysis will
include in its hazard characterization an examination of this issue.

Likelihood of Hazards Occurring

The central question of the DSW EJ analysis is how likely is it that the
hazards described above will occur under the requirements and conditions
of the DSW rule.  Table 1 summarizes some of the key differences between
the hazardous waste regulatory requirements and the requirements of the
DSW rule.

Table 1:  Comparison of RCRA Hazardous Waste Requirements

with the DSW Exclusion Conditions,

Hazardous Waste

 Regulation Requirements: Hazardous Waste Generators

DSW Exclusion Conditions: Hazardous Secondary Material Generators

Cannot accumulate waste for more than 90 days without a permit or being
in compliance with the interim status standards.	No permit required for
storage even if store for more than 90 days; must recycle 75% of the
hazardous secondary material within 1 calendar year.

Must meet specific technical storage standards for tanks and containers.
No specific technical standards; rather hazardous secondary materials
must be contained and not released to the environment.

Hazardous secondary materials must also be managed in a manner at least
as protective as analogous raw materials, to the extent that there is an
analogous raw material.

Waste must be packaged, marked and labeled according to DOT hazardous
materials regulations prior to transport.  All hazardous wastes are DOT
hazardous materials.	Hazardous secondary materials must be packaged,
marked and labeled according to DOT hazardous materials regulations
prior to transport if it is a DOT hazardous material based on its hazard
class.

Manifest is required.	No hazardous waste manifest, but records of all
off-site shipments and confirmations of receipt must be kept for three
years.

DOT hazardous materials shipping paper requirements in 49 CFR Part 172
may apply if the material is a DOT hazardous material based on its
hazard class.

Recordkeeping

Biennial Reporting

Exception Reporting

Three-year record retention	Recordkeeping:

Biennial notifications

Records of off-site shipments & confirmations of receipt

Three-year record retention

Exports

Notice & consent

Annual reports

Manifesting

Exception Reports	Exports

Notice & consent

Annual reports

Hazardous Waste Regulation Requirements: Treatment, Storage, or Disposal
Facilities (TSDFs)	DSW Exclusion Conditions: Intermediate and
Reclamation Facilities

Must obtain Subtitle C permit.	Must either obtain Subtitle C permit and
manage hazardous secondary materials in the permitted units or must pass
an audit by the generator, who makes reasonable efforts to ensure their
hazardous secondary material will be safely and legitimately recycled.

Must meet specific technical storage standards for tanks and containers.
No specific technical standards; rather hazardous secondary materials
must be contained and not released to the environment.

Hazardous secondary materials must also be managed in a manner at least
as protective as analogous raw materials, to the extent that there is an
analogous raw material.

Must have emergency coordinator, test and maintain emergency equipment,
and have emergency plan.	No specific DSW requirements.

OSHA requirements for emergency response plan, training, medical
surveillance, and protective clothing in 29 CFR 1910.120(q) apply.

EPCRA requirements for emergency planning and emergency release
notification in 40 CFR 355 may also apply.

Must have personnel training plan.	No specific DSW requirements.

OSHA requirements for hazard determination, hazardous communications,
labels, material safety data sheets, and employee information and
training in 29 CFR 1910.1200 apply.

Recordkeeping

Biennial Reporting

Exception Reporting

Three-year record retention	Recordkeeping:

Biennial notifications

Records of off-site shipments & confirmations of receipt

Three-year record retention

Must have financial assurance.	Must have financial assurance.

The requirements and conditions of the DSW rule described in Table 1
were intended to prevent damages from occurring EPA included an
assessment of the countervailing risks from the DSW rule and of the
conditions that were intended to address those risks in Chapter 11 of
the Regulatory Impact Analysis of the final rule; a table summarizing
that analysis is included in Appendix B.

However, stakeholders have raised the question of whether the DSW rule
will be as effective as the hazardous waste requirements in preventing
damages from occurring.  For example, under the DSW rule, hazardous
secondary materials no longer have to meet specific storage standards
for tanks and containers, but instead must be “contained.”  Also,
under the DSW rule, facilities may store hazardous secondary materials
for more than 90 days without a permit, potentially leading to both
longer storage times and a larger amount of hazardous secondary material
in storage, possibly raising the risk of an accident.  In addition, a
hazardous waste manifest is no longer required to accompany the
shipment, although the DOT standards still apply to the extent that the
material is a “DOT hazardous material,” and shipping records must be
maintained for three years.  The central question is whether the
conditions of the DSW rule increase the likelihood of the potential
hazards (e.g., soil and groundwater contamination, abandoned materials,
fires or other accidents) of occurring from discarded hazardous
secondary material, and if so, by how much?

For the analyses performed for the rule, EPA assumed full compliance
with these conditions and requirements. However, some stakeholders have
argued that compliance with the conditions of the DSW rule may not be as
high as with the full hazardous waste regulations because oversight
procedures (e.g., inspection schedules) may be different.  The RCRA
statute includes mandatory inspections for treatment storage and
disposal facilities; thus, those facilities are likely to take
precedence over excluded facilities operating under the DSW rule,
although EPA has the ability to somewhat address this issue.  In
addition, comments from the states, in particular, highlight possible
difficulties in enforcing a general “containment” standard and a
concern that facilities may not comply with the notification
requirement, which is designed to alert regulatory authorities of the
facility’s use of the DSW rule exclusions.

Two Possible Approaches to Hazard Characterization

Two possible approaches to hazard characterization are (1) a qualitative
analysis or (2) a quantitative analysis.

Under the qualitative approach, EPA would describe the above compliance
and oversight issues in more detail to evaluate their impacts and
whether they could result in significant public health and environmental
risks to communities, and particularly in minority and low income
communities.  In addition, such an analysis would include a qualitative
comparison of the RCRA air emissions controls applicable under the
pre-existing hazardous waste rules as compared to the Clean Air Act or
other controls that may apply to facilities operating under the DSW
rule.

Under the quantitative approach, the analysis could include an
assessment of compliance rates and whether these rates differ for
hazardous waste facilities and excluded hazardous secondary material
reclaimers and intermediate facilities.  In addition, EPA could choose a
few example facilities and model the potential extent of damages.  For
example, in the case of fires or other serious accidents (which
represent 5% of the damage cases), EPA could use the type of off-site
release analyses used for facility Risk Management Plans (RMPs) to
characterize how communities might be affected by those types of
hazards.  In addition, EPA could potentially model the air emissions
from the DSW facilities as compared to air emissions as regulated under
the RCRA hazardous waste regulations.

The quantitative approach has the advantage of providing more
information than the qualitative approach, but it would also require
more time to prepare, and the outcome of the quantitative approach would
depend greatly on the specific assumptions.  Ultimately EPA will need to
determine, with the help of stakeholder input, if the additional time
needed for such an analysis is worth the additional information that is
likely to be obtained.

Possible Reductions in Hazards

In some cases, the 2008 DSW rule may result in a reduction of certain
types of environmental and public health hazards.  For example, as more
hazardous secondary materials are sent to reclamation, the rule could
result in reduced hazardous secondary materials sent to communities
associated with hazardous waste landfills and incinerators, which could
potentially impact communities around these facilities.

There is one area that has the potential for an absolute risk
reduction—hazards from transportation.  Since the 2008 DSW rule is
likely to reduce (and, in the case of on-site recycling, eliminate)
vehicle-miles traveled, transportation accidents are likely to be
reduced as well.  To the extent possible, the DSW EJ analysis will
characterize likely reductions in hazards.

 Step 2:	Identification of potentially affected communities

Categories of Potentially Affected Communities

There are three main categories of communities potentially affected by
the 2008 DSW rule.

First, there are the communities surrounding facilities that have
currently notified that they will be operating under the 2008 DSW rule
exclusion.  As of January 12, 2010, twenty-three facilities have
submitted such a notification.  (See Appendix C for a summary of the
information on these facilities.)  These facilities are located in New
Jersey, Pennsylvania, and Iowa.  The locations for these facilities are
known and will be included (along with any new facilities that notify)
in the DSW EJ analysis.

Second, there are communities surrounding facilities that are currently
managing regulated hazardous waste, but may choose to participate under
the DSW rule in the future.  Assuming full adoption of the DSW rule by
all RCRA-authorized states, EPA estimated that about 5,600 facilities
(including generators and reclaimers) in 280 industries and 21 economic
sectors that are likely to participate.

For the purposes of the EJ analysis, EPA would focus on RCRA permitted
facilities that are managing recyclable hazardous secondary materials
(including intermediate storage facilities) and will assume that all
could participate in the exclusion.  EPA will also assume that
facilities that generate recyclable hazardous secondary materials at
large enough quantities to make it economically justifiable will switch
to on-site reclamation under the DSW rule and include those facilities
in the analysis.

Third, there are communities surrounding new facilities that are not
currently managing hazardous waste or hazardous secondary materials that
may choose to begin reclaiming hazardous secondary materials under the
DSW rule.  The location of these facilities is unknown; the economic
analysis for the final rule did not include any predictions on the size
or locations of new recycling facilities.   However, one question that
has been raised is whether any such reclamation facilities are likely to
be smaller, with fewer resources to invest in environmental protection,
thus increasing the likelihood of damages occurring.

To help answer this question, EPA could use the location of the
facilities in the damage cases as a surrogate to model the types of
locations where these facilities are likely to be found.  While the
facilities involved in the damage cases are themselves unlikely to
qualify for the DSW rule (because they would be unlikely to pass a
generator audit or obtain financial assurance), the types of facilities
they represent would have likely been subject to the same zoning
restrictions and other siting considerations as any new DSW facility
would be.  However, focusing on just facilities with environmental
problems would likely skew the dataset, so these facilities could also
be supplemented with a list of commercial non-hazardous industrial waste
recyclers who have no reported environmental problems.

State Adoption Assumptions

Because the DSW rule is less stringent than the RCRA hazardous waste
regulations, the rule is only effective if states and territories that
are authorized to manage their own RCRA hazardous waste programs choose
to adopt the new rule. As of December 2009, the rule is effective in
Alaska, Iowa, Pennsylvania, New Jersey, many of the territories, and in
Indian Country.  The DSW rule is not effective in authorized states that
do not adopt it.

However, for the purposes of the analysis, EPA will assume that all
facilities in the groups identified above could participate in the 2008
DSW rule exclusions, regardless of whether the state is likely to adopt
the exclusions.  Although some states have indicated that they do not
plan to adopt the exclusions, this is a decision that could (in theory
at least) be reversed in the future, and it is difficult to predict
which states will adopt the rule in the end.

As a sensitivity analysis, EPA will also examine how factoring an
estimate of the likelihood of state adoption of the rule into the DSW EJ
analysis would affect the universe of communities that are potentially
affected.

Communities With Potentially Reduced Impacts

Finally, to the extent practical, EPA will examine facilities that are
potentially affected by the DSW exclusion because less hazardous waste
will be sent there, such as hazardous waste incinerators and landfills,
and how this decrease could potentially reduce the environmental impact
to the communities that surround those facilities.

Step 3:	Demographics of potentially affected communities

Once EPA has modeled the locations of the facilities in potentially
affected communities (as described in Step 2), EPA will analyze the
demographics of the communities surrounding the facilities, including
the percent people of color and poverty rates using an “areal
apportionment method” for characterizing these communities.   Under
this method, every census tract that is at least partially inside the
specified distance (e.g., 3 km) will be given some weight in determining
the characteristics of the potentially affected community.  For example,
if 20% of a census tract is captured, then 20% of its population will be
used.  The sum (or aggregate) of these apportioned populations will then
be used to determine the characteristics of the potentially affected
communities (or “host communities”).  However, we are interested in
learning whether there are other methodologies for characterizing
communities that should also be considered as part of the analysis.

The characteristics of the potentially affected communities will then be
compared to the characteristics of non-affected areas (i.e.,
metropolitan areas that lie beyond 3 km from a facility managing
hazardous waste or hazardous secondary material).

Finally, EPA will include a separate analysis of any facilities
potentially located within Indian Country, regardless of the distance to
the nearest population.  Because the RCRA hazardous waste program is
administered federally in Indian Country, the DSW rule is in effect
there.  While there are currently no facilities in Indian Country using
the DSW rule, EPA will coordinate closely with the Tribes to ensure
proper identification of any facilities that may take advantage of the
DSW rule exclusion there.

Step 4:	Identifying other factors that affect vulnerability in
potentially affected communities

In order to understand the potentially affected communities better, EPA
will also look at other factors that may impact a community’s risk
profile.  These include factors that may increase the likelihood of
damages, or the likelihood that a facility is sited within a community,
or the likelihood of health risks in the event of releases.

The amount of detail that the Agency will be able to capture will depend
on the availability of time, resources and data.  In most cases, these
factors would be part of a qualitative discussion, because it may be
difficult to translate many of these factors into actual health impacts.

Factors EPA will investigate are:

•	Susceptibility of the community (e.g., higher numbers of children,
higher disease rates);

•	Ability of the community to participate in decision-making or
receiving information (e.g., lack of information, language barriers,
lack of social capital);

•	Ability of the community to prepare for or cope with impacts (e.g.,
inability to evacuate during an emergency, such as a chemical accident);

•	Ability of the community to recover from environmental insults
(e.g., lack of access to health care, lack of financial resources);

•	Potential impacts with land use in the community (e.g., availability
of recreational and other enrichment opportunities);

•	Cumulative impacts, which may include all or a combination of the
above, as well as other factors;

•	Distribution of environmental burdens (e.g., location of other
potential sources of pollution, such as Superfund sites or hazardous
waste facilities, within the same community); and

•	Compliance rates, particularly comparing facilities subject to the
DSW rule to facilities subjection to the hazardous waste regulations.

Step 5:	Information synthesis: assessment of disproportional impact

Once the above analyses are complete, EPA will evaluate all of the
information and make an overall assessment of disproportionate impact.
A key part of this assessment will be to properly characterize the
nuances of the results of the analyses and avoid creating a
“one-size-fits-all” expectation for such evaluations.

This step will also include consideration of the uncertainties and
variability in the Environmental Justice analysis.

Step 6: 	Identification of potential preventative and mitigation
strategies

After completion of the DSW EJ analysis, EPA’s next step will be to
decide what steps might be needed to take in response.  Final decisions
will be made in the larger context of EPA’s response to the Sierra
Club’s petition on the DSW rule.  That decision-making process will
take into account the DSW Environmental Justice analysis, and EPA’s
evaluation of all of the other issues that were raised at the public
meeting and in the written comments.  As part of that decision-making
process, the public will have the opportunity to formally comment on
both the DSW EJ analysis and EPA’s tentative decision on revising the
DSW rule.

This part of the DSW EJ analysis will identify potential strategies that
could be used to prevent non-compliance with the rule and mitigate any
disproportionate negative impacts to minority or low-income communities
identified in Step 5.  Possible options could come from a wide range of
actions including, for example, particular revisions to the DSW rule,
changes in regulatory implementation programs, changes in regulatory
oversight programs, increased availability of information, and increased
public participation opportunities.

X.  Supplementary Environmental Justice Analysis: Other Hazardous Waste
Recycling Exclusions

The primary purpose of the DSW Environmental Justice analysis is to
provide EPA, interested stakeholders and the public with information on
the potential for disproportionate impacts to minority, low-income, and
Tribal populations from the DSW rule.  This information will be used by
EPA as the Agency responds to Sierra Club’s administrative petition.

However, an Environmental Justice analysis may also look at existing
disproportionate impacts of the pre-existing regulations, whenever such
an examination is practical.  As discussed earlier, the DSW rule does
not address existing hazardous waste recycling exclusions, most of which
have fewer conditions than the DSW rule.  Many of these exclusions are
also associated with the damage cases associated with the environmental
problems study that was conducted in support of the rule.  Table 2
includes a partial list of recycling exclusions that appear to be
associated with at least some of the damage cases.

Table 2:  Examples of Other Hazardous Waste Exclusions

Related to Recycling

40 CFR Citation	Materials Affected	Type of exclusion

261.2(c)(3)	By-products and sludges exhibiting a hazardous
characteristic	Not a solid waste when reclaimed – no conditions

261.2(e)	Materials used or reused as ingredients, as an effective
substitute for ingredients or returned to the original process.	Not a
solid waste – no conditions

261.4(a)(13)	Processed scrap metal, unprocessed home scrap metal, and
unprocessed prompt scrap metal being recycled.	Not a solid waste – no
conditions

261.6(a)(3)(ii)	Scrap metal that is not excluded under 261.4(a)(13)
Solid waste, but not subject to hazardous waste regulations – no
conditions

261.7	Residues of waste in “empty container” (e.g., a drum with no
more than one inch of hazardous waste remaining)	Solid waste, but not
subject to hazardous waste regulations – no conditions beyond the
definition of “empty”

266.70	Precious metals used for precious metals recovery	Solid and
hazardous waste– reduced regulation

266.80	Lead acid battery	Solid and hazardous waste – reduced
regulation

273	Universal Waste:   Batteries, pesticides, mercury-containing
equipment, lamps	Solid and hazardous waste  – reduced regulation

279	Used Oil	Alternative regulatory structure for used oil

Thus, as time and resources allow, EPA also will conduct a supplementary
Environmental Justice analysis of other hazardous secondary material
recycling exclusions, following the same steps described above and using
the information from the damage cases.  While this information would not
directly be used in responding to the Sierra Club petition, which
addresses the 2008 DSW rule, it could provide information that EPA could
use to make decisions about future efforts to improve the definition of
solid waste or other provisions of the hazardous waste recycling
regulations.

Appendix A: Description of the DSW Rule Exclusions

Under the DSW rule, EPA promulgated a conditional exclusion from the
Subtitle C hazardous waste regulations for persons who generate or
reclaim hazardous secondary materials.  The regulation established
streamlined requirements for the following hazardous secondary
materials:

Materials that are generated and transferred to another company for
legitimate reclamation under specific conditions;

Materials that are generated and legitimately reclaimed under the
control of the generator (i.e., generated and reclaimed on-site, by the
same company, or under “tolling” agreements); and

Materials that EPA or an authorized state determines to be non-wastes
through a case-by-case petition process.

More specifically, a generator of an excluded hazardous secondary
material that is transferred to another company for legitimate
reclamation must either send it to a permitted RCRA hazardous waste
reclamation facility or must perform an audit of the reclaimer (and any
intermediate facilities) every three years.  While the regulations
contain no specific standards in conducting the audit, the regulations
make clear that the audit documentation must demonstrate that (1) the
reclamation is legitimate, (2) the reclamation facility (and any
intermediate facilities)  has notified EPA that they are operating under
the DSW rule and that they certify they have appropriate financial
assurance, (3) the reclamation facility (and any intermediate
facilities) has no formal enforcement actions and is not a significant
non-complier, or has otherwise demonstrated that the hazardous secondary
material will be managed properly, (4) the reclamation facility has the
equipment and trained personnel to recycle the hazardous secondary
material safely, and (5) the reclamation facility will safely manage any
residuals from the reclamation operations.

The generator may use any credible evidence available in performing this
audit, including information gathered by the generator, information
provided by the reclaimer or intermediate facility, and/or information
provided by a third party, in lieu of personally performing an
assessment. For example, the hazardous secondary material generator
might hire an independent auditor to review the operations, produce
audit reports as a consortium of generators, or rely on an assessment of
a recycler or intermediate facility by a parent corporation or trade
association that is used by several generating facilities.

The audit must also include a certification by the generator that states
“I 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(s) of reclamation facility and any intermediate facility],
reasonable efforts were made in accordance with §261.4(a)(24)(v)(B) 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.”

Reclaimers and intermediate facilities must have adequate financial
assurance to ensure that there would be enough funds to dispose of the
maximum possible volume of hazardous secondary material as hazardous
waste in the event they could not reclaim it.  This financial assurance
could take the form of a trust fund, a surety bond, letter of credit,
insurance, or a financial test and corporate guarantee, and must be
re-calculated annually.  Reclamation facilities operating under the DSW
rule are required to have sudden accidental coverage for bodily injury
and property damage to third parties for all units, and non-sudden
accidental coverage (e.g., coverage for long-term releases to soil or
groundwater) for land-based units.  These facilities must also be able
to demonstrate that they are managing the hazardous secondary materials
in a manner that is as least as protective as that used for analogous
raw materials and that any residuals from the recycling process will be
managed in a manner that is protective of human health and the
environment.

Similar to the way financial assurance works for hazardous waste
facilities, the DSW financial assurance requirement does not include the
costs of corrective action in the case that materials are mishandled
unless there is an indication that such contamination exists (in which
case the DSW facility would likely be out of compliance with the
conditional exclusion and potentially subject to the RCRA hazardous
waste corrective action requirements).

Generators, intermediate facilities and reclaimers must keep records of
all shipments of excluded hazardous secondary materials and
confirmations of receipt indicating that the hazardous secondary
materials arrived at the reclamation facility (and any intermediate
facilities).  These records are kept at the facility and are subject to
inspection, but do not accompany the shipment or get sent to the
regulatory authority.  Shipments are potentially subject to the DOT
hazardous materials shipping requirements in 49 CFR Part 172 (which
include shipping papers, labeling and placarding requirements).

Generators, intermediate facilities and reclaimers also must make sure
that the hazardous secondary material is contained, that the recycling
is legitimate, and that at least 75% of the material is recycled
annually (also known as the “speculative accumulation” condition).

On the other hand, generators who reclaim hazardous secondary material
onsite, within the same company, or under specific toll manufacturing
agreements must meet the same containment, legitimacy, and speculative
accumulation conditions that are required for generators who transfer
their hazardous secondary materials to another company for reclamation.

Finally, all parties who participate in the DSW rule exclusions must
first notify EPA using the RCRA Site ID form.  This notification must
include the facility information, types and quantities of hazardous
secondary materials to be reclaimed, which exclusion they will be
managed under, and whether they will be managed in a land-based unit.
The notification information must be updated biennially.  Appendix B:
Historical Causes of Industrial Recycling Damages Involving Hazardous
Secondary Materials

 and the Definition of Solid Waste (DSW) Final Rule Conditions that
Address Them

A	B	C	D

Primary cause of historical recycling environmental damages	Historical
occurrence in 208 recycling damage cases (1982-2005)	Hazardous Secondary
Materials Reclaimed Under the Control of the Generator	Hazardous
Secondary Materials Transferred to another Facility for Recycling

1. Mismanagement of recyclables	40%

(81 cases)	No speculative accumulation (i.e., 75% of material must be
recycled each calendar year).

Materials must be contained

Generator initially, annually & upon change notifies USEPA of offsite
recycling shipments.

Generator maintains offsite recycling shipment records (receipts).

Legitimacy must be considered: in particular, Factor 3:  manage
DSW-excluded material as valuable commodity, or as analogous raw
material, or contained (40 CFR 260.43).	Same as Column C plus:

Generator documents that the recycler intends to legitimately recycle
the material.

Generator documents that there is credible evidence recycler will manage
materials safely based on environmental violations history.

Generator maintains offsite recycling shipment records.

2. Mis-management of recycling residuals	34%

(71 cases)	Materials must be contained.

Legitimacy must be considered in particular Factor 1: in cases where a
hazardous component of the secondary material is not being used in the
recycling process, the recycler is responsible for management of any
hazardous residuals of the recycling process (40 CFR 260.43).

RCRA Subtitle C hazardous waste regulations still apply to residuals
either exhibiting 40 CFR 261 subpart C hazardous characteristics or
meets 40 CFR 261 subpart D hazardous waste listing descriptions.	Same as
Column C plus:

Recycler has financial assurance for site closure.

Generator documents that the recycler has permits to manage residuals,
or there is credible evidence that recycler will manage residuals
safely.

3. Abandoned materials	14%

(30 cases)	Materials must be contained.

No speculative accumulation (i.e., 75% of material must be recycled each
calendar year).

Generator initially, annually & upon change notifies USEPA of offsite
recycling shipments.

Legitimacy must be considered; in particular Factor 3: manage
DSW-excluded material as valuable commodity, or as analogous raw
material, or contained (40 CFR 260.43).	Same as Column C plus:

The generator documents that the recycler has financial assurance for
site closure.

4. Fire or accident	5%

(11 cases)	Materials must be contained.

No speculative accumulation (i.e., 75% of material must be recycled each
calendar year).

Legitimacy must be considered; in particular Factor 4: product of
recycling process does not contain hazardous constituent concentrations
or exhibit a hazardous characteristic. (ignitability, corrosivity,
reactivity, toxicity) (40 CFR 260.43).

[Note: Although not counted in this exhibit as a condition of this DSW
exclusion, other regulatory fire and accident prevention requirements
apply, such as OSHA workplace standards & local fire codes.]	Same as
Column C plus:

The generator documents that the recycler has equipment & trained
personnel for safe recycling.

Recycler must have liability insurance for accidents.

5. Sham recycling	3%

(7 cases)	Legitimacy must be considered; in particular Factor 1:
DSW-excluded material must provide a useful contribution to the
recycling process (40 CFR 260.43); Factor 2: recycling process must
produce a valuable product (40 CFR 260.43); Factor 3: generator &
recycler manages secondary materials as a valuable commodity (40 CFR
260.43); and Factor 4: product of recycling process does not contain
hazardous constituent concentrations or exhibit a hazardous
characteristic (40 CFR 260.43).	Same as Column C plus:

The generator documents that the recycler intends to legitimately
recycle the material.

6. Unknown causes	4%

(8 cases)	Not analyzed 	Not analyzed

Appendix C:   Summary of Definition of Solid Waste Final Rule
Notifications (as of January 12, 2010)

Under the DSW final rule (73 FR 64668), facilities must notify their
regulatory authority prior to managing hazardous secondary materials
under the DSW rule and every other year thereafter. As of January 12,
2010, EPA and states have collectively received notifications from 23
facilities. EPA is providing this Summary of Definition of Solid Waste
Final Rule Notifications to enable public access to the information
received from these notifications. Note: The information from the
notifications is reported as it was submitted by the companies.

State			# of facilities that have submitted a DSW notification

Iowa 					10

Pennsylvania   				  8

New Jersey				  5

TOTAL					23

Facility Type 									# of facilities

Generator-controlled exclusion, reclaiming onsite 						9

Generator-controlled exclusion, reclaiming within same company				5

Generator-controlled exclusion, tolling							0

Transfer-based exclusion, generator transferring offsite					9

Transfer-based exclusion, reclamation facility 						3

Transfer-based exclusion, intermediate facility						0

Transfer-based exclusion, generator exporting HSM						0

Transfer-based exclusion, reclamation facility importing HSM					1

Hazardous Secondary Material Type								# of facilities

Solvents (F001-F005, D035, plus D001)									14

Electric arc furnace dust (K061)										 2

Spent pickle liquor (K062)										          	 2

WW treatment sludges; plating bath residues from electroplating
operations (F006;F008)		          	           	 3

Ignitable and/or corrosive (only) (D001, D002)							          	 5

Characteristically toxic for metals (D004-D011)							          	 3

Other characteristically toxic (D012-D043, except D035)
1

List of Facilities that have Notified under the Definition of Solid
Waste Final Rule:

EPA ID	Name	City	State	NAICS Description	Facility Description	Waste
codes for Hazardous Secondary Material	Estimated Annual Quantity	Start
Date

IAD005286539	Iowa Mold Tooling Company Inc	Garner	IA	Construction
Machinery Manufacturing	HSM Generator transferring offsite
F003;F005;D001; D035	60 tons	Mar-09

IAD043490150	Curries 9th Street Facility	Mason City	IA	Metal Window and
Door Manufacturing	HSM Generator reclaiming onsite	D001;D035;F005	5.4
tons	Jan-09

IA0000990762	Iowa Contract Fabricators Inc	Riceville	IA	Motor Vehicle
Body Manufacturing	HSM Generator transferring offsite	F003;F005;D001;
D035	40 tons	Mar-09

IAR000007377	Siegwerk USA Co	Des Moines	IA	Printing Ink Manufacturing
HSM Generator transferring within "same company"	D001	125 tons	Mar-09

IAD078096732	Siegwerk USA Co	Des Moines	IA	Printing Ink Manufacturing
HSM Generator reclaiming onsite; Reclaimer receiving HSM from within
"same company"	D001	250 tons	Mar-09

IA0000362905	Curries 12th St NW Facility	Mason City	IA	Metal Window and
Door Manufacturing	HSM Generator reclaiming onsite	D001;D035;F005	15.4
tons	Jan-09

IAD000678094	John Deere Engine Works	Waterloo	IA	Other Engine Equipment
Manufacturing	HSM Generator reclaiming onsite	D001	2 tons	Aug-09

IAD007276728	Vogel Paint & Wax Co Inc	Orange City	IA	Paint and Coating
Manufacturing	Managing under 261.2(a)(2)(ii)	D001;F003;F005	225,000
gal/yr	Feb-09

IAD000805168	John Deere Waterloo Works	Waterloo	IA	Farm Machinery and
Equipment Manufacturing	HSM Generator reclaiming onsite	D001;F003;F005
100 tons	Oct-09

IAD069624500	John Deere Des Moines Works	Ankeny	IA	Farm Machinery and
Equipment Manufacturing	HSM Generator reclaiming onsite	F005	75 tons
Nov-09

PAD980829287	Johnson Matthey Emissions Control Technologies	Wayne	PA	All
Other Motor Vehicle Parts Manufacturing	HSM Generator reclaiming onsite;
Reclaimer receiving HSM from within "same company"	D002;D005	530,000
gallons	Dec-08

PAD003043353	Cherokee Pharmaceuticals, LLC	Riverside	PA	Medicinal and
Botanical Manufacturing	HSM Generator transferring offsite	D001;D002	200
tons	Jul-09

PAD087561015	International Metals Reclamation Company, Inc	Ellwood City
PA	Nonferrous Metal (Except Aluminum) Smelting and Refining	Reclaimer
receiving HSM from offsite	K061;K062;F006;

D001;D002;D003;D004;D005;D006;D007;D008;D009;D010;D011	31,000 tons
Jun-09

PAR000519322	Johnson Matthey Emissions Control Technologies	Smithfield
PA	All Other Motor Vehicle Parts Manufacturing	HSM Generator
transferring within "same company"	D002	14,000 gallons	Aug-09

PAD002344315	Carpenter Technology Corporation	Reading	PA	Iron and Steel
Mills	HSM Generator transferring offsite	K061;K062;F001;F008	5,103 tons
Jul-09

PAD003025418	BAE Systems, Land & Armaments	York	PA	Military Armored
Vehicle, Tank, and Tank Component Manufacturing	HSM Generator
transferring offsite	D001;F003	40 tons	Sep-09

PAD981037377	Triangle Circuits	Oakmont	PA	Bare Printed Circuit Board
Manufacturing	HSM Generator transferring offsite	F006	25 tons	Jan-10

PAD980550412	Lonza, Inc.	Conshocken	PA	Medicinal and Botanical
Manufacturing	HSM Generator transferring offsite	D001;F003	3,700 tons
Jun-09

NJD002338267	Aluminum Shapes LLC	Delair	NJ	Secondary Smelting and
Alloying of Aluminum	HSM Generator reclaiming onsite	D001;F005	10,000
gallons	Jul-09

NJD002182897	Safety-Kleen Systems, Inc (Linden Facility)	Linden	NJ
Hazardous Waste Treatment and Disposal	Reclaimer receiving HSM from
within "same company"; HSM Generator and Reclaimer of Imported HSM;
Reclaimer receiving HSM from offsite
D001;D008;D018;D035;D036;D039;D040;F001;F002;F003;F005;	23,482 tons
Jun-09

NJD064344575	Siegfried USA Incorporated	Pennsville	NJ	Medicinal and
Botanical Manufacturing	HSM Generator transferring offsite	D001;F003
1,700 tons	Aug-09

NJD002454544	Veolia ES Technical Solutions LLC	Middlesex	NJ	Hazardous
Waste Treatment and Disposal	Reclaimer receiving HSM from offsite
D001;F003	40 tons	Sep-09

NJD002482545	Viking Yacht Company	New Gretna	NJ	Boat Building	HSM
Generator transferring offsite	D001;F003	70 tons	Dec-09

 The DSW rule defines hazardous secondary materials as those materials
that would be classified as hazardous waste, if discarded.

 U.S. EPA An Assessment of Environmental Problems Associated with
Recycling of Hazardous Secondary Materials , EPA-HQ-RCRA-2002-0031-0355,
January 11, 2007.
http://www.regulations.gov/search/Regs/home.html#documentDetail?R=090000
64801f3efb

 A hazardous secondary material is any material that, if discarded,
would be a hazardous waste.

 On October 30, 2008, EPA published a rule that revised the definition
of solid waste to exclude certain hazardous secondary materials from the
hazardous waste regulations promulgated under Subtitle C of the Resource
Conservation and Recovery Act (RCRA).  See 73 FR 64663.

 See 50 FR 618, January 4, 1985.  For a more detailed explanation of the
1985 rules defining solid waste, see also EPA’s webpage on DSW
resources at http://www.epa.gov/epawaste/hazard/dsw/resources.htm.

 U.S. EPA An Assessment of Environmental Problems Associated With
Recycling of Hazardous Secondary Materials , January 2007
(EPA-HQ-RCRA-2002-0031-0355).

 Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), commonly known as Superfund.

 Potential cases were identified from a variety of sources, including:
(1)  comments on the October 28, 2003 proposed rule; (2)  the Superfund
National Priorities List; (3)  national EPA databases maintained for the
CERCLA, RCRA, and enforcement programs; (4)  contacts with staff in
state environmental agencies; (5)  contacts with staff in EPA Regional
Offices; (6)  state agency data bases maintained for state Superfund
programs and other environmental programs; (7)  internet searches; and
(8) news media reports.  In conducting these searches, EPA recognizes
that it likely does not identify all relevant cases, and that there are
additional cases of environmental damage that have not been identified.

 Because many of the damage cases involved secondary materials or
activities that have not been subject to Subtitle C regulation, one of
the questions that we will be reviewing as part of this Environmental
Justice analysis is whether one or more of these materials or activities
should be regulated in some sense under Subtitle C of RCRA.

 Robert B. Bullard, PhD et al., Toxic Wastes and Race at Twenty,
1987-2007, A Report Prepared for the United Church of Christ Justice and
Witness Ministries (2007), p 52.
http://www.ejrc.cau.edu/TWART%20Final.pdf.

 A copy of the transcript of the meeting and of the written comments can
be found in the public docket (Docket ID No. EPA-HQ-RCRA-2009-0315) at
HYPERLINK "http://www.regulations.gov"  www.regulations.gov .  Video of
the speakers at the meeting can also be viewed online at
http://www.epa.gov/epawaste/hazard/dsw/meeting/speaker.htm.

 See RCRA section 1004.

 The litigants are Sierra Club and the American Petroleum Institute
(API), and the interveners are Environmental Technology Council, the
National Mining Association, National Paint & Coatings Association,
Synthetic Organic Chemical Manufacturers Association, Inc., American
Forest and Paper Association Inc., Metals Industry Recycling Coalition,
Alliance of Automobile Manufacturers, American Chemistry Council,
American Coke and Coal Chemicals Institute, Treated Wood Council,
Utility Solid Waste Activities Group, Edison Electric Institute,
American Gas Association, and National Rural Electric Cooperative
Association.  Gulf Metallurgical has also filed a motion to intervene;
the motion was opposed by API and, as of December 2009, the court has
yet to rule on it.

 Percentages do not add up to 100% because a site may have more than one
type of damage.

 40 CFR parts 264 or 265, subparts AA, BB and CC.

 Hazardous wastes that are burned for energy recovery or used on the
land (i.e., “used in a manner constituting disposal”) are not
eligible for the DSW rule and remain subject to the pre-2008 hazardous
waste regulations.

 In addition to the DSW exclusions described here, the DSW rule also
includes a case-by-case petition process for persons to obtain a
regulatory determination that their hazardous secondary materials are
not solid waste.

 Exports are not eligible where the hazardous secondary material is
controlled by the generator.

 U.S. EPA Regulatory Impact Analysis: EPA's 2008 Final Rule Amendments
to the Industrial Recycling Exclusions of the RCRA Definition of Solid
Waste September 2008 (EPA-HQ-RCRA-2002-0031-0602)

 As explained the preamble to the 2007 DSW proposal (72 FR 14210), EPA
estimated that transportation distances for hazardous secondary
materials that are affected by the DSW  rule to be reduced from an
average distance of approximately 340 miles for disposal at hazardous
waste landfills and between 400 to 520 miles for off-site hazardous
waste recycling to 0 miles for on-site recycling (for about 9% of the
affected facilities) and an average of approximately 50 miles for
non-hazardous waste recycling (for about 91% of the affected
facilities).  Because, on an annual nationwide basis, 91% of the RCRA
hazardous waste is transported by truck, transportation risk is
predominantly roadway crash risks involving property damage crashes,
personal injury crashes, or fatal crashes.  Because of the fact that
transportation accident risks positively correlate with travel
distances, EPA estimated a minimum 85% to 90% reduction in baseline
annual transport accident risk for affected materials, as a rough
estimate, regardless of DOT regulatory status (i.e., 340 to 520 miles
average transport distance baseline, compared to 0 to 50 miles
hypothetical average post-promulgation distance).

 For the purpose of this discussion, the term “facility” includes
any entity operating under the DSW rule, including hazardous secondary
material generators, intermediate facilities and reclaimers.

 New Jersey and Pennsylvania are the only RCRA-authorized states which
have adopted the rule.  The rule is effective in Iowa (and in Alaska,
certain territories, and Indian Country) because RCRA is federally
administrated in those locations.

 One of the uncertainties of the economic analysis was whether
generators would invest in on-site reclamation.  Based on public
comments, the economic analysis assumed no significant switch to on-site
reclamation.   However, of the 22 DSW notifications that have been
received to date, seven (32%) are for on-site reclamation so this
scenario will be included in the EJ analysis.

 In addition, mapping the location of the damage case facilities will
allow EPA to perform the secondary EJ analysis on other hazardous waste
recycling exclusions.

 For the purpose of this analysis, “people of color” means those
persons who have identified themselves as African American, Hispanic or
Latino, Asian or Pacific Islander, or Native American in the most recent
U.S. Census.

 The discussion of the assumptions for the areal apportionment method is
based on the work of Dr. Paul Mohai and Dr. Robin Saha as documented in
Toxic Wastes and Race at Twenty 1987-2007,  A Report Prepared for the
United Church of Christ Justice and Witness Ministries, March 2007.

 Indian Country includes: (1) all land within the limits of an Indian
reservation under the jurisdiction of the United States government; (2)
all dependent Indian communities, and (3) all Indian allotments still in
trust, whether they are located within the reservation or not.

 This particular exclusion will not be discussed in the Appendix since
the decision on whether or not to exclude the material from the DSW
regulations must be based on a case-by-case decision.

 Some facilities notified they are operating as multiple facility types
and thus are counted more than once in this column.

 Three reclaimers have notified under the rule (INMETCO Ellwood City,
PA; Safety-Kleen Linden, NJ; and Veolia Middlesex, NJ).  All have
notified they have financial assurance.

 Some facilities notified they are managing multiple types of hazardous
secondary materials and thus are counted more than once in this column.

 May also be ignitable or corrosive.

 No facility has notified they are using land-based units.

 PAGE

 PAGE

 PAGE   22

A-  PAGE  2

 PAGE

B-  PAGE  1

C-  PAGE  3


[Federal Register Volume 83, Number 47 (Friday, March 9, 2018)]
[Notices]
[Pages 10533-10536]
[FR Doc No: 2018-04790]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82812; File No. SR-PEARL-2018-05]

Self-Regulatory Organizations; MIAX PEARL, LLC ; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange
Rule 403, Withdrawal of Approval of Underlying Securities

March 6, 2018.
    Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on February 21, 2018, MIAX PEARL, LLC (``MIAX
PEARL'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 403,
Withdrawal of Approval of Underlying Securities, to allow the Exchange
to delist an option class if open for trading on another national
securities exchange, and to not open for trading or restrict securities
with open interest to closing transactions, if open for trading solely
on the Exchange.
    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange seeks to amend Rule 403 to add Interpretations and
Policies .02, to allow the Exchange to delist an option class if it is
open for trading on another securities exchange; restrict option series
to closing transactions when an option class is open for trading solely
on the Exchange and the underlying security continues to meet the
requirements for approval; restrict series with open interest to
closing transactions, provided that, opening transactions by Market
Makers executed to accommodate closing transactions of other market
participants may be permitted; and to delist the option class

when all series within that class have expired. The Exchange believes
the ability to restrict option series to closing transactions when an
option class is open for trading solely on the Exchange and the
underlying security continues to meet the requirements for approval
will allow the Exchange to delist option series in a timely and
efficient manner. The Exchange believes the proposed rule amendment is
necessary in connection with the listing and trading of option classes
that are open for trading solely on the Exchange, including, but not
limited to, cash-settled index option products.\3\ The proposed rule
change is based on a proposal recently submitted by Cboe Exchange, Inc.
(``Cboe'').\4\
---------------------------------------------------------------------------

    \3\ MIAX PEARL recently submitted a filing to list cash-settled
index option products, which, if approved, will be applicable to
this proposed rule amendment. See SR-PEARL-2018-02 (filed February
8, 2018).
    \4\ See Securities Exchange Act Release No. 82346 (December 18,
2017), 82 FR 60778 (December 22, 2017)(SR-CBOE-2017-076).
---------------------------------------------------------------------------

    Currently, whenever the Exchange determines that an underlying
security previously approved for Exchange options transactions does not
meet the then current requirements for continuance of such approval or
for any other reason should no longer be approved, the Exchange will
not open for trading any additional series of options of the class
covering that underlying security and may prohibit any opening
transactions in series of options of that class previously opened
(except that opening transactions by Market Makers executed to
accommodate closing transactions of other market participants may be
permitted). The Exchange seeks to add Interpretations and Policies .02
to provide that when an option class is trading on another exchange,
MIAX PEARL may delist such option class immediately, regardless of
whether the option class continues to meet the requirements for
approval. When an option class that no longer meets the requirements
for approval is trading solely on the Exchange, the Exchange may not
add any additional series, may restrict series with open interest to
closing transactions, and may delist any series without open interest.
However, when an option class continues to meet the requirements for
approval and is trading solely on the Exchange, the Exchange may not
restrict series with open interest to closing transactions; instead,
the Exchange may only delist series with no open interest and determine
to not open for trading any additional series in that option class, and
may delist the option class when all series within that class have
expired.
    There are various business reasons why the Exchange may choose to
no longer list an option class (e.g., lack of trading interest, lack of
market-making interest, etc.). The Exchange believes restricting such
classes to closing transactions will allow open interest to be closed
in a timelier and more efficient manner. When seeking to delist an
option class the Exchange believes that restricting series to closing
transactions is a better way to transition the class to a delisted
state than the current method of not adding additional series and
allowing market participants to continue to add new positions in the
existing series. Restricting trading to closing transactions encourages
market participants to close transactions, which helps to limit any
potential negative effects associated with delisting a class. For
example, restricting trading to closing transactions helps prevent
market participants from adding new positions that cannot be rolled
into the following expiration (a common options strategy).
    The Exchange notes that this proposal is consistent with the manner
in which Rule 403 operates in relation to option classes with
underlying securities that no longer meet the requirements for
approval--additional series are not added, series with open interest
are restricted to closing only, and series without open interest are
delisted. As proposed, when the Exchange seeks to delist an option
class with an underlying security that continues to meet the
requirements for approval the Exchange will not open additional series
in the option class and will restrict trading to closing transactions.
    Allowing Market Makers to facilitate closing transactions of other
market participants will help market participants close positions in
classes that will be delisted by the Exchange, which helps to protect
investors and the public interest. It is reasonable to restrict series
to closing only pursuant to current Rule 403 when underlying securities
no longer meet requirements for approval. The Exchange believes it is
also reasonable to restrict series to closing when the options class no
longer satisfies business justifications for listing the class.
    The Exchange will announce the implementation date of the proposed
rule change by Regulatory Circular to be published no later than 90
days following the operative date of the proposed rule. The
implementation date will be no later than 90 days following the
issuance of the Regulatory Circular.
    The Exchange notes that this filing is substantially similar to a
companion MIAX Options filing, amending Rule 403 to allow the Exchange
to delist an option class if open for trading on another national
securities exchange, and to not open for trading or restrict securities
with open interest to closing transactions, if open for trading solely
on the Exchange.
2. Statutory Basis
    MIAX PEARL believes that its proposed rule change is consistent
with Section 6(b) of the Act \5\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \6\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with
Section 6(b)(5) \7\ requirements that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
---------------------------------------------------------------------------

    In particular, when seeking to delist an option class--whether or
not the underlying security continues to meet the requirements for
approval--the Exchange believes that restricting series to closing
transactions is a better way to transition the class to a delisted
state than the current method of not adding additional series and
allowing market participants to continue to add new positions in the
existing series. Restricting trading to closing transactions encourages
market participants to close transactions, which helps to limit any
potential negative effects associated with delisting a class and helps
to protect customers and the public interest.
    The Exchange notes that this proposal is consistent with the manner
in which Rule 403 operates in relation to option classes with
underlying securities that no longer meet the requirements for
approval--additional series are not added, series with open interest
are restricted to closing only, and series without open interest are
delisted. As proposed, when the Exchange seeks to delist an option
class with an underlying security that continues to meet the
requirements for approval the

Exchange will not open additional series in the option class and will
restrict trading to closing transactions. Also consistent with current
Rule 403, opening transactions by Market Makers executed to accommodate
closing transactions of other market participants may be permitted.
Allowing Market Makers and market participants to facilitate closing
transactions will help close positions in classes that will be delisted
by the Exchange, which helps to protect investors and the public
interest. It is reasonable to restrict series to closing only pursuant
to current Rule 403 when underlying securities no longer meet
requirements for approval. The Exchange believes it is also reasonable
to restrict series to closing when the option class no longer satisfies
business justifications for listing the class.
    The Exchange also believes the proposed changes promote just and
equitable principles of trade and remove impediments to and perfect the
mechanism of a free and open market and a national market system
because the proposed rule is designed to allow the Exchange to
facilitate transactions in products solely listed on the Exchange in a
uniform manner. Additionally, the proposed amendment would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national exchange system
because the proposed amendment would make the rules of Exchange
consistent with other options exchanges which trade index options.\8\
In particular, the Exchange believes that the proposed changes will
provide greater clarity to Members \9\ and the public regarding the
Exchange's Rules as they pertain to index options. It is in the public
interest for rules to be uniform and consistent across options
exchanges so as to eliminate the potential for confusion.
---------------------------------------------------------------------------

    \8\ See supra notes 3 and 4.
    \9\ The term ``Member'' means an individual or organization that
is registered with the Exchange, pursuant to Exchange rules, for the
purposes of trading on the Exchange as an ``Electronic Exchange
Member'' or ``Market Maker.'' See Exchange Rule 100.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
consistent with the manner in which Rule 403 operates in relation to
option classes with underlying securities that no longer meet the
requirements for approval--additional series are not added, series with
open interest are restricted to closing only, and series without open
interest are delisted. Also consistent with current Rule 403, opening
transactions by Market Makers executed to accommodate closing
transactions of other market participants may be permitted. Allowing
Market Makers to facilitate closing transactions of other market
participants will help close positions in classes that will be delisted
by the Exchange, which helps to protect investors and the public
interest and does not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Additionally, the proposed rule change is consistent with the rules of
other options exchanges that currently list for trading index options,
therefore, the Exchange believes that this proposed rule change will
add clarity and uniformity to the rule governing index options.\10\
---------------------------------------------------------------------------

    \10\ See supra note 3.
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition as the Rules apply equally
to all Exchange Members.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\
thereunder.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-PEARL-2018-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-PEARL-2018-05. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2018-05, and

should be submitted on or before March 30, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Eduardo A. Aleman,
Assistant Secretary.
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-04790 Filed 3-8-18; 8:45 am]
 BILLING CODE 8011-01-P