1 ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 260 and 261 [ RCRA 2002 0031; FRL  ]

RIN 2050 AE98 Revisions to the Definition of Solid Waste AGENCY: Environmental Protection Agency.

ACTION: Proposed rule.

SUMMARY: The Environmental Protection Agency ( EPA) is today proposing revisions to the definition of solid waste that identify certain recyclable hazardous secondary materials as not discarded, and thus not subject to regulation as wastes under Subtitle C of the Resource Conservation and Recovery Act ( RCRA). The proposed rule would also establish specific regulatory criteria for determining whether or not hazardous secondary materials are recycled legitimately.

DATES: To make sure we consider your comments on this proposed rule, they must be postmarked by [ INSERT 90 DAYS FROM DATE OF FEDERAL REGISTER PUBLICATION]

ADDRESSES: Comments may be submitted by mail to: OSWER Docket, Environmental Protection Agency, Mailcode: 5305T, 1200 Pennsylvania Ave., NW, Washington, DC, 20460,

Attention Docket ID No. RCRA 2002 0031. Comments may also be submitted electronically, or through hand delivery/ courier. Follow the detailed instructions as provided in Section C of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: For general information, contact the RCRA 2 Call Center at 800 424 9346 or TDD 800 553 7672 ( hearing impaired). In the Washington, DC,

metropolitan area, call 703 412 9810 or TDD 703 412 3323. For more detailed information on specific aspects of this rulemaking, contact Dave Fagan at ( 703) 308 0603 ( fagan. david@ epa. gov), or Ingrid Rosencrantz at ( 703) 605 0709 ( rosencrantz. ingrid@ epa. gov).

SUPPLEMENTARY INFORMATION:

A. Regulated Entities. Entities potentially affected by this action are expected to include more than 1300 facilities that generate and/ or recycle hazardous secondary materials. Most of these facilities are in manufacturing industries, and the most common types of recyclable materials that would be affected by the rule are metal bearing secondary materials and solvents. The rule is expected to result in a net savings to industry of approximately $ 178 million per year. More detailed information on the entities, industries and materials potentially affected by this rule is presented in section VII. A. of this preamble.

B. How Can I Get Copies of This Document and Other Related Information?

Docket. EPA has established an official docket for this action under Docket ID No. RCRA 2002

0031. The official docket consists of the documents specifically referenced in this action, any public comments received, and other information related to this action. Although a part of the official docket, the public docket does not include Confidential Business Information ( CBI) or other information whose disclosure is restricted by statute. The public docket is the collection of materials that is available for public viewing at the OSWER Docket at the EPA Docket Center ( EPA/ DC), Room B102, EPA West Building, 1301 Constitution Avenue, NW, Washington, DC.

The EPA/ DC Reading Room is open from 8: 30 AM to 4: 30 PM, Monday through Friday,

excluding legal holidays. The telephone number for the Reading Room is ( 202) 566 1744, and 3 the OSWER Docket telephone number is ( 202) 566 0270. Copies are $ 0.15 per page.

Electronic Access. You may access this Federal Register document electronically through the EPA Internet under the " Federal Register" listings at http:// www. epa. gov/ fedrgstr. Comments on the proposed rule can be submitted through the federal e rulemaking portal,

http:// www. regulations. gov.

An electronic version of the public docket is also available through EPA's electronic public docket and comment system, EPA Dockets. You may use EPA Dockets at http:// www. epa. gov/ edocket/ to submit or view public comments, access the index listing of the contents of the public docket, and access those documents in the public docket that are available electronically. Once in the system, select " search," then key in the appropriate docket identification number.

Certain types of information will not be placed in the EPA Docket. Information claimed as CBI and other information whose disclosure is restricted by statute, which is not included in the official public docket, will not be available for public viewing in EPA's electronic public docket. EPA's policy is that copyrighted material will not be placed in EPA's electronic public docket but will be available only in printed, paper form in the official public docket. Although not all docket materials may be available electronically, you may still access any of the publicly available docket materials through the docket facility. EPA intends to work toward providing electronic access to all of the publicly available docket materials through EPA's electronic public docket.

For public commenters, it is important to note that EPA's policy is that public comments,

whether submitted electronically or in paper, will be made available for public viewing in EPA's 4 electronic public docket as EPA receives them and without change, unless the comment contains copyrighted material, CBI, or other information whose disclosure is restricted by statute. When EPA identifies a comment containing copyrighted material, EPA will provide a reference to that material in the version of the comment that is placed in EPA's electronic public docket. The entire printed comment, including the copyrighted material, will be available in the public docket.

Public comments submitted on computer disks that are mailed or delivered to the docket will be transferred to EPA's electronic public docket. Public comments that are mailed or delivered to the Docket will be scanned and placed in EPA's electronic public docket. Where practical, physical objects will be photographed, and the photograph will be placed in EPA's electronic public docket along with a brief description written by the docket staff.

For additional information about EPA's electronic public docket visit EPA Dockets online or see 67 FR 38102, May 31, 2002.

C. How and To Whom Do I Submit Comments?

You may submit comments electronically, by mail, or through hand delivery/ courier. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your comment. Please ensure that your comments are submitted within the specified comment period. Comments received after the close of the comment period will be marked " late." EPA is not required to consider these late comments.

Electronically. If you submit an electronic comment as prescribed below, EPA recommends that you include your name, mailing address, and an e mail address or other contact information in the body of your comment. Also include this contact information on the outside of any disk or CD ROM you submit, and in any cover letter accompanying the disk or CD ROM. This ensures that 5 you can be identified as the submitter of the comment and allows EPA to contact you in case EPA cannot read your comment due to technical difficulties or needs further information on the substance of your comment. EPA's policy is that EPA will not edit your comment, and any identifying or contact information provided in the body of a comment will be included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment.

Your use of EPA's electronic public docket to submit comments to EPA electronically is EPA's preferred method for receiving comments. Go directly to EPA Dockets at http:// www. epa. gov/ edocket, and follow the online instructions for submitting comments. To access EPA's electronic public docket from the EPA Internet Home Page, select " Information Sources," " Dockets," and " EPA Dockets." Once in the system, select " search," and then key in Docket ID No. RCRA 2002 0031. The system is an " anonymous access" system, which means EPA will not know your identity, e mail address, or other contact information unless you provide it in the body of your comment.

Comments may be sent by electronic mail ( e mail) to rcra docket@ epamail. epa. gov,

Attention Docket ID No. RCRA 2002 0031. In contrast to EPA's electronic public docket,

EPA's e mail system is not an " anonymous access" system. If you send an e mail comment directly to the Docket without going through EPA's electronic public docket, EPA's e mail system automatically captures your e mail address. E mail addresses that are automatically captured by EPA's e mail system are included as part of the comment that is placed in the official public docket, and made available in EPA's electronic public docket. 6 You may submit comments on a disk or CD ROM that you mail to the mailing address identified in the following paragraph. These electronic submissions will be accepted in WordPerfect or ASCII file format. Avoid the use of special characters and any form of encryption.

By Mail. Send comments to: OSWER Docket, Environmental Protection Agency, Mailcode:

5305T, 1200 Pennsylvania Ave., NW, Washington, DC, 20460, Attention Docket ID No. RCRA

2002 0031.

By Hand Delivery or Courier. Deliver your comments to: OSWER Docket, EPA West Building,

Room B102, 1301 Constitution Avenue, NW, Washington, D. C., Attention Docket ID No.

RCRA 2002 0031. Such deliveries are only accepted during the Docket's normal hours of operation as identified in the " How Can I Get Copies of This Document and Other Related Information?" section.

How Should I Submit CBI To the Agency?

Do not submit information that you consider to be confidential business information ( CBI)

electronically through EPA's electronic public docket or by e mail. Send or deliver information identified as CBI only to the following address: RCRA CBI Document Control Officer, Office of Solid Waste ( 5305W), U. S. EPA, 1200 Pennsylvania Avenue, NW., Washington, D. C. 20460,

Attention Docket ID No. RCRA 2002 0031. You may claim information that you submit to EPA as CBI by marking any part or all of that information as CBI ( if you submit CBI on disk or CD ROM, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is CBI). Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR, Part 2. 7 In addition to one complete version of the comment that includes any information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket and EPA's electronic public docket. If you submit the copy that does not contain CBI on disk or CD ROM, mark the outside of the disk or CD ROM clearly that it does not contain CBI. Information not marked as CBI will be included in the public docket and EPA's electronic public docket without prior notice. If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in the FOR FURTHER INFORMATION CONTACT section.

D. What Should I Consider as I Prepare My Comments for EPA?

You may find the following suggestions helpful for preparing your comments:

1. Explain your views as clearly as possible.

2. Describe any assumptions that you used.

3. Provide any technical information and/ or data you used that support your views.

4. If you estimate potential burden or costs, explain how you arrived at your estimate.

5. Provide specific examples to illustrate your concerns.

6. Offer alternatives.

7. Make sure to submit your comments by the comment period deadline identified.

8. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line on the first page of your response. It would also be helpful if you provided the name,

date, and Federal Register citation related to your comments.

Preamble Outline I. Statutory Authority 8 II. Background A. What is the intent of today's proposed rule?

B. Who would be affected by today's rule?

C. How is hazardous waste recycling currently regulated?

D. What are the legal issues surrounding the definition of solid waste?

1. Background 2. A series of D. C. Circuit Court decisions 3. Today's action E. What suggestions have stakeholders offered for future efforts to revise the current recycling regulations?

F. What is the scope of today's proposed rule?

III. Detailed description of the proposed rule.

A. Exclusion for hazardous secondary materials generated and reclaimed in a continuous process within the same industry 1. What is the intent of the proposed exclusion?

2. What is reclamation?

3. What types of materials would be eligible for the proposed exclusion?

4. What is meant by a " continuous process within the same industry?"

5. What other options were considered for defining " continuous process within the same industry?"

6. How is EPA proposing to define " industry?"

7. How is EPA proposing to define " continuous process?" 9 8. What type of notification will be required?

9. What conforming changes to existing regulations are proposed?

10. How would the proposal be implemented and enforced?

B. Legitimate Recycling 1. What is legitimate recycling?

2. What is the current guidance for legitimate recycling?

3. Today's proposed criteria for legitimate recycling IV. Request for Comment on a Broader Exclusion for Legitimate Recycling V. Effect of today's proposal on other programs A. Exports and Imports B. Superfund VI. State Authority A. Applicability of rules in authorized states B. Effect on state authorization C. Interstate transport VII. Statutory and Executive Order reviews.

A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal 10 Governments G. Executive Order 13045: Protection of Children from Environmental Health & Safety Risks H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution,

or Use I. National Technology Transfer Advancement Act of 1995 I. Statutory Authority These regulations are proposed under the authority of sections 2002, 3001, 3002, 3003,

and 3004 of the Solid Waste Disposal Act of 1970, as amended by the Resource Conservation and Recovery Act of 1976 ( RCRA), as amended by the Hazardous and Solid Waste Amendments of 1984 ( HSWA), 42 U. S. C. 6921, 6922, 6923, and 6924.

II. Background A. What is the intent of today's proposed rule?

Today's proposed rule is intended to revise and clarify the RCRA definition of solid waste as it pertains to certain types of hazardous secondary materials that are not considered to be discarded, and thus are not considered wastes subject to regulation under RCRA Subtitle C. This regulatory action was initiated primarily in response to decisions by the United States Court of Appeals for the D. C. Circuit, which, taken together, have provided the Agency with additional direction in this area. Specifically, this proposal would define those circumstances under which materials would be excluded from RCRA's hazardous waste regulations because they are 11 generated and reclaimed in a continuous process within the same industry.

This proposal represents an important restructuring of the RCRA regulations that distinguish wastes from non waste materials for Subtitle C purposes, and that ensure environmental protections over hazardous waste recycling practices. As such, it is also an opportunity for the Agency to clarify in a regulatory context the concept of " legitimate recycling,"

which has been and is a key component of RCRA's regulatory program for hazardous material recycling, but which to date has been implemented without specific regulatory criteria. Today's proposal thus includes specific regulatory provisions for determining when hazardous wastes and other hazardous secondary materials are recycled legitimately.

Today's proposal is de regulatory in nature, in that certain recyclable materials that have heretofore been subject to hazardous waste regulations would no longer be regulated under the hazardous waste regulatory system. The proposed criteria for legitimate recycling codify existing principles, without increasing regulation. This proposal is not intended to bring new wastes into the RCRA Subtitle C regulatory system.

By removing hazardous waste regulatory controls over certain recycling practices, and by providing more explicit criteria for determining the legitimacy of recycling practices in general,

EPA expects that this proposed rule will encourage safe, beneficial recycling of hazardous secondary materials by industry. This regulatory initiative is thus consistent with the Agency's longstanding policy of encouraging the recovery and reuse of valuable resources as an alternative to land disposal. It is also consistent with one of the primary goals of the Congress in enacting the RCRA statute ( as evidenced by its name), and with the Agency's vision of how the RCRA program could evolve over the longer term to promote sustainability and more efficient use of 1The Agency's long term " vision" of the future of the RCRA program is discussed in the document " Beyond RCRA: Prospects for Waste and Materials Management in the Year 2020," which is available on the Agency's website at http:// www. epa. gov/ epaoswer/ osw/ vision. htm 12 resources1. Finally, this regulatory proposal is an important component of EPA's recently announced " Resource Conservation Challenge," which is designed to encourage and provide new incentives for increased reuse and recycling of materials, including hazardous wastes and hazardous secondary materials ( for further information on this initiative see www. epa. gov/ epaoswer/ osw/ conserve/ index. htm).

It should be understood that today's proposal does not attempt to resolve all issues surrounding the current RCRA Subtitle C recycling regulations. Since the current regulations were put in place in 1985 ( see 50 FR 614 668, January 4, 1985), many of the program's stakeholders have expressed the view that the current system is unnecessarily restrictive, and imposes regulatory controls that often discourage legitimate recycling opportunities by industry.

These stakeholders have often argued that the Agency should commit itself to fundamentally restructuring the current rules, to ease controls over a wide range of recycling practices. On the other hand, other stakeholders have argued that the current regulations are in some ways too lenient, and that greater accountability and tighter controls should be built into the system.

EPA has participated with a variety of stakeholder groups in several initiatives aimed at exploring and developing comprehensive new approaches to regulating hazardous material recycling. Unfortunately, these initiatives have been largely unsuccessful. In EPA's view, these unsuccessful efforts to comprehensively revise the RCRA recycling system are in large part attributable to the fundamental difficulty of trying to distinguish wastes from non waste materials in a national regulatory framework that applies to an exceptionally broad array of industries, 13 materials and recycling practices.

Today's proposal, which addresses a particular set of recycling activities, is prompted by concerns articulated in the D. C. Circuit Court's opinions. Together with the legitimacy criteria also discussed today, the proposed exclusion is crafted to cover those cases where discard most likely does not occur because materials are being truly reused or recycled in a continuous process within the generating industry. EPA intends to continue exploring whether further initiatives aimed at encouraging legitimate recycling of hazardous secondary materials are warranted. We invite comment on this issue. Specifically, we are interested in stakeholder views as to whether EPA should undertake additional actions to encourage recycling of materials that would remain regulated as wastes under today's proposal. In this regard, most helpful would be comments describing what specific actions might be appropriate for this purpose, and the potential environmental and economic impacts that might be associated with such actions.

B. Who would be affected by today's proposed rule?

Today's proposal would most directly affect those who generate, reclaim and reuse hazardous secondary materials in a continuous process within the generating industry, in accordance with the provisions of today's proposal. These materials would not be considered to be discarded under the proposal ( and thus would not be wastes), so those who manage them would no longer be subject to hazardous waste regulatory requirements. EPA estimates that approximately 70% of the materials potentially affected by today's proposed regulatory exclusion are generated in the following industries:

  Inorganic chemicals   Plastic Materials and Resins 14   Pharmaceutical Preparations   Cyclic Crudes and Intermediates   Industrial Organic Chemicals   Secondary Smelting of Nonferrous Metals   Plating and Polishing   Printed Circuit Boards More detailed discussion of the potential impacts of this rule on the regulated community is presented in section VII. A. of this preamble.

In addition to the industries that may potentially benefit from the regulatory exclusion in today's proposal, the proposed provisions relating to legitimacy of recycling activities should provide a more general benefit to those who are engaged in hazardous material recycling, by providing clearer, more explicit rules for distinguishing between recycling practices that are legitimate, and those that EPA considers to be " sham" recycling.

C. How is hazardous waste recycling currently regulated?

The basic regulatory provisions for defining " solid wastes" and " hazardous wastes" under RCRA are found in Part 261 of Title 40 of the Code of Federal Regulations ( CFR). To be subject to RCRA's hazardous waste regulatory program, a material must be a solid waste that is also a hazardous waste. A solid waste is a hazardous waste if it is explicitly listed as such ( in Subpart D of Part 261), or if it exhibits a hazardous characteristic ( as specified in Subpart C of Part 261).

In general, hazardous wastes are subject to RCRA's full " cradle to grave" regulatory system, from the time they are generated to when they ultimately are disposed of. However,

hazardous secondary materials can often be recycled instead of being disposed, which can change 15 how those wastes are regulated. The " definition of solid waste" regulations in Part 261 in effect separate recyclable hazardous secondary materials into two broad categories   those that are classified as solid wastes when recycled, and are therefore subject to regulation under RCRA, and those that are not considered solid wastes when they are recycled, and thus are not regulated. It should be understood that the term " hazardous secondary material" as it is used in today's proposed rule and preamble therefore refers to both categories of recyclable materials; that is,

materials that are regulated as hazardous wastes when recycled, and materials that are not considered wastes when recycled.

Hazardous secondary materials that are not regulated as wastes when they are recycled include, for example, those which are used or reused directly as effective substitutes for commercial products, and those which can be used as ingredients in an industrial process,

provided the materials are not being reclaimed. See 40 CFR 261.2( e). In essence, EPA considers these types of recycling practices to be more akin to normal industrial production than waste management. EPA does not consider them to involve management of discarded materials for purposes of RCRA Subtitle C.

In contrast, some recycling practices bear more resemblance to waste management, and the hazardous secondary materials therefore remain regulated as wastes. One type of recycling that falls within this category and that is especially relevant to this proposed rule is reclamation of certain types of hazardous secondary materials. Reclamation involves processing of secondary materials in some way so that the materials can be used or reused. See 40 CFR 261.1( c)( 4) and 40 CFR 261.2( c)( 3). An example of reclamation is processing of a spent solvent to restore its solvent properties before it is suitable for reuse as a solvent. As explained elsewhere in this 16 preamble, today's proposal would de regulate a specific subset of these materials that are recycled by being reclaimed.

The existing Part 261 regulations identify other types of recycling practices that are fully regulated because they generally are more likely to involve discard of materials ( see 40 CFR 261.2( c)). These practices include recycling of " inherently waste like" materials, recycling of materials that are " used in a manner constituting disposal," and " burning of materials for energy recovery." Today's proposal is not intended to affect how these recycling practices are regulated.

The current regulations also provide certain specific exemptions and exclusions from the definition of solid waste for particular recycling practices. For example, pulping liquors from paper manufacturing that are reclaimed in a pulping liquor recovery furnace and then reused in the pulping process are excluded from regulation under 40 CFR 261.4( a)( 6). In some cases, these exclusions specify certain conditions that must be met in order to qualify for and maintain the excluded status of the recycled material. An example of such a " conditional exclusion" is the one provided in 40 CFR 261.4( a)( 9) for spent wood preserving solutions that are reclaimed and reused. Today's proposal would impact some of these existing exclusions, as discussed in Section III. A. below.

D. What are the legal issues surrounding the definition of solid waste?

1. Background RCRA gives EPA authority to regulate the management of " solid wastes" under its nonhazardous waste program. See, e. g, RCRA sections 1008( a), 4001 and 4004( a). RCRA also gives EPA authority to regulate hazardous wastes. See, e. g., RCRA sections 3001 3004.

" Hazardous wastes" are the subset of solid wastes that present threats to human health and the 17 environment. See section 1004( 5). EPA may also address solid and hazardous wastes under its endangerment authorities in section 7003. ( Similar authorities are available for citizen suits under section 7002.) Materials that are not wastes are generally not subject to regulation under RCRA Subtitle C. Thus, the definition of " solid waste" plays a key role in defining the scope of EPA's RCRA's authorities.

The statute defines " solid waste" as "... any garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility and other discarded material ...

resulting from industrial, commercial, mining, and agricultural operations, and from community activities...." RCRA Section 1004 ( 27) ( emphasis added). In its RCRA regulations, EPA has historically defined some materials destined for recycling as " waste," while excluding others.

Since 1980, EPA has interpreted " solid waste" under its Subtitle C regulations to encompass both materials that are destined for final, permanent placement in disposal units, as well as some materials that are destined for recycling. 45 FR 33090 95 ( May 19, 1980); 50 FR 604  656 ( Jan. 4, 1985) ( see especially pages 616 618). EPA has offered three arguments in support of this approach:

° The statute and the legislative history suggest that Congress expected EPA to regulate as wastes some materials that are destined for recycling ( see 45 FR 33091, citing numerous sections of the statute and U. S. Brewers' Association v. EPA, 600 F. 2d 974 ( D. C. Cir.

1979); 48 FR 14502 04 ( April 3, 1983); and 50 FR 616 618).

° Many materials stored or transported prior to recycling present the same types of threats to human health and the environment as materials stored or transported prior to disposal.

In fact, EPA found that recycling operations have accounted for a number of notorious 18 damage incidents. For example, materials destined for recycling were involved in onethird of the first 60 filings under RCRA's imminent and substantial endangerment authority, and 20 of the first sites listed under CERCLA. ( 48 FR 14474, April 4, 1983)

( The Agency has not, however, compiled definitive data on more recent damage cases associated with recycling operations.) Congress also cited some damage cases which can be interpreted to involve recycling. H. R. Rep. 94 1491, 94th Cong., 2d Sess., at 17, 18,

22.

° Excluding all materials destined for recycling would allow materials to move in and out of the hazardous waste management system depending on what any person handling the material intended to do with it. This seems inconsistent with the mandate to track hazardous wastes and control them from " cradle to grave."

Interpreting the statute to confer jurisdiction over at least some materials destined for recycling, EPA has developed in Part 261 of 40 CFR a definition of " solid waste" for Subtitle C regulatory purposes. ( Note that this definition is narrower than the definition of " solid waste" for RCRA endangerment and information gathering authorities. See 40 CFR 261.1( b) and Connecticut Coastal Fishermen's Association v. Remington Arms Co., 989 F. 2d 1305, 1315 ( 2d Cir. 1993), holding that EPA's use of a broader and more specific definition of solid waste for Subtitle C purposes is a reasonable interpretation of the statute.)

Under its Subtitle C regulations, EPA classifies as solid wastes some   but not all   secondary materials that are recycled by " reclamation." The regulations define " spent materials"

as being " discarded" if they are destined for reclamation. However, " commercial chemical products" are not defined as " discarded" when reclaimed. Byproducts and sludges are defined as 19 " discarded" on a case by case basis. EPA regulates these materials when they are reclaimed,

when it has listed them in the context of a hazardous waste listing determination. However, EPA does not regulate by products and sludges being reclaimed that are not listed hazardous wastes.

See Table 1 to 40 CFR 261.2. Finally, EPA has promulgated three exceptions from the Subtitle C definition for materials destined for reclamation. See 260.31( b) and ( c); 40 CFR 261.4( a)( 8).

In a reclamation operation, some components of a material are recovered and reused,

while others are separated and in some cases are discarded. The variety of regulatory approaches to reclamation reflects the fact that EPA has found that some reclamation processes involve discard ( because they more closely resemble waste management), while other such processes do not ( because they more closely resemble normal manufacturing).

Finally, EPA has always asserted that materials are not excluded from its jurisdiction simply because someone claims that they will be recycled. EPA has consistently considered materials destined for " sham recycling" to be discarded and, hence, to be solid wastes for Subtitle C purposes. See 45 FR 33093 ( May 19, 1980), 50 FR 638 39 ( Jan. 4, 1985). The U. S. Court of Appeals for the D. C. Circuit has agreed that materials undergoing sham recycling are discarded and, consequently, are solid wastes under RCRA. See American Petroleum Institute v. EPA, 216 F. 3d 50, 58 59 ( D. C. Cir. 2000);

2. A Series of D. C. Circuit Court Decisions Trade associations representing mining and oil refining interests challenged EPA's 1985 regulatory definition of solid waste. In 1987, the D. C. Circuit held that EPA exceeded its authority " in seeking to bring materials that are not discarded or otherwise disposed of within the compass of ` waste.'" American Mining Congress v. EPA (" AMC I"), 824 F. 2d 1177, 1178 ( D. C. 20 Cir. 1987). Although the Court clearly articulated this concept, it did not specify which portions of the rules exceeded EPA's authority. It more generally " granted the petition for review."

The Court held that some of the materials EPA was seeking to regulate were not " discarded materials" under section 1004( 27). After reviewing numerous statutory provisions and portions of the legislative history, the Court held that Congress used the term " discarded" in its ordinary sense, to mean " disposed of" or " abandoned." 824 F. 2d at 1188 89. The Court further held that the term " discarded materials" could not include materials ... destined for beneficial reuse or recycling in a continuous process by the generating industry itself ( because they) are not yet part of the waste disposal problem." 824 F. 2d at 1190 ( italics in original). The Court held that Congress had directly spoken to this issue, so that EPA's use of a conflicting definition was not entitled to deference under Chevron U. S. A., Inc. v. NRDC, 467 U. S. 837 ( 1984). 824 F. 2d at 1183, 1189 90, 1193.

At the same time, the Court did not hold that no recycled materials could be discarded.

The Court mentioned at least two examples of recycled materials that EPA properly considered within its statutory jurisdiction, noting that used oil to be reused as fuel and metal bearing secondary materials stored in open piles which leached into the environment while stored for reuse in metals recovery can be considered to be solid wastes. 824 F. 3d at 1187 ( fn 14) and 1191 ( fn 20). Also, the Court suggested that materials disposed of and recycled as part of a waste management program are within EPA's jurisdiction. 824 F. 2d at 1179. Subsequent decisions by the D. C. Circuit also indicate that some materials destined for recycling are " discarded" and therefore within EPA's jurisdiction. The Court held that emission control dust from steelmaking operations listed as hazardous waste " K061" is a solid waste, even where sent to a metals 21 reclamation facility, at least where that is the treatment method required under EPA's land disposal restrictions program. American Petroleum Institute v. EPA (" API I"), 906 F. 2d 729 ( D. C. Cir. 1990). The Court held that listed wastes managed in units that are part of wastewater treatment units are discarded materials ( and solid wastes), especially where it is not clear that the industry actually reuses the materials. (" AMC II"), 907 F. 2d 1179 ( D. C. Cir. 1990). Also, the Court found that EPA potentially had jurisdiction over oil bearing wastewaters recycled at petroleum refineries, although in the rule under review EPA failed to provide a rational basis for asserting jurisdiction. American Petroleum Institute v. EPA (" API II"), 216 F. 3d 50, 57 58 ( D. C. Cir. 2000).

It is also worth noting that two other Circuits also have held that EPA has authority over at least some materials destined for reuse rather than final discard. The U. S. Court of Appeals for the 11th Circuit found that "[ i] t is unnecessary to read into the term ` discarded' a congressional intent that the waste in question must finally and forever be discarded." U. S. v. ILCO, 996 F. 2d 1126 , 1132 ( 11th Cir. 1993) ( finding that used lead batteries sent to a reclaimer have been " discarded once" by the entity that sent the battery to the reclaimer). The Fourth Circuit found that slag held on the ground untouched for six months before sale for use as road bed could be a solid waste. Owen Electric Steel Co. v. EPA, 37 F. 3d 146, 150 ( 4th Cir. 1994).

Considering all of these decisions ( except the API case decided in 2000), in 1998 EPA promulgated a rule adjusting its Subtitle C jurisdiction over materials recycled by reclamation within the mineral processing industry ( the " LDR Phase IV rule"). 63 FR 28556 ( May 26, 1998).

In that rule, EPA promulgated a conditional exclusion for all types of mineral processing materials destined for reclamation. EPA imposed a condition prohibiting land based storage prior to 22 reclamation because it considered secondary materials from the mineral processing industry that were stored on the land to be part of the waste disposal problem. 63 FR at 28581. The conditional exclusion decreased regulation over spent materials stored prior to reclamation, but increased regulation over by products and sludges that exhibit a hazardous characteristic, and that are stored prior to reclamation. EPA noted that the statute does not authorize it to regulate " materials that are destined for immediate reuse in another phase of the industry's ongoing production process." EPA, however, took the position that materials that are removed from a production process for storage are not " immediately reused, " and therefore, are " discarded." 63 FR at 28580.

The mining industry challenged the rule, and the D. C. Circuit vacated the provisions that expanded jurisdiction over characteristic by products and sludges destined for reclamation.

Association of Battery Recyclers v. EPA (" ABR"), 208 F. 3d 1047 ( D. C. Cir. 2000). The Court held that it had already resolved the issue presented here in its opinion in AMC I, where it found that "... Congress unambiguously expressed its intent that ` solid waste' ( and therefore EPA's regulatory authority) be limited to materials that are ` discarded' by virtue of being disposed of,

abandoned, or thrown away." 208 F. 2d at 1051. It repeated that materials reused within an ongoing industrial process are neither disposed of or abandoned. 208 F. 3d at 1051 52. It explained that the intervening API I and AMC II decisions had not narrowed the holding in AMC I. 208 F. 3d at 1054 1056.

At the same time, the Court did not hold that storage before reclamation automatically makes materials " discarded." Rather, it held that "... at least some of the secondary material EPA seeks to regulate as solid waste ( in the mineral processing rule) is destined for reuse as part of a 23 continuous industrial process and thus is not abandoned or thrown away." 208 F. 3d at 1056.

3. Today's Action EPA has promulgated a final rule removing from the Code of Federal Regulations the byproduct and sludge provisions of the 1998 mineral processing exclusion that the Court vacated in ABR. 67 FR 11251 ( Mar. 13, 2002). Nonetheless, EPA views ABR as creating an opportunity to re examine its rules and interpretations and clarify whether they regulate certain materials that are not " discarded." In today's proposed rule, therefore, EPA is attempting to identify a certain class or category of materials that EPA has determined are not discarded for purposes of Subtitle C. As explained in more detail elsewhere in this notice, EPA generally believes that such materials may include those that are recycled by being reclaimed within the same industry in which they were generated. EPA thinks that other classes of recycling activities,

such as " burning for energy recovery," " use constituting disposal," and recycling of materials classified as " inherently waste like" clearly involve elements of discard.

EPA is today proposing that any material which is generated and reclaimed in a continuous process within the same industry ( as defined in today's proposal) is not " discarded"

for purposes of Subtitle C, provided that the recycling process is " legitimate." Guided by the AMC I and ABR opinions, EPA is proposing to exclude these materials from the definition of solid waste for purposes of Subtitle C. Under this approach, EPA is proposing that when generation and reclamation occur on a continuous basis within a single industry ( as the terms are defined in this proposal), secondary materials would not be regulated as solid wastes.

Looking to the D. C. Circuit decisions for guidance, EPA is proposing today to exercise its discretion to interpret the statutory term " discard" for Subtitle C purposes. EPA is proposing 24 that materials recycled in a continuous process within the generating industry would not be considered solid wastes for Subtitle C purposes. For reasons articulated later in this preamble,

EPA believes that it must draw lines to provide a measure of regulatory certainty. EPA believes that the lines it is proposing today reflect reasonable judgments.

EPA notes that the term " solid waste" is used in several places in the statute in addition to Subtitle C. EPA, however, is limiting the specific definitions in today's proposal to its Subtitle C regulations. While the general concepts that the Court articulated may also play a role in other RCRA provisions, EPA does not think the detailed scheme involving " industry" classifications and time limits on processing which it has developed for this rule are necessarily appropriate for other RCRA provisions. For example, RCRA section 7003 gives EPA authority to compel actions to abate conditions that may present an " imminent and substantial endangerment" involving solid wastes. EPA uses this authority on a case by case basis. The Agency can determine in a specific factual context whether a material which causes an endangerment is discarded. Finally, EPA notes that it continues to regard any material intended for recycling that escapes into the environment as " discarded" and, therefore, within its statutory jurisdiction E. What suggestions have stakeholders offered for future efforts to revise the current recycling regulations?

In the final rule responding directly to the vacaturs ordered by the United States Court of Appeals for the District of Columbia Circuit in Association of Battery Recyclers, v. EPA 208 F. 3d 1047 ( 2000) ( 67 FR 11251 4, March 13, 2002), EPA asked stakeholders to submit suggestions for possible future revisions to the current recycling regulations.

The Agency received responses from both States and industry stakeholders. Some 25 comments pertained to specific waste streams or industrial processes, but others were broader in nature. Although many of the broader suggestions are outside the scope of the current proposal,

EPA would like to briefly summarize the comments here in order to continue the public dialogue on possible future efforts. In addition, the full set of these suggestions are included in the docket to today's proposed rulemaking. EPA requests comment on both these and any other possible revisions to the definition of solid waste that might be included in future proposals.

Most of the comments from industry stakeholders focused on the regulatory definition of " discarded material" found in 40 CFR 261.2 ( a)( 2). Many of these stakeholders encouraged the Agency to address broadly the issue of when " discard" of recyclable materials occurs. Several commenters, including the American Chemistry Council ( ACC), American Petroleum Institute ( API), Chevron Texaco and the International Precious Metals Institute ( IPMI) suggested removing " recycled" from the definition of discarded materials. Commenters offered different regulatory alternatives to ensuring that " sham recycling" does not occur as a result of removing recycling from the definition of discard, including suggesting that EPA specify " legitimacy criteria" ( ACC), suggesting EPA delineate material management factors that would indicate discard ( IPMI), or including specific " sham" practices in the definition of solid waste ( API and Chevron Texaco).

The Synthetic Organic Chemical Manufacturers Association ( SOCMA) raised issues on clarifying the terms " continuous industrial process," " generating industry" and " off site/ on site."

SOCMA provided examples of how the different terms could be applied to the Association's members. SOCMA also provided specific comments and regulatory language for an expanded variance procedure to exempt materials from the definition of solid waste. 26 API and Chevron Texaco offered the most specific comments, attaching regulatory language for discussion. Chevron Texaco suggested adding a requirement that material with hazardous constituents above Universal Treatment Standard ( UTS) levels that is managed such that the material is released to the environment would be considered discarded. API offered several possible new additions to the definition of discarded material, which closely follow examples that EPA has used in past rulemaking and guidance. ( see October 3, 2002 letter from API to EPA).

Several commenters ( e. g. API, SOCMA) focused on the decision's discussion of a waste being recycled in a " continuous industrial process." They stated that a " continuous" process encompasses all of the steps between original production of a raw material and eventual disposal,

including any reclamation that might occur. These commenters believed that " continuous industrial process" did not necessarily imply only a single industry. Commenters cited examples of generators sending material off site to recyclers who reclaim the material for reuse in other industries.

Other industry suggested revisions include creating a variance process for waste going to environmentally protective recycling ( ACC), adding specific language that co products are not solid waste ( Hogan and Hartson, LLP), extending the storage accumulation times ( SOCMA),

revising the definition of " accumulated speculatively" in 40 CFR 261.1( b)( 8) for the mining and mineral processing industry ( National Mining Association), and a recycling exclusion for spent pickle liquor recycling efforts ( American Iron and Steel Institute).

The Association of State and Territorial Solid Waste Management Officials ( ASTSWMO)

expressed general support for simplifying the current regulations and encouraging recycling. 27 However, they also expressed the strong opinion that codified legitimacy criteria should be included in any changes, and that a notification or certification provision be added to allow state regulatory agencies to determine whether recycling practices are legitimate.

F. What is the scope of today's proposed rule?

As discussed previously in this section of today's preamble, spent materials, listed sludges and listed byproducts that are recycled by being reclaimed are currently considered wastes for RCRA regulatory purposes. Today's proposal would affect a particular subset of these waste materials. Specifically, materials that are " generated and reclaimed in a continuous process within the same industry" ( as defined in this proposal) would no longer be regulated under RCRA's Subtitle C hazardous waste management system.

Today's proposed 40 CFR 261.2( g)( 2) also requires that reclamation of excluded materials within the generating industry must produce a product or ingredient that can be used or reused without any further reclamation. This requirement is intended to prevent situations where excluded materials might be only partially reclaimed within the generating industry, and then sent to a different industry for one or more " final" reclamation steps. We do not believe that such partial reclamation practices would be consistent with the concept of " continuous process within the same industry" as it is articulated in today's proposal.

Today's proposal would not affect materials that are reclaimed in other ways. Thus, spent materials, listed by products and listed sludges that are generated and reclaimed in different industries would generally remain subject to regulation as wastes. This proposal would also not affect materials that are currently considered wastes because they are recycled in a certain way.

This category of wastes includes materials that are " inherently waste like," materials that are 28 " speculatively accumulated," materials that are recycled and " used in a manner constituting disposal," and materials that are " burned for energy recovery." The regulatory provisions for these categories of wastes are found in 40 CFR 261.2.

Today's proposal would also codify in regulations criteria for assessing " legitimate recycling" of hazardous secondary materials. These criteria would apply not only to the materials that would be excluded under today's proposal, but more broadly to recycling of hazardous wastes, as well as recycling of hazardous secondary materials that are not considered wastes when they are recycled. These criteria for legitimate recycling would not, however, apply to materials that are not hazardous wastes, or materials that do not exhibit a hazardous characteristic.

III. Detailed Description of Today's Proposed Rule A. Exclusion for hazardous secondary materials generated and reclaimed in a continuous process within the same industry.

1. What is the intent of the proposed exclusion?

Today's proposal would exclude from the RCRA regulatory definition of solid waste hazardous secondary materials that are generated and reclaimed in a continuous process within the same industry. As discussed in the previous section of this preamble, the D. C. Circuit Court's decisions have provided general direction to the Agency as to the meaning of " discarded materials" in section 1004( 27) and the extent of the Agency's Subtitle C jurisdiction over recycling. Today's proposed rule is intended to define " solid waste" for Subtitle C purposes in a way that we believe is consistent with the Court's general direction, to establish specific rules for how the exclusion will be implemented, and explain how the exclusion fits into RCRA's general 29 regulatory framework.

Today's proposal would modify the current regulatory provision at 40 CFR 261.2( c)( 3),

which specifies that some types of hazardous secondary materials are wastes if their recycling involves reclamation. In effect, we are proposing to relinquish regulatory controls over such materials, provided that they are generated and reclaimed in accordance with today's proposal.

This proposal, which we believe is consistent with the Court's opinions, would generally exclude materials that are recycled in a manner more akin to normal industrial production than waste management.

2. What is " Reclamation?"

" Reclamation" of materials can involve a number of different types of activities and end results. As defined in 40 CFR 261.1( c), a material is reclaimed "... if it is processed to recover a usable product, or if it is regenerated." From a technical standpoint, some reclamation processes are relatively simple, such as magnetic separation of ferrous metals from a pollution control sludge. Other types of reclamation may be much more complex, and may involve a series of processing steps to obtain the desired end product. An example could be where a solid form secondary material is separated into different fractions and then smelted to recover metal constituents.

In some cases, reclamation essentially involves extraction of a valuable component from a waste or other material. An example of this type of reclamation occurs in the mineral processing industry, such as when smelter by products are processed in a series of steps to successively extract several different precious metals. Another type of reclamation involves " regenerating"

used products or materials so that they can be reused for their original purpose, or some other 30 purpose. A common example of this type of reclamation is found in the steel making industry,

where " pickling" acids are used to remove scale and other impurities from steel, eventually lose their acidic properties, and must be reclaimed before they can be used again as pickling agents. In this case, the reclamation process may yield both regenerated pickling acid, as well as a marketable iron oxide product.

3. What types of materials would be eligible for the proposed exclusion?

Under the current regulations, certain hazardous secondary materials that are recycled by being reclaimed are considered wastes ( see 40 CFR 261.2( c)( 3)). These materials include sludges and by products that are listed hazardous wastes ( see listings in 40 CFR 261.31 and 40 CFR 261.32), scrap metal, and listed or characteristic " spent materials." As defined in 40 CFR 261.1( c), materials are " spent" when they are used and as a result of contamination can no longer serve the purpose for which they were produced without processing. Additional guidance on the definition of " spent material" may be found on the Agency's " RCRA Online" internet data base, at http:// yosemite. epa. gov/ OSW\ rcra. nsf/ Documents/ 8D46F076812A58D0852565DA006F0565.

An example of a spent material would be a solvent that is used for degreasing metal parts,

and which eventually becomes too contaminated for further use in degreasing. Similarly, under the current regulations some types of scrap metal are wastes prior to reclamation ( although they are subject to less stringent Subtitle C regulations under 40 CFR 261.6).

Some materials that are " generated and reclaimed in a continuous process within the same industry" ( as proposed today) would not be eligible for the exclusion. As specified in proposed 40 CFR 261.( g)( 1), the exclusion would not apply to recycling of materials that are " inherently waste like" ( see 40 CFR 261.2( d)), materials used in " a manner constituting disposal" ( see 40 31 CFR 261.2( c)( 1) and Part 266, subpart C), or materials that are " burned for energy recovery" ( see 40 CFR 261.2( c)( 2)). Any of these recycling practices could potentially be conducted intraindustry Nevertheless, these particular recycling practices have been identified by the Agency as being akin to discard, and therefore materials that are recycled in these specific ways are explicitly identified as wastes under the current regulations. The Agency does not intend to change the way these waste materials are regulated in today's proposal. We believe that the original logic for maintaining regulatory jurisdiction over these materials remains valid.

The basic premise of today's proposed exclusion is that materials that are " generated and reclaimed in a continuous process within the same industry" ( as defined in this proposal) would not be considered wastes for Subtitle C purposes. Generally, when a material is reclaimed within the same industry that generated it, the material can remain useful to that industry, and thus is not discarded. In effect, the industry has not " finished" with the material; rather, it is to the advantage of the industry to continue using it as a substitute for other types of materials.

While the Agency believes that the types of material that would be eligible for the exclusion in today's proposal would generally not be discarded, we believe there may also be more technical reasons for excluding such materials. For one, processes and facilities that operate within the same industry are likely to use similar raw materials and process them in a similar manner. They are also likely to have expertise as to the types of secondary materials produced by their industry, their potential for recycling, and appropriate practices for managing such materials. For these practical reasons, EPA believes that the potential for environmental harm from de regulating this type of recycling practice is likely to be relatively small compared to other types of recycling practices. 32 While we are proposing to define materials generated and reclaimed within the same industry as in process materials that are not solid wastes for purposes of Subtitle C, this is not to say that all materials legitimately recycled between different industries are always solid wastes. In fact, the Agency has promulgated several specific exclusions to the definition of solid waste for materials that are generated in one industry and reclaimed in another. We are not proposing to revisit those exclusions.

4. What is meant by a " continuous process within the same industry?"

Proposed 40 CFR 261.2( g)( 2) would establish the general regulatory framework for defining " continuous process within the same industry," and thus, how recycling must be conducted in order to qualify for the exclusion. As explained below, we are co proposing today two different options for defining " continuous process within the same industry." The two options differ only in that one option ( Option # 2) would treat differently reclamation facilities that also accept hazardous wastes generated from different industries. We are co proposing these two options today because the Agency believes both are viable and appropriate approaches and deserve equal consideration by commenters.

Co Proposal Option 1: Under this option, hazardous secondary materials would have to be generated and reclaimed within a single industry in order to qualify for the exclusion ( the definition of " industry" for the purpose of this proposal is discussed in section III. A. 6 of this preamble, below). Thus, for example, if a hazardous secondary material was generated in the motor vehicle manufacturing industry and then shipped for reclamation to a facility in the ship and boat building industry, the exclusion would not apply, and the materials would be regulated as hazardous wastes. 33 Under proposed 40 CFR 261.2( g)( 2), reclamation of excluded material could take place in multiple processing steps, provided that each processing step takes place in the same industry that generated the material. To illustrate, if a copper bearing sludge required three separate reclamation steps in order to produce a marketable product such as copper sulfate, each of those reclamation steps would have to take place within the same industry in order to qualify for the exclusion.

Proposed 40 CFR 261.2( g)( 2) would also allow reclamation of excluded material to take place at one or more different locations or facilities, as long as each reclamation step occurs within the generating industry. In fact, we anticipate that, in many situations, reclamation of materials will take place at a different facility from where the materials were generated, but would remain within in the same industry. In some cases, excluded materials might be reclaimed in several steps, each time at a different location or facility, but within the same industry. As proposed, therefore, the exclusion would not place any geographical limits on movements of excluded materials, provided that each facility where the material is reclaimed is in the same industry that originally generated the material.

It is likely that there will be many situations in which reclamation of an excluded material results in a finished end product that needs no further reclamation, as well as a residual secondary material that has no further use and must be disposed of. Such residuals would be wastes, and thus not eligible for the exclusion. If the wastes were hazardous, they would need to be managed according to applicable hazardous waste regulations.

Today's proposal also anticipates situations where residuals from reclamation of excluded materials are sent to a different industry for further reclamation. As proposed in 40 34 CFR 261.2( g)( 2)( ii), such residual materials would not be eligible for today's exclusion, since they would no longer be managed within the same industry. The fact that such materials are sent to another industry and are thus ineligible for the exclusion would not, however, affect the exclusion for materials that remained within the generating industry. To illustrate, if intra industry reclamation of an excluded metal bearing sludge generated a residual material that was then sent to a different industry for further reclamation, that residual would be considered a waste, but the exclusion for the original metal bearing sludge would not be affected. Similarly, a reclamation process might generate two types of residual materials one which could be further reclaimed in the same industry, and another that is amenable to reclamation in a different industry. In such cases, the material that continues to move in the same industry would continue to be excluded,

while the residual material sent to a different industry would not be excluded.

Co Proposal Option # 2: Today's co proposed Option # 2 is identical to the first option described above, with one exception. Under Option # 2, hazardous secondary materials that are generated and reclaimed in a continuous process within the same industry would not be eligible for the exclusion if the reclamation takes place at a facility that also recycles regulated hazardous wastes generated in a different industry. This option would, however, allow the exclusion for materials recycled within the same industry if the reclamation facility is also recycling nonhazardous wastes, or hazardous materials that are excluded from regulation under other provisions ( such materials could include, for example, characteristic by products and sludges that are not solid wastes when reclaimed according to 40 CFR 261.2( c), or materials being used as effective substitutes for commercial products under 40 CFR 261.2( e)). This regulatory option would, in effect, establish a bright line to distinguish facilities that are engaged in recycling that is 35 eligible for today's proposed exclusion, and facilities which could be considered to be engaged in commercial recycling, and which should thus be ineligible for the exclusion.

To illustrate this co proposed option, if a paint manufacturer who reclaims spent solvents were to accept spent solvents from other paint manufacturers, as well as spent solvents from a generator in a different industry ( e. g., an automobile repair shop), none of the spent solvents managed by the paint manufacturer would be eligible for the exclusion proposed today. If,

however, in this example the solvents from the automobile repair shop were excluded under a different regulatory provision ( e. g., because they are reused without reclamation  see 40 CFR 261.2( e)), the solvents generated and reclaimed within the paint manufacturing industry would be eligible for the exclusion.

Advantages and disadvantages of Options # 1 and # 2. The Agency believes that Option # 1 described above would likely encourage more beneficial recycling, since it would allow the exclusion for a somewhat broader set of recycling practices. Another argument for this option might be that the exclusion for a material managed at a reclamation facility should not be affected by the fact that more stringently regulated materials ( i. e., hazardous wastes) are also being managed at the facility. Such facilities would typically have RCRA permits, and thus would be subject to stringent design, operating and corrective action requirements. Some might argue,

therefore, that such regulated facilities are well suited to manage materials that would not be regulated under the terms of today's proposed exclusion.

With regard to Option # 2, an advantage to this approach would be greater certainty to the regulated community as to when they would be ineligible for the exclusion we propose today.

Otherwise, it could be difficult for a generator to determine if facilities engaged in intra industry 36 recycling that also recycle hazardous wastes from one or more different industries are engaged in a continuous process within the generating industry. Option # 2 clearly defines whether the recycling is taking place within the generating industry by drawing a bright line between excluded recycling and commercial recycling. As explained below, commercial recycling presents different legal and policy issues compared with recycling within other industries. For some facilities, this regulatory option would also address potential concerns regarding the mixing of excluded secondary materials with regulated hazardous wastes. Another concern is that if excluded secondary materials were allowed to be mingled with regulated hazardous wastes, it could be much more difficult for overseeing agencies to determine whether the generator and/ or reclaimer were in compliance with the terms of the exclusion.

EPA requests comment on the two co proposed regulatory options described above,

particularly with regard to the advantages and disadvantages of the different approaches, their potential associated benefits, and whether such approaches would be consistent with the general direction given in this area by the D. C. Circuit Court of Appeals.

5. What other options were considered for defining " continuous process within the same industry?"

In developing the exclusion in today's proposal, the Agency considered several alternative approaches to defining the concept of " continuous process within the generating industry." One option that was considered would define the scope of the exclusion depending on who uses the products of the recycling process after the secondary materials are reclaimed. Under this approach, to be eligible for the exclusion, the products from reclamation of secondary materials could be: ( a) sold to the general public if such products were considered typical products of the 37 generating industry; or ( b) reused as a product or ingredient within the generating industry, if the reclaimed material was not a typical product of the generating industry.

To illustrate this option, if a paint manufacturer received spent solvent from another paint manufacturer that s/ he then reclaimed, the reclaimed solvent could not be sold to the general public and maintain the exclusion, under the assumption that solvent is not a typical product of the paint manufacturing industry. In this example, the reclaimed solvent would have to be reused within the paint manufacturing industry in order to maintain the exclusion. The paint manufacturer would thus have the option of reusing the solvent ( e. g., as an ingredient in making paint), or selling it to another party within the paint manufacturing industry. Under this alternative approach, if the reclaimed solvent were sold to, for example, a semi conductor manufacturer, the incoming spent solvent would not be covered by the exclusion. This approach would, however, allow metal manufacturers to reclaim metals from excluded metal bearing secondary materials and sell it to the general public, since metals would be a typical product of the metals industry.

EPA believes that promulgating the exclusion in this way could be a reasonable interpretation of the concept of " continuous process within the generating industry." One important issue that such an approach would raise, however, would be defining what would be considered a " typical product" of the generating industry ( i. e., what is a typical product of an industry as identified by a particular 4 digit NAICS code?). We request comment on this alternative generally, and on how to define " typical product of the generating industry."

EPA requests comment on the regulatory alternatives described above, particularly with regard to the need for such additional restrictions, their potential associated benefits, and whether 38 such approaches would be consistent with the general direction given in this area by the D. C.

Circuit Court of Appeals.

6. How is EPA proposing to define " industry?"

Considerations for Defining " Same Generating Industry"

Consistent with the court's language, we are proposing to limit EPA's regulatory jurisdiction in cases where hazardous secondary materials are being generated and legitimately reclaimed in a continuous process within the same industry, because the activity is essentially ongoing manufacturing. In order to draft a regulation that sets out this principle, however, we needed to develop a useful definition of " industry" so that today's proposed exclusion could be implemented across a variety of materials, activities, and industries. In developing a definition of industry for this proposal, we considered 1) whether the definition could be easily identified and readily implemented; 2) whether it was simple ( versus unnecessarily complicated); and 3) the degree to which the definition, when used as part of an ` intra industry' exclusion, resulted in outcomes consistent with the principle described above ( i. e., that the materials were being continuously used rather than discarded). After consideration of these criteria against several approaches described in more detail below, we decided to propose using the North American Industry Classification System ( NAICS) developed by the Office of Management and Budget ( OMB) as the foundation for industry definitions in today's proposed rule.

We considered proposing a narrative definition of industry, using an engineering oriented approach based on similarity of inputs, processes, and/ or outputs ( products). Under this comparative approach, industry would first be defined as a set of manufacturing or service activities. Conceptually, two or more industries would be considered the same industry where 39 this set of manufacturing or service activities applies similar processes to input materials ( e. g.,

feedstocks, reagents, catalysts, etc.) having similar composition and/ or value, to produce products or services with similar composition and/ or value. We would then set out specific criteria, in a regulation, for measuring these similarities and determining when they were similar enough to be considered the same industry.

For example, this regulation could establish that processes are similar if they utilize comparable equipment and/ or engineering principles; compositions ( of either input materials, or products produced) are similar if concentrations of specific constituents ( e. g., hazardous constituents, valuable constituents) are within an order of magnitude; and values ( again, of either input materials, or products produced) are similar if they are within some specified amount ( e. g.,

+/ 30%) on a per unit basis. We would also have to consider what the relative importance should be amongst the three elements described ( inputs, processes, and outputs). For example,

we would need to decide whether we consider similar inputs to be more important than similar outputs, in determining whether two industries would be considered the same.

This approach was initially attractive because it would not require us to evaluate or compile industry categories or lists, it could possibly be tailored to reflect certain principles to help distinguish discard from ongoing production, or it might have been more flexible than a prescriptive industry list. However, we found this approach unworkable for a number of reasons.

Primarily, it would leave too much uncertainty about the boundaries of the Agency's jurisdiction.

Specifically, it would provide little certainty to the regulated community, and would require regulatory agencies to consider individual reclamation scenarios on a case by case basis.

Therefore, we decided not to pursue this approach. 2EPA does not assert that all processes classified as the same industry within a single NAICS code are, in fact, so similar that spent materials, by products and sludges from one process can easily be used by all other processes in the classification. However, given the structure and the purposes of the NAICS, EPA believes that it is reasonable to assume that they are substantially similar. EPA needs to classify broad categories of materials in this rule; it is 40 We also considered creating our own list of specific industries or industry categories. We found, however, that while there might be some advantages to drafting our own list based on our own institutional knowledge and experience across Agency programs, a large amount of time and resources would be needed to classify many of the diverse types of industrial, service and government operations that produce waste and/ or engage in recycling. While we have studied wastes and recycling for some industries in great detail ( usually when making hazardous waste listing determinations), we have not studied many others. Another disadvantage to developing our own list would be that such a list would not necessarily reflect standardized, commonly accepted definitions of industry. The most widely recognized existing industry classification system in the United States is the NAICS. In the past, we have used the Standard Industrial Classification ( SIC) system ( predecessor to the NAICS) to implement parts of RCRA Subtitle C.

EPA has also commonly used the SIC system to implement portions of regulatory programs under other statutes.

We are therefore proposing to use the NAICS as the foundation for the industry definitions in today's proposed rule. We believe that the developers of the NAICS are more familiar with many of these diverse operations, and the NAICS list is also well known and widely accepted by industry. Consequently, we find it to be a reasonable starting point for defining " industry" with regard to identifying materials that are not " discarded" for purposes of RCRA Subtitle C. 2 impracticable to study every factual variation on a case by case basis.

41 Background of NAICS NAICS is a new industry classification system that has replaced the Standard Industrial Classification ( SIC) system ( most recently updated in 1987) that has traditionally been used by government agencies for collecting statistical data and for other administrative and regulatory purposes. Beginning in 1992, NAICS was developed on behalf of the OMB by the Economic Classification Policy Committee ( ECPC), which was comprised of representatives of the Bureau of Economic Analysis, the Bureau of the Census, and the Bureau of Labor Statistics. On April 9,

1997, OMB published a Federal Register Notice of final decision ( 62 FR 17288) to adopt the NAICS for the United States.

Table 1 below provides an overview of the NAICS hierarchy, including identification of the 20 NAICS sectors and the number of entities contained within the hierarchy at each of the various levels of detail. Under the NAICS classification hierarchy, the first two digits ( of the 6

digit code) designate the Sector, the third digit designates the Sub sector, the fourth digit designates the Industry Group, the fifth digit represents the NAICS Industry ( the most detailed level for making data comparisons across the U. S., Mexico, and Canada), and the sixth digit designates individual country level national industries. 42 Table 1. NAICS United States Structure ( from NAICS, 2002)

Sector Name Subsectors ( 3 digit) Industry Groups ( 4 digit) NAICS Industries ( 5 digit) 6 digit Industries U. S. Detail Same as 5 digit Total 11 Agriculture, Forestry, Fishing and Hunting 5 19 42 32 32 64 21 Mining 3 5 10 28 1 29 22 Utilities 1 3 3 6 4 10 23 Construction 3 10 28 4 27 31 31 33 Manufacturing 21 86 184 408 65 473 42 Wholesale Trade 3 19 71 0 71 71 44 45 Retail Trade 12 27 61 24 51 75 48 49 Transportation and Warehousing 11 29 42 25 32 57 51 Information 7 16 30 12 24 36 52 Finance and Insurance 5 11 32 15 27 42 53 Real Estate and Rental and Leasing 3 8 19 9 15 24 54 Professional, Scientific, and Technical Services 1 9 35 17 30 47 55 Management of Companies and Enterprises 1 1 1 3 0 3 56 Administrative and Support and Waste Management and Remediation Services 2 11 29 23 20 43 61 Educational Services 1 7 12 7 10 17 62 Health Care and Social Assistance 4 18 30 16 23 39 71 Arts, Entertainment, and Recreation 3 9 23 3 22 25 72 Accommodation and Food Services 2 7 11 7 8 15 81 Other Services ( except Public Administration) 4 14 30 30 19 49 92 Public Administration 8 8 29 0 29 29 Total 100 317 725 669 510 1179 While the NAICS uses a 6 digit coding system as just described, the 1987 SIC system it 3" Sectors" are at the top of the classification hierarchy, the most fundamental category, such as agriculture, mining, manufacturing, education, retail, etc.

43 replaced employed a 4 digit coding system, where the fourth digit designates the industry.

According to OMB, the two extra digits in the NAICS system 1) allow for more sectors3 to be used ( compared with the SIC system which was limited to ten sectors), and 2) allow for a category at the six digit level to be available for national industry detail ( that is, industries that would not appear on the Canadian or Mexican version of the NAICS). The additional two digits in the NAICS add flexibility to the hierarchy, but do not necessarily reflect a greater level of detail in the classification compared with the SIC. 62 FR at 17291.

There are several important points we wish to emphasize regarding the NAICS system.

First, this system was developed using a " production oriented" concept, whereby producing units that use identical or similar production processes are grouped together in NAICS. 62 FR at 17289. We believe this is relevant for our purposes, because it makes sense that materials being generated from, and returned to, " identical or similar production processes" can be likewise viewed as being beneficially recycled " within the same industry." Second, the NAICS, and its SIC predecessor, were designed solely for statistical purposes. The OMB emphasizes that while the NAICS will also be used for non statistical purposes, such as regulatory purposes, the " requirements of government agencies that use it for non statistical purposes have played no role in its development." 62 FR at 17294. Thus, we want to be clear that our proposal to rely on the NAICS system is, above all else, based upon its functionality as an existing, recognized system for classifying industries, which serves our purpose well. Finally, under the NAICS system, the owner/ operator of a facility ( or more appropriately, of an establishment) is tasked with 44 determining his/ her own industry classification, largely using the NAICS Manual for help in determining how to categorize his/ her own establishment. In today's proposal, we will not be " assigning" NAICS categories to particular facilities or establishments. Rather, we are designing a system under which owners of facilities handling secondary materials will identify which NAICS code applies to them for RCRA recycling purposes. It simply is not practicable for EPA to review and make determinations for all of the individual facilities involved.

This aspect of NAICS ( and its predecessor SIC) is not new. There are already EPA regulations where certain facility owner/ operators need to identify their SIC category ( e. g., for determining the applicability of the Toxic Chemical Release Reporting/ Community Right To

Know requirements; see 40 CFR 372.22); or that refer to the SIC categories ( e. g., RCRA regulations that rely in part on SIC codes to delineate the scope of certain existing industryspecific hazardous waste listings and exclusions); or that require SIC classification information as part of required reporting for large quantity hazardous waste generators and RCRA permit applicants). There is a relatively long history of the use of an accepted industrial classification system for both regulatory and non regulatory purposes. We believe that the regulated community's familiarity with the NAICS system and its implementation is an important justification for our proposing this approach. We also believe this is particularly the case for those industries that generate hazardous secondary materials. We request comment on whether the regulated community will be unfamiliar with the existing NAICS system, or its implementation,

particularly for those industries that would most directly be affected ( i. e., those that generate hazardous secondary materials).

Finally, we are proposing to identify industry for purposes of today's rule at the Industry 45 Group level, or the 4 digit NAICS level of classification. Two establishments will be considered within the " same industry" if they share the same 4 digit NAICS code. In arriving at this approach, we considered using the 3 digit, 4 digit, and 5 digit level ( NAICS Sub sector, Industry Group, and Industry, respectively). We selected the 4 digit level because we believe that this level struck the appropriate balance between being overly broad ( i. e., undermining any meaningful distinctions of industry) and too narrow. We think operations that are similar, but not identical,

can generate and reclaim secondary materials without discarding them. Moreover, we think the narrower 5 and 6 digit NAICS classifications would potentially be more complicated ( i. e., more categories to consider), and this could be considerably more difficult to implement. In addition,

narrower industry categories could unrealistically and inappropriately restrict beneficial resource recovery and recycling opportunities.

Specifically, we first looked at the overall distribution of industry classifications within the NAICS hierarchy, as shown in Table 1, focusing in particular on the Manufacturing Sectors ( 31

33). We would estimate that the Manufacturing Sector in general, and the Chemical Manufacturing Sub sector in particular, have the potential to generate the widest array of listed hazardous secondary materials, based on the industries found in these sectors and the listing descriptions in 40 CFR Part 261, Subpart D. Under the NAICS Manufacturing Sectors, there are 184 Industries ( 5 digit), 86 Industry Groups ( 4 digit), and 21 Sub sectors ( 3 digit). While it is evident simply from the number of categories that industry classification under NAICS is broader at the 3 digit level compared with the 5 digit level, it is difficult to make any further conclusions as to the effect of this broadening or narrowing without looking at specific examples.

Looking more closely within the Chemical Manufacturing Sub sector, there are seven 46 Industry Groups at the 4 digit level, and 17 Industries at the 5 digit level. According to the NAICS 2002 Manual, the seven Industry Groups within the Chemical Manufacturing Sub sector were defined with a particular relationship in mind. That is,

" The Chemical Manufacturing subsector is based on the transformation of organic and inorganic raw materials by a chemical process and the formulation of products.

This subsector distinguishes the production of basic chemicals that comprise the first industry group from the production of intermediate and end products produced by further processing of basic chemicals that make up the remaining industry groups." ( emphasis added).

In other words, the " first industry group" under the Chemical Manufacturing Sub sector is NAICS 3251, Basic Chemical Manufacturing, which includes basic chemical industries such as Petrochemical and Industrial Gas manufacturing. Looking at the remaining 4 digit Industry Groups, this relationship is evident   away from the production of basic chemicals, towards the production of more refined chemical intermediates and end products. For example, the next several Industry Groups: 3252 ( industries that manufacture Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments), 3253 ( Pesticide, Fertilizer, and Other Agricultural Chemical Manufacturing), 3254 ( Pharmaceutical and Medicine Manufacturing), and 3255 ( Paint, Coating,

and Adhesive Manufacturing) all represent the " further processing of basic chemicals."

We think that these distinctions made at the 4 digit level in the Chemical Manufacturing industry present a reasonable and logical categorization of the different parts of the Chemical Manufacturing industry. In our view, these distinctions are important, and should be preserved by using the 4 digit level in this proposed approach. In general, we found that the use of the 3 digit codes grouped together processes that are too dissimilar to be considered the same " industry" 47 under a basic, " common sense" approach. Use of the 3 digit NAICS would have the effect of collapsing these distinct categories into the NAICS 325 Sub sector. A 3 digit NAICS classification might, however, have certain advantages, such as possibly providing more opportunities for recycling, or fewer disputes over the classification of establishments ( because it is a broader categorization). Alternatively, use of the 5 digit level increases the number of industry categories within the NAICS 325 Sub sector to 17. Within the Chemical Manufacturing Industry Groups, this results largely in a breakout of the industries that are described in the Industry Group title. For example, the 4 digit Industry Group " Paint, Coating, and Adhesive Manufacturing" splits into " Paint and Coating" and " Adhesive" manufacturing at the 5 digit level;

or, " Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments" breaks out to " Resin and Synthetic Rubber" and " Artificial and Synthetic Fibers and Filaments" at the 5 digit level.

Because we are using the NAICS principally because it is a widely recognized, familiar system that can be consistently applied, we do not necessarily see an advantage in further dividing ( in the Chemical Manufacturing example) the 4 digit Industry Groups into 5 digit Industries. In fact, the more finely divided one makes the NAICS hierarchy, the more complex the overall approach can become. We believe that using 4 digit NAICS industry groups strikes the appropriate balance for this rule, given the options available using the NAICS hierarchy.

Therefore, we do not find that the possible advantages of a 3 digit approach outweigh the reasons articulated for proposing the 4 digit NAICS classification; nor do we see the advantage for using the 5 digit approach, and have identified possible disadvantages compared with the 4

digit approach. Although this review involved only the chemical industry hierarchy, we would point out that the chemical manufacturing industry is an important component of the universe of 4For example: NAICS 2379  Other Heavy and Civil Engineering Construction; 2389  Other Specialty Trade Contractors; 3259  Other Chemical Product and Preparation Manufacturing; 3279 Other Nonmetallic Mineral Product Manufacturing; Other Electrical Equipment and Component Manufacturing; 3379  Other Furniture Related Product Manufacturing; 3399  Other Miscellaneous Manufacturing.

48 RCRA generators, and therefore how it is defined under today's proposal is important. ( As will be discussed further below, two other important industry categories in terms of waste generation   petroleum and mineral processing   are being handled in a manner different from the NAICS approach described here, for reasons explained in the next section of this preamble.)

Nevertheless, we request comment on whether or not the 4 digit NAICS classification is the most appropriate, given the goals we have articulated, or whether the 3 digit or 5 digit approach would be more appropriate, and why.

Finally, we note that there are a number of 4 digit NAICS industry codes that are designated as " Other" activities within an industry sub sector. 4 Generally, these categories seem to represent a more diverse set of process activities than occurs under other 4 digit NAICS codes.

For example, NAICS 3259 ( Other Chemical Product and Preparation Manufacturing) includes Printing Ink Manufacturing; Explosives Manufacturing; Custom Compounding of Purchased Resins; Photographic Film, Paper, Plate, and Chemical Manufacturing; and All Other Miscellaneous Chemical Product and Preparation Manufacturing. Moreover, as illustrated by the example 3259 industry group, even within the " Other" 4 digit designation there are classifications ( usually ending with an " 8" or " 9") that are often labeled as " All Other." Using the proposed 4

digit NAICS approach, all of these categories, and activities under these categories, would fall under the same Industry Group ( 3259).

The " All Other" classifications also occur in industry groups that are not designated as 49 " Other" in and of themselves. Using the Chemical Manufacturing example, there is NAICS 325188 ( All Other Basic Inorganic Chemical Manufacturing) and 325199 ( All Other Basic Organic Chemical Manufacturing). Within each of these categories, the NAICS provides eight examples of chemical manufacturing that fall under these categories ( e. g., Enzyme Proteins,

Plasticizers, and Silicone manufacturing under Organic; Hydrochloric acid, Sulfuric acid,

Carbides, and Fluorine manufacturing under Inorganic). Using the proposed 4 digit NAICS approach, these categories would fall under the same Industry Group ( 3251).

Although EPA rejected an approach that would mix and match industry definitions using differing levels of the NAICS hierarchy, due to concerns that this would result in a NAICS list that would be too complicated while not achieving a clear benefit, EPA is soliciting comment on whether those Industry Groups or Industry designations that involve " Other" or " All Other"

categorizations should be handled differently given the potential diversity within those categories.

Existing Definitions of " Industry" In RCRA Regulations In some cases, EPA has promulgated definitions of certain " industries" in the RCRA regulations, to clarify the scope of a particular hazardous waste listing, hazardous waste exemption, or exclusion from the definition of solid waste. For example, the hazardous waste listing for " spent pickle liquor from the iron and steel industry" ( K062) references SIC codes 331 and 332 to describe the scope of the listing. 40 CFR 261.32. Other examples are found at 40 CFR 261.32, a list of hazardous wastes from " specific sources." These wastes are grouped by " industry" category ( e. g, inorganic pigments, organic chemicals, inorganic chemicals, pesticides,

etc.), and each waste has a detailed listing description to help identify the waste.

The definition of industry being proposed today is only applicable to the changes we are 5Additional guidance was provided in the Phase IV Land Disposal Restrictions ( LDR) preamble ( 63 FR 28556; May 26, 1998). EPA stated that it views " mineral processing" to include but not be limited to 41 primary mineral processing sectors described in the Agency's 1996 Identification of Mineral Processing Sectors and Waste Streams.

50 proposing to make to the definition of solid waste for purposes of Subtitle C. For example, we are not proposing to change how the " source specific" hazardous wastes listed in 40 CFR 261.32 are defined. We also do not intend today's proposed redefinition of solid waste to change existing exclusions in a manner that regulates hazardous secondary materials as solid wastes,

where prior rulemakings have established that these materials are excluded.

Finally, EPA has previously defined the scope of the petroleum and mineral processing industries in earlier rules establishing exclusions from the definition of solid waste for Subtitle C regulatory purposes. We are proposing to retain these definitions for these industries in lieu of using the NAICS approach under today's rule. As discussed below, we have already looked closely at the recycling of hazardous secondary materials within these industries, and have already described in various rulemaking documents the types of activities and operations that comprise these industries, for purposes of existing exclusions. To implement these existing definitions under today's proposal, we have added clarifying provisions to proposed Appendix X ( Industries for the Purpose of 40 CFR 261.2( g)).

Primary Mineral Processing. EPA has described the scope of the primary mineral processing industry in several previous rulemakings, beginning with the 1986 Regulatory Determination on extraction and beneficiation wastes ( 51 FR 24496), and the September 1, 1989 Mining Waste Exclusion ( 54 FR 36592). In the September 1, 1989 rule, we articulated the factors we would use to determine the scope of the mineral processing industry. 5 We are 51 proposing to require the use of these same factors for determining whether a generating or reclamation process falls within the mineral processing industry. Specifically:

° Operation must follow the beneficiation of an ore or mineral and does not include beneficiation as defined in 40 CR 261.4( b)( 7)( i).

° Operation must serve to remove the desired product from or enhance the characteristics of an ore or mineral or a beneficiated ore or mineral.

° Operation uses feedstock that is comprised of less than 50 percent scrap materials.

° Operation produces either a final or an intermediate to the final mineral product.

° Operation does not combine the mineral product with another material that is not an ore or mineral, or beneficiated ore or mineral ( e. g., alloying) and does not involve fabrication or other manufacturing activities.

EPA is proposing to retain this industry classification, rather than deferring to the various NAICS categories, for purposes of implementing the exclusion for primary mineral processing secondary materials recycled within the industry, because it has examined this sector in detail and believes that its current system reflects the boundaries of this industry better than the 4 digit NAICS approach.

For secondary materials that would not be excluded under today's proposed rule, mineral processing facilities may continue to determine whether those materials are exempt from Subtitle C regulation under the Bevill exclusion, section 3001( b)( 3)( A)( iii) of RCRA and 40 CFR 261.4( b)( 7). They must use currently applicable regulatory provisions, as clarified by the criteria articulated in preamble to the September 1, 1989 Federal Register ( 54 FR 36592). Note that to be excluded under the Bevill Amendment, solid wastes must be uniquely associated with the 6We note that the exclusion for oil bearing hazardous secondary materials in 40 CFR 261.4( a)( 12)( i) is limited only to refinery generated materials, returned to a refinery; and the exclusion for recovered oil in 40 CFR 261.4( a)( 12)( ii) involves the broader definition of petroleum industry. We are not proposing to change the scope of either exclusion in today's rule.

52 mineral processing industry. For purposes of today's rule, non uniquely associated wastes,

although not Bevill exempt, are still eligible for today's proposed exclusion if they are generated and reclaimed within the mineral processing industry.

Petroleum Industry. EPA has previously promulgated exclusions related to the recycling of oil and oil bearing hazardous secondary materials. See July 28, 1994 Federal Register ( 59 FR 38536); see also August 6, 1998 Federal Register ( 63 FR 42110). In those rules, EPA identified the various industry sectors related to petroleum ( e. g., exploration and production, transportation and storage, refining and marketing, etc.) that collectively were defined as the petroleum industry for purposes of excluding recovered oil, when such oil is returned to the petroleum refinery for insertion. ( We note that this particular " intra industry" exclusion is uni directional, that is, it is conditioned on the recovered oil being sent from facilities at any point within the industry, back to a petroleum refinery.) In order to avoid any confusion between this existing definition, and the approach being proposed in today's rule for defining " industry," we would like to make several clarifications, and request comment on specific questions.

First, we reiterate that in today's notice we are not proposing to change the definition of petroleum industry as it is used in the exclusions already mentioned, specifically, 40 CFR 261.4( a)( 12) 6. See Section A. III. 7. of today's preamble for additional discussion of conforming changes to the regulatory framework. Second, because the reuse of secondary materials by burning for energy recovery or the manufacture of fuels is not within the scope of today's 53 proposal ( as mentioned elsewhere in today's preamble and reiterated in the proposed regulatory text) there may not be any overlap between today's proposed exclusion, and the existing exclusion that utilizes the broad definition of petroleum industry. However, because there may be some hazardous secondary materials that could be generated and legitimately reclaimed in a continuous process within the petroleum industry, in a manner that does not produce a fuel, to avoid confusion we have proposed to define petroleum industry in today's rule the same way as described in 40 CFR 261.4( a)( 12). Therefore, we have added a clarifying provision in proposed Appendix X to effect this departure from using the NAICS.

We request comment on using the definition of petroleum industry from existing 40 CFR 261.4( a)( 12) for hazardous secondary materials that are not already excluded under that same provision, or are reclaimed within the petroleum industry for reasons other than making fuels, in lieu of using the 4 digit NAICS approach. We believe that retaining the existing definition of petroleum industry makes the most sense, because we have already looked closely at the recycling of hazardous secondary materials within the petroleum industry, and have already described in various rulemaking documents the types of activities and operations that comprise these industries. We also request comment on whether or not the definition of industry using the 4 digit NAICS Industry Group 3241 ( Petroleum and Coal Products Manufacturing) should instead be used for hazardous secondary materials reclaimed within the petroleum industry for reasons other than making fuels.

Waste Management and Remediation Services. We are not including " Waste Management and Remediation Services" ( NAICS 562) on the list of industries in Appendix X of today's proposed rule. We think that this industry is in business to manage waste, and presents 54 different legal and policy issues than do traditional manufacturing industries. Put another way,

this type of activity is essentially waste management, as opposed to ongoing manufacturing. We do not think that most materials reclaimed by waste management industries are generated within those industries. On the contrary, we believe that most if not all materials reclaimed in waste management operations are first discarded by another entity that has no further use for them, such as used solvents generated at an automobile repair shop sent to a third party solvent reclaimer, or lead from spent batteries being reclaimed in a secondary smelter ( see U. S. v. Ilco, 996 F. 2d 1126 ( 11th Cir. 1993)).

Therefore, we have expressly excluded " Waste Management and Remediation Services"

from the scope of today's proposal. NAICS codes corresponding to these operations do not appear on the list of industries in Appendix X of today's proposed rule. The NAICS 562 Subsector includes the Industry Groups " Waste Collection" ( NAICS 5621), " Waste Treatment and Disposal" ( NAICS 5622), and " Remediation and Other Waste Management Services" ( NAICS 5629).

In addition, we have identified specific activities described within certain NAICS industry categories that should remain within our Subtitle C jurisdiction under the same logic ( that is, they manage materials that have been discarded by another entity that has no further use for them).

These are activities that fall within two separate Industry Groups within the Chemical Manufacturing Sector ( 325). Based upon the NAICS description for these activities, they appear to reclaim secondary materials from facilities that generate them, and unlike the other operations in the same NAICS codes, they do not produce any products made from non secondary materials,

nor do they provide the kinds of services that the other operations provide. Moreover, they are 55 often owned and operated by independent third parties. We are proposing to exclude these activities from the industry classifications as follows:

3256 Soap, Cleaning Compound, and Toilet Preparation Manufacturing ( except for third party operations that reclaim drycleaning fluids at sites that do not conduct drycleaning).

3259 Other Chemical Product and Preparation Manufacturing ( except for third party operations that reclaim degreasing solvents at sites that do not conduct degreasing operations).

Finally, we assume that identifying facilities properly classified under the Waste Management Services NAICS Industry Group should be relatively straightforward, and that such facilities would not be readily confused with facilities that are recycling secondary materials in a continuous process within the generating industry. Generally speaking, where such waste service facilities are stand alone operations ( i. e., are not physically on site with respect to industrial or manufacturing operations), and it is clear that virtually all materials reclaimed at such facilities are secondary materials received from off site generators ( in one or more industry categories), then reclamation services are quite obviously the principal activity undertaken at the site, and the secondary materials have been discarded by the generators, as discussed above. In addition to excluding facilities with NAICS Codes 5621, 5622, and 5629 from the list of industries in Appendix X as described above, proposed 40 CFR 261.2( g)( 2)( iv) makes clear that materials sent to these waste service industries are not excluded from the definition of solid waste under today's rule.

Manufacturing Versus Other NAICS Sectors Today's proposed rule is incorporating all of the NAICS categories into Appendix X, with the exception of the categories described above for mineral processing, petroleum, and waste 56 management services.

However, because we are relying on the NAICS list, which is designed to capture the entire breadth and scope of the U. S. economy, there may be categories on the list that do not generally generate or recycle hazardous secondary materials. Including such industries on the list used in this regulation makes the list rather large and unwieldy. In addition, for some industries,

inclusion on the list in Appendix X may create some confusion and concern as to whether we are implying that a particular industry generates hazardous secondary material by virtue of it appearing on this list in the RCRA regulations ( which we are not). We believe that the majority of hazardous secondary materials presently being recycled are generated within traditional manufacturing industry sectors ( e. g., NAICS Sectors 31 33). For example, it may be more straightforward to limit the list of industries in Appendix X to mining and manufacturing sectors.

We are requesting comment on whether the list of industries in Appendix X should be modified,

beyond what is being proposed today, based on the knowledge that certain industry categories do not generate hazardous secondary materials or will not engage in reclamation of hazardous secondary materials.

How Will the Regulated Community Identify Which NAICS Code Applies for Purposes of this Rule?

The 2002 NAICS Manual contains guidelines for using the system, along with fairly detailed descriptions of the industry categories. Individual NAICS categories contain information,

such as examples, to help identify an establishment's industry classification. We are proposing today to require the regulated community to use the existing NAICS guidance ( NAICS 2002 Edition) to identify what industry their operations fall within for purposes of today's exclusion 7NAICS Manual, 2002, p. 21.

57 from the RCRA definition of solid waste. See paragraph ( d) in proposed Appendix X.

The NAICS is a " classification system for establishments." As discussed in more detail below, an establishment is a collection of one or more activities, and under NAICS the establishment is what is classified as a particular industry. The introductory text to the 2002 NAICS Manual states that " The establishment as a statistical unit is defined as the smallest operating entity for which records provide information on the cost of resources, materials, labor,

and capital employed to produce the units of output." Establishment is further clarified in the same text as " generally a single physical location, where business is conducted or where services or industrial operations are performed ( for example, a factory, a mill, store, hotel, movie theater,

mine, farm, airline terminal, sales office, warehouse, or central administrative office)." 7 In cases where distinctly different and potentially significant activities occur at one location, in determining whether these activities should be classified as a separate establishment, the 2002 NAICS Manual states that an " activity is treated as a separate establishment provided: 1) no one industry description in the classification includes such combined activities; 2) separate reports can be prepared on the number of employees, their wages and salaries, sales or receipts, and expenses;

and 3) employment and output are significant for both activities.

Thus, the NAICS system first defines what is an establishment. An establishment is then classified to an industry when its primary activity meets the definition of that industry. In the simplest case, where an establishment consists of one activity, the industry classification for that establishment is that which best describes that single activity. When there are two or more activities, the NAICS Manual describes procedures for identifying the primary activity. The 8NAICS Manual, 2002, p. 22.

58 NAICS Manual states:

" In most cases, if an establishment is engaged in more than one activity, the industry code is assigned based on the establishment's principal product or group of products produced or distributed, or services rendered. Ideally, the principal good or service should be determined by its relative share of current production costs and capital investment at the establishment. In practice, however, it is often necessary to use other variables such as revenue, shipments, or employment as proxies for measuring significance." 8 Thus, establishments are classified under NAICS based on the primary activity within that establishment. It should also be pointed out, however, that for certain types of combined activities, the NAICS guidance provides exceptions to this " primary activity" rule approach. For example, vertically integrated facilities can be described as consecutive stages of production in which the output of one step is the input to the next. Rather than determining which of these stages of production are the largest ( or primary), NAICS would classify this series of activities based on the final process. One example of this is where the NAICS Manual specifies that a physical location with both a Pulp Mill activity and Paper Mill activity, should be classified as a Paper Mill because that is the final stage of production. But there are even exceptions to this,

such as where the NAICS Manual specifies that a particular set of vertically integrated activities should be classified based upon the first stage of the manufacturing process ( e. g., a Steel Mill where other activities such as producing Steel Castings occurs, should be classified as a Steel Mill nonetheless). An important point here, other than illustrating how the " primary activity rule" may be superseded by the way in which the NAICS manual defines particular vertically integrated establishments, is that the NAICS Manual will specify how such an establishment is classified, 59 rather than the owner/ operator having to in every case make a judgement ( such as determining the primary activity, for example).

Another example of how NAICS may classify certain combined activities, other than via the primary activity rule, is in certain examples of joint production of goods and services. Some establishments may have two activities ( e. g., a gasoline station with a convenience store) where the combined activities have been identified in the NAICS as a third, separate industry. Thus,

rather than making a determination of which activity ( gasoline retail versus convenience store) is primary using receipts/ sales and revenue data as a proxy, NAICS provides a category Gasoline Stations with Convenience Stores ( NAICS code 44711). In this case, this third category should be used in lieu of determining the " primary activity" for these establishments.

Because today's rule proposes to use the NAICS for classifying establishments ( at the 4

digit, or Industry Group level) for determining whether or not the generating industry and the reclaiming industry are the same, the concept of the establishment is important. We are proposing to add a definition of establishment to the RCRA regulations, where establishment means " an economic unit, generally at a single physical location, where business is conducted or where services or industrial operations are performed. An establishment is the smallest such unit for which records provide information on the cost of resources, materials, labor and capital employed to produce the units of output." The language in this definition follows closely the language in the 2002 NAICS Manual, and is also consistent with the same language EPA used in a separate rulemaking under EPA's Toxic Chemical Release Reporting program ( see 40 CFR 372.3). We request comment on our use of this definition for today's proposed rule. ( An additional point, the phrase " generally at a single physical location" in the proposed definition of 60 establishment does not mean that under today's proposal, " same industry" is somehow limited only to materials generated and reclaimed on site. As discussed throughout this preamble, today's proposed exclusion can apply to materials sent off site from the generator facility.)

Multiple Establishments. Thus far, we have discussed how the NAICS system defines an establishment, and how that establishment is classified to an industry from the 2002 NAICS Manual of industry classifications. We are proposing that hazardous secondary materials,

generated at an establishment, are excluded if reclaimed at the same or another establishment,

whether on site or off site, where the establishment reclaiming the material is classified under the same NAICS ( at the 4 digit level) classification as the generating establishment ( industry). This approach is relatively straightforward when it involves transactions within and between sites where each site has a single establishment, classified to a particular NAICS industry group. All one needs to know is the correct industry classifications, and then determining whether or not the secondary material is being reclaimed within the generating industry in accordance with today's proposed exclusion should be a straightforward task.

However, some locations will have two or more establishments operating, where these establishments are classified differently from one another under the NAICS. Where there are two or more different industries ( establishments) operating at the location where the secondary material is generated, or at the location where the secondary material is reclaimed, the individual establishments that generate and reclaim the secondary materials, respectively, must be classified the same under NAICS, in order to be excluded under today's proposed rule. In other words,

where there are multi industry sites, we look to whether NAICS classifications of the specific establishments generating and reclaiming the secondary material are the same. We are not 9Whereas the NAICS attaches an industry classification to an individual establishment based upon the most significant activity within that establishment ( determined using either the ` primary' activity rule, or in some other way as discussed for certain establishments with combined activities), the NAICS Manual does not appear to have any type of ` primary rule' for identifying the primary industry at multi industry facilities. However, there is at least one example of where determining the primary industry is required in a different program; the EPA Toxic Release Inventory ( TRI) regulations require that a primary establishment, or industry, be identified at multi establishment complexes. This is in order to determine applicability of the TRI rules, because the TRI program applies to some industries and not others. 40 CFR 372.22( b).

61 suggesting that a particular multi industry site be classified as a single industry, based for example on some type of determination of the " dominant" or " primary" industry or establishment at that site. 9 In fact, one scenario under today's proposal would be that secondary materials are not considered to be reclaimed in a continuous process within the same industry when sent from one industry to a different industry on the same site. While there may be opportunities for legitimate recycling between two different industries at the same site, for reasons already discussed, we are limiting today's exclusion to a ` same industry' approach. Although ` inter industry' recycling is outside the scope of today's proposal, we would be interested in obtaining additional information on specific examples of situations where two different industries ( based upon the NAICS definition proposed today) are located at the same site, and where hazardous secondary materials are generated in one industry and could be reclaimed in a different, on site industry. Again, this type of recycling is outside the scope of today's proposal, but we solicit comment and would be interested in obtaining examples of where this type of recycling might occur.

Specialty Batch Chemical Manufacturers. EPA is also aware of certain practices within the chemical manufacturing industry that might present unique situations regarding defining " intra industry" reclamation using the NAICS approach. Specifically, within the chemical manufacturing industry, larger manufacturers will contract out production of certain chemicals to 62 smaller manufacturers ( referred to as batch or tolling operations). These smaller manufacturers produce chemicals in batches, where the product slates may change several times over the course of a year, for example. These smaller manufacturers ( often referred to collectively as Specialty Batch Chemical Manufacturers) may generate hazardous secondary materials that could be returned to the larger chemical manufacturer for reclamation along with similar secondary materials ( generated by the larger facility from producing the same chemical). To the extent that the NAICS approach proposed today classifies both establishments ( the specialty batch establishment, and the larger chemical manufacturing establishment) the same at the 4 digit level,

this reclamation would be excluded under today's proposal. As stated above, we would look to whether the NAICS classifications of the specific establishments generating and reclaiming the secondary material are the same. However, we solicit comment on this particular situation, and are interested to know if there are specific examples of where ` same industry' reclamation, as outlined under today's proposed rule, would be precluded as a result of uncertain application of the NAICS classification approach at specialty batch chemical facilities ( e. g., due to frequently changing product slates, or different products being produced from the same equipment at different times, etc.).

Under today's definition of industry, we are proposing that owners and operators, as well as implementing agencies, rely on the NAICS system to identify establishments and define the bounds of an industry. As our lead approach, we are not proposing to overlay additional criteria to determine whether or not particular reclamation units, processes, or activities are " adequately"

associated with an industry so as to be included within the scope of that industry definition. In fact, we believe the NAICS approach simplifies this determination because it generally views 63 establishments as a collection of activities, and provides a consistent system for classifying the collection of activities as an industry. Generally, where reclamation units, processes or activities are located at a particular site, and are supporting the principal activities of that industry in a legitimate fashion, they should be considered part of that establishment ( industry) unless the NAICS approach ( e. g., industry descriptions or other guidance in the 2002 NAICS Manual)

yields a different answer.

For instance, in the example provided in Section III. A. 4. above, if a paint manufacturer reclaims used solvents from within the paint manufacturing industry, the used solvents would not be wastes under today's proposed exclusion. If, based upon the NAICS, this solvent reclamation activity is part of the paint manufacturing process, and thus merely one of several activities comprising an establishment best classified as paint manufacturing under NAICS, then the reclamation activity would be part of the paint manufacturing industry. Alternatively, if the solvent reclamation activity became a centralized solvent reclamation facility for paint manufacturers, then under the NAICS approach the reclamation could ultimately become so significant ( e. g., due to the number of employees, or receipts from its activities, etc.) as to be a separate establishment. In that case, the reclamation activity would likely be classified in an industry other than paint manufacturing, and the used solvents would no longer be excluded because they are not being reclaimed in a continuous process within the same industry.

The key point here is that in one instance, the reclamation activity clearly supports paint manufacturing, and is one of several activities in an establishment called paint manufacturing. In the other instance, the reclamation activity has become significant enough to be a separate establishment, and is thus classified based on its own activity, which would be different from the 10Under the SIC, establishments that primarily provided services to manufacturing establishments were classified based on the establishment being served; NAICS changed this to emphasize that each establishment should be classified based upon what the establishment does. ( See NAICS Clarification Memorandum No. 3 in docket to today's proposed rulemaking.)

11These are: 1) no one industry description in the classification includes such combined activities; 2) separate reports can be prepared on the number of employees, their wages and salaries, sales or receipts, and expenses; and 3) employment and output are significant for both activities. NAICS Manual, 2002, pp. 21 22.

64 activity of the establishment ( paint manufacture) it serves in this example. Classifying establishments based on their own activity, rather than the activity of the establishment being served, is consistent with the way in which the NAICS is intended to operate in situations involving " auxiliary" establishments. 10 While we believe the NAICS appears to offer a clear, consistent, and familiar way to classify establishments for purposes of today's rule, we acknowledge that there may be some situations where this system might not provide definitive, " bright line" answers. As discussed above, a reclamation process could expand to a point where such a " sideline" reclamation process would rightly be considered significant enough to be a separate establishment, and a different industry, for the purpose of this rule. The reclamation establishment likely would then be classified as a waste management industry.

As stated above, the 2002 NAICS Manual contains guidance to help identify whether a particular activity can be defined as a separate establishment, in situations where there are other activities occurring at the same location. 11 However, our concern is whether this guidance is sufficient for determining more precisely when " sideline" reclamation systems would become " significant" enough to be considered separate establishments. Today's proposal would help resolve such issues for certain types of on site reclamation processes. First, under proposed 40 65 CFR 261.2( g)( 2)( v), if there is still some question ( after consulting the 2002 NAICS Manual) as to the correct classification of a particular reclamation unit, process, or activity, we are proposing that with respect to hazardous secondary materials generated and reclaimed on site ( as defined in 40 CFR 260.10), the on site reclamation unit, process, or activity be considered part of the generating industry with which it is associated. This proposed provision reflects the idea that the scale or " significance" of on site reclamation processes should be less relevant for the purpose of this rule when only materials that are generated on site are involved.

The issue of when an on site reclamation process would be significant enough to be considered a separate establishment under NAICS is more complex when the process also reclaims hazardous secondary materials generated off site. Facilities that decide to accept such secondary materials from off site for reclamation need to know at what point such reclamation processes would be considered separate establishments. In the paint manufacturer example discussed above, a risk averse facility manager might unnecessarily restrict his or her reclamation activity. We believe that it may be advisable in the final rule to provide some more specific means of determining when such sideline reclamation processes would be significant enough to be considered separate establishments and, therefore, separate ( and different) industries.

In order to clarify when a sideline operation becomes a waste management operation,

EPA could identify several relevant criteria for facilities and regulators to evaluate. One of the criteria could be how much secondary material from off site is being reclaimed in the process.

For example, the regulation could specify that an on site reclamation process should be a separate establishment if more than 50% of the material reclaimed originates from off site. Some different percentage ( e. g., 25% or 75%) could also be appropriate for this purpose. Another criterion 66 could be based on how much of the facility's revenue ( e. g., more than 50%) is generated from reclaiming material from off site. Another criterion might be based on the number of off site generators ( e. g., more than five) that supply secondary material to the reclamation process. The Agency requests comment on the need for additional regulatory clarification to determine when such sideline reclamation processes would be significant enough to be considered separate establishments, particularly where reclamation processes take materials from off site generators.

We also request comment on the specific options outlined above for addressing this issue.

We point out that elsewhere in today's preamble, we discuss co proposing two options as part of defining what is a " continuous process within the generating industry." ( See Section III. A. 4. above, where under one option we propose that hazardous secondary materials that are generated and reclaimed in a continuous process within the same industry would not be eligible for today's exclusion, if the reclamation takes place at a facility that also recycles regulated hazardous wastes generated in a different industry.) However, here in this section we are requesting comment on possible ways to more clearly define industry, or more specifically,

establishment, particularly where there are materials being received and reclaimed from off site sources. While these two aspects of today's proposal address similar issues ( e. g., improving clarity, and identifying reclamation outside the scope of today's proposal), we emphasize that here we are asking for comment on possible criteria for further defining establishment, which would conceivably apply under either of the co proposed options described in section III. A. 4.

EPA also requests comment on using the existing 2002 NAICS Manual for implementing the definition of industry under today's rule, and specifically as it is incorporated into the industry categories and definitions in the newly proposed Appendix X. We anticipate that for most 67 locations, in most cases, the NAICS classification system described in the 2002 NAICS Manual,

summarized above, will serve the purpose of a clear and consistent definition of industry.

Regulatory option for on site recycling As explained in the preceding discussion, today's proposed exclusion would only be available for materials recycled within the same industry in which they are generated, and we are proposing to use the NAICS system as the primary means of identifying and classifying the industries associated with generation and reclamation of recyclable materials. However, as discussed above, we acknowledge that our proposed approach may have certain drawbacks,

particularly with regard to situations where the recycling activities all occur on site. For example,

we expect there will be numerous facilities that will have two or more establishments that would be classified as separate industries according to the NAICS system ( e. g., a facility that produces petrochemicals as well as pharmaceuticals). As proposed today, materials would not be excluded if the generating and reclaiming establishments were in different industries according to NAICS,

even if both establishments were situated at the same site and operated by the same company. In a somewhat different example, a large manufacturer such as an integrated steel production plant may find it advantageous to have a separate, specialized company operate a dedicated reclamation process at the plant site. Under the NAICS system, that reclamation process would likely not be classified as part of the steel making industry, since it could be viewed as a distinct, separate economic unit. We also acknowledge that for large, integrated facilities it could be difficult using the NAICS guidance to easily classify processes that may produce different types of outputs, but are physically or operationally linked. Finally, as discussed previously, a specific unit or process at a facility may be flexibly designed to produce a variety of outputs, and its NAICS classification 12" On site" is defined for RCRA Subtitle C purposes in 40 CFR 260.10.

68 might thus change relatively often, depending on which products are being produced at any given time.

In developing today's proposal, several stakeholders suggested that an exclusion for onsite recycling could be a more practical and simpler approach to encouraging legitimate recycling while maintaining environmental protections. The Agency believes that such an option may have merit, and in light of the potential difficulties in making clear, definitive NAICS classifications at more complex facilities, we are considering a regulatory option that could simplify implementation of today's proposed exclusion in situations where materials are all generated and reclaimed in a continuous process on site. 12 Under this option, the NAICS system would be used to classify generating and reclaiming industries that are located at different sites, consistent with today's proposal. However, materials that are generated and reclaimed in a continuous process at the same site would be excluded, regardless of whether different industries were involved. This option would also involve the same notification requirements that would apply to off site,