[Federal Register: March 26, 2007 (Volume 72, Number 57)]
[Proposed Rules]
[Page 14171-14218]
[DOCID:fr26mr07-16]

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Part II

Environmental Protection Agency

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40 CFR Parts 260 and 261

Revisions to the Definition of Solid Waste; Proposed Rule

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 260 and 261

[EPA-HQ-RCRA-2002-0031-FRL-8289-9]
RIN 2050-AG31

Revisions to the Definition of Solid Waste

AGENCY: Environmental Protection Agency.

ACTION: Supplemental Proposed Rule.

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SUMMARY: The Environmental Protection Agency (EPA) is today publishing
a supplemental proposal which would revise the definition of solid
waste to exclude certain hazardous secondary materials from regulation
under Subtitle C of the Resource Conservation and Recovery Act (RCRA).
We are also soliciting comments on regulatory factors to be used to
determine whether recycling of hazardous secondary materials is
legitimate. The Agency first proposed changes to the definition of
solid waste on October 28, 2003 (68 FR 61558). The purpose of this
proposal is to encourage safe, environmentally sound recycling and
resource conservation and to respond to several court decisions
concerning the definition of solid waste.

DATES: Comments must be received on or before May 25, 2007. Under the
Paperwork Reduction Act, comments on the information collection
provisions must be received by OMB on or before April 25, 2007.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ -
RCRA 2002-0031 by one of the following methods:
    http://www.regulations.gov: Follow the on-line instructions for

submitting comments.
    E-mail: Comments may be sent by electronic mail (e-mail) to
<EMAIL_ADDRESS>Attention Docket ID No. EPA-HQ-RCRA-2002-0031.

    Fax: Fax comments to:<PHONE_NUMBER>, Attention Docket ID No. EPA-HQ-
RCRA 2002-0031.
    Mail: Send comments to: OSWER Docket, EPA Docket Center, Mail Code
5305T, Environmental Protection Agency, 1200 Pennsylvania Avenue, NW.,
Washington, DC 20460, Attention Docket ID No. EPA-HQ-RCRA-2002-0031. In
addition, please mail a copy of your comments on the information
collection provisions to the Office of Information and Regulatory
Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for
EPA, 725 17th St., Washington, DC 20503.
    Hand delivery: Deliver comments to: Environmental Protection
Agency, EPA Docket Center, Room B102, 1301 Constitution Avenue, NW.,
Washington, DC, Attention Docket ID No. EPA-HQ-RCRA-2002-0031. Such
deliveries are only accepted during the docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID Number EPA-HQ-RCRA-
2002-0031. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
http://www.regulations.gov, including any personal information

provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site

is an ``anonymous access'' system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through http://www.regulations.gov your e-mail address will be

automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. 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. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses.
    Docket: All documents in the docket are listed in the http://www.regulations.gov
 index. Although listed in the index, some

information is not publicly available, such as CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hard copy at the OSWER Docket, EPA/

DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC.
The Public Reading Room is open from 8:30 a.m. to 4:30 p.m. Monday
through Friday, excluding legal holidays. The telephone number for the
Public Reading Room is<PHONE_NUMBER>, and the telephone number for the
OSWER Docket is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: For more detailed information on
specific aspects of this rulemaking, contact Marilyn Goode, Office of
Solid Waste, Hazardous Waste Identification Division, MC 5304P,
Environmental Protection Agency, 1200 Pennsylvania Ave., NW.,
Washington, DC 20460<PHONE_NUMBER><EMAIL_ADDRESS>or Tracy
Atagi, Office of Solid Waste, Hazardous Waste Identification Division,
MC 5304P, Environmental Protection Agency, 1200 Pennsylvania Ave., NW.,
Washington, DC 20460, at<PHONE_NUMBER> (atagi.tracy@epa.gov).

SUPPLEMENTARY INFORMATION:

A. Regulated Entities

    Entities potentially affected by this action include about 4600
facilities in 530 industries in 17 economic sectors that generate or
recycle hazardous secondary materials which are currently regulated as
RCRA Subtitle C hazardous wastes (e.g., industrial co-products, by-
products, residues, unreacted feedstocks). About 80 percent of these
affected facilities are classified in NAICS code economic sectors 31,
32, and 33 (manufacturing), and the remainder are in NAICS code
economic sectors 21 (mining), 22 (utilities), 23 (construction), 42
(wholesale trade), 44 and 45 (retail trade), 48 and 49
(transportation), 51 (information), 54 (professional, scientific and
technical services), 56 (administrative support, waste management and
remediation), 61 (educational services), 62 (health care and social
assistance, and 81 (other services). About 0.65 million tons per year
of recyclable industrial materials handled by these entities may be
affected, of which the most common types are metal-bearing hazardous
secondary materials (e.g., sludges and spent catalysts) for commodity
metals recovery, and organic chemical liquids for recycling as
solvents. This proposed rule, if promulgated, is expected to result in
regulatory and materials recovery cost savings to these industries of
approximately $107 million per year. Taking into account impact
estimation uncertainty factors, this rule, if promulgated, could affect
between 0.3 to 1.7 million tons per year of industrial hazardous
secondary materials handled by 3600 to 5400 entities in 460 to 570
industries, resulting in $93 million to $205 million per year of net
cost savings. More detailed information on the potentially affected
entities, industries, and industrial materials, as well as the economic
impacts of this

rule (with impact uncertainty factors), is presented in section XVI.A
of this preamble and in the ``Economics Background Document'' available
in the docket for this rulemaking.

B. What To Consider When Preparing Comments for EPA

    1. Submitting CBI. Do not submit this information to EPA through
http://www.regulations.gov or e-mail. Clearly mark part of all

information that you claim to be CBI. For CBI information in a disk or
CD-ROM that you mail to EPA, 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 claimed as CBI. In addition to one
complete version of the comment that includes 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.
Information so marked will not be disclosed, except in accordance with
procedures set forth in 40 CFR Part 2.
    2. Tips for Preparing Your Comments. When submitting comments,
remember to:
     Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
     Follow directions. The Agency may ask for commenters to
respond to specific questions or organize comments by referencing a
Code of Federal Regulations (CFR) part or Section number.
     Explain why you agree or disagree; suggest alternatives
and substitute language for your requested changes.
     Describe any assumptions and provide any technical
information and/or data that you used.
     If estimating burden or costs, explain methods used to
arrive at the estimate in sufficient detail to allow for it to be
reproduced.
     Provide specific examples to illustrate any concerns and
suggest alternatives.
     Make sure to submit comments by the comment period
deadline identified above.

Preamble Outline

I. Statutory Authority.
II. What Is the Scope of This Supplemental Proposal?
III. What Is the Intent of This Supplemental Proposal?
IV. How Does This Supplemental Proposal Relate to the October 2003
Proposal?
V. How Is Hazardous Waste Recycling Currently Regulated?
VI. What Is the History of Recent Court Decisions on the Definition
of Solid Waste?
VII. How Does the Concept of Discard Relate to These Proposed
Exclusions?
VIII. Recycling Studies.
IX. Exclusion for Hazardous Secondary Materials That Are
Legitimately Reclaimed Under the Control of the Generator: Proposed
40 CFR 260.10, 261.2(a)(1), 261.2(a)(2), 261.2(c)(3), 261.4(a)(23).
X. Conditional Exclusion for Hazardous Secondary Materials That Are
Transferred for the Purpose of Reclamation: Proposed 40 CFR
261.2(c)(3), 261.4(a)(24), 261.4(a)(25).
XI. Legitimacy: Proposed 40 CFR 261.2(g).
XII. Petitions for Non-waste Classification: Proposed 40 CFR
260.30(d), 260.30(e), 260.30(f), 260.34.
XIII. Effect of This Proposal on Other Programs.
XIV. Measurement of the Performance Outcomes of This Supplemental
Proposal.
XV. How Would These Proposed Regulatory Changes Be Administered and
Enforced in the States?
XVI. How Has EPA Fulfilled the Administrative Requirements for This
Rulemaking?

I. Statutory Authority

    These regulations are proposed under the authority of sections
2002, 3001, 3002, 3003, 3004, 3007, 3010, and 3017 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. What Is the Scope of This Supplemental Proposal?

    In today's notice, EPA is proposing to revise the definition of
solid waste in order to exclude from regulation under Subtitle C of
RCRA certain hazardous secondary materials sent for recycling. We are
also seeking comment on certain changes to the proposed regulatory
factors for determining whether recycling is legitimate. The Agency
first proposed changes to the definition of solid waste, as well as
regulatory criteria for legitimacy, on October 28, 2003 (68 FR 61581-
61588).
    The scope of the regulatory changes proposed today are as follows:

A. Exclusion for Materials That Are Legitimately Reclaimed Under the
Control of the Generator in Non-Land-Based Units

    This provision, with regulatory language proposed in 40 CFR
261.2(a)(2)(ii), would exclude certain hazardous secondary materials
(i.e., spent materials, listed sludges, and listed byproducts) that are
generated and legitimately reclaimed\1\ within the United States or its
territories \2\ and are only handled in non-land-based units (e.g.,
tanks, containers, containment buildings). The exclusion would apply to
hazardous secondary material that is reclaimed under the control of the
generator, if the materials are not speculatively accumulated. In
addition, EPA is proposing to include in 40 CFR 260.42 a requirement
that the generator would be required to submit a one-time notification
to EPA or the authorized state. Hazardous secondary material would be
considered ``under the control of the generator'' under the following
circumstances:
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    \1\ In this context, the terms ``recycling'' and ``reclamation''
are not necessarily synonymous. ``Recycling typically involves a
series of activities, including storage and other handling steps
that culminate in the production of a valuable end product of some
kind. Thus, if materials need to be reclaimed in order to produce a
valuable end product, the reclamation activity can be thought of as
one step in the overall recycling process. See proposed Sec.
261.4(g). Further explanation of the term ``reclamation'' can be
found in the preamble to the October 2003 proposal at 68 FR 61564.
    \2\ EPA has proposed to limit this exclusion to hazardous
secondary materials reclaimed within the United States or its
territories because it does not have sufficient information related
to recycling activities outside of the United States or its
territories to make the same general finding that it has made for
materials legitimately recycled under the control of the generator.
However, as noted below, EPA requests comment on whether the Agency
should promulgate a conditional exclusion for exported hazardous
secondary material otherwise meeting the criteria for this rule.
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    (1) It is generated and then reclaimed at the generating facility;
or
    (2) It is generated and reclaimed by the same company, if the
generator certifies that it is under the same ownership as the
reclaimer and that the owner company has acknowledged responsibility
for safe management of the hazardous secondary materials; or
    (3) It is generated and reclaimed pursuant to a written agreement
between a tolling contractor and batch manufacturer, if the tolling
contractor retains ownership of, and responsibility for, the hazardous
secondary materials that are generated during the course of the
manufacture.
    This proposed exclusion would not include recycling practices that
involve discard of materials. These practices include recycling of
inherently waste-like materials (40 CFR 261.2(d)), recycling of
materials that are used in a manner constituting disposal or used to
produce products that are applied to or placed on the land (40 CFR
261.2(c)(1)), and burning of materials for energy recovery or used to
produce a fuel or otherwise contained in fuels (40 CFR 261.2(c)(2)).
This proposed exclusion is further described in section IX of this

preamble. We note that the Agency is considering expanding its
regulations for comparable fuels in a separate rulemaking.

B. Exclusion for Materials That Are Legitimately Reclaimed Under the
Control of the Generator in Land-Based Units

    This provision, with regulatory language proposed in 40 CFR
261.4(a)(23), would exclude certain hazardous secondary materials that
are generated and legitimately reclaimed within the United States or
its territories and handled in land-based units (e.g., surface
impoundments, waste piles). This provision requires that hazardous
secondary materials managed in land-based units must be contained in
such units.

C. Conditional Exclusion for Materials That Are Transferred for the
Purpose of Reclamation

    This conditional exclusion, with regulatory language proposed in 40
CFR 261.4(a)(24), (hereinafter referred to as the ``transfer-based
exclusion'') would apply to hazardous secondary materials (i.e., spent
materials, listed sludges, and listed byproducts) that are generated
and subsequently transferred to a different person or company for the
purpose of reclamation. As long as the conditions to the exclusion are
satisfied, the hazardous secondary materials would not be subject to
Subtitle C regulation. The conditions are intended to ensure that such
materials are handled as commodities rather than wastes. They will also
help guarantee that protection of human health and the environment will
not be compromised in the absence of hazardous waste regulatory
requirements for these materials. It is important to note that when
hazardous secondary materials are generated and reclaimed within the
United States pursuant to a written agreement between a tolling
contractor and a batch manufacturer as defined in proposed 40 CFR
260.10, these materials would be subject to the requirements of
proposed 40 CFR 261.2(a)(ii) or 261.4(a)(23) rather than the more
extensive requirements of proposed 40 CFR 261.4(a)(24).
    If any of the hazardous secondary materials under proposed 40 CFR
261.4(a)(24) are generated and then exported to another country for
reclamation, we are also proposing that the exporter notify the
receiving country of the export through EPA and obtain consent from
that country before shipment of the material. This requirement is
proposed to be codified in 40 CFR 261.4(a)(25). Like the previously
discussed exclusion for hazardous secondary materials recycled under
the control of the generator, this exclusion would not cover recycling
of inherently waste-like materials, recycling of materials that are
used in a manner constituting disposal, and burning of materials for
energy recovery. The proposed exclusion is described in more detail in
section X of this preamble.

D. Petition Process for Non-Waste Determinations

    In addition to the exclusions discussed above, the Agency also is
proposing a petition process, with regulatory language found in
proposed 40 CFR 260.30(d), 260.30(e), 260.30(f), and 260.34, for
obtaining a case-specific non-waste determination for certain hazardous
secondary materials that are recycled. This process would allow a
petitioner to receive a formal determination from the Agency that its
hazardous secondary material is clearly not ``discarded'' and therefore
is not a solid waste. The procedure would allow EPA or the authorized
state to take into account the particular fact pattern of the recycling
and to determine that the hazardous secondary material in question is
not a solid waste without imposing additional requirements. The
determination would be available to petitioners who could demonstrate
that their hazardous secondary materials were recycled in a continuous
industrial process, or that the materials were indistinguishable in all
relevant aspects from a product or intermediate, or that the materials
were under the control of the generator via a tolling arrangement or
similar contractual arrangement. The petition process for the non-waste
determinations would be the same as that for the variances from the
definition of solid waste found in 40 CFR 261.31. This process and the
criteria for making these determinations, are described in section XII
of this preamble.

E. Legitimacy

    On October 28, 2003 (68 FR 61581-61588), EPA extensively discussed
our position on the relevance of legitimacy to hazardous waste
recycling in general and to the redefinition of solid waste
specifically. We proposed to codify in the RCRA regulations four
general criteria to be used in determining whether recycling of
hazardous secondary materials is legitimate. In today's action, we are
proposing changes to the proposed legitimacy criteria and asking for
public comment on these revisions. The changes consist of a
restructuring of the proposed criteria, called factors in this
proposal, by making two of these factors mandatory and two non-
mandatory considerations, and providing further guidance and
clarification on how the economics of recycling should be considered in
making legitimacy determinations. The changes are described in section
XI of this preamble.

III. What Is the Intent of This Supplemental Proposal?

    Today's supplemental proposal would revise and clarify the RCRA
definition of solid waste as it pertains to certain types of hazardous
secondary materials that would not be considered wastes subject to
regulation under RCRA Subtitle C. This notice builds on our October 28,
2003 proposal (68 FR 61558) which was initiated partially in response
to decisions by the United States Court of Appeals for the DC Circuit,
which, taken together, have provided the Agency with additional
direction in this area.
    This proposal represents an important restructuring of the RCRA
regulations that distinguish wastes from non-waste materials for RCRA
purposes, and that ensure environmental protections over hazardous
secondary materials recycling practices. As such, it also is 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 recycling, but which to date
has been implemented without regulatory criteria. Today's supplemental
proposal thus includes specific regulatory provisions for determining
when hazardous secondary materials are recycled legitimately.
    Today's supplemental proposal is de-regulatory in nature because
certain recyclable materials that have heretofore been subject to the
hazardous waste regulations would no longer be regulated as hazardous
waste. The factors to consider for legitimate recycling codify existing
principles without increasing regulation. This proposal is not intended
to bring new wastes into the RCRA regulatory system.
    By removing unnecessary 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 proposal will encourage the safe, beneficial
recycling of hazardous secondary materials. 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, while at the same time maintaining protection of human health
and the environment.

It also is 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 resources.\3\
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    \3\ The 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 Web site http://www.epa.gov/epaoswer/osw/vision.htm
.

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IV. How Does This Supplemental Proposal Relate to the October 2003
Proposal?

    On October 28, 2003 (68 FR 61558), the Agency proposed to exclude
from the definition of solid waste any material generated and reclaimed
in a continuous process within the same industry, provided the
reclamation was legitimate. ``Same industry'' was defined as industries
sharing the same 4-digit North American Industry Classification System
(NAICS) code. The basis for that exclusion was the holding in American
Mining Congress v. EPA (``AMC I''), 824 F.2d 1177 (DC Cir. 1987)) that
materials destined for beneficial reuse of recycling in a continuous
process by the generating industry are not discarded. In order to be
eligible for the exclusion, the hazardous secondary material could not
be speculatively accumulated under 261.1(c)(8). In addition, the
generator of such materials would be required to submit a one-time
notification to EPA or the authorized State with contact information,
the type of material that would be excluded, and the industry that
generated the material. In the October 2003 proposal, the Agency also
proposed to codify in the RCRA regulations four criteria to be used in
determining whether recycling of hazardous secondary material was
legitimate. We also solicited comment on a broader conditional
exclusion from RCRA regulation for essentially all hazardous secondary
materials that are legitimately recycled. For a discussion of public
comments received on our proposed exclusion, see section IX of this
preamble.
    After evaluating comments received on the October 2003 proposal and
conducting an independent analysis, EPA decided to restructure its
approach. Following the decision of the DC Circuit Court in Association
of Battery Recyclers v. EPA (``ABR'')( 208 F.3d 1047 (DC Cir. 2000),
EPA has decided to examine the principles behind the court's holdings
on the definition of solid waste, rather than trying to fit materials
into specific fact patterns addressed by the court. EPA is therefore
proposing (1) an exclusion for hazardous secondary materials that are
generated and then reclaimed under the control of the generator; (2) a
conditional exclusion for hazardous secondary materials that are
generated and then transferred to another person for the purpose of
reclamation; and (3) a petition process for obtaining a case-specific
non-waste determination for certain hazardous secondary materials that
are recycled. Today's notice also proposes a restructuring of the
previously proposed legitimacy criteria and further clarification and
guidance on how the economics of the recycling transaction should be
considered in making legitimacy determinations. A detailed description
of today's proposed regulatory changes and the reasons for not
finalizing the October 2003 proposal are discussed in sections IX, X,
XI, and XII of this preamble.

V. 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 one or more of the hazardous characteristics (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 the time
that they are ultimately disposed. However, hazardous secondary
materials often can be recycled instead of being disposed, which can
change 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 Subtitle C of RCRA if they are listed or
characteristic hazardous wastes, 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 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 currently 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 rather than waste
management.
    In contrast, in some recycling practices, the hazardous secondary
material cannot be used as is and must be significantly processed
before it can be reused in a manner similar to products in commerce. In
these cases, EPA has found that the material may be more ``waste-like''
and the hazardous secondary materials therefore have been regulated as
hazardous wastes. One type of recycling that falls within this category
and that is especially relevant to this rule is reclamation of certain
types of hazardous secondary materials. Reclamation involves the
processing of hazardous secondary materials in some way in order so
that they 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 today's preamble, this supplemental
proposal would reexamine the regulatory status of these hazardous
secondary materials and de-regulate a specific subset of these
materials that are recycled by being reclaimed.
    In the existing Part 261 regulations, EPA identified other types of
recycling practices that are fully regulated because, we concluded,
they involve discard of materials. These practices include recycling of
``inherently waste-like'' materials (40 CFR 261.2(d)), recycling of
materials that are ``used in a manner constituting disposal,'' or
``used to produce products that are applied to or placed on the
land,''(40 CFR 261.2(c)(1)) and ``burning of materials for energy
recovery'' or ``used to produce a fuel or otherwise contained in
fuels'' (40 CFR 261.2(c)(2)). Today's supplemental proposal is not
intended to affect how these recycling practices are regulated.
    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. EPA is proposing that hazardous secondary
materials that are currently excluded with specific requirements or
conditions should be required to continue to meet those requirements
(e.g., the drip pad requirements for the wood preserving exclusion). In
addition, recycling of such materials at new facilities, or at existing
facilities that are not currently operating under the terms of an
existing exclusion, would also be subject to the existing applicable
regulatory exclusion, rather than today's proposed exclusions. For a
fuller discussion of this issue, see section XIII of this preamble. In
that section, we solicit comment on allowing regulated entities to
choose which exclusion they would be subject to in cases where more
than one exclusion could apply.

VI. What Is the History of Recent Court Decisions on the Definition of
Solid Waste?

A. Background

    RCRA gives EPA the authority to regulate the disposal of ``solid
wastes'' under its non-hazardous 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 environment. See section 1004(5). EPA
also may 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 solid 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 authorities under RCRA.
    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 hazardous waste regulations, EPA
has historically defined certain hazardous secondary 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 solid and hazardous wastes certain
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 (DC Cir. 1979); 48 FR 14502-04 (April 3, 1983); and 50 FR
616-618).
     Hazardous secondary materials stored or transported prior
to recycling have the potential to present the same types of threats to
human health and the environment as hazardous wastes stored or
transported prior to disposal. In fact, EPA found that recycling
operations have accounted for a number of significant damage incidents.
For example, materials destined for recycling were involved in one-
third of the first 60 filings under RCRA's imminent and substantial
endangerment authority, and 20 of the initial sites listed under
CERCLA. (48 FR 14474, April 4, 1983.) 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). More recent data (i.e.,
information on damages occurring after 1982) included in the rulemaking
docket for today's supplemental proposal corroborate the fact that
recycling operations can result in significant damage incidents. (See
section IV.B.2 of today's preamble.)
     Excluding all hazardous secondary 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.''
    EPA has interpreted the statute to confer jurisdiction over at
least certain hazardous secondary materials destined for recycling. The
Agency has therefore developed in Part 261 of 40 CFR a definition of
``solid waste'' for Subtitle C regulatory purposes. (Note: 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
narrower and more specific definition of solid waste for Subtitle C
purposes is a reasonable interpretation of the statute. See also
Military Toxics Project v. EPA, 146 F.3d 948 (DC Cir. 1998).)
    Under its current Subtitle C regulations, EPA classifies as solid
wastes some--but not all--hazardous 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. In addition, byproducts and sludges are defined as
``discarded'' when reclaimed on a case-by-case basis. That is, EPA
considers these materials to be ``discarded'' when they are
specifically listed as a hazardous waste at 40 CFR 261 Subpart D. See
Table 1 to 40 CFR 261.2. EPA has also 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).
    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 hazardous secondary 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 DC 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 (DC Cir. 2000).

B. A Series of DC Circuit Court Decisions

    Trade associations representing mining and oil refining interests
challenged EPA's 1985 regulatory definition of solid waste. In 1987,
the DC 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 (DC 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 certain 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. 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 can be considered a solid waste. 824
F.3d at 1187 (fn 14). 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 DC Circuit
also indicate that some materials destined for recycling are
``discarded'' and therefore within EPA's jurisdiction. In particular,
the Court held that emission control dust from steelmaking operations
listed as hazardous waste ``K061'' is a solid waste, even when sent to
a metals 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 (DC Cir.
1990). The Court held that it is reasonable for EPA to consider as
discarded (and solid wastes) listed wastes managed in units that are
part of wastewater treatment units, especially where it is not clear
that the industry actually reuses the materials. (``AMC II''), 907 F.2d
1179 (DC 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 (DC Cir. 2000).
    It also is worth noting that two other Circuits also have held that
EPA has authority over at least some materials destined for reclamation
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 in which EPA claimed Subtitle C
jurisdiction over hazardous secondary 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 hazardous secondary
materials destined for reclamation. EPA imposed a condition prohibiting
land-based storage prior to reclamation because it considered hazardous
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 DC 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 (DC 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 nor 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 continuous industrial process and thus is not
abandoned or thrown away.'' 208 F.3d at 1056.
    In its most recent opinion dealing with the definition of solid
waste, Safe Food and Fertilizer v. EPA, 350 F.3d 1263 (DC Cir. 2003),
the Court upheld an EPA rule that excludes from the definition of solid
waste hazardous secondary materials used to make zinc fertilizers, and
the fertilizers themselves, so long as the recycled materials meet
certain handling, storage and reporting conditions and the resulting
fertilizers have concentration levels for lead, arsenic, mercury,
cadmium, chromium, and dioxins that fall below specified thresholds.
Final Rule, ``Zinc Fertilizers Made From Recycled Hazardous Secondary
Materials'' (``Fertilizer Rule''), (67 FR 48393 (2002)). EPA determined
that if these conditions are met, the recycled materials have not been
discarded. The conditions apply to a number of recycled materials not
produced in the fertilizer production industry, including certain zinc-
bearing hazardous secondary materials such as brass foundry dusts.
    EPA's reasoning was that market participants, consistent with the
EPA-required conditions in the rule, would treat the exempted materials
more like valuable products than like negatively-valued wastes and,
thus, would manage them in ways inconsistent with discard. In addition,
the fertilizers derived from these recycled feedstocks are chemically
indistinguishable from analogous commercial products made from raw
materials. 350 F.3d at 1269. The court upheld the rule based on EPA's
explanation that market participants manage materials in ways
inconsistent with discard, and the fact that the levels of contaminants
in the recycled fertilizers were ``identical'' to the fertilizers made
with raw materials. The court held that this interpretation of
``discard'' was reasonable and consistent with the statutory purpose.
The court

noted that the identity principle was defensible because the
differences in health and environmental risks between the two types of
fertilizers are so slight as to be substantively meaningless.
    However, the Court specifically stated that it ``need not consider
whether a material could be classified as a non-discarded exclusively
on the basis of the market-participation theory.'' 350 F.3d at 1269.
The court only determined that the combination of market participants'
treatment of the materials, EPA required management standards and the
``identity principle'' are a reasonable set of tools to establish that
the recycled secondary materials and fertilizers are not discarded.

C. 2003 Proposed Revisions to the Definition of Solid Waste

    As a result of the court decision in ABR to vacate the provisions
in the May 1998 final rule that increased regulation of characteristic
by-products and sludges from mineral processing, EPA promulgated a
final rule removing from the Code of Federal Regulations the byproduct
and sludge provisions (67 FR 11251 (Mar. 13, 2002)). Later, prompted by
concerns articulated in the various Court opinions up to the ABR
decision, EPA issued the October 2003 notice, which proposed that
material generated and reclaimed in a continuous process within the
same industry is not discarded for purposes of Subtitle C, provided
that the recycling process is legitimate. However, for the reasons
described elsewhere in today's notice, we are proposing different types
of exclusions from the definition of solid waste in this supplemental
proposal that we believe more directly consider whether particular
materials are not considered ``discarded'', and are not solid and
hazardous wastes subject to regulation under Subtitle C of RCRA. The
October 2003 proposal and how it relates to today's supplemental
proposal is further discussed elsewhere in today's preamble.

VII. How Does the Concept of Discard Relate to These Proposed
Exclusions?

    The concept of ``discard'' is the central organizing idea behind
today's supplemental proposal, which reflects the fundamental logic of
the RCRA statute. As stated in RCRA Section 1004(27), ``solid waste''
is defined as ``* * * any garbage, refuse, sludge from a waste
treatment plant, or air pollution control facility and other discarded
material * * * resulting from industrial, commercial, mining and
agricultural activities* * *'' Therefore, in the context of this
supplemental proposal, a key issue is the circumstances under which a
material that is recycled by reclamation is or is not discarded.
    In the series of decisions discussed above relating to the RCRA
definition of solid waste, the Court of Appeals for the DC Circuit has
consistently cited a plain language definition of discard, as meaning
``disposing, abandoning or throwing away.'' EPA believes that this is a
workable and logical definition of the term, and the underlying logic
of today's proposed exclusions is consistent with this definition.
    The basic rationale that EPA is applying in this case
differentiates between recycled hazardous secondary materials over
which the generator maintains control and recycled hazardous secondary
materials over which the generator relinquishes control. If the
generator maintains control over the recycled hazardous secondary
material and it is legitimately recycled under the standards
established in this proposal and the material is not speculatively
accumulated within the meaning of EPA's regulations, the hazardous
secondary material is not discarded. This is because the material is
being treated as a valuable commodity rather than as a waste. By
maintaining control over, and potential liability for, the recycling
process, the generator ensures that the materials are not discarded.
See ABR 208 F.3d at 1051 (``Rather than throwing these materials
[destined for recycling] away, the producers saves them; rather than
abandoning them, the producer reuses them.''). However, when the
hazardous secondary materials are managed in land-based units (e.g.,
waste piles, surface impoundments, etc), the hazardous secondary
materials must be contained, or they may be considered discarded, even
if they remain under the control of the generator. While placement on
the land would not in itself constitute discard, when hazardous
secondary materials are not being managed as a valuable product and, as
a result, a significant release occurs, such materials would be
considered discarded. Further discussion of these concepts appears in
section IX of this preamble.
    In those cases, however, where generators of hazardous secondary
materials do not re-use or recycle the materials themselves, it often
may be a sound business decision to ship the material to be recycled to
a commercial facility or another manufacturer in order to avoid the
costs of disposing of the material. In such situations, the generator
has relinquished control of the hazardous secondary material and the
entity receiving such materials may not have the same incentives to
manage the hazardous secondary material as a useful product.
Accordingly, the Agency believes that conditions are needed for the
Agency to determine that this material is not discarded. However, if
the recycler legitimately recycles the hazardous secondary material, it
is not regulated as a solid waste, provided certain additional
conditions are met. Further discussion of the Agency's rationale for
this concept appears in section X.A. of this preamble.
    This is the general logic we have used in developing the exclusions
in today's supplemental proposal. The proposed exclusion for hazardous
secondary materials that are recycled under the control of the
generator is based on the notion that as long as the generator has
control over the recycling process, has chosen to legitimately reclaim
it within the United States or its territories, retains liability in
the event that the hazardous secondary materials (be they the materials
that were generated, residuals from a reclamation process, or both) are
somehow released into the environment, these materials are not
discarded. In addition, if the materials are managed in a land-based
unit, the generator must ensure that the materials are contained. Of
course, if such hazardous secondary materials are released into the
environment and are not recovered in a timely manner, these materials
have been discarded and the generator is subject to all applicable
federal and state regulations, and applicable cleanup authorities. The
``broader'' exclusion for materials that are transferred by the
generator to another person or company for reclamation is based on the
idea subsequent activities are more likely to involve discard, given
that the generator has relinquished control of the hazardous secondary
material, and additional conditions are needed for the Agency to
determine that these materials are not discarded.

VIII. Recycling Studies

A. Purpose of Studies

    In response to the October, 2003 proposal, a number of commenters
criticized the Agency specifically for not having conducted a thorough
study of the potential impact of the proposed regulatory changes. These
commenters expressed the general concern that deregulating hazardous
secondary materials that are reclaimed in the manner proposed could
result in mismanagement of these materials, and thus could create new
cases of environmental damage that would require remedial action under
federal or

state authorities. Some of the commenters further cited a number of
examples of environmental damage that were attributed to hazardous
material recycling, including a number of sites listed on the Superfund
National Priorities List (NPL).
    However, a number of other commenters expressed the view that the
great majority of these cases of recycling-related environmental
problems occurred before RCRA, CERCLA or other environmental programs
were established in the early 1980s. These commenters further argued
that these environmental programs--most notably, RCRA's hazardous waste
regulations, and the liability provisions of CERCLA--have created
strong incentives for proper management of recyclable materials and
recycling residuals. Several commenters further noted that because of
these developments, industrial recycling practices have changed
substantially since the early 1980s, and present day generators and
recyclers are much better environmental stewards than in the pre-RCRA/
CERCLA era. Thus, they argued, cases of ``historical'' recycling-
related environmental damage are not particularly relevant or
instructive with regard to modifying the current RCRA hazardous waste
regulations for hazardous material recycling.
    In light of these comments and in deliberating on how to proceed
with this rulemaking effort, the Agency decided that additional
information on hazardous material recycling would benefit the
regulatory decision-making process, and would provide stakeholders with
a clearer picture of the hazardous material recycling industry in this
country. Accordingly, the Agency examined three basic issues that we
believed were of particular importance to informing this rulemaking
effort:
     How do responsible generators and recyclers of hazardous
secondary materials ensure that recycling is done in an environmentally
safe manner?
     To what extent have hazardous secondary material recycling
practices resulted in environmental problems in recent years, and why?
     Are there certain economic forces or incentives specific
to hazardous secondary material recycling that can explain why
environmental problems can sometimes originate from such recycling
activities?
    Reports documenting these studies are in the administrative record
for this rulemaking, under the following titles:
     ``An Assessment of Current Good Practices for Recycling of
Hazardous Secondary Materials''
     ``An Assessment of Environmental Problems Associated With
Recycling of Hazardous Secondary Materials''
     ``Potential Effects of Market Forces on the Management of
Hazardous Recyclable Materials''
    The findings of these background studies have informed many of the
Agency's policy decisions in developing this regulatory proposal.
However, it should be understood that these three reports are not
definitive, peer-reviewed documents of a technical nature. We fully
acknowledge that in some respects they may not paint a complete
picture, or capture every detail of the subject matter that was
examined. However, we believe that the information in the studies
provides an important perspective on current recycling practices, and
that it supports our policy direction in developing today's
supplemental proposal. EPA solicits comment on the policy and
regulatory implications of the information in these studies.

B. Results

1. Successful Recycling Practices
    One of the studies that EPA has completed is an examination of what
practices many generators and recyclers currently use to ensure that
their hazardous secondary materials are recycled safely and
responsibly. One purpose of this study was to provide the Agency and
the rulemaking record with another angle from which to view the
hazardous secondary material recycling industry. In addition, the
results of this study suggest what kinds of regulatory controls might
be appropriate for these hazardous secondary materials to determine
that they are handled as commodities rather than wastes. The practices
have helped the Agency develop elements of the supplemental proposal
presented today.
    The Agency has long heard from various representatives of industry
and other stakeholders that management of hazardous secondary materials
has changed and improved since the inception of the RCRA hazardous
waste regulations in the early 1980s and that these hazardous secondary
materials are being managed much more carefully than they were
historically. The successful recycling study examines which improved
practices are used by many companies in the industry and the reasons
the practices are implemented.
    To complete this study, EPA spoke with representatives from
multiple organizations that regularly manage hazardous secondary
materials, both for recycling and for treatment followed by disposal,
and examined literature and publicly available information on the
Internet focused on the subject of recycling of hazardous secondary
materials. The study uses these sources to assemble an overall picture
of the good practices that are currently in use by a number of
companies. The full study can be found in the docket for today's
supplemental proposal, available at http://www.regulations.gov.

    The successful recycling study found two main drivers behind
companies adopting responsible recycling practices in the management of
their hazardous secondary materials. The first is concern of liability
under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), also known as Superfund. Under CERCLA, a
company can be held liable as an arranger for disposal for
contamination caused by its materials sent for recycling at another
facility's site. Therefore, it is in that company's best interest to
ensure that the facility to which it sends its waste is not likely to
become a Superfund site or to fall under CERCLA in the future either
because of financial failure or because of bad materials management
practices. The threat of Superfund liability was cited by many of the
sources for the responsible recycling study as the main reason for the
development of their audit programs in this area.
    The other reason for adoption of responsible recycling practices
cited falls into a broad category of concerns about corporate
responsibility and public relations. Many companies now have very
public environmental policies and have implemented environmental
management systems that are part of their programs for corporate
responsibility. Although the real effects of these corporate policies
are hard to gauge, EPA observed during this study that audit programs
that were developed in response to CERCLA, now are maintained as part
of a philosophy of corporate responsibility, which is part of the image
a corporation sells to its customers.
    EPA found that responsible recycling practices used by generators
and recyclers to manage hazardous secondary materials fall into two
general categories. The first category includes the audit activities
and inquiries performed by a generator of a material to determine
whether the entity to which it is sending the hazardous secondary
material is equipped to responsibly manage those materials without the
risk of releases or other environmental damage. These recycling and
waste audits of other companies' facilities form a backbone of many of
the transactions in the hazardous secondary

materials market. The second category of responsible recycling
practices consists of the control practices that ensure responsible
management of any given shipment of hazardous secondary material, such
as the contracts under which the transaction takes place and the
tracking systems in place that can inform a generator that its
hazardous secondary material has been properly managed.
    In this study, EPA found that certain generators of hazardous
secondary materials perform facility audits--a kind of environmental
due diligence--on the facilities to which they send their materials.
These audits can take many forms and can be of varying degrees of
complexity, depending on the secondary material or, in some cases, on
the size and sophistication of the generator. Although large companies
are more likely to perform in-depth facility audits, possibly because
they more frequently have environmental health and safety divisions
coordinating audits or because they may have greater amounts of
hazardous secondary materials they are sending off-site, some smaller
companies are also performing some kind of audit on the recycling
facility receiving the hazardous secondary material.
    The exact nature of each generator's audit process will vary, but
there are some common elements. Often the audit has two parts: (1) A
remote screening audit during which the auditor examines the recycler's
compliance history and financial records and the recycler may fill out
a questionnaire about its operations and facility and (2) a visit to
the recycler's facility, which can take anywhere from several hours to
several days. Some common elements examined in both phases of an audit
include: (1) Site history; (2) history of compliance with environmental
requirements and permits; (3) general appearance and housekeeping at
the facility; (4) description of process design and capability; (5)
residuals management; (6) financial soundness of the recycler; and (7)
possession of adequate pollution liability and general insurance.
    In addition to generators auditing recycling facilities, another
example of a practice that EPA believes helps to ensure responsible
management is the design of hazardous secondary materials recycling
contracts and tracking systems to manage information about the location
of a particular container and to document its eventual recycling.
    Recycling contracts are normal business practice and minimize the
potential for recyclers to receive shipments of hazardous secondary
materials that they are not equipped to recycle. In these contracts,
the two parties can lay out specifications for the make-up of materials
being shipped to the recycler and describe the protocol for actions
taken if a material not meeting these specifications arrives at the
recycling facility. In some cases, the recycler can still handle the
material, but may charge the generator an additional fee for having to
alter the material to meet specifications. In other cases, the recycler
may not be able to accept the material at all. Through the contract
mechanism, both parties then agree on whether that hazardous secondary
material should be returned to the generator or sent to a different
recycler or waste disposal facility.
    EPA also found that knowing whether materials conform to the
contract specifications necessitated sampling of the hazardous
secondary material arriving at a recycler. Several recyclers told EPA
that they sample each rail car, truck, and drum arriving at their
facilities before accepting them. Legitimate recycling practices
operate as a manufacturing process might and there is tight control
over the nature of the materials being recycled. Recyclers who are
seeking to make a salable product will make sure that the inputs meet
specifications.
    Due to time and resource limitations, EPA's examination of
successful recycling practices was not exhaustive, as we were able to
gather information from a limited number of sources. We believe that
the practices and situations outlined in the study are representative
of industry practices performed by many companies, but ask today for
comments on the results of the study and for relevant information not
represented therein.
2. Environmental Problems Associated With Recycling of Hazardous
Secondary Materials
    a. Scope and objectives of the study. The general goal of this
study was to identify and characterize environmental problems that have
been attributed to some type of hazardous secondary material recycling
activity, and that are relevant for the purpose of this rulemaking
effort. The Agency believes that discarding is more likely to occur if
environmental problems exist. Specifically, we sought to identify the
following types of cases:
     Cases where environmental damage clearly can be attributed
to some type of recycling activity. In conducting this study, we
limited our search to those environmental problems in which
environmental damages were clearly caused by some type of recycling-
related activity. In this context, ``recycling-related activities''
included--
     accumulation or storage of hazardous secondary materials
by the generator, the recycler or an intermediary;
     illegal disposal or abandonment of recyclable hazardous
secondary materials or recycling residuals;
     transportation of recyclable hazardous secondary
materials;
     ``sham'' recycling operations (i.e., illegal disposal or
treatment disguised as recycling);
     production and/or use of contaminated products from
recycled hazardous secondary materials, reclamation and/or production
processes;
     management of residuals from reclamation or production
processes, or
     other activities associated with the management of
recyclable hazardous secondary materials, recycling residuals, or the
products of recycling processes.
    The study identified a number of cleanup sites at which a recycling
process had operated, but where other sources of contamination made it
extremely difficult to determine with any certainty that the recycling
activity contributed to the environmental problems at the site. These
cases were not included in this study.
     Relatively recent cases. Many of the environmental
problems that were examined in the course of this study occurred before
RCRA, CERCLA or other environmental programs were established in the
early 1980s. The Agency believes that, for the purpose of this
rulemaking effort, these ``historical'' recycling-related damage cases
are much less relevant and instructive than cases which have occurred
within the current regulatory and liability ``landscape.'' This belief
is based in large part on the findings of our companion study of
current good hazardous secondary material recycling practices, which
indicate that in today's era (though there are exceptions), most
generators and recyclers are aware of their environmental
responsibilities, and generally make considerable efforts to ensure
that materials are recycled and otherwise managed responsibly.
Therefore, all the cases included in the data for this study occurred
after 1982.
     Cases involving recycling of regulated hazardous secondary
materials that are specifically excluded from RCRA regulation. The
study was intended to identify environmental problems associated with
recycling of regulated hazardous secondary materials, as well as those
involving the recycling of hazardous secondary materials that are not
regulated because

they are subject to a specific regulatory exemption or exclusion (see,
for example, the exclusions in 40 CFR 261.4). The Agency was interested
in these types of problems because they may indicate the extent to
which environmental damages can occur even when recycling is conducted
under a stringent regulatory regime, and whether such environmental
problems may be more or less prevalent for materials that are not
regulated as hazardous wastes. The study was not designed to identify
cases involving recycling of non-hazardous materials such as paper,
glass, rubber, or plastics.
    b. Methodology. The initial task of this study was to identify as
many recycling-related environmental problems that were relevant to the
scope and purpose of the study as possible (the preceding section of
this preamble describes the types of cases that were considered
relevant to the study). Potential cases were identified from a variety
of sources, including:
     Comments on the October 28, 2003, proposed rule
     The Superfund National Priorities List
     National EPA data bases maintained for the CERCLA, RCRA,
and enforcement programs
     Contacts with staff in state environmental agencies
     Contacts with staff in EPA Regional Offices
     State agency data bases maintained for state Superfund
programs and other environmental programs
     Internet searches
     News media reports
    For those environmental problems found at recycling facilities or
resulting in the mismanagement of hazardous secondary materials to be
recycled that were relevant to the study, we gathered available
information to identify certain key facts relating to when the problem
occurred, the type of recycling practice involved, the types of
materials recycled, how and why the environmental damage occurred, and
other key data (these data are summarized in tabular form in Appendix 1
of the report entitled The Assessment of Environmental Problems
Associated With Recycling of Hazardous Secondary Materials). A written
description of each case was then prepared--these are in Appendix 2 of
the same report.
    Many of the cases that were investigated, including many of the
Superfund sites, were well-documented, and we were able to assemble
relatively complete profiles for those cases. For many other cases,
however, much less complete information was available, while at some of
the sites, we were able to collect only very basic information.
    In addition, because of time and resource limitations, the search
for potentially relevant cases was not exhaustive. For example, we did
not systematically survey all state environmental agencies for relevant
cases, nor did we search paper files in EPA Regional Offices. Because
of this relatively limited scope, we believe that the cases we have
identified and described in this report in effect represent those that
were relatively easy to find, and that there are likely to be
additional cases that we did not identify. However, we have no reason
to think that additional cases would substantially change the overall
picture. Nevertheless, the Agency requests information on relevant
cases of environmental problems that we did not identify, as well as
comments or supplemental information on those that were characterized
in the report. If you provide data on additional cases of environmental
problems from recycling, Appendix 2 of the study is a good resource for
the types of information most useful to the Agency, particularly when
the problem occurred; the type of recycling practice involved; whether
recycling occurred at an on-site or off-site recycling facility; the
types of hazardous secondary materials being recycled; and how and why
the problem occurred.
    c. Summary of findings. The study identified 208 cases in which
environmental damages of some kind occurred from some type of recycling
activity and that fit the scope of the study. Such damages included
leaks, spills, dumps, or other types of releases that were serious
enough to require some type of cleanup action. They also included
instances where materials were abandoned (e.g., in warehouses) and
which required removal overseen by a government agency and expenditure
of public funds. However, the study did not include situations in which
environmental regulatory violations occurred, but did not result in
actual damage to the environment or human health.
    With regard to the types of materials associated with the cases
that were documented in the study, most common were scrap metals,
solvents, used oil, non-ferrous metals, lead-acid batteries, and used
drums sent for cleaning and reconditioning. Less common were cases
involving mercury, precious metals, and hazardous foundry sands.
    The types of environmental damage that occurred varied widely; many
were relatively small incidents involving contaminated soils and/or
residuals, such as battery casings, while a number were much more
substantial and expensive, with large-scale soil and ground water
contamination, and remediation costs in the tens of millions of
dollars. A surprising number of cases (sixty-nine) involved materials
that were abandoned in one way or another.
    The study also tried to identify the cause of the environmental
problems for each case that was investigated. In large part, we were
able to identify, or at least infer, how the problems occurred,
although for four percent of the cases examined, we were unable to
determine the primary cause of damage. However, in only a few cases
were we able to identify with any certainty why they occurred. For
example, in approximately one-third of the cases, we were able to
conclude that mismanagement of recycling residuals was at least partly
the cause of contamination problems. We were unable, however, to
identify why the residuals were managed improperly.
    Mismanagement of the hazardous secondary materials prior to their
reclamation or reuse caused contamination at forty percent of sites,
whereas mismanagement of recycling residuals was the primary cause at
thirty-four percent of the sites. Often, at the latter category of
sites, reclamation processes generated residuals in which the toxic
components of the recycled materials became concentrated, and these
wastes were then mismanaged. Examples of this include a number of drum
reconditioning facilities, where large numbers of used drums were
cleaned out to remove small amounts of remaining product such as
solvent, and these wastes were then improperly stored or disposed of.
    As already noted, sixty-nine of the cases examined in the study
involved abandonment of recyclable hazardous secondary materials as the
primary cause of damage. In most of these cases, business failure
appears to have been the main reason the hazardous secondary materials
were abandoned. Seven of the cases that were examined appear to have
been outright ``sham'' recyclers. In most of these cases, companies
advertised themselves to local generators as recyclers and accumulated
considerable quantities of waste materials, but did not actually
recycle them. These sites were also then abandoned.
    Since a considerable number of commenters to the October 2003
proposal supported the idea of a regulatory exclusion for on-site
recycling (i.e., at the generating facility), the study also
distinguished between environmental problems from recycling

that occurred at off-site, commercial recycling facilities, and those
from recycling on-site. Thirteen (6%) of the 208 cases were determined
to be from recycling that occurred on-site. This relatively small
proportion of cases may signify that on-site recycling is inherently
less likely to result in environmental problems, for various reasons.
However, it may also be that recycling conducted at facilities
generating hazardous secondary materials occurs at fewer facilities
than recycling by commercial facilities or that these types of
environmental problems are not as well documented, or for other reasons
are more difficult to identify, given the scope and methodology of the
study. The Agency solicits comment and additional data on the issue of
environmental problems from on-site recycling that occurred since 1982
and where the problems are clearly attributable to the recycling
activity. We are particularly seeking facts about any instances that
are not captured in the study, particularly answering the questions of
when the recycling took place, what type of recycling practices were
involved, what the environmental problem was, and what caused the
problem.
    The study also addressed whether or not instances of environmental
damage occurred at hazardous waste recycling facilities with RCRA
permits (Note: RCRA does not require Part B permits for the recycling
processes themselves; typically, permits are issued to such facilities
when hazardous secondary materials are stored prior to recycling.) RCRA
permitted hazardous waste management facilities are subject to
relatively stringent, facility-specific requirements, and in general
are given more oversight by regulatory agencies than facilities without
permits. For these reasons, these cases are of particular interest to
the Agency with regard to this rulemaking.
    Twenty-four of the cases identified were, at one time or another,
operating under RCRA hazardous waste permits. However, only nine
clearly appear to have been operating under RCRA permits at the time
the damage occurred. Two of these cases involved fires and/or
explosions.
    The study also looked at some of the financial circumstances
regarding clean up of environmental problems. At thirteen of the
twenty-four hazardous waste permitted facilities, all or part of the
funds used to clean up environmental damages were contributed by the
owner/operator of the facility, either voluntarily or under some form
of consent agreement. In at least two of these cases, it appears that
cleanup funds became available by means of a RCRA-required financial
assurance mechanism, such as a surety bond. Thirteen of the facilities
appear to have been cited for serious permit violations, either before
or as a result of the damage incident. In four cases, the facility
permits were revoked because of compliance issues. Eleven of the
twenty-four facilities were found to be no longer in business, because
of bankruptcy or for other reasons.
    Of the 208 cases that were documented in the study, fifty-one were
or are listed on the CERCLA National Priorities List (NPL). Fifty-five
additional cases were addressed under CERCLA authorities, but the sites
were not listed on the NPL. State cleanup authorities were used to
address sixty-five of the cases, while thirty were addressed using RCRA
corrective action authorities. For nineteen of the cases, we were
unable to identify what remedial program, if any, was used to clean up
the sites. (In some cases, there was more than one type of cleanup
action at a site).
    For eighty-nine of the cases, we were able to identify the costs,
or at least cost estimates, associated with addressing the
environmental problems caused by recycling activities. Thirty-seven of
these cases required less than one million dollars to clean up; forty-
four cost between one and ten million dollars; and eight cost more than
ten million dollars to remediate.
    It is possible that these cost data are incomplete and are not an
accurate representation of actual cleanup costs for the entire sample
of 208 cases. For one thing, cost data were much easier to find for
CERCLA-lead cleanups than cleanups done under other programs. Another
uncertainty with regard to these cost data is that in some cases, it
was not possible to distinguish between cleanup costs that were
incurred specifically to address recycling-related contamination, and
costs for other cleanup activities at the site. The Agency solicits
additional information from commenters regarding cleanup costs (actual
or estimated) incurred in remediating these recycling-related
environmental problems.

C. Potential Effects of Market Forces on the Management of Recyclable
Hazardous Secondary Materials

    EPA also has completed a study of how market forces can affect the
management of recyclable hazardous secondary materials. This study uses
economic theory to describe how various market incentives can influence
a firm's decision making process when the recycling of hazardous
secondary material is involved. Because the study is largely
theoretical, the results should be interpreted with caution, but it
does provide insights that can explain some of the possible fundamental
economic drivers of both the successful and unsuccessful recycling
practices, which in turn help us to design the exclusions that we are
proposing today.
    The October 2003 proposal was based in part on the premise that
some types of recycling are more akin to manufacturing than waste
management and therefore are not appropriate for regulation as waste
management. [``In EPA's view, a recycler will value secondary materials
that provide an important contribution to his process or product and
will manage them in a manner consistent with a valuable feedstock
material (i.e., will manage them to minimize their loss)''; 68 FR
61583].
    However, as pointed out by some commenters to the proposed rule,
the economic forces shaping the behavior of firms that recycle
hazardous secondary materials can be different from those at play in
manufacturing processes using virgin materials. For example, the
inherent value of hazardous secondary materials can be much lower than
virgin materials used in manufacturing, resulting in a different set of
economic incentives. Additionally, different economic incentives
between the recycling of hazardous secondary materials and
manufacturing may arise due to differences in these two business
models. As opposed to manufacturing, where the cost of raw materials or
intermediates (or inputs) is greater than zero and revenue is generated
primarily from the sale of the output, some models of hazardous
materials recycling involve generating revenue primarily from receipt
of the hazardous secondary materials. Recyclers of hazardous secondary
materials in this situation may thus respond differently from
traditional manufacturers to economic forces and incentives.
    An increased understanding of these aspects of hazardous secondary
material recycling can help to craft a rule that takes advantage of the
positive economic forces, and compensates for the negative ones, in
order to produce an optimal amount of recycling. An optimal amount of
recycling is one that maximizes the net benefits (private and social
benefits minus private and social costs). One sub-optimal outcome of
not providing a proper balance could be too little recycling, resulting
in inefficiencies. In this case, increasing the rate of recycling (for
example, via today's proposed changes) would realize additional net
benefits. However, sub-

optimal outcomes can also result from too much of an activity. For
hazardous secondary material recycling, this situation occurs when
firms accumulate more hazardous secondary material than can be recycled
in a reasonable timeframe, or operate their recycling process in a way
that imposes excessive costs on society (such as excess pollution or
mishandling of hazardous secondary material) and that can result in the
material being discarded.
    The market incentive study uses economic theory to provide
information on how certain characteristics can influence three
different recycling models to encourage or discourage an optimal
outcome. The three recycling models examined are: (1) Commercial
recycling, where the primary business of the firms is recycling
hazardous secondary materials, which are accepted for recycling from
offsite industrial sources (which usually pay a fee); (2) industrial
intra-company recycling, where firms generate hazardous secondary
materials as byproducts of their main production processes and recycle
the hazardous secondary materials for sale or for their own reuse in
production; and (3) industrial inter-company recycling, where firms
whose primary business is not recycling, but use or recycle hazardous
secondary materials obtained from other firms with the objective of
reducing the cost of their production inputs.
    For each of these recycling models, the report looks at how they
are potentially affected by three market characteristics: (1) Value of
the recycled product; (2) price stability of recycling output or
inputs; and (3) net worth of the firm.
    For all three models of hazardous secondary material recycling, a
recycled product with a high value appears to contribute to an optimal
outcome for hazardous secondary material recycling. For commercial and
industrial inter-company firms, the value of the product can serve as a
strong incentive for the firm to recycle the product with care and
bring it to the market. Recycling by these firms would thus be driven
primarily by the potential revenues from the recycled product, and not
by other factors such as an acceptance fee. For industrial intra-
company recyclers, the value of the recycled product would contribute
to optimal recycling behavior even if the firm is reusing the product
in its own production process instead of selling it to outside firms.
Conversely, for all three models of hazardous secondary material
recycling, a recycled product with a low value could be a potential
indicator of sub-optimal recycling outcomes. For commercial firms in
particular, the acceptance fee is likely to be a much more prevalent
factor in the firm's revenue structure when the recycled product has a
low value. If the value of the recycled product is low, the firm may
have more of an incentive to focus on accepting hazardous secondary
material than properly recycling it and selling a low-value recycled
product.
    Price stability is another potential indicator of hazardous
secondary material recycling markets that produce optimal outcomes,
particularly for commercial recyclers. When prices are stable, firms
can more easily adjust their production in response to the price
signals they receive from the market. They are thus less subject to
sudden upsets to their revenue streams or costs which could force them
to operate at a short or long-term loss. Unstable markets can
contribute to sub-optimal outcomes, due to an unexpected fall in
revenues or rise in costs, such that the firm is no longer able to
cover the costs incurred to make the product. This could encourage the
stockpiling of hazardous secondary material by the firm in order to
continue collecting the acceptance fee. A commercial firm's choice to
shut down can also contribute to sub-optimal recycling outcomes if this
involves the abandonment of hazardous secondary material that the firm
was stockpiling on-site. Since industrial intra- and inter-company
recyclers are also recycling to produce a marketable product, they are
subject to similar forces as commercial firms. They are less
constrained in their responses to these forces, however, since
recycling is not their primary business operation, and are able to
switch from recycling to disposal, or from using recycled materials to
raw materials, if market conditions shift.
    For all three recycling models, firms that have a higher net worth
have more to lose from liability issues and thus have a greater
incentive to invest in safe hazardous secondary material management and
recycling practices. These firms would have more incentive to practice
recycling in an environmentally safe manner and also to insure against
possible liability risks that would jeopardize their investments. Firms
that have a relatively low worth and do not have an established history
in the market could be potentially more likely to face incentives that
could cause them to engage in recycling practices that impose few
controls or cut corners in order to boost revenues. While we recognize
that it should not be assumed that all low-value firms would engage in
such practices, this can be viewed as one potential indicator of risky
behavior.
    As mentioned earlier, using economic theory to interpret recycling
behavior should be done with extreme caution. An individual firm's
decision-making process is based on many factors, and attempting to
extrapolate a firm's likely behavior from a few factors, particularly
based on theoretical considerations, could lead to erroneous
conclusions. However, when used in conjunction with other pieces of
information, the economic theory can be quite illuminating. For
example, because the industrial intra- and inter-company recyclers have
more flexibility (e.g., during price fluctuations, these companies can
more easily switch from recycling to disposal or from recycled inputs
to virgin inputs), they would be less likely to have environmental
problems from over-accumulated materials. This outcome appears to be
supported by the results of the assessment of environmental problems
study (see section VIII.B.2 of today's supplemental proposal).
    On the other hand, certain specific types of commercial recycling,
where the product has low value, the prices are unstable, and/or the
firm has a low net worth, could indicate that it is more likely for
environmental problems to occur from over-accumulation of recycled
materials, compared to recycling by a well-capitalized firm that yields
a product with high value. Again, this outcome appears to be supported
by the results of the assessment of environmental problems study (see
section VIII.B.2 of today's supplemental proposal).
    However, as shown by the study of successful recycling practices,
generators who might otherwise bear a large liability from poorly
managed recycling at other companies have addressed this issue by
carefully examining the recyclers to which they send their hazardous
secondary materials to ensure the recyclers are technically and
financially capable of performing the recycling (see section VIII.B.1
of today's supplemental proposal). In addition, we have seen that
successful recyclers (both commercial and industrial) have often taken
advantage of mechanisms such as tolling contracts to help stabilize
price fluctuations, allowing recyclers to plan their operations better.
    For further discussion of this study, please see A Study of
Potential Effects of Market Forces on the Management of Hazardous
Secondary Materials in the docket for today's supplemental proposal.

IX. Exclusion for Hazardous Secondary Materials That Are Legitimately
Reclaimed Under the Control of the Generator: Proposed 40 CFR 260.0,
261.2(a)(1), 261.2(a)(2), 261.2(c)(3), 261.4(a)(23)

A. Purpose of the Exclusion

    In the October 2003 proposal, EPA proposed to exclude from the
definition of solid waste hazardous secondary materials generated and
reclaimed in a continuous industrial process within the same industry.
``Same industry'' was defined as industries sharing the same four-digit
North American Industry Classification System (NAICS) code. We also co-
proposed a second option, under which such materials would not be
eligible for the exclusion if the reclamation took place at a facility
that also recycled regulated hazardous wastes generated in a different
industry. EPA chose the NAICS system as a way to define ``same
industry'' because the system is already widely used to classify
different industries. We recognized that the system was developed for
statistical rather than regulatory purposes. However, the NAICS scheme
employs a production-oriented concept, grouping together industries
that have similar or identical production processes. In addition, the
regulated community is generally familiar with the NAICS system. For
these reasons, the Agency proposed this system to define ``same
industry''.
    EPA chose the four-digit NAICS level (rather than the three or
five-digit level) because that level appeared to be an appropriate
compromise between being too broad or too restrictive. The Agency
evaluated the potential recycling opportunities available through
defining ``same industry'' at the three, four, and five-digit levels.
We performed the analysis for the chemical manufacturing sector, which
contains many RCRA hazardous waste generators and served as a surrogate
for other manufacturing sectors. In general, we found that
classification at the three-digit level led to grouping facilities that
did not have similar production processes. Classification at the five-
digit level, on the other hand, led to grouping similar processes, but
greatly reduced opportunities for recycling.
    In the same notice, EPA also solicited comment on several different
alternatives to the proposed exclusion. The first alternative was
whether to exclude from the definition of solid waste those hazardous
secondary materials that are generated and reclaimed in a continuous
process on-site (as defined in 40 CFR 260.10), even if different
industries were involved. This option would also have required the same
notification and speculative accumulation provisions proposed for the
proposed option. This exclusion would be based on the premise that
materials recycled on-site in a continuous process are unlikely to be
discarded because they would be closely managed and monitored by a
single entity who is intimately familiar with both the generation and
reclamation of the material. In addition, no off-site transport of the
hazardous secondary material (with its attendant risks) would occur,
and there would be few questions about potential liability in the event
of mismanagement or mishap. An example of such recycling given in the
proposal was a facility that produces petrochemicals, as well as
pharmaceuticals. Under the four-digit NAICS-based proposal, such
reclamation would not have been excluded even if both establishments
were located at the same site and operated by the same company. Another
example might be a situation where a generator contracts with a
different company to reclaim material at the generator's facility,
possibly through a mobile treatment unit.
    The second alternative was an exclusion for certain situations
within the chemical manufacturing industry that might present unique
recycling situations. Specifically, within the chemical manufacturing
industry, the first manufacturer will contract out production of
certain chemicals to another manufacturer (referred to as batch or
tolling operations). The second manufacturer may generate hazardous
secondary materials that could be returned to the larger chemical
manufacturer for reclamation. In the proposal, we inquired whether some
recycling could be precluded as a result of uncertain application of
the NAICS classification approach due to frequently changing product
slates, or different products being produced from the same equipment at
different times.
    The third alternative would have provided a broader conditional
regulatory exclusion from RCRA regulation for essentially all hazardous
secondary materials that are legitimately recycled by reclamation. The
purpose of this broader exclusion would be to encourage recycling and
lower costs, while still protecting human health and the environment.
The Agency suggested that additional requirements or conditions might
be appropriate to protect human health and the environment for this
exclusion, compared to the same-industry exclusion that we proposed.
Examples of such additional conditions could include record-keeping and
reporting requirements, along with safeguards on storage or handling.
Although the Agency solicited comment on additional conditions, the
discussion in the preamble of this approach was brief and may not have
provided sufficient information to commenters. Like the other
exclusions discussed in the October 28, 2003 proposal, hazardous
secondary materials used in a manner constituting disposal, burned for
energy recovery, or materials that were inherently waste-like would not
be eligible. The Agency solicited comment on the increased recycling
and reuse that would result from broadening the rule in this way, as
well as comment on the potential effects to human health and the
environment.
    EPA received many comments on the NAICS ``same industry'' scheme
from various stakeholders. Many commenters did not agree that NAICS was
an appropriate way to define ``same industry''; more importantly, most
commenters did not agree that excluding recycling within the same
industry was justified on legal or pragmatic grounds. These commenters
generally stated that EPA's proposed exclusion did not accurately
reflect Congressional intent or court mandates concerning EPA's
authority over legitimate recycling. They reiterated that EPA's RCRA
authority extends only to materials that are truly discarded (i.e.,
disposed of, thrown away, or abandoned) and that have not yet become
part of the waste disposal problem. Many of these commenters
interpreted the relevant court decisions to mean that any legitimately
reclaimed material (whether recycled within the same industry or
between industries) is not ``discarded'' and thus cannot be regulated
as a solid waste. Some of these commenters cited the ``Safe Foods''
decision (Safe Food and Fertilizer, et al., v. EPA, 350 F.3d 1263, DC
Cir. 2003) as support for their contention that materials recycled in
different industries were not discarded.
    Other commenters said that they would not benefit from the proposed
exclusion because so many recycling opportunities occur among different
industries. These commenters included companies in the metals recycling
industry, mining and mineral processors, specialty batch chemical
manufacturers, some solvent recyclers, the paint and coatings industry,
spent pickle liquor generators, and small businesses.
    Still other commenters argued that the Agency had read the court
decisions too broadly rather than too narrowly, but some of these
commenters also said that

EPA had failed to present a reasoned analysis of the indicia of
discard. One commenter stated that EPA did not analyze potential
environmental harm from the proposed rule.
    Many commenters, on the other hand, responded positively to the
Agency's solicitation of comment about excluding on-site recycling from
the definition of solid waste. These commenters agreed with EPA's
suggestion that generators who recycle materials on-site (even if the
reclamation takes place in a different NAICS code) are likely to be
familiar with the material and more likely to maintain responsibility
for the materials. Some commenters wanted any exclusion confined to on-
site recycling, but other commenters suggested that EPA expand any on-
site exclusion to include recycling (including off-site recycling)
conducted within the same company. These commenters believed that the
principal reasoning applied to on-site recycling would also apply to
same-company recycling--i.e., that the same entity would be familiar
with the material and would remain responsible for it.
    Concerning our solicitation of comments on tolling arrangements,
some stakeholders commented that the specialty batch chemical industry,
in particular, might present unique situations regarding appropriate
exclusions, principally due to the varying nature of production and
hence of potential hazardous secondary materials available for
recycling. Because of these circumstances, stakeholders believed that
exclusions targeted to the types of tolling arrangements common in this
industry would be easier to implement.
    After evaluating the comments, the Agency has concluded that its
proposed approach to ``same industry recycling'' does not accurately
delineate EPA's RCRA jurisdiction over hazardous secondary materials.
We agree with the many commenters who said that whether materials are
recycled within the same NAICS code is not an appropriate indication of
whether they are discarded. NAICS designations are designed to be
consistent only with product lines, so that the effect of our October
2003 proposal would be that materials generated and reclaimed under the
control of the generator would not be excluded, even though the
generator has not abandoned the material and has every opportunity and
incentive to maintain oversight of, and responsibility for, the
material that is reclaimed (see ABR, 208 F.2d at 1051 (noting that
discard has not taken place where the producer saves and reuses
secondary materials)). Under these circumstances, we believe that
discard has generally not occurred. For example, of the 208 recycling
cases that caused environmental damage, only thirteen (approximately
six percent) occurred as a result of on-site recycling. We also agree
with those commenters who said that most of this rationale would apply
just as reasonably to reclamation taking place within the same company.
In the case of same-company recycling, both the generating facility and
the reclamation facility (if they are different) would be familiar with
the hazardous secondary materials and the parent company would be
ultimately liable for any mismanagement of the hazardous secondary
materials. Under these circumstances, the incentive to avoid such
mismanagement would be so strong that mismanagement also would be very
unlikely.
    Concerning tolling arrangements, we also believe that the type of
tolling contract common in the specialty batch chemical industry does
not constitute discard as long as the recycling is legitimate and the
hazardous secondary material is not speculatively accumulated. Under a
typical type of arrangement, one company (the tolling contractor)
contracts with a second (often smaller) company (the batch
manufacturer) to produce a specialty chemical (sometimes because of a
temporary lack of capacity, or because the batch manufacturer has
specialized equipment or expertise). The batch manufacturer produces
the chemical and the production process generates a hazardous secondary
material (such as a solvent) which is routinely reclaimed at the
tolling contractor's facility through an exempt closed-loop recycling
process when it has the capacity to manufacture the chemical in
question at its own facility. However, if the batch manufacturer
transports the hazardous secondary material back to the tolling
contractor for reclamation, the tolling contractor would be deemed
under existing regulations to be reclaiming a spent material, and an
RCRA storage permit would generally be required. The typical contract
in the specialty batch chemical industry contains detailed
specifications about the product to be manufactured, including
management of any hazardous secondary materials that are produced and
returned to the tolling contractor for reclamation. Under this
scenario, the hazardous secondary material continues to be managed as a
valuable product, so discard has not occurred. Moreover, if hazardous
secondary materials are generated and reclaimed pursuant to a written
contract between a tolling contractor and a batch manufacturer, and if
the contract specifies that the tolling contractor retains ownership
of, and responsibility for, the hazardous secondary materials, there is
a strong incentive to avoid any mismanagement or release.
    In today's supplemental notice, EPA has described three general
situations where we believe that discard has not taken place and where
the potential for environmental releases is therefore low. The three
situations involve circumstances under which hazardous secondary
materials are generated and reclaimed within the United States or its
territories. They are either generated and reclaimed at the generating
facility, at a different facility, but within the same company, or
through a tolling arrangement. Because the facility owner in these
situations still finds value in the hazardous secondary materials, has
retained control over them, and intends to use them, EPA is proposing
to exclude these materials from being a solid waste and thus from
regulation under Subtitle C of RCRA, if the recycling is legitimate
(see 40 CFR 261.4(g)), and if the hazardous secondary materials are not
speculatively accumulated. We are proposing slightly different
exclusions, depending on whether or not the excluded hazardous
secondary materials are stored in land-based units prior to reclamation
or as part of the reclamation process. The scope and applicability of
the exclusions are described below.

B. Scope and Applicability

1. Hazardous Secondary Materials Managed Under the Control of the
Generator in Non-Land-Based Units
    As stated above, the Agency generally believes that discard has not
occurred if hazardous secondary materials are legitimately recycled
under the control of the generator, provided they are not speculatively
accumulated, and provided they are reclaimed within the United States
or its territories. We are therefore proposing an exclusion for these
hazardous secondary materials under Sec.  261.2(a)(2)(ii), except if
such materials are managed in a land-based unit prior to reclamation or
as part of the reclamation process. See section B.2 below for
discussion of management in land-based units. Examples of non-land-
based units include, but are not limited to, tanks, containers, and
containment buildings.
    The definition of ``hazardous secondary material generated and
reclaimed under the control of the generator'' is proposed in 40 CFR
260.10 and consists of three parts. The first part

of the definition would apply to hazardous secondary materials
generated and reclaimed at the generating facility. This definition
would include situations where a generator contracts with a different
company to reclaim hazardous secondary materials at the generator's
facility, either temporarily or permanently. For purposes of this
exclusion, ``generating facility'' means all contiguous property owned
by the generator. We are proposing to exclude hazardous secondary
material that is reclaimed ``at the generating facility'' rather than
``on-site'' as defined in 40 CFR 260.10 (as we proposed in October
2003) because the latter definition may encompass facilities not under
the control of the generator. For example, an industrial park meets the
definition of ``on-site,'' even though facilities operating at an
industrial park may be completely separate and under separate
ownership. However, EPA solicits comment on whether facilities under
separate ownership, but located at the same site, should be included
within this proposed exclusion. Additionally, EPA solicits comment on
other definitions which might be equally compatible with generator
control as the definition proposed in today's notice.
    The second part of the definition of hazardous secondary materials
generated and reclaimed under the control of the generator would apply
to hazardous secondary materials generated and reclaimed by the same
company (i.e., by the same ``person'' as defined in Sec.  260.10). The
generator must certify that the hazardous secondary materials will be
sent to a company under the same ownership as the generator, and that
the owner corporation has acknowledged full responsibility for the safe
management of the hazardous secondary materials. Because of existing
complexities in corporate ownership and liability, we are proposing to
require the generator to certify regarding ownership and responsibility
for the recyclable hazardous secondary materials. EPA solicits comment
on any other certification language that might accomplish the same end,
and we also seek comment on other definitions of ``same-company.''
    The third part of the definition of hazardous secondary materials
generated and reclaimed under the control of the generator would apply
to hazardous secondary materials that are generated pursuant to a
written contract between a tolling contractor and batch manufacturer
and reclaimed by the tolling contractor. Under today's proposal, the
tolling contractor must retain ownership of, and responsibility for,
the hazardous secondary materials that are generated during the course
of the manufacture. For purposes of this exclusion, tolling contractor
means a person who arranges for the production of a product made from
raw materials through a written contract with the batch manufacturer.
Batch manufacturer means a person who produces a product made from raw
materials pursuant to a written contract with a tolling contractor. As
stated above, this type of contract appears to be common within the
specialty batch chemical manufacturing industry.
    EPA notes that in order to be eligible for this exclusion, it is
not a requirement that the contractual arrangement in question refer
specifically to ``tolling'' or ``batch manufacturing,'' as long as the
person commissioning the manufacture of the product retains ownership
of, and responsibility for, the hazardous secondary materials that are
generated during the course of the manufacture. The Agency also
solicits comment on other types of contractual arrangements under which
discard is unlikely to happen and which could appropriately be covered
by an exclusion for ``generator-controlled'' hazardous secondary
material. For example, one company may enter into a contractual
arrangement for a second company to reclaim and reuse (or return for
reuse) the first company's hazardous secondary material. The first
company could create a contractual instrument that exhibits the same
degree of control over how the second company manages the hazardous
secondary material as is found in a tolling agreement. EPA solicits
comment on whether hazardous secondary materials recycled under such
contracts also should be included within the scope of the exclusion.
2. Hazardous Secondary Materials Managed Under the Control of the
Generator in Land-Based Units
    As stated above in section B.1 of this preamble, the exclusion
proposed today at 40 CFR 261.2(a)(2)(ii) would apply to materials
generated and reclaimed within the United States or its territories
that are under the control of the generator and that are stored in non-
land-based units. However, some hazardous secondary materials that are
generated and reclaimed within the United States or its territories
under the control of the generator (i.e., at the generating facility,
within the same company, or through a tolling arrangement) are managed
in units that are land-based. For these materials, we are proposing a
slightly different exclusion at 40 CFR 261.4(a)(23).
    The Agency is proposing to place this exclusion in 40 CFR
261.4(a)(23) because while we recognize that raw materials and
hazardous secondary materials can be and are stored in land-based units
(such as mineral processing residues or pulping liquors), we also
recognize that such management clearly presents a greater potential for
releases to the environment than management in non-land-based units.
Therefore, we are proposing an additional requirement which provides
that if hazardous secondary materials are managed in land-based units,
such materials must be contained in the units. We are not proposing
that the units meet any particular design requirement or that the
hazardous secondary materials in the unit be managed in a particular
way. Rather, we are only proposing that the hazardous secondary
material in the unit be ``contained'' and not released into the
environment. The definition of land-based unit is proposed in Sec.
260.10, and is taken from section 3004(k) of RCRA (i.e., landfill,
surface impoundment, waste pile, injection well, land treatment
facility, salt dome formation, salt bed formation, or underground mine
or cave). Examples of surface impoundments include ditches and sumps.
    Whether the hazardous secondary material is ``contained'' in the
land-based unit will necessarily be determined on a case-by-case basis.
Generally, however, recyclable material is ``contained'' if it is
placed in a unit that controls the movement of the hazardous secondary
material out of the unit. Hazardous secondary material that remains
contained in a land-based unit that experiences a release would still
meet the terms of the exclusion in 261.4(a)(23), unless the hazardous
secondary material is not managed as a valuable product and as a
result, a significant release from the unit occurs. In this situation,
the hazardous secondary material in the land-based unit would be
considered discarded. In determining whether hazardous secondary
materials in a land-based unit are contained, a facility should
consider the circumstances under which the materials are stored. For
example, materials that are stored in direct contact with the soil in a
natural or man-made impoundment may be more likely to leak. However,
the local geological and meteorological conditions can greatly
influence whether such materials would be contained. These local
conditions, along with specific measures that a facility employs, such
as liners, leak detection

measures, inventory control and tracking, control of releases, or
monitoring and inspection during construction and operation of the
unit, may be used in determining whether the hazardous secondary
material is contained in the land-based unit.
3. Hazardous Secondary Materials Managed Under the Control of the
Generator: General Provisions
    Hazardous secondary materials released from any storage unit,
whether land-based or non-land based, are discarded and if such
materials upon discard would be either a listed hazardous waste or
exhibit a hazardous waste characteristic, the hazardous secondary
materials would be part of the waste disposal problem and would be
subject to the hazardous waste regulations, unless they are immediately
cleaned up.
    We also note that hazardous secondary materials excluded from the
definition of solid waste generally become wastes when they are
speculatively accumulated, because at that point they are considered to
be discarded. For this reason, all hazardous secondary materials
excluded under proposed 40 CFR 261.2(a)(2)(ii) or 261.4(a)(23) would be
subject to the speculative accumulation provisions of 40 CFR
261.1(c)(8). In addition, as with other excluded recycling operations,
residuals from the recycling process are considered to be newly
generated solid wastes, which can also be hazardous wastes if they
exhibit a hazardous characteristic under Subpart C of Part 261 or if
they are specifically listed under Subpart D of Part 261.
    The Agency is soliciting comment on whether additional requirements
might be necessary to demonstrate absence of discard when hazardous
secondary materials are recycled under proposed 40 CFR 261.2(a)(2)(ii)
or 261.4(a)(23). Our analysis has led us to conclude that discard has
not occurred and releases are highly unlikely when hazardous secondary
materials are generated and reclaimed under these circumstances, except
possibly when such materials are managed in land-based units.
Nevertheless, we are requesting comment on other points of view. An
example of such conditions would be recordkeeping requirements, such as
those proposed today in 40 CFR 261.4(a)(24)). Another example would be
appropriate limitations on storage, such as performance-based standards
designed to address releases to the environment. The Agency solicits
comment on whether additional management requirements are appropriate
for hazardous secondary materials that are generated and reclaimed
under the control of the generator. If commenters believe such
additional requirements are appropriate, they should specify the
technical rationale for each requirement suggested, and why the
requirement is necessary if the hazardous secondary material remains
under the control of the generator.
    We are also proposing that generators (and reclaimers, where the
generator and reclaimer are located at different facilities) of
hazardous secondary materials recycled under the control of the
generator, whether managed in a land-based or non-land based unit,
would be required to submit a one-time notice to the EPA Regional
Administrator or, in an authorized state, to the state Director. The
notice would need to identify the name, address, and EPA ID number (if
it has one) of the generator or reclaimer, the name and phone number of
a contact person, the type of hazardous secondary material that would
be managed according to the exclusion, and when the hazardous secondary
materials would begin to be managed in accordance with the exclusion. A
revised notice would be required to be submitted in the event of a
change to the name, address, or EPA ID number of the generator or
reclaimer or a change in the type of hazardous secondary material being
recycled.
    The intent of this proposed notification requirement is to provide
basic information to regulatory agencies about who will be managing
hazardous secondary materials under the exclusion, and the types of
hazardous secondary materials that would be recycled. For hazardous
secondary materials that would be excluded under 40 CFR
261.2(a)(2)(ii), this proposed notification requirement would be
specified in 40 CFR 260.42 (i.e., separate from 40 CFR 261.2). For
hazardous secondary materials that would be excluded under 40 CFR
261.4(a)(23), this proposed notification requirement is included in the
exclusion. We note that in both cases, the requirement to provide this
notification would not be a condition of the exclusion. Thus, failure
to comply with the requirement would constitute a violation of RCRA,
but would not affect the excluded status of the waste.
    We believe our authority to request such information is inherent in
our authority to determine whether a material is discarded, and we
consider this to be the minimum information needed to enable credible
evaluation of the status of a hazardous secondary material under
section 3007 of RCRA. EPA further believes that RCRA section 3007
allows it to gather information with regard to any material when the
Agency has reason to believe that the material may be a solid waste and
possibly a hazardous waste within the meaning of RCRA section 1004(5).
Section 2002 also gives EPA authority to issue regulations necessary to
carry out the purposes of RCRA.
    We also note that after EPA promulgates regulations listing a
material as a hazardous waste or identifying it by its characteristics,
section 3010 of RCRA requires generators of such materials to submit a
notification to EPA within 90 days. Since the changes proposed today
could substantially affect this universe of facilities in the Subtitle
C system, we believe the notifications are appropriate and useful.
    EPA notes that the information discussed above can be difficult for
regulatory authorities to retrieve and use if it is not placed into a
data management system. Similarly, using different notification
procedures and data management systems for different regulated
materials can be confusing and time-consuming for the regulated
community. For these reasons, the Agency requests comment on whether
the Subtitle C Site Identification Form (EPA Form 8700-12) or the
comparable state form should be used to provide the information
required in this supplemental proposal. This form is used to enter data
into the RCRAInfo data management system managed by the states and EPA.
To implement use of this form for the notification requirements
proposed today, we would revise the form to include a section for
materials covered by this exclusion, with spaces for the appropriate
data elements.
    In addition, we are considering including additional information in
the notification in order to measure the impact of the proposed
rulemaking. More data would assist EPA in targeting future resources
and activities to further increase recycling and to report to the
public the impacts of the proposed rulemaking. The additional data
elements for which we are requesting comment are discussed in section
XIV of today's notice.
    We note that this exclusion applies only to hazardous secondary
materials generated and reclaimed within the United States or its
territories, because most of our information about recycling comes from
these geographical areas. We do not have sufficient information about
most recycling activities outside of the United States to decide
whether discard is likely or unlikely. However, we are soliciting
comment on whether

EPA should promulgate a conditional exclusion for exported material
otherwise meeting the criteria for this exclusion.

C. Enforcement

    Under today's proposal, hazardous secondary materials generated and
reclaimed within the United States under the control of the generator
would be excluded from RCRA Subtitle C regulation, but would be subject
to certain restrictions, principally speculative accumulation. Persons
that handle these hazardous secondary materials would be responsible
for maintaining the exclusion by ensuring that these restrictions are
met. If the hazardous secondary materials were not managed pursuant to
these restrictions, they would not be excluded. They would then be
considered solid and hazardous wastes if they were listed or they
exhibited a hazardous waste characteristic for Subtitle C purposes from
the time they were generated. Persons operating under the exclusion
would also be required to notify EPA or the authorized state.
    Persons taking advantage of today's proposed exclusion that fail to
meet the requirements may be subject to enforcement action and the
materials could be considered hazardous waste from the point of their
generation. EPA could choose to bring an enforcement action under RCRA
section 3008(a) for all violations of the hazardous waste requirements
occurring from the time they are generated through the time they are
ultimately disposed or reclaimed. The Agency believes that this
approach provides generators with an incentive to handle (or in the
case of tolling or other contractual arrangements, ensure that their
contractors handle) the hazardous secondary materials pursuant to the
requirements. It also encourages each person to take appropriate steps
to ensure that such materials are safely handled and legitimately
recycled by others in the management chain. If there is a release of
the hazardous secondary materials into the environment, they are
considered discarded and subject to all applicable hazardous waste
regulations.

X. Conditional Exclusion for Hazardous Secondary Materials That Are
Transferred for the Purpose of Reclamation: Proposed 40 CFR
261.2(c)(3), 261.4(a)(24), 261.4(a)(25)

    EPA is today proposing an exclusion from the definition of solid
waste for hazardous secondary materials that are generated and
subsequently transferred to another company or person for the purpose
of reclamation, provided that certain conditions are met. Recycling
that conforms to these conditions would not involve discard and
therefore the recyclable materials would not be regulated as solid
waste. Such excluded hazardous secondary materials would also need to
be recycled legitimately, as determined according to the provisions of
40 CFR 261.2(g), which also are being proposed today, and could not be
speculatively accumulated, as defined in 40 CFR 261.1(c)(8).
    The conditions that EPA is proposing today are based on our
understanding of how successful third-party recycling currently
operates (and, conversely, how unsuccessful recycling practices can
result in recyclable hazardous secondary materials being discarded),
and are supported by the information included in the recycling studies
that are described in section VIII of this preamble. For example, the
study of current good recycling practices indicates that many
generators examine the recycler's technical capabilities, business
viability, environmental track record, and other relevant questions
before sending hazardous secondary materials for recycling. These
recycler audits, which can be thought of as a form of environmental
``due diligence,'' are in essence a precaution to minimize the prospect
of incurring CERCLA liability in the event that the recycling, or lack
thereof, results in discard of the material. The fact that these
companies are willing to incur the expense of auditing recyclers as a
business practice is of itself a marketplace affirmation that sending
hazardous secondary materials to other companies for recycling involves
some degree of risk. Although these risks may be small when the
recycler is a well established, successful enterprise with a good
record of environmental stewardship, it also is apparent that not all
recyclers fit this profile, as evidenced in the study of environmental
problems associated with hazardous secondary material recycling. Thus,
we believe that there is sufficient reason for the Agency to place
certain conditions on this proposed exclusion for the generator to
determine that the material is not discarded, particularly since we
expect that this rulemaking, if implemented, could encourage some
number of companies that may be unfamiliar with recycling to enter the
hazardous secondary material recycling business.

A. What Is the Intent of Today's Proposed Conditional Exclusion?

    In proposing this conditional exclusion, EPA's objectives are to
encourage recycling of hazardous secondary materials, and reduce
unnecessary regulatory compliance costs to industry, while maintaining
protection of human health and the environment. We believe that this
proposed conditional exclusion is a workable, common sense approach to
meeting these objectives, is well supported by the record for this
rulemaking, including the recent recycling studies that EPA has
conducted, and in important ways reflects current good industry
practices that are used by certain generators for recycling of
hazardous secondary materials.

B. Scope and Applicability

    The conditional exclusion for transferred materials would
potentially apply to materials that are currently regulated as
hazardous wastes because their recycling involves reclamation--
specifically, spent materials, and listed sludges and listed by-
products.
    This is the same universe of materials that would have potentially
been eligible for the exclusion proposed in October, 2003, except that
that proposed exclusion would have applied only to these types of
hazardous secondary materials that were recycled within the ``same
industry.'' It would not be available for recycled materials that are
regulated as hazardous wastes for other reasons, such as ``inherently
waste-like materials,'' materials that are ``used in a manner
constituting disposal,'' or ``materials burned for energy recovery.''
    The exclusion proposed today also would not address materials that