[Federal Register: October 30, 2008 (Volume 73, Number 211)]
[Rules and Regulations]
[Page 64667-64788]
[DOCID:fr30oc08-13]

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Part II

Environmental Protection Agency

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40 CFR Parts 260, 261, and 270

Revisions to the Definition of Solid Waste; Final Rule

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 260, 261, and 270

[EPA-HQ-RCRA-2002-0031; FRL-8728-9]
RIN 2050-AG31

Revisions to the Definition of Solid Waste

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is publishing a
final rule that revises the definition of solid waste to exclude
certain hazardous secondary materials from regulation under Subtitle C
of the Resource Conservation and Recovery Act (RCRA). The purpose of
this final rule is to encourage safe, environmentally sound recycling
and resource conservation and to respond to several court decisions
concerning the definition of solid waste.

DATES: This final rule is effective on December 29, 2008.

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-RCRA-2002-0031. All documents in the docket are listed on
the http://www.regulations.gov Web site. Although listed in the index,
some information is not publicly available, e.g., Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is
not placed on the Internet and will be publicly available only in hard
copy form. 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 3334, 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. Does This Action Apply to Me?

    Entities potentially affected by today's action include
approximately 5,600 facilities in 280 industries in 21 economic sectors
that generate or recycle hazardous secondary materials that are
currently regulated as RCRA Subtitle C hazardous wastes (e.g.,
secondary materials, such as industrial co-products, by-products,
residues, and unreacted feedstocks). Approximately 60% of these
affected facilities are classified in NAICS code economic sectors 31,
32, and 33 (manufacturing). The remaining economic sectors, which have
more than ten affected industries each, are in NAICS codes 48
(transportation), 42 (wholesale trade), and 56 (administrative support,
waste management and remediation). About 1.5 million tons per year of
hazardous secondary materials generated and 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 liquid hazardous
secondary materials for recovery as solvents. Today's action is
expected to result in regulatory and materials recovery cost savings to
these industries of approximately $95 million per year. Taking into
account impact estimation uncertainty factors, today's action could
result in cost savings ranging from $19 million to $333 million per
year to these industries in any future year. 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 XXI.A of this preamble
and in the ``Regulatory Impact Analysis'' available in the docket for
this final rule.

B. Why Is EPA Taking This Action?

    There are two primary purposes of this action. One purpose is to
respond to a series of seven decisions by the U.S. Court of Appeals for
the DC Circuit (1987 to 2000), which, taken together, have provided EPA
with additional direction regarding the proper formulation of the RCRA
regulatory definition of solid wastes for purposes of Subtitle C. A
second purpose is to clarify the RCRA concept of ``legitimate
recycling,'' which is a key component of EPA's approach to recycling
hazardous secondary materials.
    This action is not intended to bring new wastes into the RCRA
hazardous waste regulatory system and it does not do so. By removing
unnecessary controls over certain hazardous secondary materials, and by
providing more explicit and consistent factors for determining the
legitimacy of recycling practices, EPA expects that today's action will
encourage and expand the safe, beneficial recycling of additional
hazardous secondary materials. Today's action is consistent with EPA's
longstanding policy of encouraging the recovery, recycling, and reuse
of valuable resources as an alternative to disposal (i.e., landfilling
and incineration), while at the same time maintaining protection of
human health and the environment. It also is consistent with the
resource conservation goal of the Congress in enacting the RCRA statute
(as evidenced by the statute's name), and with EPA's vision of how the
RCRA program could evolve over the long term to promote economic
sustainability and more efficient use of resources. EPA's long-term
vision of the future of the RCRA waste management program is discussed
in the document ``Beyond RCRA: Prospects for Waste and Materials
Management in the Year 2020,'' which is available on EPA's Web site at:
http://www.epa.gov/epaoswer/osw/vision.htm.

Preamble Outline

I. Statutory Authority
II. Which Revisions to the Regulations Is EPA Finalizing?
III. What Is the History of These Rules?
IV. How Do the Provisions in the Final Rule Compare to Those
Proposed on March 26, 2007?
V. How Does the Concept of Discard Relate to the Final Rule?
VI. When Will the Final Rule Become Effective?
VII. Exclusion for Hazardous Secondary Materials That are
Legitimately Reclaimed Under the Control of the Generator
VIII. Exclusion for Hazardous Secondary Materials That are
Transferred for the Purpose of Legitimate Reclamation
IX. Legitimacy
X. Non-Waste Determination Process
XI. Effect on Other Exclusions
XII. Effect on Permitted and Interim Status Facilities
XIII. Effect on CERCLA
XIV. Effect on Imports and Exports
XV. General Comments on the Proposed Revisions to the Definition of
Solid Waste
XVI. Major Comments on the Exclusion for Hazardous Secondary
Materials Legitimately Reclaimed Under the Control of the Generator
XVII. Major Comments on the Exclusion for Hazardous Secondary
Materials Transferred for the Purpose of Legitimate Reclamation

XVIII. Major Comments on Legitimacy
XIX. Major Comments on the Non-Waste Determination Process
XX. How Will These Regulatory Changes Be Administered and Enforced
in the States?
XXI. Administrative Requirements for This Rulemaking

I. Statutory Authority

    These regulations are promulgated 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. 6912, 6921, 6922, 6923,
6924, 6927, 6930, and 6938. These statutes, combined, are commonly
referred to as ``RCRA.''

II. Which Revisions to the Regulations Is EPA Finalizing?

    In today's rule, EPA is revising the definition of solid waste to
exclude from regulation under Subtitle C of RCRA (42 U.S.C. 6921
through 6939(e)) certain hazardous secondary materials which are being
reclaimed. We have defined hazardous secondary materials as those which
would be classified as hazardous wastes if discarded. We are also
promulgating regulatory factors for determining when recycling is
legitimate. The Agency first proposed changes reflecting the court
decisions on the definition of solid waste rules on October 28, 2003
(68 FR 61558). We then published a supplemental proposal on March 26,
2007 (72 FR 14172).
    Today's preamble is organized as follows: This section of the
preamble (Section II) describes the three principal regulatory
revisions that are finalized in this rule: (1) An exclusion for certain
hazardous secondary materials legitimately reclaimed under the control
of the generator within the United States or its territories; (2) a
conditional exclusion for hazardous secondary materials that are
transferred for the purpose of legitimate reclamation; and (3) a case-
by-case non-waste determination procedure. Section II also discusses
EPA's treatment of legitimacy in the final rule. Section III describes
the history of these revisions, including relevant court cases and the
original proposal (October 28, 2003, 68 FR 61558). Section III also
describes the Agency's independent analyses of successful recycling
practices, environmental problems associated with recycling of
hazardous secondary materials, and potential effects of market forces
on the management of such materials, and provides an overview of the
March 26, 2007, supplemental proposal (72 FR 14172). Section IV
explains the ways in which the March 2007 supplemental proposal differs
from today's rule. Section V discusses how this rule is related to the
concept of ``discard,'' and section VI indicates the effective date of
the rule. Sections VII-X contain detailed descriptions of all
regulatory provisions promulgated today. Sections XI-XIV describe the
effect of this rule on other exclusions, permitted and interim status
facilities, Superfund, and imports/exports. Sections XV-XIX contain a
discussion of all major public comments received on the March 26, 2007,
supplemental proposal, along with the Agency's responses to these
comments. Section XX describes how this rule will be administered and
enforced in the states, and section XXI describes the administrative
requirements for this rulemaking.
    Below is a summary of the principal regulatory revisions
promulgated today.

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

    This provision--40 CFR 261.2(a)(2)(ii)--would exclude certain
hazardous secondary materials (i.e., listed sludges, listed by-
products, and spent materials) that are generated and legitimately
reclaimed within the United States or its territories under the control
of the generator, when such materials are handled only in non-land-
based units (e.g., tanks, containers, or containment buildings). This
provision applies to hazardous secondary materials that are not spent
lead-acid batteries or listed wastes K171 or K172, or otherwise subject
to the specific management conditions under 40 CFR 261.4(a). Under this
provision, the hazardous secondary materials must be contained in such
units and are subject to the speculative accumulation requirements of
40 CFR 261.1(c)(8), as well as the provisions for legitimate recycling
at 40 CFR 260.43. In addition, under 40 CFR 260.42, the generator (and
the reclaimer, if the generator and reclaimer are located at different
facilities) must send a notification prior to operating under the
exclusion and by March 1 of each even numbered year thereafter to the
EPA Regional Administrator or, in an authorized state, to the state
director.
    Hazardous secondary materials would be considered ``under the
control of the generator'' under the following circumstances:
    (1) They are generated and then reclaimed at the generating
facility; or
    (2) They are generated and reclaimed at different facilities, if
the generator certifies that the hazardous secondary materials are sent
either to a facility controlled by the generator or to a facility under
common control with the generator, and that either the generator or the
reclaimer has acknowledged responsibility for the safe management of
the hazardous secondary materials; or
    (3) They are generated and reclaimed pursuant to a written
agreement between a tolling contractor and toll manufacturer, if the
tolling contractor certifies that it has entered into a tolling
contract with a toll manufacturer and that the tolling contractor
retains ownership of, and responsibility for, the hazardous secondary
materials generated during the course of the manufacture, including any
releases of hazardous secondary materials that occur during the
manufacturing process.
    This exclusion does not include the recycling of hazardous
secondary materials that are inherently waste-like under 40 CFR
261.2(d), hazardous secondary 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)), or hazardous secondary
materials burned to recover energy or used to produce a fuel or
otherwise contained in fuels (40 CFR 261.2(c)(2)).

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

    This provision--40 CFR 261.4(a)(23)--contains requirements that are
identical to those that apply to hazardous secondary materials
generated and legitimately reclaimed under the control of the generator
within the United States or its territories and are handled in non-
land-based units in 40 CFR 261.2(a)(2)(ii), described above. Land-based
units are defined in 40 CFR 260.10 as an area where hazardous secondary
materials are placed in or on the land before recycling, but this
definition does not include land-based production units. Examples of
land-based units are surface impoundments and piles. This provision
applies to hazardous secondary materials that are not spent lead-acid
batteries or listed wastes K171 or K172, or otherwise subject to the
specific management conditions under 40 CFR 261.4(a).

C. Exclusion for Hazardous Secondary Materials That Are Transferred for
the Purpose of Legitimate Reclamation

    This conditional exclusion--40 CFR 261.4(a)(24), hereinafter
referred to as

the ``transfer-based exclusion''--applies to hazardous secondary
materials (i.e., spent materials, listed sludges, and listed by-
products) that are generated and subsequently transferred to a
different person or company for the purpose of reclamation. As long as
the conditions and restrictions to the exclusion are satisfied, the
hazardous secondary materials would not be subject to Subtitle C
regulation.
    Hazardous secondary material generators, reclaimers, and
intermediate facilities (i.e., other facilities storing hazardous
secondary materials for more than 10 days) must all submit a
notification prior to operating under the exclusion and by March 1 of
each even numbered year thereafter to the EPA Regional Administrator
or, in an authorized state, to the state director (see 40 CFR 260.42).
In addition, hazardous secondary materials managed at such facilities
may not be speculatively accumulated as defined in Sec.  262.1(c)(8)
(see 40 CFR 261.4(a)(24)(i)) and must be legitimately recycled as
specified in Sec.  260.43 (see 40 CFR 261.4(a)(24)(iv)).
    Conditions applicable to generators of hazardous secondary
materials are found at 40 CFR 261.4(a)(24)(v) and include containment
of such materials, reasonable efforts to ensure that the intermediate
facility or reclaimer intends to manage or recycle the hazardous
secondary material properly and legitimately, and retention of records
of off-site shipments for three years. Conditions applicable to
intermediate facilities and reclaimers of hazardous secondary materials
are found at 40 CFR 261.4(a)(24)(vi) and include containment of such
materials, transmittal of confirmations of receipt to generators,
maintenance of records for hazardous secondary materials received and
sent off-site, financial assurance, and (for reclaimers) proper
management of residuals. In addition, if any of the hazardous secondary
materials excluded under 40 CFR 261.4(a)(24) are generated and then
exported to another country for reclamation, the exporter must notify
and obtain consent from the receiving country, and file an annual
report. This requirement is codified in 40 CFR 261.4(a)(25).
    Like the previously discussed exclusion for hazardous secondary
materials reclaimed under the control of the generator, this exclusion
would not apply to hazardous secondary materials that are inherently
waste-like under 40 CFR 261.2(d), hazardous secondary 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)), or
hazardous secondary materials burned to recover energy or used to
produce a fuel or are otherwise contained in fuels (40 CFR
261.2(c)(2)).

D. Codification of Legitimacy

    Under the RCRA Subtitle C definition of solid waste, certain
hazardous secondary materials, if recycled, are not solid wastes and,
therefore, are not subject to RCRA's ``cradle to grave'' management
system. The basic idea behind this principle is that recycling of these
materials often closely resembles industrial manufacturing rather than
waste management. However, due to economic incentives for managing
hazardous secondary materials outside the RCRA regulatory system, there
is a potential for some handlers to claim that they are recycling the
hazardous secondary materials when, in fact, they are conducting waste
treatment and/or disposal. To guard against this, EPA has long
articulated the need to distinguish between ``legitimate'' (i.e., true)
recycling and ``sham'' recycling, beginning with the preamble to the
1985 regulations that discussed the definition of solid waste (50 FR
638, January 4, 1985) and continuing through today's final rule.
    In the October 28, 2003, proposed rule (68 FR 61581-61588) on the
definition of solid waste, we proposed codifying four criteria (called
``factors'' in today's rule) to determine when recycling of hazardous
secondary materials is legitimate. In the March 26, 2007, supplemental
proposal in section XI of the preamble (72 FR 14197), we refined our
original proposal in response to public comments. In today's final
rule, we are codifying the factors to be used in determining whether
recycling under the provisions finalized in this rule is legitimate,
applying the structure basically as proposed in March 2007 (proposed at
40 CFR 261.2(g)). The legitimacy provision is finalized in 40 CFR
260.43.

E. Non-Waste Determinations

    Today's rule establishes a non-waste determination process that
provides persons with an administrative process for receiving a formal
determination that their hazardous secondary materials are not
discarded and, therefore, not solid wastes when legitimately reclaimed.
This process is voluntary and is available in addition to the two self-
implementing exclusions included in today's rule. There are two types
of non-waste determinations: (1) A determination for hazardous
secondary materials reclaimed in a continuous industrial process; and
(2) a determination for hazardous secondary materials indistinguishable
in all relevant aspects from a product or intermediate.
    For hazardous secondary materials reclaimed in a continuous
industrial process, the non-waste determination will be based on the
following four criteria: (1) The extent that the management of the
hazardous secondary material is part of the continuous primary
production process; (2) whether the capacity of the production process
would use the hazardous secondary material in a reasonable time frame;
(3) whether the hazardous constituents in the hazardous secondary
material are reclaimed rather than discarded to the air, water, or land
at significantly higher levels from either a statistical or from a
health and environmental risk perspective than would otherwise be
released by the production process; and (4) other relevant factors that
demonstrate the hazardous secondary material is not discarded.
    For hazardous secondary materials which are indistinguishable in
all relevant aspects from a product or intermediate, the non-waste
determination will be based on the following five criteria: (1) Whether
market participants treat the hazardous secondary material as a product
or intermediate rather than a waste; (2) whether the chemical and
physical identity of the hazardous secondary material is comparable to
commercial products or intermediates; (3) whether the capacity of the
market would use the hazardous secondary material in a reasonable time
frame; (4) whether the hazardous constituents in the hazardous
secondary material are reclaimed rather than discarded to the air,
water, or land at significantly higher levels from either a statistical
or from a health and environmental risk perspective than would
otherwise be released by the production process; and (5) other relevant
factors that demonstrate the hazardous secondary material is not
discarded.
    The process for the non-waste determination is the same as that for
the solid waste variances found in 40 CFR 260.30.

III. What Is the History of These Rules?

A. Background

    RCRA gives EPA the authority to regulate hazardous wastes (see,
e.g., RCRA sections 3001-3004). The original statutory designation of
the subtitle for the hazardous waste program was Subtitle C and the
national hazardous waste program is referred to as the RCRA Subtitle C
program. Subtitle C is codified at 42 U.S.C. 6921 through

6939e. ``Subtitle C'' regulations are found at 40 CFR Parts 260 through
279. ``Hazardous wastes'' are the subset of solid wastes that present
threats to human health and the environment (see RCRA 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 not subject to regulation
as hazardous wastes under RCRA Subtitle C. Thus, the definition of
``solid waste'' plays a key role in defining the scope of EPA's
authorities under Subtitle C of 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)).
    Since 1980, EPA has interpreted ``solid waste'' under its Subtitle
C regulations to encompass both materials that are destined for final,
permanent treatment and placement in disposal units, as well as certain
materials that are destined for recycling (45 FR 33090-95, May 19,
1980; 50 FR 604-656, Jan. 4, 1985 (see in particular 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, hazardous secondary materials destined for recycling were
involved in one-third of the first 60 filings under RCRA's imminent and
substantial endangerment authority, and in 20 of the initial sites
listed under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) (48 FR 14474, April 4, 1983). Congress also
cited some damage cases which involve recycling (H.R. Rep. 94-1491,
94th Cong., 2d Sess., at 17, 18, 22). More recent data (i.e.,
information on damage incidents occurring after 1982) included in the
rulemaking docket for today's final rule corroborate the fact that
recycling operations can result in significant damage incidents.
     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
hazardous secondary material intended to do with them. This seems
inconsistent with the mandate to track hazardous wastes and control
them from ``cradle to grave.''
    Hence, 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)). Also Connecticut Coastal Fishermen's Association v.
Remington Arms Co., 989 F.2d 1305, 1315 (2d Cir. 1993) holds 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).)
    EPA has always asserted that hazardous secondary 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 on the Definition of Solid
Waste

    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)).
    The Court held that certain of the materials EPA was seeking to
regulate were not ``discarded materials'' under RCRA section 1004(27).
The Court also 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 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 recycled materials
could not 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)). In addition, the Court held
that it is reasonable for EPA to consider as discarded (and solid
wastes) listed wastes managed in units that are in part 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)).
    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)). In addition, 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)).
    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
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 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 in ABR 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).
    Notably, 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 (``Safe Food''), 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,
July 24, 2002). EPA determined that if these conditions are met, the
hazardous secondary materials used to make the fertilizer 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 virgin 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-discard 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 hazardous secondary materials and fertilizers are not
discarded.

C. October 2003 Proposal To Revise the Definition of Solid Waste

    Prompted by concerns articulated in various Court opinions decided
up to that point, in October 2003, EPA proposed a rule that material
generated and reclaimed in a continuous process within the same
industry is not discarded for purposes of Subtitle C, provided the
recycling process is legitimate (68 FR 61558, October 28, 2003). ``Same
industry'' was defined as industries sharing the same 4-digit North
American Industry Classification System (NAICS) code.
    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 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 that is intimately familiar with both the generation and
reclamation of the hazardous secondary 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.
    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 contracts 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 first chemical manufacturer for
reclamation.
    The third alternative would have provided a broader conditional
exclusion from the RCRA hazardous waste regulations for essentially all
hazardous secondary materials that are legitimately recycled by
reclamation. The purpose of this broader exclusion

would have been to encourage reclamation by lowering costs of
recycling, 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
broader exclusion, compared to the same-industry exclusion that we
proposed. Examples of such additional conditions could include
recordkeeping and reporting requirements, along with safeguards on
storage or handling.
    In response to the October 2003 proposal, a number of commenters
criticized the Agency specifically for not having conducted a study of
the potential impacts 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 secondary material recycling, including a number of sites
listed on the Superfund National Priorities List (NPL).
    However, other commenters to the October 2003 proposal 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 hazardous secondary 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
secondary materials recycling.

D. Recycling Studies

    In light of these comments on the October 2003 proposal, and in
deliberating on how to proceed with this rulemaking effort, the Agency
decided that additional information on hazardous secondary material
recycling would benefit the regulatory decision-making process, and
would provide stakeholders with a clearer picture of the hazardous
secondary 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 have been available for comment
in the docket for this rulemaking, under the following titles:
     An Assessment of Good Current Practices for Recycling of
Hazardous Secondary Materials (EPA-HQ-RCRA-2002-0031-0354 )
(``successful recycling study'').
     An Assessment of Environmental Problems Associated With
Recycling of Hazardous Secondary Materials (EPA-HQ-RCRA-2002-0031-0355)
(``environmental problems study'').
     A Study of Potential Effects of Market Forces on the
Management of Hazardous Secondary Materials Intended for Recycling
(EPA-HQ-RCRA-2002-0031-0358) (``market forces study'').

The results of these three studies have informed and supported EPA's
decision making in today's final rule.
    The successful recycling study has provided information to the
Agency that has helped us determine what types of controls would be
appropriate for hazardous secondary materials sent for reclamation to
determine that they are handled as commodities rather than wastes. 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 hazardous secondary material to
determine whether the entity to which it is sending such material is
equipped to responsibly manage it 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.
    As discussed later in today's preamble, these findings helped
inform EPA's decision to require that a hazardous secondary material
generator conduct reasonable efforts to ensure its materials are
properly and legitimately recycled, and to require certain
recordkeeping requirements.
    The goal of the environmental problems study was to identify and
characterize environmental problems that have been attributed to some
types of hazardous secondary material recycling activity that are
relevant for the purpose of this rulemaking effort. To address
commenters' concerns that historic damages are irrelevant to current
practices, EPA only included cases where damages occurred after 1982
(post-RCRA and -CERCLA implementation). The study identifies 208 cases
in which environmental damages of some kind occurred from some type of
recycling activity and that otherwise fit the scope of the study. The
Agency believes that the occurrence of certain types of environmental
problems associated with current recycling practices shows that discard
has occurred. In particular, instances where materials were abandoned
(e.g., in warehouses) and which required removal overseen by a
government agency and expenditure of public funds clearly demonstrate
that the hazardous secondary material was discarded. Of the 208 damage
cases, 69 cases (33%) involve abandoned materials. The relatively high
incidence of abandoned materials likely reflects the fact that
bankruptcies or other types of business failures were associated with
138 (66%) of the cases.
    In addition, the pattern of environmental damages that resulted
from the mismanagement of recyclable materials (including contamination
of soils, groundwater, surface water and air) is a strong indication
that the hazardous secondary materials were generally not managed as
valuable commodities and were discarded. Of the 208 damage cases, 81
cases (40%) primarily resulted from the

mismanagement of recyclable hazardous secondary materials.
Mismanagement of recycling residuals was the primary cause in 71 cases
(34%). Often, in the case of mismanagement of recycling residues,
reclamation processes generated residuals in which the toxic components
of the recycled materials were separated from the non-toxic components,
and these portions of the hazardous secondary material were then
mismanaged and discarded. 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.
    As discussed later in today's preamble, these findings helped
inform EPA's decision to require that the hazardous secondary material
be contained in the unit and managed in a manner that is at least as
protective as an analogous raw material (where there is an analogous
material), that the recycling residuals be properly managed, and that
the reclamation facility and any intermediate facilities have financial
assurance. In addition, the relatively small proportion of cases of
damages from on-site recycling (13 of the 208 cases (6%)) lends support
for EPA's decision to include fewer limitations on the exclusion for
hazardous secondary materials recycled under the control of the
generator.
    The market forces study uses accepted economic theory to describe
how various market incentives can influence a firm's decision-making
process when the recycling of hazardous secondary materials is
involved. This study helps explain some of the possible fundamental
economic drivers of both the successful and unsuccessful recycling
practices, which, in turn, helped the Agency to design the exclusions
being finalized today.
    As pointed out by some commenters to the October 2003 proposed
rule, the economic forces shaping the behavior of firms that recycle
hazardous secondary materials are often different from those at play in
manufacturing processes using virgin materials. The market forces 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 that are accepted
for recycling from off-site industrial sources (which usually pay a
fee); (2) industrial intra-company recycling, where firms generate
hazardous secondary materials as by-products 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
either use or recycle hazardous secondary materials obtained from other
firms, with the objective of reducing the cost of their production
inputs. The report looks at how the outcome from each model is
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.
    While 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 could be an over-simplification, when used in conjunction
with other pieces of information, the economic theory can be quite
illuminating. For example, according to the market forces study, the
industrial intra- and inter-company recyclers have more flexibility in
adjusting to unstable recycling markets (e.g., during price
fluctuations, these companies can more easily switch from recycling to
disposal or from recycled inputs to virgin inputs). Therefore, they
would be expected to be less likely to have environmental problems from
over-accumulated materials. 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 be more
susceptible to environmental problems from the over-accumulation of
hazardous secondary materials, especially when compared to recycling by
a well-capitalized firm that yields a product with high value. In both
cases, these predicted outcomes appear to be supported by the results
of the environmental problems study, which show the majority of
problems occur at off-site commercial recyclers.
    However, as shown by the successful recycling study, 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 that they are technically and financially capable of performing
the recycling. In addition, we have seen that successful recyclers
(both commercial and industrial) have often taken advantage of
mechanisms, such as long-term contracts to help stabilize price
fluctuations, allowing recyclers to plan their operations better.
    Further discussion of the recycling studies, including the
methodology and limitations of the studies, can be found in the March
2007 supplemental proposal (72 FR 14178-83), and the studies themselves
can be found in the docket for today's rulemaking.

E. March 2007 Supplemental Proposal To Revise the Definition of Solid
Waste

    To provide public notice on the recycling studies discussed above,
in March 2007, EPA published a supplemental proposal (72 FR 14172,
March 26, 2007). In addition, based on the comments received on the
October 2003 proposal, EPA also decided to restructure our approach to
revising the definition of solid waste to more directly consider
whether particular materials are not considered ``discarded'' and thus
are not solid and hazardous wastes subject to regulation under Subtitle
C of RCRA. We agreed with the many commenters on the October 2003
proposal 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 hazardous secondary 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)).
    Instead, in March 2007, EPA proposed two exclusions for hazardous
secondary materials recycled under the control of the generator (one
exclusion would apply to hazardous secondary materials managed in non-
land-based units, whereas the other exclusion would apply to hazardous
secondary materials managed in land-based units) and an additional
exclusion for hazardous secondary materials transferred to another
party for reclamation.
    For the exclusions for hazardous secondary materials reclaimed
under the control of the generator, EPA described three circumstances
under which we believe that discard does not take place and where the
potential for environmental releases is low to non-existent. The three
situations involve legitimate recycling of hazardous secondary
materials that are generated and reclaimed at the generating facility,
at a different facility within the same

company, or through a tolling arrangement. Under all three
circumstances, the hazardous secondary materials must be generated and
reclaimed within the United States or its territories. Because the
hazardous secondary material generator in these situations still finds
value in the hazardous secondary materials, has retained control over
them, and intends to use them, EPA proposed to exclude these materials
from being a solid waste and, thus, from regulation under Subtitle C of
RCRA if the recycling is legitimate and if the hazardous secondary
materials are not speculatively accumulated.
    In those cases, however, where generators of hazardous secondary
materials do not reclaim the materials themselves, it often may be a
sound business decision to ship the hazardous secondary materials to a
commercial facility or another manufacturer for reclamation in order to
avoid the costs of disposing of the material. In such situations, the
generator has relinquished control of the hazardous secondary materials
and the entity receiving such materials may not have the same
incentives to manage the hazardous secondary materials as a useful
product, especially if they are paid a fee for managing the hazardous
secondary materials.
    Accordingly, for the exclusion for hazardous secondary materials
transferred to another party for reclamation, the Agency proposed
conditions that, when met, would indicate that these hazardous
secondary materials are not discarded. One of the conditions would
require the generator to make reasonable efforts to determine that its
hazardous secondary materials will be properly and legitimately
recycled (thus demonstrating the hazardous secondary material is not
being discarded). Another condition would require the reclamation
facility to have adequate financial assurance (thus demonstrating that
the hazardous secondary material will not be abandoned). In addition,
EPA proposed that both the generator and reclaimer would need to
maintain shipping records (to demonstrate that the hazardous secondary
material was sent for reclamation and was received by the reclaimer),
and the reclaimer would be subject to additional storage and residual
management standards (to address the instances of discard observed at
off-site reclamation facilities in the damage cases).
    In addition, in March 2007, EPA's supplemental proposal included a
case-by-case petition process to allow applicants to demonstrate that
their hazardous secondary materials are not discarded and therefore are
not solid wastes.
    Finally, in EPA's March 2007 supplemental proposal, EPA proposed a
definition of legitimate recycling that restructured the legitimacy
factors originally proposed in October 2003. The proposed legitimacy
factors would be used to determine whether the recycling of hazardous
secondary materials is legitimate.

IV. How Do the Provisions in the Final Rule Compare to Those Proposed
on March 26, 2007?

    EPA is finalizing the exclusions largely as proposed in March 2007,
with some revisions and clarifications. The following is a brief
overview of the revisions to the proposal, with references to
additional preamble discussions for more detail.
    For the exclusion for hazardous secondary materials that are
legitimately reclaimed under the control of the generator, we are
clarifying the scope of the exclusion, including addressing issues with
defining ``on-site,'' ``same company,'' and ``tolling arrangement.'' We
have also added additional data elements to the notification
requirement, clarified that the hazardous secondary materials must be
contained when managed in non-land-based units, as well as in land-
based units, because hazardous secondary materials that are released to
the environment and not immediately recovered are discarded, and added
a reference to the new legitimacy provision in Sec.  260.43. We have
also revised the definition of land-based unit to be ``an area where
hazardous secondary materials are placed in or on the land before
recycling,'' while also clarifying that the definition does not include
production units. For further discussion of the generator-controlled
exclusion, see section VII of this preamble.
    For the exclusion for hazardous secondary materials that are
transferred for the purpose of reclamation, we are clarifying that
hazardous secondary materials held at a transfer facility for less than
10 days will be considered to be in transport. We are also allowing the
use of intermediate facilities that store hazardous secondary materials
for more than 10 days, provided the facilities comply with the same
conditions applicable to reclamation facilities. In addition, the
hazardous secondary material generator must select the reclamation
facility (or facilities) that can be used and must perform reasonable
efforts on both the intermediate facility and reclamation facility (or
facilities), and the intermediate facility must send the hazardous
secondary material to the reclamation facility that the generator
selected. For the reasonable efforts condition, we have included
specific questions in the regulatory language, and are requiring both
documentation and certification. We are also clarifying how the
financial assurance condition applies to reclamation and intermediate
facilities excluded under the transfer-based exclusion, including
tailored regulatory language for financial assurance specific to these
types of facilities. We have also added a reference to the new
legitimacy provision in Sec.  260.43. For further discussion, see
section VIII of this preamble.
    Regarding legitimacy, we are adding legitimacy as a condition of
the exclusions and the non-waste determinations in this rule, but are
not finalizing the language proposed in Sec.  261.2(g) for all
recycling. The new legitimacy provision can be found at Sec.  260.43.
For further discussion, see section IX of this preamble.
    Finally, for the non-waste determination process, we have limited
the categories for non-waste determinations to materials reclaimed in a
continuous industrial process and materials indistinguishable from
products and we have revised the criteria to make them more consistent
across the two categories of non-waste determinations. Furthermore, we
are not finalizing the non-waste determination for materials reclaimed
under the control of the generator via a tolling arrangement or similar
contractual arrangement. For further discussion, see sections X and XIX
of this preamble.

V. How Does the Concept of Discard Relate to the Final Rule?

    In the March 2007 supplemental proposal, EPA explained how the
concept of ``discard'' is the central organizing idea behind the
revisions to the definition of solid waste being finalized today (72 FR
14178). Basing the revisions on ``discard'' 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
final rule, a key issue is the circumstances under which a hazardous
secondary material that is recycled by reclamation is or is not
discarded.

    The March 2007 supplemental proposal represented a shift from the
approach taken in the October 2003 proposal, which proposed to exclude
from the definition of solid waste any hazardous secondary 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 NAICS code. The
basis for that proposed 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 in a continuous process by the
generating industry are not discarded (68 FR 61563, 61564-61567).
    Commenters critical of the October 2003 proposal argued, among
other things, that EPA failed to present a reasoned analysis of the
indicia of discard (72 FR 14184-14185). In evaluating these comments,
EPA determined that the effect of our October 2003 proposal would be
that some hazardous secondary materials generated and reclaimed under
the control of the generator would not be excluded, even though the
generator had not abandoned the material and had every opportunity and
incentive to maintain oversight of, and responsibility for, the
hazardous secondary material being reclaimed. Under these
circumstances, we determined in March 2007 that discard has generally
not occurred (72 FR 14185). Therefore, in the March 2007 supplemental
proposal, EPA decided to examine the concept of discard, which is the
driving principle 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 (see 72 FR 14175).
    EPA continues to believe that the concept of discard is the most
important organizing principle governing the determinations we have
made in today's final rule. 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.''
Today's final rule is consistent with that definition. Below is a
discussion of each provision of the final rule with an explanation of
how it relates to discard. Further discussion of the concept of discard
and its relationship to specific provisions and ways of implementing
this rule is found in sections V.A through V.D, below.
    The Agency also incorporates in this preamble to the final rule all
determinations in the March 2007 supplemental proposal, except to the
extent they are inconsistent with the determinations in this preamble,
regarding the conditions for the solid waste exclusions. In addition,
EPA notes that it did not reopen the specific details of the
speculative accumulation regulation regarding the time periods under
which materials are to be recycled, since these periods have been part
of the Agency's regulations for many years and are familiar to persons
who are affected by the regulations.

A. Discard and the Generator-Controlled Exclusions

    In the March 2007 supplemental proposal, EPA determined that if the
generator maintains control over the recycled hazardous secondary
material, the material is legitimately recycled under the standards
established in the proposal, and the material is not speculatively
accumulated within the meaning of EPA's regulations, then the hazardous
secondary material is not discarded. This is because the hazardous
secondary 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 hazardous
secondary materials are not discarded (see ABR 208 F.3d 1051 (``Rather
than throwing these materials [destined for recycling] away, the
producer saves them; rather than abandoning them, the producer reuses
them.'')) (72 FR 14178).
    EPA continues to believe that when a generator legitimately
recycles hazardous secondary material under its control, the generator
has not abandoned the material and has every opportunity and incentive
to maintain oversight of, and responsibility for, the hazardous
secondary material that is reclaimed.
    In determining when recycling occurs ``under the control'' of the
generator, EPA looked at three scenarios: Recycling performed on-site,
recycling performed within the same company, and recycling performed
under certain specific tolling arrangements.
    In the March 2007 supplemental proposal, EPA noted that, of the 208
recycling cases that caused environmental damage, only 13
(approximately 6%) occurred as a result of on-site recycling. We also
agreed with commenters on the October 2003 proposal who asserted 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'' (72 FR 14185).
    EPA also determined that this rationale applies to legitimate
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 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 unlikely.
    In the case of certain tolling operations, EPA determined in the
March 2007 supplemental proposal that a certain specific type of
tolling arrangement provides equivalent assurance that recycling is
performed ``under the control of the generator'' and does not
constitute discard. Under this type of arrangement, one company (the
tolling contractor) contracts with a second company (the toll
manufacturer) to produce a specialty chemical from specified unused
materials identified in the tolling contract. The toll manufacturer
produces the chemical and the production process generates a hazardous
secondary material (such as a spent solvent) which is routinely
reclaimed at the tolling contractor's facility. The typical toll
manufacturing contract 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, because 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 essence, the tolling contractor has
outsourced a step in its manufacturing process, but continues to take
responsibility and maintain control of the process as a whole,
including both the unused materials going into the process and the
product and hazardous secondary materials resulting from the process.
    For all three of these generator-controlled exclusions--reclamation
performed on-site, within the same company, and via certain tolling
arrangements--EPA continues to find that the facility owner still finds
value in the hazardous secondary materials, has retained control over
them, and intends to reclaim them. Therefore, EPA

is finalizing an exclusion for these materials, with certain
restrictions discussed below.
    In the March 2007 supplemental proposal, EPA also noted that
management in a land-based unit does not automatically indicate a
hazardous secondary material is being discarded. As long as the
hazardous secondary material is contained and is destined for recycling
under the control of the generator, it would still meet the terms of
the exclusion. However, if the hazardous secondary material is not
managed as a valuable product and, as a result, a significant release
to the environment from the unit occurs and is not immediately
recovered, the hazardous secondary material in the land-based unit
would be considered discarded (72 FR 14186). Thus, EPA proposed that
the hazardous secondary material must be contained in the land-based
unit in order for the exclusion to be applicable.
    However, in making this finding that hazardous secondary materials
managed in a land-based unit must be contained in order to retain the
exclusion, EPA did not intend to imply that hazardous secondary
materials managed in non-land-based units do not need to be contained.
Hazardous secondary materials released to the environment are not
destined for recycling and are clearly discarded whether they
originated from a land-based unit or not. Because non-land-based units
do not involve direct contact with the land, in the March 2007
supplemental proposal, EPA did not include an explicit ``contained''
restriction for these units. However, as commenters noted, it is still
possible for non-land-based units to leak or otherwise release
significant amounts of hazardous secondary materials to the
environment, even if they are not in direct contact with the land,
resulting in those materials being discarded. Thus, for today's final
rule, EPA is requiring that hazardous secondary materials must be
contained (whether it is managed in land-based units or non-land-based
units) in order to identify the hazardous secondary materials that are
not being discarded and, therefore, are not solid wastes.
    Another restriction on the generator-controlled exclusions is the
prohibition against speculative accumulation. As noted in the March
2007 supplemental proposal, restrictions on speculative accumulation
(40 CFR 261.1(c)(8)) have been an important element of the RCRA
hazardous waste recycling regulations since they were promulgated on
January 4, 1985. Historically, 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 unlikely to be recycled and therefore discarded.
According to this regulatory provision, a hazardous secondary material
is accumulated speculatively if the person accumulating it cannot show
that the material is potentially recyclable; further, the person
accumulating the hazardous secondary material must show that during a
calendar year (beginning January 1) the amount of such material that is
recycled, or transferred to a different site for recycling, must equal
at least 75% by weight or volume of the amount of that material at the
beginning of the period. As noted in the March 2007 supplemental
proposal, this provision already applies to hazardous secondary
materials that are not otherwise considered to be wastes when recycled,
such as materials used as ingredients or commercial product
substitutes, materials that are recycled in a closed-loop production
process, or unlisted sludges and by-products being reclaimed (72 FR
14188). Given that a significant portion of the damage cases stemmed
from over-accumulation of hazardous secondary materials, EPA continues
to believe that a restriction on speculative accumulation is needed to
determine that the hazardous secondary material is being recycled and
is not discarded.
    In addition, as with all recycling exclusions under RCRA, the
excluded hazardous secondary materials must be recycled legitimately.
As discussed in section IX of this preamble, EPA has long articulated
the need to distinguish between ``legitimate'' (i.e., true) recycling
and ``sham'' recycling, beginning with the preamble to the 1985
regulations that established the definition of solid waste (50 FR 638,
January 4, 1985) and continuing with the October 2003 proposed
codification of criteria for identifying legitimate recycling. Because
there can be a significant economic incentive to manage hazardous
secondary materials outside the RCRA regulatory system, there is a
potential for some handlers to claim that they are recycling, when, in
fact, they are conducting waste treatment and/or disposal in the guise
of recycling. While the legitimacy construct applies to both excluded
recycling and the recycling of regulated hazardous wastes, hazardous
secondary materials that are not legitimately recycled (i.e., that are
being treated and/or disposed in the guise of recycling) are discarded
materials and, therefore, are solid wastes.
    A final restriction on the generator-controlled exclusion from the
definition of solid waste is that the hazardous secondary material must
be generated and recycled within the United States.\1\ Because
hazardous secondary materials that are exported for recycling passes
out of the regulatory control of the federal government, making it
difficult to determine if these activities are ``under the control of
the generator'' and because, as noted in the March 2007 supplemental
proposal, we do not have sufficient information about most recycling
activities outside of the United States to decide whether discard is
likely or unlikely (72 FR 14187), EPA continues to find that this
restriction is needed to properly define when the hazardous secondary
material is not being discarded.
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    \1\ As discussed in section VII.C., persons taking advantage of
the generator-controlled option must also notify the regulatory
authority. This notification requirement is needed to enable
credible evaluation of the status of hazardous secondary materials
under RCRA and to ensure the terms of the exclusions are being met
by generators and reclaimers. These types of notification
requirements in this rule are being promulgated under the authority
of RCRA section 3007.
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B. Discard and the Transfer-Based Exclusion

    As EPA noted in the March 2007 supplemental proposal, in cases
where generators of hazardous secondary materials do not reclaim the
materials themselves, it often may be a sound business decision to ship
the hazardous secondary materials to be reclaimed to a commercial
facility or another manufacturer in order to avoid the costs of
disposing of the material.
    In such situations, EPA determined that the generator has
relinquished control of the hazardous secondary materials and the
entity receiving such materials may not have the same incentives to
manage them as a useful product (72 FR 14178). This is evidenced by the
results of the environmental problems study, found in the docket of
today's final rule. Of the 208 damage cases EPA identified for the
March 2007 supplemental proposal, 195 (about 94%) were from off-site
third-party recyclers, with clear instances of discard resulting in
risk to human health and the environment, including cases of large-
scale soil and ground water contamination with remediation costs in
some instances in the tens of millions of dollars.
    In addition, the market forces study in the docket for today's
rulemaking supports the conclusion that the pattern of discard at off-
site, third party reclaimers is a result of inherent differences
between commercial

recycling and normal manufacturing. 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,
hazardous secondary materials recycling can involve generating revenue
primarily from receipt of the hazardous secondary materials (72 FR
14182). Recyclers of hazardous secondary materials in this situation
may thus respond differently from traditional manufacturers to economic
forces and incentives, accumulating more inputs (hazardous secondary
materials) than can be processed (reclaimed). In addition, commercial
recyclers appear to have less flexibility than in-house recyclers
(e.g., during price fluctuations, in-house recyclers can more easily
switch from recycling to disposal or from recycled inputs to virgin
inputs, which commercial recyclers cannot) (72 FR 14183).
    After reviewing public comments on the recycling studies (see
section XV.D. of today's preamble), EPA continues to believe that
conditions are needed under the transfer-based exclusion for the Agency
to determine that these hazardous secondary materials are not
discarded.\2\
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    \2\ These are conditions beyond the prohibition on speculative
accumulation, the requirement that the hazardous secondary material
be contained, and the requirement that the materials be legitimately
recycled, as described in section VII.C., which would also apply to
the transfer-based exclusion. The transfer-based exclusion also
includes a notification requirement, which is needed to enable
credible evaluation of the status of hazardous secondary materials
under section 3007 of RCRA and to ensure the terms of the exclusions
are being met by generators, intermediate facilities, and
reclaimers.
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    One key condition that reflects the basic premise underlying the
exclusion is the condition that the hazardous secondary material
generator perform and document reasonable efforts to ensure that its
hazardous secondary material will be properly and legitimately
recycled. As EPA explained in the March 2007 supplemental proposal, in
order to demonstrate that hazardous secondary materials will not be
discarded, generators who transfer their hazardous secondary materials
to a third party must have a reasonable understanding of who will be
reclaiming the materials and how they will be managed and reclaimed and
a reasonable assurance that the recycling practice is safe and
legitimate (72 FR 14194). In order for a generator to determine whether
its hazardous secondary materials are not solid wastes because they are
not discarded, the generator must make a reasonable effort to ensure
that the reclaimer intends to legitimately recycle the material and not
discard it, and that the reclaimer (and any intermediate facility) will
properly manage the material.
    EPA continues to find that the reasonable efforts condition is
critical in determining when hazardous secondary materials sent to
another party for reclamation are not discarded. According to the
successful recycling study found in the docket for today's rulemaking,
generators of hazardous secondary materials frequently perform audit
activities and inquiries to determine whether the entity to which they
are sending hazardous secondary materials is equipped to responsibly
and legitimately reclaim and 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 markets. As noted in
the March 2007 supplemental proposal, EPA's successful recycling study
quotes one large recycling and disposal vendor as stating that of its
new customers, 60% of the large customers and 30-50% of the smaller
customers now perform audits on them (72 FR 14191). Thus, although
these practices are not universal, they do indicate that there are
currently many generators who recognize the risk of third-party
recyclers discarding their hazardous secondary materials and who take
responsibility to ensure that this discard does not occur. By codifying
the reasonable efforts condition of the transfer-based exclusion, EPA
believes that hazardous secondary materials generated by companies who
take this type of responsibility are not being discarded.
    EPA has developed a reasonable efforts condition that is objective
and is based on the types of information that are typically gathered in
environmental audits currently performed by generators. However, one
piece of information that is not included under the reasonable efforts
provision being finalized today is the financial health of the
reclamation facility. While EPA agrees with comments received that
state that evaluating the financial health of a company can be a useful
exercise, and encourages companies to do so, it is not an activity that
lends itself to an objective standard that would be workable in a solid
waste identification regulation.
    However, the financial health of a reclamation facility can still
be a crucial consideration in determining whether discard is taking
place. According to the successful recycling study, an examination of a
company's finances is an important part of many environmental audits.
In addition, the environmental problems study showed that bankruptcies
or other types of business failures were associated with 138 (66%) of
the damage cases, and the market forces study identified a low net
worth of a firm as a strong indication of a sub-optimal outcome of
recycling.
    To address the issue of the correlation of financial health with
the absence of discard, EPA proposed in the March 2007 supplemental
proposal to require that reclamation facilities obtain financial
assurance. The financial assurance requirements are designed to help
EPA determine that the hazardous secondary material generator is not
discarding the hazardous secondary material by sending it to a
reclamation facility that is financially unsound.
    In addition, by obtaining financial assurance, the owner/operator
of the reclamation facility (or intermediate facility) is making a
direct demonstration that it will not abandon the hazardous secondary
material. Discard through abandonment was a major cause of damages
identified in the environmental problems study. Of the 208 damage
cases, 69 (33%) cases involved abandoned materials. By obtaining
financial assurance, a reclaimer (or intermediate facility) is
demonstrating that even if events beyond its control make its
operations uneconomical, the hazardous secondary material will not be
abandoned.
    Another major cause of damages identified in the environmental
problems study was mismanagement of recyclable materials, constituting
the primary cause of damage in 81 (40%) of the 208 cases. Accordingly,
in the March 2007 supplemental proposal, EPA proposed a condition for
reclaimers that they must manage the hazardous secondary materials in
at least as protective a manner as they would an analogous raw
material, and in such a way that the hazardous secondary materials
would not be released into the environment (72 FR 14195). After
reviewing the comments, EPA continues to find that such a condition is
needed for the Agency to determine that the hazardous secondary
materials are not discarded.
    The third major source of damages identified in the environmental
problems study was mismanagement of residuals generated from the
reclamation activity, constituting the primary cause of damage in 71
(34%) of the 208 cases. As discussed in the March 2007 supplemental
proposal, EPA found that in many cases, the

residuals were comprised of the most hazardous components of the
hazardous secondary materials (e.g., polychlorinated biphenyls (PCBs)
from transformers) and were simply disposed of in on-site landfills or
piles, with little regard for the environmental consequences of such
mismanagement or possible CERCLA liabilities associated with cleanup of
these releases. Therefore, EPA proposed that ``any residuals that are
generated from reclamation processes will be properly managed. If any
residuals exhibit a hazardous characteristic according to subpart C of
40 CFR part 261, or themselves are listed hazardous wastes, they are
hazardous wastes (if discarded) and must be managed according to the
applicable requirements of 40 CFR parts 260 through 272'' (72 FR
17195). EPA continues to find that this condition is important to
clarify the regulatory status of these waste materials, and to
emphasize in explicit terms that the residuals generated from
reclamation operations must be managed properly (i.e., consistent with
federal and state requirements).
    Finally, other provisions of the transfer-based exclusion help
ensure that the hazardous secondary material is properly transferred to
the reclamation facility for recycling. Only the hazardous secondary
material generator, transporter, intermediate facility and reclaimer
can handle the material. (Note that, as with hazardous waste, a
hazardous secondary material can be held up to 10 days at a transfer
facility and still be considered as being in transport.) The hazardous
secondary material generators, intermediate, and reclamation facilities
claiming the exclusion must keep records of the hazardous secondary
material shipments, and reclamation and intermediate facilities must
send confirmations of receipt back to the hazardous secondary material
generator. Thus, all parties responsible for the excluded hazardous
secondary materials will be able to demonstrate that the materials were
in fact sent for reclamation and arrived at the intended facility and
were not discarded in transit. For hazardous secondary material
generators who are exporting to other countries for reclamation, notice
and consent must be obtained, thus facilitating oversight of the
hazardous secondary material when sent beyond the borders of the United
States, helping to ensure that it is recycled rather than discarded.

C. Discard and Non-Waste Determinations

    In addition to the exclusions discussed above, the Agency is also
finalizing a process for obtaining a case-specific non-waste
determination for certain hazardous secondary materials that are
recycled. This process allows a petitioner to receive a formal
determination from EPA (or the state, if the state is authorized for
this provision) that its hazardous secondary material is not discarded
and therefore is not a solid waste. The procedure allows EPA or the
authorized state to take into account the particular fact pattern of
the reclamation operation to determine that the hazardous secondary
material in question is not a solid waste.
    The determination is available to applicants who demonstrate (1)
that their hazardous secondary materials are reclaimed in a continuous
industrial process, or (2) that the materials are indistinguishable in
all relevant aspects from a product or intermediate.
    As discussed earlier, court decisions have made it clear that
hazardous secondary materials reclaimed in a continuous industrial
process are not discarded and, therefore, are not solid waste. As
discussed in the March 2007 supplemental proposal, EPA believes that
the generator-controlled exclusion also excludes from the definition of
solid waste hazardous secondary materials recycled in a continuous
industrial process (72 FR 14202). In effect, hazardous secondary
materials reclaimed in a continuous process are a subset of the
hazardous secondary materials reclaimed under the control of the
generator that are excluded under today's rule.
    However, EPA also recognized in the March 2007 supplemental
proposal that production processes can vary widely from industry to
industry. Thus, in some cases, EPA may need to evaluate case-specific
fact patterns to determine whether an individual hazardous secondary
material is reclaimed in a continuous industrial process, and therefore
not a solid waste.\3\ EPA continues to believe that this is best done
through a case-by-case procedure and is, therefore, finalizing the non-
waste determination process today.
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    \3\ See, for example the ABR decision, where the Court
acknowledged that the term ``discard'' could be ``ambiguous as
applied to some situations, but not as applied to others,'' and
particularly cited the difficulty in examining the details of the
many processes in the mineral processing industry (208 F.3d at
1056). While the court overturned EPA's regulations for casting too
wide a net over continuous industrial processes, it acknowledged
that there are a large number of processes, some of which may be
continuous and some of which may not. Determining what is a
continuous process in the mineral processing industry, according to
the Court, would require examination of the details of the processes
and does not lend itself, well, to broad abstraction. Specifically,
the Court stated,
    ``Some mineral processing secondary materials covered under the
Phase IV Rule may not proceed directly to an ongoing recycling
process and may be analogous to the sludge in AMC II. The parties
have presented this aspect of the case in broad abstraction,
providing little detail about the many processes throughout the
industry that generate residual material of the sort EPA is
attempting to regulate under RCRA, * * *'' 208 F.3d at 1056.
    In the case of today's final rule, which applies across
industries, there are far larger and more diverse processes. While
EPA believes it is establishing a reasonable set of principles, they
must still be applied to the details of the industrial processes in
question.

    In addition to ruling that hazardous secondary materials recycled
within a continuous industrial process are not discarded and therefore
not solid waste, the courts have also said that hazardous secondary
materials destined for recycling in another industry are not
automatically discarded. In the Safe Food decision, the Court stated,
``[n]obody questions that virgin * * * feedstocks are products rather
than wastes. Once one accepts that premise, it seems eminently
reasonable to treat [recycled] materials that are indistinguishable in
the relevant respects as products as well'' (350 F.3d at 1269). In Safe
Food, the court accepted EPA's determination that the ``relevant
respects'' were that ``market participants treat the * * * materials
more like valuable products rather than like negatively-valued wastes
managing them in ways inconsistent with discard, and that the
fertilizers derived from these recycled feedstocks are chemically
indistinguishable from analogous commercial products made from virgin
materials.'' Id. As a result, EPA recognized in the March 2007
supplemental proposal, and continues to believe today, that there may
be some instances that would benefit from a non-waste determination (72
FR 14203). Thus, we are also finalizing the non-waste determination
process for hazardous secondary materials indistinguishable in all
relevant aspects from a product or intermediate.

VI. When Will the Final Rules Become Effective?

    This final rule is effective on December 29, 2008. Section 3010(b)
of RCRA allows EPA to promulgate a rule with a period for the effective
date shorter than six months where the Administrator finds that the
regulated community does not need additional time to come into
compliance with the rule. This rule does not impose any requirements on
the regulated

community; rather, the rule provides flexibility in the regulations
with which the regulatory community is required to comply. The Agency
finds that the regulatory community does not need six months to come
into compliance.

VII. Exclusion for Hazardous Secondary Materials That Are Legitimately
Reclaimed Under the Control of the Generator

A. What Is the Purpose of This Exclusion?

    Sections 261.2(a)(2)(ii) and 261.4(a)(23), being finalized today,
excludes from the definition of solid waste those hazardous secondary
materials which remain under the control of the generator when
legitimately reclaimed. By maintaining control over, and potential
liability for, the hazardous secondary materials and the reclamation
process, the generator ensures that such materials have not been
discarded. When reclaimed under the control of the generator, the
hazardous secondary materials are being treated as a valuable commodity
rather than a waste. However, if such hazardous secondary materials are
released into the environment and are not recovered immediately, they
have been discarded and the generator is subject to all applicable
federal and state regulations, as well as applicable cleanup
authorities.

B. Scope and Applicability

    EPA is today excluding from the definition of solid waste those
hazardous secondary materials that are legitimately reclaimed under the
control of the generator, provided they are not speculatively
accumulated and they are reclaimed within the United States or its
territories. In addition, the generator must submit a notification of
the exclusion to EPA or the authorized state and the hazardous
secondary material must be contained in the units in which it is
stored. The provision excluding hazardous secondary materials that are
under the control of the generator and that are managed in land-based
units is found at 40 CFR 261.4(a)(23), while the provision excluding
such materials that are managed in non-land-based units is found at 40
CFR 261.2(a)(2)(ii). A land-based unit is defined in 40 CFR 260.10 as
an area where hazardous secondary materials are placed in or on the
land before recycling, but this definition does not include land-based
production units. Examples of land-based units include surface
impoundments and piles.
    The definition of ``hazardous secondary material generated and
reclaimed under the control of the generator'' is finalized in 40 CFR
260.10 and consists of three parts. The first part applies to hazardous
secondary materials generated and legitimately reclaimed at the
generating facility. For purposes of this exclusion, ``generating
facility'' means all contiguous property owned, leased, or otherwise
controlled by the hazardous secondary material generator, and
``hazardous secondary material generator'' means any person whose act
or process produces hazardous secondary materials at the generating
facility. A facility that collects hazardous secondary materials from
other persons (for example, when mercury-containing equipment is
collected through a special collection program) is not the hazardous
secondary material generator of those materials.
    Under this definition, if a generator contracts with a different
company to reclaim hazardous secondary materials at the generator's
facility, either temporarily or permanently, the materials would be
considered under the control of the generator. However, generators
sometimes contract with a second company to collect hazardous secondary
materials at the generating facility and the materials are subsequently
reclaimed at the facility of the second company. In that situation, the
hazardous secondary materials would no longer be considered ``under the
control of the generator'' and would instead be managed under the
exclusion for materials transferred for reclamation.
    The second part of the definition applies to hazardous secondary
materials generated and legitimately reclaimed at different facilities
if the reclaiming facility is controlled by the generator or if a
person as defined in Sec.  260.10 controls both the generator and the
reclaimer. For purposes of this exclusion, ``control'' means the power
to direct the policies of the facility, whether by the ownership of
stock, voting rights, or otherwise, except that contractors who operate
facilities on behalf of a different person as defined in Sec.  260.10
shall not be deemed to ``control'' such facilities. Thus, when a
contractor operates two facilities, each of which is owned by a
different company, hazardous secondary materials generated at the first
facility and reclaimed at the second facility are not considered
``under the control of the generator'' and must use the exclusion for
such materials that are transferred for reclamation.
    Under the definition promulgated in today's final rule, the
generating facility must provide one of two certifications: (1) That
the generating facility will send the indicated hazardous secondary
materials to the reclaiming facility, which is controlled by the
generating facility, and that either the generating facility or the
reclaiming facility has acknowledged full responsibility for the safe
management of such hazardous secondary materials; or (2) that the
generating facility will send the hazardous secondary materials to the
reclaiming facility, that both facilities are under common control, and
that either the generating facility or the reclaiming facility has
acknowledged full responsibility for the safe management of such
hazardous secondary materials. This certification should be made by an
official familiar with the corporate structure of both the generating
and the reclaiming facilities. The certification should be retained at
the site of the generating facility.
    The third part of the definition applies to hazardous secondary
materials that are generated pursuant to a written contract between a
tolling contractor and a toll manufacturer and legitimately reclaimed
by the tolling contractor. For purposes of this exclusion, a tolling
contractor is a person who arranges for the production of a product or
intermediate made from specified unused materials through a written
contract with a toll manufacturer. The toll manufacturer is the person
who produces a product or intermediate made from specified unused
materials pursuant to a written contract with a tolling contractor.
Under today's final rule, the tolling contractor must certify that it
has a written contract with the toll manufacturer to manufacture a
product or intermediate made from specified unused materials, and that
the tolling contractor will reclaim the hazardous secondary materials
generated during the manufacture of the product or intermediate. The
tolling contractor must also certify that it retains ownership of, and
liability for, the hazardous secondary materials that are generated
during the course of the manufacture, including any releases of
hazardous secondary materials that occur during the manufacturing
process at the toll manufacturer's facility. This certification should
be made by an official familiar with the terms of the written contract
and should be retained at the site of the tolling contractor.

C. Restrictions and Requirements

    Hazardous secondary materials must be contained. The regulations at
40 CFR 261.2(a)(2)(ii) and 40 CFR 261.4(a)(23) apply to hazardous
secondary materials that are generated and legitimately reclaimed under
the control of the generator in the United States or its

territories. Under these provisions, the hazardous secondary materials
must be contained, whether they are stored in land-based units or non-
land-based units. Generally, such material is ``contained'' if it is
placed in a unit that controls the movement of the hazardous secondary
material out of the unit and into the environment. These restrictions
support EPA's determination that materials managed in this manner are
not discarded.
    In the event of a release from a unit to the environment, the
hazardous secondary materials that remain in the unit may or may not
meet the terms of the exclusion. They would be considered solid wastes
if they are not managed as a valuable raw material, intermediate, or
product, and as a result, a ``significant'' release of hazardous
secondary materials from the unit to the environment were to take place
and the materials were not immediately recovered. If such a significant
release were to occur, the hazardous secondary materials remaining in
the unit would be considered solid and hazardous wastes and the unit
would be subject to the appropriate hazardous waste regulations. For
example, an acidic hazardous secondary material undergoing reclamation
could be stored in a tank that experienced a failure. A facility might
fail to monitor the structural integrity of the tank, as most product
tanks are monitored, or the tank might not be constructed to contain
acidic hazardous secondary materials, causing a significant release of
such materials into the environment that is not immediately recovered.
The unit itself would consequently be considered a hazardous waste
management unit because the hazardous secondary materials were not
being managed as a valuable raw material, intermediate, or product, as
evidenced by the failure to monitor it for structural integrity,
resulting in the release. Thus, the unit and any remaining waste would
be subject to Subtitle C controls because the hazardous secondary
materials in the unit have been discarded. In addition, any of the
released materials that were not immediately recovered would also be
considered discarded and, if hazardous, subject to appropriate federal
or state regulations and applicable authorities. Thus, to be excluded
from the definition of solid waste, the facility has an obligation to
manage the material as it would any raw material, intermediate or
product because of its value. This includes, for example, operating and
maintaining storage units in the same manner as product units. In the
above example, whether by mismanagement of the hazardous secondary
materials or by storing acidic materials in a tank not constructed to
handle them or because of the failure to monitor the structural
integrity of the unit, the result is that the unit would come under
Subtitle C regulation.
    Conversely, a tank or a surface impoundment in good condition may
experience small releases resulting from normal operations of the
facility. Sometimes a material may escape from primary containment and
may be captured by secondary containment or some other mechanism that
would prevent the material from being released to the environment or
would allow immediate recovery of the material. In that case, the unit
would retain its exclusion from RCRA hazardous waste regulation and the
hazardous secondary materials in the unit would still be excluded from
the definition of solid waste, even though any such materials that had
been released would be considered discarded if not immediately
recovered and would be subject to appropriate regulation. One specific
example of ``contained'' hazardous secondary materials would be furnace
bricks collected from production units and stored on the ground in
walled bins before being used as feedstocks in the metals production
process. If there were very small releases from the walled bins due to
precipitation runoff, such releases would not cause the storage bins to
be subject to Subtitle C controls.
    It should be noted that a ``significant'' release is not
necessarily large in volume. Such a release could include an
unaddressed small release to the environment from a unit that, if
allowed to continue over time, could cause significant damage. Any one
release may not be significant in terms of volume. However, if the
cause of such a release remains unaddressed over time and hazardous
secondary materials are managed in such a way that the release is
likely to continue, the materials in the unit would not be contained.
For example, a rusting tank or containers that are deteriorating may
have a slow leak that, if unaddressed, could, over time, cause a
significant environmental impact. Similarly, a surface impoundment with
a slow, unaddressed leak to groundwater could result, over time, in
significant damage. Another example would be a large pile of lead-
contaminated finely ground dust without any provisions to prevent wind
dispersal of the dust. Such releases, if unaddressed over time and
likely to continue, would mean that the hazardous secondary materials
remaining in the unit were not being managed as a valuable raw
material, intermediate, or product and that the materials had been
discarded. As a result, the hazardous secondary materials in the unit
would be hazardous wastes and these units would be subject to the RCRA
hazardous waste regulations.
    Speculative accumulation. In addition to the containment provision,
hazardous secondary materials that are generated and legitimately
reclaimed under the control of the generator are subject to the
speculative accumulation provisions of 40 CFR 261.1(c)(8). If these
materials are speculatively accumulated, they are considered discarded.
EPA did not propose changes to the speculative accumulation provisions
in its March 26, 2007 proposal.
    Legitimate Recycling. Under this exclusion, hazardous secondary
materials under the control of the generator must be legitimately
reclaimed, as specified under 40 CFR 260.43. Legitimate recycling must
involve a hazardous secondary material that provides a useful
contribution to the recycling process or product and the recycling
process must produce a valuable product or intermediate. In addition,
as part of a legitimacy determination, persons must consider whether
the hazardous secondary material is managed as a valuable product and
must consider the levels of toxics in the product of the recycling
process as compared to analogous products made from virgin materials.
The details of the legitimacy provision are discussed in section IX of
this preamble.
    Notification. Under today's rule, hazardous secondary material
generators, tolling contractors, toll manufacturers, and reclaimers
(where the generator and reclaimer are part of the same company, but
located at different facilities) managing hazardous secondary materials
reclaimed under the control of the generator are required to submit a
notification prior to operating under this exclusion and by March 1 of
each even numbered year thereafter to the EPA Regional Administrator
using EPA Form 8700-12. In states authorized by EPA to administer the
RCRA Subtitle C hazardous waste program, notifications may be sent to
the state Director. The notice must include:
     The name, address and EPA ID number (if applicable) of the
facility;
     The name and telephone number of a contact person;
     The NAICS code of the facility;
     The exclusion under which the hazardous secondary
materials will be managed (e.g., 40 CFR 261.2(a)(2(ii)

and/or 40 CFR 261.4(a)(23) for hazardous secondary materials managed in
a land-based unit);
     When the facility expects to begin managing the hazardous
secondary materials in accordance with the exclusion;
     A list of hazardous secondary materials that will be
managed according to the exclusion (reported as the EPA hazardous waste
numbers that would apply if the hazardous secondary materials were
managed as hazardous waste);
     For each hazardous secondary material, whether the
material, or any portion thereof, will be managed in a land-based unit;
     The quantity of each hazardous secondary material to be
managed annually; and
     The certification (included in EPA Form 8700-12) signed
and dated by an authorized representative of the facility.
    Generators and reclaimers are required to notify on a per facility
basis. In other words, facilities managing hazardous secondary
materials will need to submit a notification form in accordance with
the exclusion. One notification cannot cover two or more facilities.
Furthermore, each facility need only use one notification form to list
all of the hazardous secondary materials to be managed under the
exclusion (i.e., facilities need not file separate notifications for
each hazardous secondary material).
    We are also requiring facilities that stop managing hazardous
secondary materials in accordance with the exclusion to notify the
Regional Administrator within 30 days using the same EPA Form 8700-12.
Notification in this instance serves two objectives: (1) It allows
states to follow up with the facility to verify that the hazardous
secondary material has not been discarded; and (2) it maintains the
usability of the database to enable states to monitor compliance and,
for today's transfer-based exclusion, to assist generators with
performing reasonable efforts on potential reclaimers. We consider a
facility to have `stopped' managing hazardous secondary materials when
a facility no longer generates, manages and/or reclaims hazardous
secondary materials under the exclusion and does not expect to manage
any amount of hazardous secondary material under the exclusion for at
least one year. This includes if the facility chooses to manage the
hazardous secondary materials as hazardous waste or the facility
chooses to temporarily suspend management of hazardous secondary
materials and does not expect to manage any amount of hazardous
secondary materials for at least one year. For example, a facility that
has previously notified it is managing hazardous secondary materials
under the exclusion, but then subsequently chooses to stop managing all
hazardous secondary materials for a period of at least one year, must
notify the Regional Administrator. However, if this same facility only
stopped managing one type of hazardous secondary material (but
continued to manage another type of hazardous secondary material under
the exclusion) it would not need to notify, and could just update its
list of hazardous secondary materials during the next periodic re-
notification submitted every two years. Additionally, if a reclaimer or
intermediate facility managing hazardous secondary materials under the
transfer-based exclusion requests release of financial assurance under
40 CFR 261.143(h), it is clear the facility has `stopped' managing
hazardous secondary materials, and, therefore, must notify the Regional
Administrator (for additional clarification, notification does not
`trigger' the process for releasing financial assurance; instead, a
facility wishing to be released from financial assurance obligations
must notify it has `stopped' managing hazardous secondary materials).
Of course, a facility could certainly choose to begin managing
hazardous secondary materials again and would simply have to submit a
notification in compliance with 40 CFR 260.42.
    We note that the requirement to provide this notification is not a
condition of the exclusion. Thus, failure to comply with the
requirement constitutes a violation of RCRA, but does not affect the
excluded status of the hazardous secondary materials.
    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 hazardous secondary materials under section
3007 of RCRA and to ensure that the terms of the exclusions are being
met by generators and reclaimers. EPA further believes that RCRA
section 3007 allows us to gather information about any material when we
have reason to believe that it 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 finalized today
could substantially affect the universe of facilities in the Subtitle C
system, we believe the notifications are appropriate.
    The intent of this notification requirement is to provide basic
information to the regulatory agencies about who will be managing
hazardous secondary materials under the exclusion. The specific
information included in today's notification requirement will enable
regulatory agencies to monitor compliance adequately and to ensure
hazardous secondary materials are managed according to the exclusion
and not discarded. For example, in the notification, EPA requires
facilities to include the quantity of hazardous secondary materials
that will be managed according to the exclusion and whether certain
types of hazardous secondary materials will be managed in land-based
units. This information can be used to assist RCRA inspectors in
determining which facilities may warrant greater oversight and provides
a basis for setting enforcement priorities. Furthermore, requiring
facilities to notify when they have stopped managing hazardous
secondary materials allows states to follow-up and ensure that
hazardous secondary materials were not discarded. Notification
information is collected in EPA's RCRAInfo database, which is the
national repository of all RCRA Subtitle C site identification
information, whether collected by a state authority or EPA. EPA
provides public access to this information through EPA's public Web
site at http://www.epa.gov/enviro/html/rcris/ (or other successor Web
site).
    This notification requirement is the same as the notification
requirement for today's transfer-based exclusion found in section
VIII.C. of today's preamble. Sending to an intermediate facility. We
note that under this exclusion, hazardous secondary materials may not
be sent to an intermediate facility as defined in 40 CFR 260.10 (i.e.,
a facility, other than a generator or reclaimer, that stores hazardous
secondary materials for more than 10 days). If hazardous secondary
materials are sent to intermediate facilities, they would not meet the
definition of hazardous secondary materials reclaimed under the control
of the generator, and they are subject to the conditions of the
transfer-based exclusion, discussed below.

D. Terminating the Exclusion

    Units managing excluded hazardous secondary materials are not
subject to the closure regulations in 40 CFR parts 264 and 265 subpart
G. However, when the use of these units is ultimately discontinued, all
owners and operators must manage any remaining hazardous secondary
materials that are not reclaimed and remove or decontaminate all
hazardous residues and contaminated containment system components,
equipment structures, and soils. These hazardous secondary materials
and residues, if no longer intended for reclamation, would also no
longer be eligible for the exclusion (which only applies to materials
that will be reclaimed). Failure to remove these materials within a
reasonable time frame after operations cease could cause the facility
to become subject to the full Subtitle C requirements if the Agency
determines that recycling is no longer feasible. While this final rule
does not set a specific time frame for these activities, the Agency
believes that they typically should be completed within the time frames
established for analogous activities. For example, the requirements for
product tanks under 40 CFR 261.4(c) allow 90 days for removal of
hazardous material after the unit ceases to be operated for
manufacturing. This time frame should serve as a guideline for
regulators in determining on a case-by-case basis whether owners and
operators have completed these activities within a reasonable time
frame. In any event, these hazardous secondary materials remain subject
to the speculative accumulation restrictions in 40 CFR 261.1(a)(8),
which includes both a time limitation and a requirement that the
facility be able to show there is a feasible means of recycling the
hazardous secondary material.

E. Enforcement

    Under today's rule, hazardous secondary materials generated and
legitimately reclaimed within the United States under the control of
the generator are excluded from RCRA Subtitle C regulation, but are
subject to certain restrictions, principally speculative accumulation,
legitimate recycling, and containment. Persons that handle these
hazardous secondary materials are responsible for maintaining the
exclusion by ensuring that these restrictions are met. If the hazardous
secondary materials are not managed pursuant to these restrictions,
they are not 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 their point of
generation. Persons operating under the exclusion are also required to
notify EPA or the authorized state.
    Persons taking advantage of today's exclusion that fail to meet the
requirements may be subject to an enforcement action. EPA could choose
to bring an enforcement action under RCRA section 3008(a) for
violations of the hazardous waste requirements occurring from the time
the hazardous secondary materials are generated through the time they
are ultimately disposed of or reclaimed. The Agency affirms in this
preamble that Sec.  261.2(f) applies to claims that hazardous secondary
materials are not solid waste because they are being legitimately
recycled. Respondents in enforcement cases should be prepared to
demonstrate that they meet the terms of the exclusion or exemption,
which includes demonstrating that the recycling is legitimate.
Appropriate documentation must be provided to the enforcing agency to
demonstrate that the material is not a solid waste or is exempt from
regulation. In addition, the recycler of the hazardous secondary
materials should be prepared to show they have the necessary equipment
to perform the recycling operation. Furthermore, any release of the
hazardous secondary materials to the environment that is not
immediately cleaned up would be considered discarded and, thus, the
hazardous secondary materials that were released would be a solid waste
and potentially subject to the RCRA hazardous waste regulations.
    The Agency believes that this approach provides hazardous secondary
material generators with an incentive to handle or (in the case of
tolling) to ensure that their contractors handle the hazardous
secondary materials pursuant to the requirements. It also encourages
each hazardous secondary material generator to take appropriate steps
to ensure that such materials are properly handled and legitimately
reclaimed 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 and cleanup authorities.

VIII. Exclusion for Hazardous Secondary Materials That Are Transferred
for the Purpose of Legitimate Reclamation

    Today, EPA is also finalizing 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 (i.e., ``transfer-based exclusion''), provided that
certain conditions are met. Reclamation that conforms to these
conditions would not involve discard, and therefore the hazardous
secondary materials would not be regulated as solid waste. As with all
recycling-related exclusions and exemptions, such excluded hazardous
secondary materials would also need to be recycled legitimately. For
further discussion on how the transfer-based exclusion relates to the
concept of discard, see section V.B. of this preamble.
    The conditions that must be met for this exclusion are based on our
analysis of how successful third-party recycling currently operates
(and, conversely, how unsuccessful third-party recycling practices can
result in recyclable hazardous secondary materials being discarded),
and are supported by the information contained in the rulemaking
record, including the recycling studies found in the public docket for
today's rulemaking and discussed previously in section III.D. of
today's preamble and in the preamble to the March 2007 supplemental
proposal at 72 FR 14178-14183. For example, the successful recycling
study indicates that many responsible generators examine the recycler's
technical capabilities, business viability, environmental track record,
and other relevant questions before sending hazardous secondary
materials for recycling. Currently, 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 the release
of material to the environment. 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 materials recycling. Thus, we
believe that there is sufficient basis for the Agency to place certain
conditions on this exclusion for the generator to determine that the
hazardous secondary material is not discarded, particularly since we
expect that this rulemaking could encourage

some companies that are currently not involved with hazardous secondary
materials recycling to enter the business.

A. What Is the Purpose of This Exclusion?

    In finalizing this conditional exclusion, EPA's objectives are to
encourage the reclamation of hazardous secondary materials and reduce
unnecessary regulatory compliance costs to industry, while still
maintaining protection of human health and the environment. After
considering the entire rulemaking record, including comments submitted
by the public, we continue to believe that this exclusion is a
workable, common-sense approach to meeting these objectives; is well
supported by the record for this rulemaking, including the recycling
studies that EPA has conducted; and, in important ways, reflects
current good industry practices that are used by responsible generators
for recycling hazardous secondary materials.

B. Scope and Applicability

    The conditional exclusion for the transfer-based approach applies
to hazardous secondary materials that are currently regulated as
hazardous wastes because their recycling involves reclamation--
specifically, spent materials, listed sludges, and listed by-products.
It would not be available for hazardous secondary 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 conditional exclusion also does not apply to materials that are
currently excluded from the definition of solid waste according to
other, existing provisions of 40 CFR part 261. For example, the
exclusion for broken cathode ray tubes requires them to be transported
in closed containers per 40 CFR 261.4(a)(22). Today's exclusion does
not supersede or otherwise affect these other exclusions, and such
hazardous secondary materials will need to be managed in accordance
with those existing exclusions. For a discussion of how this exclusion
relates to particular existing exclusions and additional details
involving these exclusions, see section XI of today's preamble.
    This exclusion is available to hazardous secondary material
generators, transporters, intermediate facilities, or reclaimers. In
the March 2007 supplemental proposal, EPA proposed that the hazardous
secondary material must be transferred directly from the generator to
the reclaimer and not be handled by anyone else other than a
transporter. Thus, as proposed, a generator that wished to maintain the
excluded status of its hazardous secondary materials would not be able
to ship those materials to a middleman, such as a broker. We said that
we believed that a generator who ships materials to a middleman, such
as a broker typically does not know who will ultimately manage and
reclaim them, or how they will be reclaimed (72 FR 14189). However, we
requested comment on allowing middlemen to participate in the
exclusion.
    Comments on the proposal disputed the assumption that the generator
does not know the final destination when shipping to an intermediate
facility, saying, that in certain cases, the generator works with an
intermediate facility to choose the reclamation facility and the final
destination is arranged by contract before the hazardous secondary
materials are shipped. Commenters also asserted that such arrangements
allow for consolidation of shipments, making recycling economical for
small businesses who generate hazardous secondary materials.
    EPA agrees with the comments that some types of intermediate
facilities could participate in the exclusion, while still allowing the
hazardous secondary material generator to perform reasonable efforts to
ensure that the hazardous secondary material is properly and
legitimately recycled. Thus, in the final rule, EPA has determined that
intermediate facilities will be allowed under the transfer-based
exclusion. However, to limit the exclusion to those intermediate
facilities where discard will not occur, if the hazardous secondary
material will be passing through an intermediate facility, the
hazardous secondary material generator must make contractual
arrangements with the intermediate facility to ensure that the
hazardous secondary material is sent on to the reclamation facility or
facilities identified by the generator and must perform reasonable
efforts on the intermediate facility, as well as on the reclamation
facility. Also, the intermediate facility must send the hazardous
secondary material to the reclaimer(s) designated by the generator.
    In addition, the intermediate facility must meet the same
conditions as the reclamation facility for the same reasons the
reclamation facility must meet them. Section VIII.C.4. below discusses
additional details as to why these conditions need to apply to the
reclamation facilities and this reasoning applies equally to
intermediate facilities involved in the process. Of the 208 damage
cases in the environmental problems study, 45 (22%) cases were from
intermediate facilities. Therefore, EPA believes the record for
requiring the conditions for the reclamation facility also supports
promulgation of the same conditions for intermediate facilities.
    In addition, in the March 2007 supplemental proposal, the Agency
recognized that, in some cases, recycling of an excluded hazardous
secondary material may involve more than one reclamation step. For
example, a recyclable hazardous secondary material, such as an
electroplating secondary material, might have a relatively high
moisture content and a somewhat variable chemical composition. Such
materials might need to be dried and blended to a suitable, consistent
specification before they are amenable to a ``final'' reclamation
process (e.g., metals smelting). In this example, the two different
reclamation processes might be conducted by different companies and/or
at different facilities. The Agency continues to see no reason to