if the person accumulating it cannot show that the material is
potentially recyclable; further, the person accumulating the hazardous
secondary material must show that during a calendar year (beginning
January 1) the amount of such material that is recycled, or transferred
to a different site for recycling, must equal at least 75% by weight or
volume of the amount of that material at the beginning of the period.
This provision already applies to hazardous secondary materials that are
not otherwise considered to be wastes when recycled, such as materials
used as ingredients or commercial product substitutes, materials that
are recycled in a closed-loop production process, or unlisted sludges
and byproducts being reclaimed.

A second restriction or pre-condition specified in the proposed
exclusion is that excluded hazardous secondary materials would need to
be transferred directly from the generator to the reclaimer, and not be
handled by anyone else other than a transporter.  Thus, brokers or other
middlemen would not be allowed to own or otherwise handle excluded
hazardous secondary materials.  This is because a key condition of this
exclusion would require the generator to make "reasonable efforts"
Thus, a generator who wished to maintain the excluded status of his
hazardous secondary materials would not be able to ship those materials
to a "middleman," such as a broker.  This restriction is consistent with
a  premise underlying this proposed exclusion--that is, in order to
ensure that such excludedunregulated materials will not be safely and
legitimately recycled.  These reasonable efforts in effect require the
generator todiscarded, generators should have knowledgea reasonable
understanding of who will reclaim the hazardous secondary material,be
reclaiming the materials and how itthey will be managed and reclaimed,
and otherwise legitimately recycled.  However,a reasonable assurance
that the recycling practice is safe and legitimate (see the following
discussion of the proposed condition for "reasonable efforts").  A
generator who ships materials to a middleman such as a broker typically
does not know who will ultimately manage and reclaim them, or  how they
will be reclaimed.  Thus, we believe that this restriction helps ensure
that materials that become unregulated under the terms of this
conditional exclusion will not be discarded by the generator.  The
Agency requests comment on this aspect of the proposed exclusion.

The Agency recognizes that, in some cases, recycling of an excluded
hazardous secondary material may involve more than one reclamation step.
 For example, a recyclable hazardous secondary material such as an
electroplating waste might have a relatively high moisture content, and
a somewhat variable chemical composition.  Such materials might thus
need to be dried and blended to a suitable, consistent specification
before they are amenable to a "final" reclamation process (e.g., metals
smelting).  In this example, the two different reclamation processes
might be conducted by different companies and/or at different
facilities.  The Agency sees no reason to discourage this kind of
recycling, and we are thus proposing that today's transfer-based
exclusion would be available for materials that are recycled by means of
one or more reclamation processes.  Note, however, that the condition
for generators to make "reasonable efforts" under the terms of this
exclusion would apply in the same way, regardless of how many
reclamation steps were involved with recycling of an excluded material.
In other words, if the excluded hazardous secondary material were
reclaimed by more than one facility or company, the generator of such
material would need to make "reasonable efforts" to examine each
facility or company in order to ensure that the hazardous secondary
materials will be safely and legitimately recycled.  We believe that
this is a consistent application of the idea of requiring "reasonable
efforts" as a condition of this proposed exclusion; where recycling of a
hazardous secondary material involves more than one reclamation step at
more than one facility, generators should nevertheless be well informed
as to how the materials will be reclaimed, and by whom, throughout the
recycling process.

The third specified pre-condition is that, for all hazardous secondary
materials that would be excluded under 40 CFR 261.4(a)(24), generators
and reclaimers that are currently subject to the hazardous waste
regulations would need to submit a one-time notice to EPA or the
authorized state.  The notice would need to identify the name, address,
and EPA ID number (if applicable) of the generator or reclaimer, the
name and phone number of a contact person, the type of hazardous
secondary material that would be managed according to the exclusion, and
when the hazardous secondary materials would begin to be managed in
accordance with the exclusion.  A revised notice would be required to be
submitted in the event of a change to the name, address, or EPA ID
number of the generator or reclaimer or a change in the type of material
recycled.

The intent of this proposed notification requirement is to provide basic
information to regulatory agencies about who would be managing hazardous
secondary materials under the exclusion, and the types of materials that
would be recycled.  We believe our authority to request such information
is inherent in our authority to determine whether a material is
discarded, and we consider this to be the minimum information needed to
enable credible evaluation of the status of a material under section
3007 of RCRA.  We also note after EPA promulgates regulations listing a
material as a hazardous waste or identifying it by its characteristics,
section 3010 of RCRA requires generators of such materials to submit a
notification to EPA within 90 days.  Since the changes proposed today
could substantially affect this universe of facilities in the Subtitle C
system, we believe the notifications are appropriate and useful.

The Agency requests comment on alternative notification requirements for
this exclusion.  One such alternative would be to require that more
detailed information be provided in the notice, such as identification
of the reclamation facility to which it will be shipped, how it will be
stored at the generator's facility, and/or a detailed characterization
of the hazardous secondary material and of the recycling process.

Another option being considered with regard to notification would be a
requirement that it be signed by an authorized representative.  In
addition, we are considering the option of requiring persons using this
exclusion to submit periodic (e.g., annual) reports detailing their
recycling activities, to provide information on the types of volumes of
hazardous secondary materials recycled, to whom the materials were sent
for reclamation, the types of products that were produced from the
reclamation processes, or other relevant information.  We are also
considering (and soliciting comment on) the option of requiring the
information to be submitted in a particular format, or submitted
electronically, and whether, in lieu of sending it to the implementing
agency, it should be maintained at the facility.

EPA notes that the information discussed above can be difficult for
regulatory authorities to retrieve and use if it is not placed into a
data management system.  Similarly, using different notification
procedures and data management systems for different regulated materials
can be confusing and time-consuming for the regulated community.  For
these reasons, the Agency requests comment on whether the Subtitle C
Site Identification Form (EPA Form 8700-12) or the comparable state form
should be used to provide the information required in this supplemental
proposal.  This form is used to enter data into the RCRAInfo data
management system managed by the states and EPA.  To implement use of
this form for the notification requirements proposed today, we would
revise the form to include a section for materials covered by this
exclusion, with spaces for the appropriate data elements.

C. Conditions

Today's proposed conditional exclusion for transferred materials
specifies conditions for generators, as well as the reclaimers to whom
generators transfer their hazardous secondary materials.

1. Conditions for generators

In addition to the three pre-conditions described above, EPA is
proposing that generators who wish to avail themselves of the exclusion
for transferred materials must satisfy two basic conditions:  record
keeping, which includes export notification, and "reasonable efforts,"
which in effect would require the generator to make an assessment of the
reclaimer so as to ensure that the hazardous secondary materials he or
she generates will be recycled legitimately and would allow the Agency
to determine that the materials are not discarded.

Record Keeping.  In order to allow for adequate oversight of generators
who manage hazardous secondary materials in accordance with this
exclusion, we are proposing that such generators maintain for a period
of three years certain records that document shipments (i.e., transfers)
of excluded hazardous secondary materials to reclamation facilities.
Specifically, the generator would need to maintain, for each shipment of
excluded material, documentation of when the shipment occurred, who the
transporter was, the name and address of the destination reclamation
facility, confirmation of the receipt of the hazardous secondary
material by the reclaimer, and the type and quantity of the hazardous
secondary material in the shipment.  We are not proposing to prescribe
any specific template for these records, or require that they be
maintained in a particular format (e.g., paper vs. electronic records).

It is our understanding, supported by the information in the study of
current good recycling practices, that responsible generators who send
hazardous secondary materials to commercial recycling facilitiesare
concerned about potential environmental liability maintain these types
of records as a routine business matter.  Thus, we expect that this
record keeping condition will impose a minimal additional paperwork
burden for them.those facilities.  We also believe that this
recordkeeping condition will help to clarify what "appropriate
documentation" the generator would need to provide in the event of some
type of RCRA enforcement action (see 40 CFR 261.2(f)).  This proposed
condition is also very similar to the record-keeping condition that
currently applies to excluded hazardous secondary materials used to make
zinc fertilizer (see 40 CFR 261.4(a)(20)(ii)(D)).  We are also
requesting comment on whether to require the generator to maintain a
copy of a confirmation of the receipt of the hazardous secondary
material by the reclaimer.  Based on our conversations with commercial
recycling facilities, they routinely issue receipt confirmations or
“recycling certificates” as a way of helping the generator verify
that the hazardous secondary material reached its intended destination.
The Agency solicits comment on this proposed condition for record
keeping.

The Agency also is proposing today a condition that would require
generators to maintain at the generating facility for no less than three
years of documentation showing the reasonable efforts made before
transferring the hazardous secondary materials to the reclamation
facility.  Such records would presumably include copies of audit
reports, and other relevant information that was used as the basis for
the generator’s determination that the reclamation facilities to which
the hazardous secondary materials were sent would legitimately recycle
the hazardous secondary material in a protective manner.

In addition, we are proposing that for each reclamation facility to
which the generator transferred excluded hazardous secondary materials,
this documentation also include a certification signed and dated by an
authorized representative, including whether retention of the generator
company, which states the following:

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

The reason for requiring these certifications is that we believe there
is some potential for abuse of this condition of requiring documentation
of reasonable efforts, and requiring such a certification is a
reasonable precaution against such abuses.  To illustrate, it is
possible that a generator could try to document his reasonable efforts
with an audit report that he knew to be well outdated or that otherwise
contained inaccurate information.  Such cases would not, in our view,
constitute a "reasonable effort."  The Agency requests comment on this
proposed condition.

We considered additional record keeping conditions for generators who
would operate under this proposed exclusion, but are not proposing them
today, primarily because we are committed to limiting such conditions to
those we believe are essential to allowing proper oversight of hazardous
secondary materials that are managed outside of the existing RCRA
hazardous waste regulatory system.  Examples of such additional
conditions would include more thorough characterization of the materials
that are transferred for reclamation, the types of units in which they
were accumulated at the generating facility, how they were transported
(e.g., by truck), whether or not the hazardous secondary materials were
transported as a DOT hazardous material, the date the hazardous
secondary  materials were generated, the quantity of hazardous secondary
materials generated, and other similar conditions.  We request comment
on whether such additional record keeping conditions or others not
mentioned here are warranted for generators who would manage materials
under this proposed exclusion.

Similarly, under today’s supplemental proposal, exporters of hazardous
secondary materials that are excluded under 40 CFR 261.4(a)(24) would be
required to notify the receiving country through EPA and obtain consent
from that country before shipment of the hazardous secondary materials
could take place (see 40 CFR 261.4(a)(25)).  This requirement would
serve as a notification to the receiving country so that it can ensure
that the hazardous secondary materials are recycled rather than
disposed. As an additional benefit, the receiving country has the
opportunity to consent or not based on its analysis of whether the
recycling facility can properly recycle the hazardous secondary
materials and manage process residuals in an environmentally sound
manner within its borders. EPA believes that sections 2002, 3002, 3007,
and 3017 of RCRA provide authority to impose this condition because such
notice and consent help determine that the materials are not discarded.

Under today’s supplemental proposal, hazardous secondary materials
that are exported from the United States and recycled at a reclamation
facility located in a foreign country are not solid wastes, provided
that the exporter complies with the requirements of 40 CFR
261.4(a)(24)(i)-(iv) and notifies EPA and obtains a subsequent written
consent forwarded by EPA from the receiving country.  The provisions
that we are proposing today in 40 CFR 261.4(a)(25) require exporters to
notify EPA of an intended export 60 days before the initial shipment is
intended to be shipped off-site.  The notification may cover export
activities extending over a 12 month or shorter period.  The
notification must include contact information about the exporter and the
recycler, including any alternate recycler.  The notification must
include a description of the manner in which the hazardous secondary
materials will be recycled. It must also include the frequency and rate
at which they will be exported, the period of time over which they will
be exported, the means of transport, the estimated total quantity of
hazardous secondary materials to be exported, and information about
transit countries through which such materials will pass. Notifications
must be sent to EPA’s Office of Enforcement and Compliance Assurance,
which will notify the receiving country and any transit countries. When
the receiving country consents in writing to the receipt of the
hazardous secondary materials, EPA will forward the written consent to
the exporter. The exporter may proceed with shipment only after it has
received a copy of the written consent from EPA.  If the receiving
country does not consent to receipt of the hazardous secondary materials
or withdraws a prior consent, EPA will notify the exporter in writing.
EPA also will notify the exporter of any responses from transit
countries.  Exporters must keep copies of notifications and consents for
a period of three years following receipt of the consent.  These
procedures are similar to those required for exports of hazardous waste
under 40 CFR Subpart E, except for the use of the hazardous waste
manifest.

Reasonable Efforts.  Today’s supplemental proposal would require
generators to make "reasonable efforts" to ensure that their materials
are safely and legitimately recycled, before shipping or otherwise
transferring them to a reclamation facility.  In effect, this would
require the generator to perform a type of "environmental review" due
diligence" of the reclaimer in advance of transferring the hazardous
secondary materials.   We believe that today's proposed condition for
reasonable efforts reflects, and would perhaps reinforce, the methods,
such as audits, that responsiblemany generators of hazardous secondary
materials now routinely use to maintain their commitment to sound
environmental stewardship, and to minimize their potential regulatory
and liability exposures.

Auditing recyclers before shipping hazardous secondary materials to them
has become an appropriate practice among certain Some generators,
particularly those who generate relatively large volumes of hazardous
secondary materials, audit recyclers before shipping such materials.  to
them. EPA's study of good practices for recycling quotes one large
recycling and disposal vendor as stating that of its new customers,
sixty percent of the large customers and thirty to fifty percent of the
smaller customers now perform audits on them. Under current practices,
such audits can involve a site visit to the recycling facility, and an
examination of the company's finances, technical capability,
environmental compliance record, and housekeeping practices, and the
products (and the markets for them) that they will make from recycling
the hazardous secondary material..  (Note:  Audits that are currently
conducted may or may not cover all of these areas.)  According to those
interviewed as part of our recycling study, auditing a recycler
typically costs the generator from two to five thousand dollars, and in
some cases more, depending on how thorough the audit is, and whether it
is conducted by the generator's own personnel, or by an outside
consultant.  The study also identified at least one trade association
organization which conducts audits at several hundred recycling and
other waste handling facilities per year, and typically charges its
member companies less than $1000 for a recycling facility audit report.
This organization audits overseas facilities, as well as domestic
recyclers, and re-audits facilities on a more or less ongoing basis.
Membership in this and similar organizations, by spreading the  expense
of conducting audits among a number of companies, gives a generator a
means of reducing the cost of this type of “environmental "due
diligence" ” even further.  Such auditing "consortiums" also reduce
costs for the facilities that are audited, since fewer audits need to be
conducted by individual generators.  Note, however, that third-party
auditors do not generally draw any conclusions based on their audits or
provide a “certification” with respect to reclaimer operations, so
the generator would still be expected to decide if the reclaimer is
acceptable.

Today's proposed condition that addresses "reasonable efforts" is
intended to reflect and capture in a regulatory context how
responsiblemany generators currently inquire and make decisions about
whom they should do business with, and how they manage their potential
liability and regulatory non-compliance risks.  Such efforts would at a
minimum need to address the following questions:

(A) Is the recycler technically capable of reclaiming the hazardous
secondary material, and of managing them safely?

(B) Does the recycler’s compliance history and current practices
indicate a record of, and a continuing commitment to, sound
environmental stewardship?

(C) Is there is a reliable market for the products or intermediaries
that are made from recycling the hazardous secondary material?

(D) Will residuals generated from recycling the Currently, under 40 CFR
262, a generator must make a hazardous waste determination and thus,
already has an obligation to determine whether the waste is subject to
regulation.  EPA believes that to make a parallel determination that
hazardous secondary materials, if any, be managed are not solid wastes
because they are destined for reclamation and are not discarded, the
generator must make a reasonable effort to ensure that the reclaimer
intends to legitimately recycle the material pursuant to 40 CFR 261.2(g)
and not discard it, and that the reclaimer will manage the material in a
manner that is protective of human health and the environment?.

The Agency acknowledges

EPA is also proposing that the four questions that would need to be
addressed by the generator as part of can use any credible evidence
available in making his reasonable efforts are by nature subjective.
Under today’s supplemental proposal, the generator would be required
to maintain documentation of the reasonable efforts made and the ,
including information that was found in making their certification.  The
Agency’s intent is to ensure that the generator conducted appropriate
inquiry as to these questions, as well as other possible
informationgathered by the generator, provided by the reclaimer, and/or
provided by a third party, in deciding who should reclaim their
hazardous secondary materials.  For example, it is possible that a
generator could conductlieu of personally performing an audit, consider
these four questions (and thus, make reasonable efforts) and decide to
ship his excluded materials to a particular reclamation facility where,
due to circumstances beyond the control of the generator, they are
released and cause environmental problems at that facility.  In such
situations, and where the generator’s decision is based on an
objectively reasonable belief that the hazardous secondary materials
would be recycled legitimately and otherwise managed in a manner that is
protective of human health and the environment, the generator would not
have violated the terms of the exclusion.

EPA solicits comment on whether the frequency of periodic updates of the
“reasonable efforts” should be identified in the regulations or
whether that question should be left to individual situations applying
an objectively reasonable belief standard.  Information on industry
standards for facility audits of off-site activities, including how
frequently they are conducted, would be especially helpful.audit.  (In
fact, in some cases, the generator may not be an expert in different
aspects of recycling, and reliable third-party information or judgment
would play an important part in the generator’s conclusion.)  For
example, the generator might hire an independent auditor to review the
operations of a recycler.  Also, the generator might rely on third-party
certifying bodies to provide a reasonable level of confidence that a
recycler would safely manage his materials.  Trade associations might
make available to their members information on specific facilities that
could be used to determine that the facility is safely and legitimately
recycling the hazardous secondary material.  Likewise, a parent
corporation might perform an environmental audit of a recycler, and the
audit could then be used by several of the company’s facilities. In
fact, EPA believes that many reputable third party auditors, and trade
associations that might make available to their members information on
specific facilities, already assemble the types of information that
would be needed for a generator to determine, based on credible
evidence, that the hazardous secondary material is being legitimately
recycled. EPA would encourage this type of pooling of information in
order to reduce the burden and take advantage of specialized technical
expertise.

	This proposed provision requiring reasonable efforts by generators
would only apply to generators who send hazardous secondary materials to
recyclers that are not operating under RCRA Part B permits or interim
status standards.  RCRA permitted facilities and interim status
facilities are already subject to stringent design and operating
standards, must demonstrate financial assurance, are subject to
corrective action requirements in the event of environmental problems,
and are typically given more thorough oversight than facilities without
RCRA Part B permits.  Thus, the Agency believes that permitted and
interim status recycling facilities provide generators with
environmental assurances that would ensure the hazardous secondary
material materials sent to such a facility isare not discarded.  Not
requiring reasonable efforts for generators who ship hazardous secondary
materials to RCRA permitted or interim status recycling facilities would
likely be of particular benefit to relatively smaller volume generators
who may not have the time and moneyresources required to undertake
“reasonable efforts”.   .”

It should be noted that although RCRA permits provide relatively
stringent environmental protections, they are not an absolute guarantee
that environmental problems will always be prevented from occurring at
permitted facilities.  Evidence of this can be found in the results of
the study of environmental problems associated with hazardous secondary
material recycling.  That study found that nine of the 208 damage
incidents occurred at facilities operating under RCRA Part B permits.
At least two of these cases were associated with accidents such as
fires, while others were caused by other factors such as bankruptcy or
permit violations.  In most of these cases, expenditure of public funds
to clean up the environmental problems was not required.

	Other possible

EPA requests comment on whether to require generators to maintain at the
generating facility documentation showing the reasonable efforts made
before transferring the hazardous secondary materials to the reclamation
facility.  Such records would presumably include copies of audit
reports, and/or other relevant information that was used as the basis
for the generator’s determination that the reclamation facilities to
which the hazardous secondary materials were sent would legitimately
recycle the hazardous secondary material in a protective manner.
Requiring specific documentation would help EPA or the authorized state
to determine whether the generator did make reasonable efforts to ensure
that his hazardous secondary material was not discarded.

	In addition, EPA requests comment on whether, as part of the
documentation, the generator should also be required to maintain at the
generating facility a certification statement, signed and dated by an
authorized representative of the generator company, that for each
reclamation facility to which the generator transferred excluded
hazardous secondary materials, that the generator made reasonable
efforts that the hazardous secondary material was legitimately recycled.
 Such certification statement could, for example, be worded as follows:

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

Today's proposed condition for reasonable efforts is in effect a general
standard; we are not proposing specific questions that generators would
need to assess in satisfying this condition of the exclusion.  However,
we acknowledge that specifying in more explicit terms the questions that
should be examined in making such reasonable efforts could provide more
certainty to generators, as well as overseeing agencies.  On the other
hand, more explicit provisions for defining reasonable efforts in this
context could also limit a generator's flexibility.   The Agency
requests comment on whether more specific provisions to define
reasonable efforts for the purpose of this exclusion should be specified
in the final rule.

If EPA were to specify in more explicit terms how generators should
perform reasonable efforts with respect to this regulatory exclusion,
one approach could be to identify specific questions that generators
would need to address in satisfying this condition.  Such questions
would be focused on ensuring that the hazardous secondary material will
not be discarded.  The following are examples of possible questions that
EPA could specify in the final regulatory condition for determining
reasonable efforts, with an explanation of how each question could
potentially assist in determining that the hazardous secondary material
is not discarded.  EPA then outlines two options for how to determine
"reasonable efforts;" the first option would use the broader list of
questions (A through F) and the second option would use a subset of
questions (A and F) that some believe have a more bright-line nature.
EPA requests comment on whether any or all of these questions should be
included in the regulation (including the advantages and disadvantages
of the various questions, as well as of the two options outlined below),
and if there are other questions that should be also be considered.

(A)  Has the reclaimer notified the appropriate authorities pursuant to
§261.4(a)(24)(iii) and does he have financial assurance as required
under §261.4(a)(24)(v)(D)?

(B) Does the reclamation facility have the equipment and trained
personnel to safely recycle the hazardous secondary material?

(C) Are there any unresolved significant violations of environmental
regulations at the reclamation facility, or any formal enforcement
actions taken against the facility in the previous three years for
violations of environmental regulations?  If yes, then the generator
must have credible evidence that the reclaimer will manage the materials
safely.

(D)  Does the material being recycled provide a useful component that
will be reused in the product of the recycling process or aid in the
recycling process itself?

(E) Is the product (or intermediate) of recycling at the reclamation
facility a generally traded commodity meeting applicable specifications?
 If not, is there other available information, such as sales records or
long-term contracts, demonstrating that there is a reliable market for
the product (or intermediate)?  If not, then the generator must have
credible evidence that the recycling at the reclamation facility will
produce a valuable product or intermediate.

(F) Does the reclamation facility have the permits required (if any) to
manage the residuals (if any) generated from reclamation of the excluded
hazardous secondary material?  If not, does the reclaimer have a
contract with an appropriately permitted facility to dispose of the
residuals (if any) generated from the reclamation of the excluded
hazardous secondary material?   If not, then the generator must have
credible evidence that the residuals generated from the recycling of the
excluded secondary hazardous material will be managed in a manner that
is protective of human health and the environment.

The first possible question (A) focuses on whether the recycler has met
two of the requirements he must fulfill before accepting excluded
hazardous secondary materials for reclamation:  notification of the
appropriate regulatory authority that he plans to reclaim excluded
hazardous secondary material (see Section X.B of today’s proposal),
and establishment of financial assurance to cover the costs of managing
any hazardous secondary materials that remain if the facility closes
(see Section X.C.2 of today’s proposal).  If a recycler were found to
have failed to meet these requirements then he will have also failed to
show a good faith effort towards demonstrating that he intends to
recycle the material and not discard it, and will manage the material in
a manner that is not protective of human health and the environment

The second possible question (B) focuses on the technical capability of
the recycler, the most basic of requirements for ensuring safe recycling
of hazardous secondary material.  If a reclamation facility were found
to not have adequate equipment or trained personnel, it raises serious
questions as to whether the facility would be engaged in safe recycling.

The third set of possible questions (C) focuses on the compliance
history of the recycler.  Although compliance data are an imperfect tool
for determining whether a recycler would safely manage the hazardous
secondary material, EPA believes that they are a reasonable starting
point.  Facility-specific enforcement data on unresolved alleged
significant violations and on formal enforcement actions (by both EPA
and states) and specific case information for the formal enforcement
actions are readily available on EPA’s public website at
http://www.epa.gov/echo/.  While the presence of a violation does not
automatically mean that the facility would not recycle the hazardous
secondary material safely, it would raise questions and would likely
require additional information from the facility.   If the generator
provides reasonable documentation that the enforcement data are
unrelated to the facility’s commitment to manage the hazardous
secondary material safely or that the violation has been corrected and
the facility is back in compliance, then that would satisfy this aspect
of the reasonable efforts determination.

The fourth possible question (D) focuses on the usefulness of the
secondary material to the recycling process. EPA’s study of the
potential effect of market forces on the recycling of hazardous
secondary materials shows that there is a particular incentive for
materials to be recycled when it can be done at a lower cost than
disposing of the material. In some cases, however, a hazardous secondary
material with little value can be put into a “recycling” process,
but not add anything of value either to the end product or to the
process itself.  In such cases, the hazardous secondary material is
effectively being discarded rather than recycled. A material being
legitimately recycled can contribute value to the process in two ways.
The recycled material can contain a constituent that is being reused and
which also appears in the final product. Alternatively, the material
being recycled can aid in the process itself, such as by replacing a raw
material that would otherwise be needed. For example, a hazardous
secondary material may act as an important catalyst or a carrier in a
process, but not end up in the final product. To ensure that its
hazardous secondary material is being properly recycled, a generator
would need to ensure that his material contributes to the process in one
of these ways.

The fifth set of possible questions (E) focuses on the products of
recycling.  According to EPA’s study of the potential effect of market
forces on the management of recyclable hazardous secondary materials,
there is a relationship between the value of the product from recycling
and the likelihood of successful recycling.  Products with little or no
value can result in recyclable materials being over-accumulated and
mismanaged.  Mismanagement of recyclable materials was a major cause of
environmental damage in forty percent of the cases that EPA has studied.
 To provide assurance that the products created from the hazardous
secondary materials are in fact valuable, the generator would need to
determine if the products are general commodities that meet applicable
standards, or that there is a reliable market based on sales records or
long-term contracts.

 For most recycled products, this determination would be straightforward
and the product specifications are well known.  Metals reclamation and
solvents, for example, results in the production of valuable products
that are readily traded on the open market.  Other products, however,
may be unique or recycled in a different manner and may require a closer
look to determine if they meet minimum standards.   For example, in one
of the damage cases, the reclamation facility used spent plastic blast
media to make certain construction materials, which are a generally
traded commodity with rigorous standards.  However, in this case, the
“recycling” process resulted in cinder blocks that would crumble on
contact, and concrete slabs that would not support the weight of a
person.  In some cases, there may be no formal standard for a product,
but a commonsense informal standard would still apply, particularly in
regards to toxic constituents.  For example, in another of the damage
cases, children’s play sand was made from foundry sands highly
contaminated with lead, which, in this situation would not meet such a
commonsense standard.  There are also other instances in the damage
cases of recyclers marketing their product as appropriate for “fill”
despite high levels of toxic constituents. In one case, a battery
recycler distributed material from old battery casings to a community to
be used as fill and driveway paving material, resulting in elevated
levels of lead at 96 of the 109 properties.  In order to determine
whether a reclamation facility is legitimately recycling, the generator
will need to check to make sure that the recycling results in a valuable
product or intermediate.

Although a typical audit of a recycling facility would include an
examination of the facility’s finances, EPA does not have information
on whether this financial evaluation would include an investigation as
to whether the recycling process results in a valuable product.   EPA
requests comment on how including such a question might affect the scope
of a typical audit.

The sixth set of possible questions (F) focuses on another major cause
of environmental problems from hazardous secondary material recycling:
the management of the residuals.  Roughly one-third of the damage cases
that EPA documented were caused by mismanagement of the residuals from
recycling.  Because the residuals from recycling can contain the
hazardous constituents that originated with the hazardous secondary
materials, it is important that the generator understands how those
residuals will be disposed.  These residuals may or may not be regulated
hazardous wastes, but in either case, the generator would need to
determine that they are managed in units that have the necessary permits
(either solid waste permits or hazardous waste permits) or otherwise
comply with applicable environmental standards (whether federal or
state), such that the material is being managed in a manner that is
protective of human health and the environment.

         In drafting these possible questions to establish reasonable
efforts, we have attempted to write them in as an objective a manner as
possible, but we recognize that answering these questions still requires
a certain amount of judgment.  We understand that generators might
prefer more definitive criteria.  Therefore, we ask for suggestions on
how the possible reasonable efforts questions (if they are included in
the regulation) could be more objective, yet provide the necessary
information, or any other information that should be required for making
a reasonable efforts determination.

         In particular, as noted at the beginning of this discussion,
EPA requests comment on the alternative option of focusing “reasonable
efforts” only on questions A and F above.  This second of the two
options would limit the generator's reasonable efforts requirement to
determining whether the reclaimer has notified EPA or the authorized
state that he is engaged in recycling excluded hazardous secondary
material; whether the recycler complies with the financial requirements
of this part; and whether the reclaimer has obtained the appropriate
permits for managing residuals onsite or, alternatively, ships the
material offsite under a contract with an appropriately permitted
facility.   These requirements would assure the generator that the
reclaimer’s operations are known to the regulatory authority and
therefore can be inspected for compliance, that residuals would be
properly managed (thus addressing the second most common environmental
problem in the recycling case studies EPA has analyzed), and that
financial assurance would cover the cost of facility closure and other
potential environmental liabilities.   While this list would not be as
comprehensive, this option of focusing on a set of criteria that some
believe is of a more bright-line nature could make it easier for the
generator to determine whether the criteria have been met and thereby
make, in good faith, a certification that would demonstrate
“reasonable efforts.”

         In addition, EPA requests comment on how difficult it would be
for a generator to address and certify in good faith the responses to
questions B through E.  In this regard, EPA requests comment on whether
generators already possess, or would be able to acquire through
reasonable efforts, the information and ability necessary to evaluate
the relevant aspects of the recycling industry, especially in situations
where the generator does not work in that industry or otherwise have a
reason to be familiar with it.  For example, under question (B), to what
extent do generators already posses, or would be able to acquire
readily, the information and ability needed to evaluate the adequacy of
“the equipment and trained personnel” in a different industry than
the one in which the generator operates?  Similarly, under question (E),
to what extent do generators already possess, or would be able to
acquire readily, the required knowledge of markets (in which they might
not participate) for purposes of determining whether something
constitutes a "valuable product or intermediate"?

           EPA also requests comment on whether, if the final regulation
does include specific questions for the generator to consider when
making reasonable efforts, (1) should all generators be required to
answer those questions and document their responses to each of
them—that is, this documentation would be a condition of the
exclusion, or (2) should generators have the option of choosing to
answer and document their response to these sets of questions or not.
Under the latter approach, if a generator chooses to meet his burden of
an objectively reasonable belief that his materials would not be
discarded and would be managed in a manner that is protective of human
health and the environment by answering these sets of questions, then
the generator would have met his obligation under the regulations.
Alternatively, the generator under the latter approach could meet his
burden of proof based on other considerations, but without any assurance
that a court, if the Agency were to undertake an enforcement action,
would not later decide that the information he relied on did not support
an objectively reasonable belief that his materials would not be
discarded or would be managed in a manner that is protective of human
health and the environment.  However, under both approaches, if a
generator meets the burden of proof that his decision to send his
materials to a reclaimer was based on an objectively reasonable belief
that the hazardous secondary materials would not be discarded and would
be managed in a manner that is protective of human health and the
environment, then the Agency would consider that the generator met his
obligation under the regulations.

	Note that codifying “reasonable efforts” standards that the
generator would certify have been met would have the effect of placing
on the generator the responsibility of assessing the recycler and
ensuring that the hazardous secondary materials would not be discarded.
EPA is seeking comment on this aspect of the proposal.  Further, the
Agency seeks comment on whether any or all of the questions are
appropriate for the generator to answer in making reasonable efforts to
ensure that the reclaimer intends to legitimately recycle the material
and will not discard it pursuant to the criteria in 261.2(g), and that
the reclaimer will manage the material in a manner that is protective of
human health and the environment.

            Of course, regardless of the type of information/questions
EPA may include in the final rule, if any, the generator could choose to
seek additional information or ask additional questions, and as shown in
EPA’s study of good recycling practices, many generators already do
so.  EPA anticipates generators may seek additional information in
determining that their hazardous secondary materials will not be
discarded  due to concerns about CERCLA liability (which is unaffected
by today’s proposal, see Section XIII.D. of today’s proposal).

EPA also requests comment on the relationship between the reasonable
efforts questions and legitimacy (discussed in more detail in section XI
of today’s preamble).   Two of the questions identified above,
questions D and E, are related to the two factors that EPA is proposing
today to be the “core” considerations for determining whether a
recycling operation is legitimate, rather than sham recycling (i.e.,
whether the hazardous secondary material makes a useful contribution,
and whether the recycling process results in a valuable product).  EPA
believes that it is appropriate to include these concepts in
“reasonable efforts,” thus allowing the generator to make only one
determination before sending hazardous secondary material for recycling.
 In other words, if these reasonable efforts questions are codified in
the regulations, EPA is proposing that by satisfying reasonable efforts,
the generator would have also satisfied the obligation to determine his
hazardous secondary material would be legitimately recycled per proposed
40 CFR 261.2(g).  However, because EPA is also requesting comment on
recordkeeping and certification requirements related to reasonable
efforts, incorporating questions D and E could alter the implementation
of the legitimacy determination for materials excluded under this
provision.   EPA requests comment on whether to keep the legitimacy
determination an independent requirement for generators who would claim
today’s proposed exclusion and not directly link it to “reasonable
efforts.”

         Finally, EPA also solicits comment on whether the frequency of
periodic updates of the “reasonable efforts” should be identified in
the regulations, or whether that question should be left to individual
situations applying an objectively reasonable belief standard.
Information on industry standards for facility audits of off-site
activities, including how frequently they are conducted, would be
especially helpful.

Storage conditions.  The As with the proposed exclusion for hazardous
secondary materials reclaimed under the control of the generator, if the
generator  manages the hazardous secondary material in a land-based unit
under the transfer-based exclusion, the material must be contained.  For
further discussion of how to determine if a material in a land-based
unit is contained, see section IX of today’s preamble.

However, the Agency is also considering several other conditions for
generators under this exclusion.  One option would be a condition
addressing storage of accumulated recyclable hazardous secondary
materials by the generator prior to shipping them to a reclamation
facility.  For example, we are proposing today a condition that
specifies a general performance standard for storage of excluded
hazardous secondary materials at reclamation facilities.  Arguably, the
same or a similar standard could be required for generators who take
advantage of the exclusion.  Without such a condition, generators would
have no restrictions at all as to how they could store excluded
materials, although they presumably would have an incentive to not
contaminate their property as a result of improperThe Agency requests
comment as to whether a storage.  If such materials were released into
the environment as the result of improper storage, they would be wastes
subject to remediation under CERCLA, RCRA or other authorities.  On the
other hand, some storage practices are considerably less expensive than
others, and some generators might store materials in such units (e.g.,
lagoons) that, while inexpensive, pose relatively high risk of release
into the environment.  The Agency requests comment as to whether a
storage condition  condition (beyond the requirement that material in
land-based units be contained) should be imposed on generators as part
of this exclusion, and if so, what type of condition(s) it should be.

2. Conditions for Reclaimers

EPA is proposing that reclaimers of conditionally excluded materials
will have to satisfy four general conditions, which pertain to record
keeping, storage of recyclable hazardous secondary materials, management
of the residuals from reclamation processes, and financial assurance.

Record Keeping.  Today’s supplemental proposal would require
reclaimers who operate under this conditional exclusion for transferred
materials to maintain certain records, similar to the records we are
proposing to require for generators.  Specifically, such reclaimers
would need to maintain for at least three years records of each shipment
of materials received at the reclamation facility that were excluded
from regulation under the terms of this exclusion.  Such records would
need to document the name and address of the generator of the hazardous
secondary materials, the name of the transporter and the date such
materials were received, and the type and quantity of hazardous
secondary materials received.  The Agency believes that this information
is the minimum needed to enable effective oversight of recycling
activities that would no longer be subject to the existing hazardous
waste regulations.

In addition to these proposed record keeping provisions, the Agency is
considering additional records that would more thoroughly document
excluded recycling activities by reclaimers.  Examples of such
additional records would include more thorough characterization of the
hazardous secondary materials that are received for reclamation, the
types of units in which they were stored at the reclamation facility,
how they were transported (e.g., by truck), whether or not the hazardous
secondary material was transported as a DOT hazardous material, and
other similar conditions.  We request comment on whether such additional
record keeping conditions are warranted for reclaimers.

Storage of Recyclable Hazardous Secondary Materials.  We are proposing
today a general performance standard for storage of excluded hazardous
secondary materials at reclamation facilities that operate under this
proposed exclusion.  Specifically, the hazardous secondary materials
must be managed in a manner that is at least as protective as that
employed for analogous raw materials.  An "analogous raw material" is a
raw material for which a hazardous secondary material is a substitute
and serves the same function and has similar physical and chemical
properties as the hazardous secondary material. A raw material that has
significantly different physical or chemical properties would not be
considered analogous even if it serves the same function.  For example,
a metal-bearing ore might serve the same function as a metal-bearing air
pollution control dust, but because the physical properties of the dust
would make it more susceptible to wind dispersal, the two would not be
considered analogous.  Similarly, a hazardous secondary material with
high levels of toxic volatile chemicals would not be considered
analogous to a raw material without these volatile chemicals.  Where
there is no analogous raw material, or if the hazardous secondary
material is managed in a land-based unit, the material must be
contained.  For example, in the case of the metal-bearing air pollution
control dust, dust suppression measures would likely be needed to
contain the hazardous secondary materials.  For the hazardous secondary
material with high levels of toxic volatile chemicals, a closed tank or
container would probably be needed to contain the volatile chemicals.
For further discussion of how to determine if a material is contained,
see Sectionsection IX of today’s preamble.

Storage conditions for reclamation facilities that operate under today's
proposed exclusion would allow the Agency to determine that the
recyclable materials are not discarded.  The great majority of damages
documented in the study of recent recycling-related damage incidents
occurred at commercial reclamation facilities, and mismanagement of
hazardous secondary materials was found to be a cause of environmental
problems in 35% of the incidents.   Accordingly, EPA believes that this
proposed condition for storage, or some similar condition, is necessary
and appropriate for reclamation facilities that take advantage of this
exclusion, and will establish an expectation for the owner/operators of
such facilities; i.e., that they must manage hazardous secondary
materials in at least as protective a manner as they would an analogous
raw material, and in such a way that materials would not be released
into the environment.

The Agency considered a number of alternatives to this proposed storage
condition, including specifying a much more rigorous set of conditions
equivalent to current Subtitle C regulatory requirements for storage
(see, for example, the requirements for tanks and containers, which are
specified in subparts I and J of 40 CFR Part 264), or to a similar, but
less stringent set of storage conditions (e.g., requiring the hazardous
secondary material to be stored in an engineered unit).  However, we do
not believe that an elaborate set of conditions for storage are
necessary for the purpose of this exclusion.  For one thing, we are
proposing today that generators who wish to take advantage of this
exclusion must make "reasonable efforts" to evaluate the reclamation
facilities they ship materials to, to ensure that the hazardous
secondary materials will be legitimately and safely recycled.  In making
such reasonable efforts, we expect that generators will make an
assessment of the reclamation facilities' material storage practices and
equipment.  Thus, we believe generators will themselves evaluate the
storage and handling practices of hazardous secondary materials at the
reclamation facilities they do business with.   We request comment on
whether or not the condition should be written in more specific terms,
that is, in a way that would provide greater clarity with regard to how
storage units should be designed and operated.

Management of recycling residuals.  We are today proposing a condition
pertaining to management of residuals that are generated from
reclamation of hazardous secondary materials excluded from regulation
under this proposal.  The proposed condition specifies that "any
residuals that are generated from reclamation processes will be managed
in a manner that is protective of human health and the environment.  If
any residuals exhibit a hazardous characteristic according to subpart C
of 40 CFR part 261, or themselves are listed hazardous wastes, they are
hazardous wastes (if discarded) and must be managed according to the
applicable requirements of 40 CFR parts 260 through 272."

The purpose of this condition is primarily to clarify the regulatory
status of these waste materials, and to emphasize in explicit terms that
recycling residuals must be managed properly.  The study of recent
(i.e., post-CERCLA, post-RCRA) recycling-related environmental problems
revealed that mismanagement of residuals was the cause of such problems
in one third of the incidents that were documented.  Some common
examples of these mismanaged residuals were acids and casings from
processing of lead-acid batteries, solvents and other liquids generated
from cleaning drums at drum reconditioning facilities, and PCBs and
other oils generated from disassembled transformers.  In many of these
damage incidents, the residuals were simply disposed in on-site
landfills or piles, with little apparent regard for the environmental
consequences of such mismanagement, or possible CERCLA liabilities
associated with cleanup of these releases.

One issue that the Agency considered with respect to this proposed
condition was the regulatory status of wastes generated from the
reclamation of hazardous secondary materials that would be listed
hazardous wastes if they were not recycled.  One argument could be that
these residuals should be regulated as listed hazardous wastes, since
they were derived from materials that were physically and chemically
identical to listed hazardous wastes, and could contain hazardous
constituents that might pose significant threats to human health and the
environment if the residuals were mismanaged.  A different argument
would be that such a regulatory construct is unwarranted, since the
recycled hazardous secondary materials are not wastes, provided they
meet the conditions of the exclusion, and therefore the "derived from"
concept as articulated in §261.3(c)(2) should not be applied to these
wastes.  Further, such waste residuals from reclamation processes often
do not resemble the hazardous secondary materials that were reclaimed,
and thus, the argument goes, it should not be assumed that they would
always need to be managed as hazardous wastes.

The Agency does not believe it is necessary to apply the
“derived-from” principle to the residuals generated from the
reclamation of excluded hazardous secondary materials.  If the residuals
exhibited a hazardous characteristic, or they themselves were a listed
hazardous waste, they would be considered hazardous wastes, and would
have to be managed accordingly.  If they did not exhibit a hazardous
characteristic, or were not themselves a listed hazardous waste, they
would need to be managed in accordance with applicable state or federal
requirements for non-hazardous wastes.  Thus, they would be subject to
the same regulatory system that applies to wastes that are not hazardous
wastes.  The Agency does not see a compelling reason to establish as
part of this rulemaking a different regulatory system based on the
“derived-from” principle for reclamation residuals.  We solicit
comment on this aspect of today’s supplemental proposal.

Financial Assurance.  EPA is proposing today the condition that
owner/operators of reclamation facilities that would operate under the
terms of this exclusion for transferred materials demonstrate financial
assurance, in accordance with the current requirements of Subpart H of
40 CFR Part 265.  Under Part 265 Subpart H, owners and operators must
demonstrate that resources will be available to pay for closure, and
post-closure care at their facilities.  They also must meet liability
coverage requirements for sudden and accidental occurrences at their
facilities.  The requirements found in Subpart H of 40 CFR 265 also
outline how owners and operators should determine cost estimates,
provide the acceptable mechanisms for demonstrating financial assurance,
and set the minimum amounts of liability coverage required.

We believe that requiring financial assurance for these reclamation
facilities is necessary for the Agency to determine that the materials
managed at these facilities are not discarded, and is supported by the
findings of the recycling studies we conducted as part of this
rulemaking effort.

For example, the study of current good recycling practices indicated
that one of the main reasons that generators audit recyclers is to
evaluate their financial health and resources to respond to accidents or
other problems that could cause adverse environmental or human health
consequences.  This is primarily because of the joint-and-several
liability provisions of CERCLA, under which a generator can become a
"responsible party" obligated to help pay for remediation expenses if
(in this example) a recycler to whom he sent recyclable hazardous
secondary materials were to create contamination problems, but lacked
the resources to pay for their cleanup.  Because American manufacturers
have considerable experience with these types of CERCLA liability
issues, evaluating the financial health of the reclamation facility
before shipping recyclable materials to them has become a standard
business precaution for responsiblemany generators.  Today's proposed
condition for financial assurance thus can be seen as a regulatory
precaution against the same concern, ensuring that the reclamation
facility owner/operators who would operate under the terms of this
proposed exclusion are financially sound.

The need for some type of financial assurance for recyclers in this
context also is supported by the study of recycling-related
environmental problems.  The study indicates that business failure is a
primary causative factor associated with these damage incidents.  For
example, of the 208 damage incidents that were documented, at least 138
of the recyclers are no longer in business.  While there may not be a
clear cause-and-effect relationship in all of these cases, we believe
that this clearly suggests a correlation between the financial health of
recycling companies and the probability that their recycling activities
will result in some form of environmental damage.  In our view, this
further supports the need for some type of financial assurance condition
for this exclusion.

As proposed, reclaimers of excluded hazardous secondary materials would
need to have financial assurance in accordance with the applicable
financial assurance requirements for hazardous waste treatment, storage
and disposal facilities.  These regulations for financial assurance were
not designed specifically to address the financial assurance
requirements of reclamation facilities that would be affected by
today’s supplemental proposal.  However, developing an entirely new
set of (cited above).   We believe that these financial assurance
requirements are appropriate for reclamation facilities that would be
managing excluded hazardous secondary materials, since such management
will typically involve some type of storage, and reclamation, which is
defined as "treatment" under the existing RCRA regulations.  If a
reclamation facility were to manage excluded materials in land-based
units (e.g., piles), it would be subject to the additional Subpart H
financial assurance requirements tailored specifically for these types
ofland disposal facilities would be a complex, resource intensive
undertaking, and was outside the scope of this rulemaking effort.  In
any case, the

The Agency currently has underway a review of the Subpart H financial
assurance regulations now in effect. We may, as part of that effort,
explore options for developing requirements more tailored to
reclamationhazardous waste treatment, storage and disposal facilities.

  The Agency does not intend to address general issues related to the
financial assurance mechanisms as a part of today’s rulemaking, since
these issues are being addressed in the broader review. However, in the
context of this rulemaking, the Agency is interested in receiving
comments regarding financial assurance for the as to whether or not the
existing Subpart H requirements need to be modified in some way
specifically for reclamation facility owner/operators that would be
affected by today's proposed exclusion, including.  EPA also solicits
comment on whether towe should adopt the financial assurance
requirements that were promulgated as part of the standardized permit
rule (see 70 FR 53419, September 8, 2005).  In particular, we are
interested in whether there are alternatives to the Subpart H
requirements that for the purpose of this rulemaking might be more
tailored to requiring financial assurance for reclaimers.), which are
EPA’s most recently issued RCRA financial assurance requirements.

We are also interested in options that would involve tailoring the
costing requirements associated with Subpart H requirements for
today’s rulemaking.  For example, the Subpart H financial obligations
are tied in large part to the estimated future cost of closing the
hazardous waste facility. Closure costs can be difficult to estimate, or
subject to disagreement, and failure to close might not be the problem
at a given facility.  For example, closure cost estimates might not
address the kind of releases identified in the recycling study.  AThus,
a simpler alternative might be to set a standard, fixed amount of
financial assurance that would need to be demonstrated (e.g., $5 million
– an amount consistent with the costs identified in EPA’s recycling
study) and specify that the funds in the mechanism would.  For example,
EPA's study of environmental problems associated with hazardous material
recycling was able to identify actual or estimated cleanup costs
associated with 89 of the damage cases that were documented.  Of these
cases, 71 (80%) involved cleanup costs of  $5 million or less, while 81
cases (91%) cost $10 million or less.  It should be noted that there are
important uncertainties associated with these cost data, as explained in
our study report.  With these uncertainties in mind, these findings
might be used as the basis for identifying a specific, minimum amount of
financial assurance that reclamation facility owner/operators would need
to demonstrate.  Such funds would thus be available for any
environmental damage associated with the recycling.  Such an reclamation
operations at such facilities.

This type of approach to establishing financial assurance requirements
for reclamation facilities would be less flexible than the current
regulations, but it would have the virtue of simplicity and
transparency. Similarly, the regulatory language of individual financial
assurance mechanisms might need to be modified slightly, to make it
clear that funds would be available for environmental damages beyond
closure.  The Agency solicits comment on such alternative approaches to
financial assurance requirements for reclamation facilities that would
operate under today’s proposed exclusion.

	Finally, the Agency anticipates that, when and if today's proposed
exclusion for transferred materials is promulgated and becomes
effective, there are likely to be some generators of recyclable
hazardous wastes that will choose not to use the exclusion, and thus
will continue to manage their wastes under the current hazardous waste
regulatory system.  These generators may nevertheless wish to ship their
hazardous waste to a reclamation facility that is operating under this
exclusion.  In such situations, it is possible that questions could
arise as to the regulatory status of the hazardous waste materials that
are sent to such reclamation facilities.  Today's proposed exclusion
includes a provision (§261.4(a)(24)(vi)) that is intended to clarify
that the reclamation facilities may still claim the exclusion in these
types of situations.  The Agency requests comment on this provision.

Enforcement

Under today’s proposal, hazardous secondary materials transferred for
the purpose of reclamation would be excluded from RCRA subtitle C
regulation, but would be subject to certain conditions and restrictions.
 If a generator fails to meet any of the above-described conditions or
restrictions on the management of hazardous secondary materials that are
applicable to the generator, then the materials would be considered
discarded by the generator and would be subject to RCRA subtitle C
regulations from the point at which the material was used and could not
be reused without reclamation.  If a reclaimer were to fail to meet any
of the above-described pre-conditions or restrictions on the management
of hazardous secondary materials that are applicable to the reclaimer,
then the materials would be considered discarded by the reclaimer and
would be subject to RCRA subtitle C regulation from the point at which
the reclaimer failed to meet a condition or restriction, thereby
discarding the material.

Please note that the failure of the reclaimer to meet conditions or
restrictions does not mean the material was considered waste when
handled by the generator, as long as the generator can adequately
demonstrate that he has met his obligations, including the obligation
under proposed 40 CFR 261.4(a)(24)(iv)(A) to make reasonable efforts to
ensure that the material will be recycled legitimately and otherwise
managed in a manner that is protective of human health and the
environment.  A generator who met his reasonable efforts obligations
could in good faith ship his excluded materials to a reclamation
facility where, due to circumstances beyond his control, they were
released and caused environmental problems at that facility.  In such
situations, and where the generator’s decision to ship to that
reclaimer is based on an objectively reasonable belief that the
hazardous secondary materials would be recycled legitimately and
otherwise managed in a manner consistent with this regulation, the
generator would not have violated the terms of the exclusion.

XI.   SEQ CHAPTER \h \r 1 What Changes Is EPA Proposing to the
Legitimacy Criteria?:  Proposed 40 CFR 261.2(g)

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

Under the RCRA Subtitle C definition of solid waste, many existing
hazardous secondary materials are not solid wastes and thus, not subject
to RCRA’s “cradle to grave” management system if they are
recycled. The basic idea behind this construct is that recycling of such
materials often closely resembles normal industrial manufacturing,
rather than waste management. However, since there can be significant
economic incentive to manage hazardous secondary materials outside the
RCRA regulatory system, there is a clear potential for some handlers to
claim that they are recycling, when in fact they are conducting waste
treatment and/or disposal in the guise of recycling. To guard against
this, EPA has long articulated the need to distinguish between
“legitimate” (i.e., true) recycling and “sham” recycling,
beginning with the preamble to the 1985 regulations that established the
definition of solid waste (50 FR 638, January 4, 1985) and continuing
with the 2003 proposed codification of criteria for identifying
legitimate recycling.

On October 28, 2003 (68 FR 61581-61588), EPA extensively discussed our
position on the relevance of legitimate recycling to hazardous secondary
materials recycling in general and to the redefinition of solid waste
specifically. We proposed to codify in the RCRA hazardous waste
regulations four general criteria to be used in determining whether
recycling of hazardous secondary materials is legitimate. In today’s
action, we are proposing two changes to the proposed legitimacy criteria
and asking for public comment on those changes. The changes are 1) a
restructuring of the proposed criteria, called factors in this proposal,
to make two of them mandatory, while leaving the rest as factors to be
considered, and 2) additional guidance on how the economics of the
recycling activity should be considered in a legitimate recycling
determination.

 As we explained in the 2003 proposal, it is the Agency’s longstanding
policy that, for activities to qualify as recycling of hazardous
secondary materials, they must be legitimate. This principle applies to
both recycling of excluded hazardous secondary materials and recycling
of regulated hazardous secondary materials. The definition of legitimate
recycling is intended to apply to all recycling of hazardous secondary
materials, including:

Recyclable hazardous secondary materials that would be excluded from
Subtitle C regulation as wastes under today’s proposed exclusion from
the definition of solid waste.

Hazardous secondary materials that, because they are recycled, are
excluded or exempted from Subtitle C regulation under other regulatory
provisions (e.g., see the exclusions in 40 CFR 261.2(e) and 261.4).

Recyclable hazardous wastes that are regulated under Subtitle C prior to
recycling.

Apart from the definition of solid waste implications, the concept of
legitimate recycling also is used to determine if a recycling unit is
exempt from RCRA Subtitle C permitting (except for certain air emission
standards) or a regulated waste treatment or disposal unit, subject to
full RCRA Subtitle C permitting.

          The concept of legitimate recycling is designed to be used in
addition to and in concert with more specific criteria or requirements
when they have been established in the regulations for specific
recycling activities or recycled hazardous secondary materials. Affected
parties should look to those regulatory provisions, in addition to the
definition of legitimate recycling, to ensure compliance. For example,
for a zinc micronutrient fertilizer manufacturer who uses hazardous
secondary materials as a feedstock, the consideration of hazardous
constituents in the final product would involve an analysis of whether
the operation is legitimate recycling and an analysis of whether the
fertilizer meets the contaminant limits specified in 40 CFR 261.4(a)
(21).

          By ensuring that use of hazardous secondary materials in an
industrial process is legitimate recycling, the Agency seeks to ensure
that when a facility claims that it is recycling, the hazardous
secondary material is in fact being recycled and is contributing to a
valuable product and is not being treated or disposed of in the guise of
recycling.

B. Definition of Legitimate Recycling in the 2003 Proposal

In the 2003 proposed rule (68 FR 61581-61588), EPA proposed codifying
specific regulatory provisions for determining when hazardous secondary
materials are recycled legitimately. Previously, the criteria considered
in evaluating legitimate recycling have been discussed extensively in
preambles to definition of solid waste rulemakings and, notably, in a
1989 memorandum that laid out a single list of criteria to be considered
in evaluating legitimacy (the “Lowrance Memo”; OSWER directive
9441.1989(19), dated April 26, 1989).

The 2003 proposal consolidated the criteria in that memorandum into four
criteria. EPA was clear in its expectation that most, if not all,
legitimate recycling would conform with all four of the criteria, but
stated that the application of those criteria would require some
subjective evaluation of the criteria in each specific situation to
which they are being applied. In those cases where a legitimate
recycling operation does not meet all four criteria, the structure of
the definition of legitimacy was designed to be flexible enough to allow
those situations to be deemed legitimate.

In general, the proposed regulatory language stated that legitimacy
determinations must be made by considering whether:

The hazardous secondary material to be recycled is managed as a valuable
commodity;

The hazardous secondary material provides a useful contribution to the
recycling process or to a product of the recycling process;

The recycling process yields a valuable product or intermediate;

The product of the recycling process does not contain significant
amounts of hazardous  constituents that are not found in the analogous
products or exhibit a hazardous characteristic not exhibited by the
analogous product.

The full proposed regulatory text can be found in the proposed rule (68
FR 61596).

          It is the Agency’s opinion that the concept of legitimate
recycling proposed in the October 2003 proposal and in today’s
supplemental proposal is not substantively different than our
longstanding policy, as expressed in earlier preamble and guidance
statements. As part of proposing regulatory provisions on the legitimacy
of recycling, we are simply reorganizing, streamlining, and clarifying
the existing legitimacy principles. We believe that the regulatory
definition of legitimate recycling, when applied to specific recycling
scenarios, will result in determinations that are consistent with the
earlier policy. Therefore, we generally do not see the need for the
regulated community or overseeing agencies to revisit previous
determinations and expect any written determinations from these agencies
to, in effect, be grandfathered. For a more detailed analysis on how the
definition of legitimacy has evolved from earlier preamble and guidance
statements, see the October 28, 2003 proposal (68 FR 61581-61588), where
we provided a thorough explanation of how the proposed criteria related
to existing guidance. The Agency does not intend to reiterate that
analysis in today’s supplemental proposed rule, but will explain below
the changes we are proposing to make from the 2003 proposal.

The 2003 proposal did result in comments on the Agency’s proposal to
codify legitimacy and we are requesting further comment on this issue.
The Agency believes that there are many benefits to codifying the
legitimacy factors, as discussed in the 2003 proposal.  Many commenters,
particularly the state regulatory agencies, but some members of industry
as well, agreed with EPA’s rationale for codifying the legitimacy in
Part 261.  However, some commenters urged EPA to retain the existing
legitimacy guidance instead of codifying it in the regulations. These
commenters stated that the existing guidance provides a more flexible
way to assess whether an activity constitutes legitimate recycling and
raised several concerns with the codification of legitimacy. The
commenters expressed concern that codification could alter the
application of legitimacy. Although EPA intends to preserve current
interpretations of legitimacy, the commenters raised the concern that
putting legitimacy in the regulations could eliminate the flexibility in
the existing guidance for subjective evaluation and balancing of the
factors when making a determination. EPA is requesting comment on this
issue.

     	In addition, the commenters raised the concern that codification
of legitimacy would place too much burden on the regulated entity to
make a showing that it is engaged in legitimate recycling. The Agency
believes that it has always been the responsibility of the regulated
entity to ensure, and if requested, to show that its recycling is
legitimate. EPA expects that regulated entities have evaluated and will
continue to evaluate their recycling operations using these factors and
will reach their conclusions about legitimacy without prior approval by
an overseeing agency. However, EPA is requesting comment on whether
codifying the factors in today’s proposal would place increased burden
on the regulated entity and, if so, what the reasons are for such
increased burden.  Finally, the concern has been expressed that
codification would fix into place a specific formulation of EPA’s
legitimacy factors, and therefore would limit future evolution of them.
Future changes to the factors could become more difficult if they have
been codified. The Agency believes there are many benefits to codifying
the legitimacy factors, as discussed in the 2003 proposal, but is
requesting comment on this issue.

EPA is interested in comments about the benefits and drawbacks of
codifying legitimacy. In particular, EPA solicits comments on current
practices for assessing legitimacy, on any problems with current
practices that may be alleviated by codifying the factors, and on
alternative means of addressing any such problems.

C. Changes Proposed in Today’s Action

1. New structure of legitimacy factors

a. Design of the new structure

For the reasons discussed below, EPA is proposing a new structure for
the definition of legitimate recycling. The proposed design of the
definition has two basic parts. The first part is considered the core of
legitimacy, which includes a requirement that the hazardous secondary
material being recycled provides a useful contribution to the recycling
process or to the product of the recycling process and a requirement
that the product of the recycling process is valuable. These two factors
are fundamental to the definition of legitimacy and, therefore, an
industrial process that does not conform to them would be considered
sham recycling (i.e., treatment or disposal in lieu of recycling).

The second part of the proposed structure for legitimacy is a list of
two factors that must be considered, but not necessarily met, when a
recycler is making a legitimacy determination. EPA believes that these
factors are important in determining legitimacy, but has not proposed to
make them mandatory because the Agency believes that there may be some
situations in which a legitimate recycling process does not conform to
one of these factors. Therefore, EPA is proposing that the management of
the hazardous secondary material and the presence of hazardous
constituents in the product of the recycling activity be factors that
must be considered in the overall legitimacy determination, but not
mandatory requirements that must be met as part of a definition of
legitimacy.  The full proposed regulatory text for the legitimacy
portion of this supplemental proposal is found in 40 CFR 261.2(g).

b. Why EPA is proposing this change

In the 2003 proposed rule, the regulatory text for legitimacy was made
up of paragraph (g) of proposed section 261.2, which stated that
hazardous secondary materials that are not legitimately recycled are
discarded and, therefore, solid wastes. Paragraphs (1) through (4) then
listed the four proposed legitimacy criteria after a statement that
legitimacy determinations must be made by considering them. Proposed
criteria 1 and 2 focused on the hazardous secondary material being
recycled and criteria 3 and 4 focused on the product of the recycling
process.

In the 2003 proposed rule, the application of the four criteria to a
recycling process was proposed to require some evaluation and balancing.
That is, although the Agency expected that most legitimate recycling
practices would conform to all the pieces of legitimacy, it was aware
that there would be some cases in which legitimate recycling may not
conform to one or more of the criteria. As in the Lowrance Memo, the
structure of legitimacy allowed circumstances in which certain criteria
weighed more heavily than others in the final legitimacy determination.

Analysis of public comment on the 2003 proposal shows that there was
general agreement from industry, states, and other commenters that
recycling cannot be legitimate if the hazardous secondary material being
recycled does not provide a useful contribution to the process or to the
product and if the recycling process does not yield a product or
intermediate that is valuable to someone. Certain commenters requested
that EPA provide more information on how it defines the terms used in
the regulation and there was some disagreement with the specifics laid
out in the preamble. Some commenters, particularly several states, felt
that all four criteria should be mandatory requirements.  However,
almost all commenters agreed that proposed criteria 2 and 3 should be
met in order for recycling to be considered legitimate.

EPA agrees with the importance of criteria 2 and 3 and, for this
proposal, has decided that these two concepts are, in fact, at the very
core of what it means to recycle legitimately. Therefore, today’s
proposed regulatory language states in 40 CFR 261.2(g)(2) that
“Legitimate recycling must involve a hazardous secondary material that
provides a useful contribution to the recycling process or to a product
of the recycling process and the recycling process must produce a
valuable product or intermediate.” This statement is followed by
paragraphs (i) and (ii) to give more details on how the Agency defines
these critical concepts.

EPA has determined that the other criteria in the 2003 proposal,
criterion 1 and criterion 4, are still important concepts in making
legitimacy determinations, but should not be mandatory. Instead,
today’s proposed regulations state that a legitimacy determination
must consider these other two factors need to be considered in making a
determination as to the overall legitimacy, which are found in 40 CFR
261.2(g)(3) of the regulatory language.). In stating that the these
factors mustneed to be considered, EPA expects that anyone making a
legitimacy determination will look carefully at how their hazardous
secondary materials are managed as compared to analogous raw materials
and at the hazardous constituents in their products.

However, these two factors would not be mandatory because EPA and
commenters were able to identify situations in which a recycling
scenario appears to be legitimate, but one of these factors was not met
in the way EPA described because that factor is not applicable or
relevant to the materials being recycled or to the particulars of the
recycling process.

To illustrate, in the case of proposed criterion 1,  For example, it is
possible that a solid, powdery hazardous secondary material could be
shipped to a recycling facility in flexible, woven "supersack"
containers, where the supersacks are then stored at the facility in a
well-designed, designated indoor containment area. and then legitimately
recycled.    If, however, an analogous raw material (i.e., with similar
physical and chemical characteristics) was typically received and stored
at the same facility in sealed steel drums, one could conclude that the
hazardous secondary material was not managed "in a manner consistent
with the analogous raw material."  In this case, therefore, ita strict
finding  could be concluded made that this factor was not met, even
though the differences in storage practices do not affect
protectiveness. In evaluating the legitimacy of a recycling process in
situations like this, we EPA does not believe that such a strict finding
that materials are not managed consistently should not necessarily be
the determining factor.  It is primarily to allow some flexibility for
these types of situations that weWe are proposing that this factor not
be mandatory in making legitimacy determinations in order to allow
flexibility for these types of situations.

For similar reasons, the Agency is also proposing that the factor which
addresses "toxics along for the ride" be a consideration in making
legitimacy determinations, rather than a mandatory requirement.  One
illustration as to why some flexibility may be needed in assessing this
proposed factor could be a hypothetical situation in which a
pharmaceutical manufacturer uses a

"virgin" solvent ("Solvent X") as a process ingredient, and generates a
spent solvent that is identical to the virgin solvent, except that it
has become contaminated with a relatively small amount of a different
solvent ("Solvent Y").  Solvents X and Y are assumed to have essentially
the same toxicity and solvent properties, and both chemicals would be
considered "hazardous constituents" under RCRA for waste identification
purposes.   In this example, the spent material (i.e., the mixture of
solvents "X" and "Y") is no longer useful to the generator in making
pharmaceuticals.  It would potentially be useful, however, to a
manufacturer of oil-based paints, as a substitute for virgin Solvent X.
If the spent material was used in this manner by the paint manufacturer,
the resulting paint products could contain significant concentrations of
a hazardous constituent (i.e., "Solvent Y") not found in analogous
products made from virgin Solvent X.   Thus, this recycling practice
could be determined as not meeting today's proposed legitimacy factor
that addresses "toxics along for the ride."

Given that the paint products made from spent (i.e., secondary)
materials would essentially have the same solvent properties and
potential environmental hazards as paint made from virgin solvents, it
might be reasonable to determine that the overall recycling practice was
legitimate.  Again, because of situations like this, we believe that
this factor is best expressed as a consideration in making legitimacy
determinations, rather than as a mandatory requirement.

At the same time, it should be noted that “toxics along for the
ride” is an important consideration when the toxic constituents affect
either the performance of the product or cause adverse environmental or
health effects.  For example, elevated levels of lead in foundry sand
would not be a problem when the sand is re-used in the foundry molds,
but it has been a significant problem when the sand was sold as
children’s play sand.  In such a case, the high levels of lead would
disqualify this use from being considered legitimate recycling.

Under this proposed structure, if a facility making a legitimacy
determination decides that one of these two factors to be considered is,
in fact, not applicable to the recycling process, we recommend that the
facility document why the recycling process is legitimate, even though
it may not meet one or more of the factors to be considered.

EPA believes that the new structure for the definition of legitimacy
will clarify what the Agency believes are the most important elements of
legitimacy and requests comment on this structure for making legitimacy
determinations related to hazardous secondary material recycling.

2. Consideration of Economics in Legitimate Recycling

EPA also notes that the economics of the recycling activity may be
relevant to legitimate recycling determinations.  Consideration of
economics has long been a part of the Agency’s concept of legitimacy,
as evident in the Lowrance Memo and earlier preamble text (50 FR 638,
January 4, 1985 and 53 FR 522, January 8, 1988) [see also American
Petroleum Institute v. EPA (“API II”), 216 F.3d 50, 57-58 (D.C. Cir.
2000)].  In addition, in our October 2003 proposal, EPA proposed that
consideration of economics be part of the second legitimacy criterion
(i.e., whether the hazardous secondary material provides a useful
contribution).  In their comments to the October 2003 proposal, states
and some other stakeholders supported including a consideration of
economics when making legitimacy determinations, although they also
expressed a need for clarification of how economics should inform
legitimacy determinations.  Today’s proposal, unlike the October 2003
proposal, does not codify specific regulatory language on economics, but
offers further guidance and clarification on how economics may be
considered in making legitimacy determinations. The Agency believes that
we are clarifying how economics has traditionally been implemented via
the Lowrance Memo guidance, and therefore, does not believe the
consideration of economics as explained below impacts existing
legitimacy determinations.

	Specifically, EPA believes that consideration of the economics of a
recycling activity can be used to inform and help determine whether the
recycling operation is legitimate.   Positive economic factors would be
a strong indication of legitimate recycling, whereas negative economic
factors would be an indication that a further look at the recycling
operation may be warranted in assessing its legitimacy.  While not
specifically addressed in the proposed regulations, consideration of
economics could be a factor in informing whether the hazardous secondary
material input provides a useful contribution and whether the product of
the recycling operation is of value.

Consideration of the economics of a particular recycling operation can
greatly assist in making legitimacy determinations. Appropriate
information for this consideration could include an understanding of the
major costs, revenues, and economic flows for a recycling operation.
Information that may be useful could include (1) the amount paid or
revenue generated by the recycler for recycling hazardous secondary
materials; (2) the revenue generated from the sale of recycled products;
(3) the future cost of processing existing inventories of hazardous
secondary materials and (4) other costs and revenues associated with the
recycling operation. The economics of the recycling transaction may be
more of an issue when hazardous secondary materials are sent to a
third-party recycler, although where the hazardous secondary material
being recycled is under the control of the generator, the generator must
still be able to show that the hazardous secondary material is, at a
minimum, providing a useful contribution and producing a valuable
product.

The basic economic flows can suggest whether the recycling operation
will process inputs, including hazardous secondary materials, and
produce products over a reasonable period of time, recognizing that
there will be lean and slow times.   Thus, processing inputs that
produce legitimate products is a threshold for legitimate recycling.  A
general accounting of the major costs, revenues, and economic flows for
a recycling operation over a reasonable period of time  can provide
information to consider whether recycling is likely to continue at a
reasonable rate, compared to the rate at which inputs are received, or
whether it is likely that significant amounts of unrecycled material are
likely to be accumulated and then abandoned when the facility closes.
Any bona fide sources of revenues would be included in this
consideration, such as payments by generators to recyclers for accepting
hazardous secondary materials and subsidies supporting recycling.
However, in order to have some level of confidence that beneficial
products are or will be produced; we believe that at least some portion
of the revenues should be from product sales (or savings due to avoided
purchases of products if the hazardous secondary materials are used
directly by the recycler), consistent with the hazardous secondary
material being recycled to make a useful product.

Two examples illustrate this concept.  A recycling operation that
generates revenues from sales of recycled products that greatly exceed
the costs of the operation is likely to quickly process the hazardous
secondary materials it receives into useful products. A very different
example is an operation that has, relative to its revenues, large
inventories of unsold product and large future liabilities in terms of
stocks of unprocessed hazardous secondary material.  This operation
would draw closer attention to determine whether it is engaged, in
essence, in treatment and/or abandonment in the guise of recycling.

When the economics of a recycling operation is similar to that of
manufacturing using raw materials, the Agency believes that such an
operation is likely to be legitimate.  That is, the recycler pays for
hazardous secondary materials as a manufacturer would pay for raw
materials, the recycler sells products from the recycling process as a
manufacturer would sell products of manufacturing, and revenues equal or
exceed costs. In this scenario, hazardous secondary materials are
valuable (i.e., the recycler is willing to pay for them) and make a
useful contribution to a valuable recycled product (otherwise the
recycler would not be willing to pay for them).  In addition, the sale
of the products of recycling demonstrates their value.

However, we also recognize that the economics of many legitimate
recycling operations that utilize hazardous secondary materials differs
from the economics of more traditional manufacturing operations.  An
understanding of the economics of these operations can be useful in
evaluating the legitimacy of a recycling operation.  For example, many
recyclers are paid by generators to accept hazardous secondary
materials.  Generators may be willing to pay recyclers because they can
save money if the recycling is less expensive than disposing of the
hazardous secondary materials in landfills or incinerators. Another
example is a scenario where recyclers receive subsidies which may be
designed to develop recycling infrastructure and markets, remove
problematic materials from disposal, or achieve other benefits of
recycling. For example, the recycling of electronic materials can be
legitimate even though the recycler is often subsidized for processing
the material.  Both of these examples involve situations that are
different from manufacturing using raw materials, but as long as they
are appropriately considered, an analysis of the economics of these
operations can assist in determining the legitimacy of the recycling.

Any analysis of the economics of a recycling operation should recognize
that a recycler may be able to charge generators and still be a
legitimate recycling operation properly excluded from regulation.  In
short, because these hazardous secondary materials are hazardous wastes
if disposed of, typically the generators’ other alternative management
option already carries a cost that is based on the existing market for
hazardous waste transportation and disposal.  Hence, unless there is
strong competition in recycling markets or the hazardous secondary
materials are extremely valuable, a recycler may be able to charge
generators simply because alternative disposal options cost more. While
the generator’s objective may be finding the least cost alternative
for getting rid of the hazardous secondary material, the recycling may
well be a legitimate recycling operation.

Recognizing that such a dynamic exists can assist those making
determinations in evaluating legitimacy of the recycling operation. For
example, if a recycler is charging generators fees (or receiving
subsidies from elsewhere) for taking hazardous secondary material and
receives a far greater proportion of its revenue from acceptance fees
than from the sale of its products, both the useful contribution and the
valuable product factors may warrant further review, unless other
information would indicate that such recycling is legitimate.  Fees and
subsidies could indicate that the economic situation allows the recycler
to charge high fees, regardless of the contribution provided by the
inputs, including hazardous secondary materials. In this situation,
recyclers may also have an increased economic incentive to
over-accumulate or overuse hazardous secondary materials, or to manage
them less carefully than one might manage more valuable inputs.
Additionally, if there is little competition in the recycling market,
and/or if acceptance fees seem to be set largely to compete with the
relative costs of alternative disposal options rather than to reflect
the quality or usefulness of the input to the recycling operation, this
may also suggest a closer look at “useful contribution.”

A relatively low proportion of revenues coming from sales of recycled
products compared to payments by generators may suggest the need for
more consideration of the “valuable product” criterion.  It is
possible that it is appropriate for product sales revenues to be dwarfed
by acceptance fee revenues because markets for the particular products
are highly competitive or because high alternative disposal costs allow
for high acceptance fees.  However, relatively low sales revenues could
also point to a review of product sales prices to see whether they are
lower than other comparable products, products are being stockpiled
rather than sold, or very little product is being produced relative to
the amount of inputs to the recycling operation. These could be possible
indicators that the recycled product may not be valuable and, thus, sham
recycling may be occurring.

A consideration of the future cost of processing or alternatively
managing existing inventories of hazardous secondary material inputs
also can inform the legitimacy determination.  When hazardous secondary
materials make a significant useful contribution to the recycling
activity, a recycler will have an economic incentive to process input
materials relatively quickly or efficiently, rather than to maintain
large inventories. While recyclers often need to acquire a sufficient
amount of a hazardous secondary material to make it economically
feasible to recycle, there should be little economic incentive to
over-accumulate such materials that make a useful contribution. Overly
large accumulations of input materials may indicate that the input
materials are not providing a useful contribution or that the recycler
is increasing its future costs of either processing or disposing of the
material, and hence may be faced with an unsound recycling operation in
the future. Again, it is important to weigh this factor against other
considerations. For example, it is possible that the recycler has
acquired a large stock of hazardous secondary material because the price
was unusually low or perhaps the material is generated episodically and
the recycler has few opportunities to collect it.

When recycling is conducted under the control of the generator, the
recycler may not account formally for some of the costs and savings of
the operation.  Still, when deciding whether to undertake or continue
the recycling operation or to utilize alternative outside recycling or
disposal options, the recycler will evaluate basic economic factors as a
part of doing business.  Also, the recycler would be likely to account
for the costs of virgin materials avoided by using hazardous secondary
materials. Similarly, sales of recycled products under the control of
the generator that are sold to an external market may be used to
evaluate the valuable product criterion. Thus, the recycler should have
available the basic information necessary to consider the economics of
an on-site or internal recycling operation for purposes of making a
legitimacy determination.  We recognize, however, that an evaluation of
the economic structure of a recycling operation under the control of the
generator is likely to be less rigorous than that of a typical offsite
commercial recycling operation.

	We request comment on how the economics of the recycling activity
should be considered in making overall legitimate recycling
determinations consistent with prior legitimacy determinations under the
Lowrance Memo. We are specifically interested in whether economics
should simply be a consideration that informs legitimacy overall or
whether the economics of recycling should be a separate factor,
including regulatory language, to consider. In addition, we are
interested in hearing from both the regulated community and the States
about other ways in which consideration of economics can inform and
support determinations of legitimate recycling for both on-site and
offsite recycling.

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

A. What is the Intent of this Provision?

The intent of the non-waste determination petition process is to provide
petitioners with an administrative procedure for receiving a formal
determination that their recycled hazardous secondary material is not
discarded. This process would be available in addition to the solid
waste exclusions proposed today. Once a non-waste determination has been
granted, the hazardous secondary material would not be subject to the
restrictions and conditions that the exclusions discussed elsewhere in
today’s supplemental proposal would include (e.g., prohibition on
speculative accumulation, or, for the transfer-based exclusion,
recordkeeping, reasonable efforts, financial assurance, storage standard
and export notice and consent).

The petition process would be voluntary.  Facilities may choose to
continue to self-implement any applicable waste exclusions and, for the
vast majority of cases, where the regulatory status of the material is
evident, self-implementation will still be the most appropriate
approach.  In addition, facilities may continue to contact EPA or the
authorized state asking for informal assistance in making these types of
waste determinations.  However, for cases where there is ambiguity about
whether a hazardous secondary material is a solid waste, thisthe formal
petition process will provide regulatory certainty for both the facility
and the implementing Agency.

EPA anticipates that most generators who recycle their hazardous
secondary materials would use either the self-implementing exclusions
proposed today or existing exclusions.  We request comment on how
frequently the non-waste determination process is likely to be used and
how best to minimize the burden to the authorized states and to the
regulated community.

The Agency is proposing three types of non-waste determinations:  (1)
for hazardous secondary materials recycled in a continuous industrial
process, (2) for hazardous secondary materials indistinguishable in all
relevant aspects from a product or intermediate, (3) for hazardous
secondary materials that is recycled under the control of the generator,
such as through contracts similar to the tolling arrangements proposed
in Sectionsection IX of today’s preamble.

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

As discussed earlier in today’s supplemental proposal, court decisions
have made it clear that hazardous secondary material that is recycled in
a continuous industrial process is not discarded and therefore, not a
solid waste. The October 2003 proposed rule attempted to parse the
language of some of those decisions in order to identify when material
destined for recycling is clearly not a solid waste.  As explained
earlier, we are not finalizing that approach.  Instead, the Agency has
decided to link the rulemaking more explicitly to the concept of
“discard” which underlie those decisions.  EPA believes that
today’s supplemental proposal excludes from the definition of solid
waste hazardous secondary materials recycled in a continuous industrial
process by virtue of the determination that such materials that are
legitimately recycled under the control of the generating facility and
not speculatively accumulated are not discarded and therefore not solid
waste.

However, production processes can vary widely from industry to industry.
  In the October 2003 proposal, we attempted to define “recycled in a
continuous industrial process” using the NAICS codes.  Based on the
comments we received, we determined that identifying which hazardous
secondary materials are recycled within a continuous industrial process
presents difficulties as courts have, at least implicitly, acknowledged.
 Even if EPA had more specific information on some hazardous secondary
materials, it still would be impossible to know if the Agency has
addressed every possibility. Thus to determine whether an individual
hazardous secondary material is recycled in a continuous industrial
process, and therefore not a solid waste, EPA may need to evaluate
case-specific fact patterns, which is best done through a case-by-case
procedure.  We are titling this procedure a “non-waste
determination” to acknowledge that this procedure constitutes an
administrative process for formally recognizing that a specific
hazardous secondary material is not a solid waste.

EPA is proposing four criteria for making this “non-waste
determination” that a specific hazardous secondary material is
reclaimed in a continuous industrial process.  The first is how
integrated the extent that the management of the hazardous secondary
material is intopart of the continuous production process.  At one end
of the spectrum, if the material is handled in a manner identical to
virgin feedstock, then it is fully integrated into the production
process. At the other end of the spectrum, materials indisputably
discarded prior to being reclaimed are not a part of the continuous
primary production process. (“AMC II”), 907 F. 2d 1179 (D.C. Cir.
1990) (listed wastes managed in units that are part of wastewater
treatment units are discarded materials (and solid wastes), especially
where it is not clear that the industry actually reuses the materials).
For cases that lie within the spectrum, the petitioner would need to
provide sufficient information about the production process to
demonstrate that the management of the hazardous secondary material is
an integral part of the production process and is not waste treatment.

The second criterion for making this non-waste determination is the
capacity of the production process to use the hazardous secondary
material in a reasonable timeframe and ensure that it will not be
abandoned (for example, based on past practices, market factors, the
nature of the material, and any contractual arrangements).  Abandonment
of stockpiled recyclable hazardous secondary materials is one way that
discard can occur at recycling operations and is one of the major causes
of environmental problems.  As indicated in the recycling studies, 69 of
the 208 incidents of environmental damage involve abandonment of the
hazardous secondary material as the primary cause of damage.  For
today’s proposed exclusions for hazardous secondary materials recycled
under the control of the generating facility and hazardous secondary
materials transferred to another facility for recycling, EPA is
proposing speculative accumulation (as defined in 40 CFR 261.1(a)(8)) as
the method for determining when a material is unlikely to be recycled
and therefore may end up being discarded via abandonment.  For the
non-waste determination, the petitioner would not necessarily need to
demonstrate that the material would not be accumulated speculatively per
40 CFR 261.1(a)(8), but he must provide sufficient information about the
material and the process to demonstrate that the hazardous secondary
material will in fact be reclaimed in a reasonable timeframe and will
not be abandoned. EPA is not proposing an explicit definition of
“reasonable timeframe” because such a timeframe would vary according
to the material and industry involved, and therefore determining this
timeframe should be made on a case-specific basis.  However, an
applicant may still choose to use the speculative accumulation timeframe
as a default if it wishes.

The third criterion for this non-waste determination is whether the
hazardous constituents in the hazardous secondary material are recycled
rather than released to the air, land or water at significantly higher
concentrations from either a statistical or from a health and
environmental risk perspective than would otherwise be released by the
primary production process. To the extent that the hazardous
constituents are a continuation of the original hazardous secondary
material, their release to the environment is an indicator of discard.
The Agency recognizes that normal production processes also result in a
certain level of releases and, in evaluating this criteria, would not
deny a petition if the increase in releases is not significantly
different from either a statistical or risk perspective.  However, when
unacceptably high levels of the constituents that make the hazardous
secondary material of regulatory concern are released to the environment
rather than recycled, then that material (or at least the portion of the
material that is of most concern) is not in fact being “reused within
an ongoing industrial process.”

The fourth and final criterion for this non-waste determination includes
any other relevant factors that demonstrate the hazardous secondary
material is not discarded. This “catch-all” criterion is intended to
allow the applicant to provide any case-specific information it deems
important in making the case that its material is not discarded and
therefore not a solid waste.

EPA requests comment on these criteria, as well as any other criteria
that may be relevant for making this non-waste determination.

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

Although the courts have made clear that hazardous secondary materials
recycled within a continuous industrial process are not discarded and
therefore not solid waste, they have also said that hazardous secondary
materials destined for recycling in another industry are not
automatically discarded. In the Safe Foods case, the Court stated
“Nobody questions that virgin . . . feedstocks are products rather
than wastes. Once one accepts that premise, it seems eminently
reasonable to treat [recycled] materials that are indistinguishable in
the relevant respects as products as well.”  350 F.3d at 1269.  In
most cases, hazardous secondary materials that are indistinguishable
from products are unambiguously excluded from solid waste regulation
under 40 CFR 261.2(e). However, there may be some instances which would
benefit from a non-waste determination similar to that proposed today
for hazardous secondary materials reclaimed in a continuous industrial
process. EPA is proposing four criteria for making a non-waste
determination for hazardous secondary materials indistinguishable in all
relevant aspects from a product or intermediate.

The first criterion for this non-waste determination is consideration of
likely markets for the hazardous secondary material (for example, based
on the current positive value of the material, stability of demand, and
any contractual arrangements). This evaluation of market participation
is a key element for determining whether companies view and handle these
hazardous secondary materials like products rather than like
negatively-valued wastes. EPA’s report on how market incentives affect
the management of hazardous secondary materials indicates that both high
value and stable markets are strong incentives to refrain from
over-accumulating recyclable materials, thus maximizing the likelihood
that the hazardous secondary materials will be recycled and not
abandoned.

The second criterion for this non-waste determination is the chemical
and physical identity of the hazardous secondary material and whether it
is comparable to commercial products or intermediates. This “identity
principle” is a second key factor that the Court in Safe Food found
useful in determining whether a material is indistinguishable from a
product. It is important to note that the identity of a material can be
“comparable” to a product without being identical.  However, to
qualify for a non-waste determination, any differences between the
hazardous secondary material in question and commercial products or
intermediates must be insignificant from either a statistical or from a
health and environmental risk perspective.

The third criterion for this non-waste determination is whether the
hazardous constituents in the hazardous secondary materials are recycled
rather than released to the air, land or water at significantly higher
concentrations from either a statistical or from a health and
environmental risk perspective than would otherwise be released by the
production process.  The Agency believes that to the extent that the
hazardous constituents are a continuation of the original hazardous
secondary material, their release to the environment is a possible
indicator of discard. The Agency recognizes that normal production
processes also result in a certain level of releases and, in evaluating
this criteria, would not deny a petition if the increase in releases is
not significant from either a statistical or a health and environmental
risk perspective.  However, when high concentrations of the constituents
that make the hazardous secondary material of regulatory concern are
released to the environment rather than reclaimed, then that material
(or at least the portion of the material that is of most concern) is not
being handled as a commercial product or intermediate.

As with the non-waste determination for hazardous secondary materials
reclaimed in a continuous industrial process, the fourth and final
criterion for this non-waste determination includes any other relevant
factors that demonstrate the material is not discarded. This
“catch-all” criterion is intended to allow the applicant to provide
any case-specific information it deems important in making the case that
its material is not discarded.

EPA requests comment on these criteria, as well as any other criteria
that may be relevant for making this non-waste determination.

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

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

However, the large variety of tollingcontractual arrangements may
preclude EPA from identifying all possible arrangements that clearly do
not involve discard. For this reason, the Agency also is proposing that
generators may seek a non-waste determination for tolling or other
contractual arrangements not covered by the proposed exclusion discussed
in Sectionsection IX of today’s preamble.

The first criterion for this non-waste determination would be whether
the generator retains ownership and responsibility via a contract or
other mechanism for the hazardous secondary materials and the residuals
that result from their recycling.  Assumption of responsibility of both
the hazardous secondary materials and the residuals that would result
from their recycling is a key indication that the generator is not
abandoning the hazardous constituents that would have caused the
hazardous secondary materials to have been hazardous waste had they been
discarded.

The second criterion for this non-waste determination is whether the
hazardous constituents in the hazardous secondary materials are recycled
rather than released to the air, land or water at significantly higher
concentrations from either a statistical or from a health and
environmental risk perspective than would otherwise be released by the
production process.  The Agency believes that to the extent that the
hazardous constituents are a continuation of the original hazardous
secondary material, their release to the environment is a possible
indicator of discard. The Agency recognizes that normal production
processes also result in a certain level of releases and, in evaluating
this criteria, would not deny a petition if the increase in releases is
not significant from either a statistical or a health and environmental
risk perspective.  However, when high concentrations of the constituents
that make the hazardous secondary material of regulatory concern are
released to the environment rather than reclaimed, then that material
(or at least the portion of the material that is of most concern) is not
being recycled under the control of the generator.

As with the other types of non-waste determinations, the final criterion
for this non-waste determination includes any other relevant factors
that demonstrate the material is not discarded. This “catch-all”
criterion is intended to allow the applicant to provide any
case-specific information it deems important in making the case that its
material is not discarded.

EPA requests comment on these criteria, as well as any other criteria
that may be relevant for making this non-waste determination.

E. Scope and Eligibility

As with any solid waste determination that involves recycling, hazardous
secondary materials presented for a non-waste determination must be
legitimately recycled. In other words, the hazardous secondary material
must provide a useful contribution to the recycling process or to a
product of the recycling process, and the recycling process must produce
a valuable product or intermediate.  For further discussion of
legitimacy and the factors to be considered, see section XII of
today’s preamble.

In addition, non-waste determinations are limited to reclamation
activities and would not apply to recycling of “inherently
waste-like” materials (40 CFR 261.2(d)), recycling of materials that
are “used in a manner constituting disposal,” or “used to produce
products that are applied to or placed on the land,”(40 CFR
261.2(c)(1)) and “burning of materials for energy recovery” or
“used to produce a fuel or otherwise contained in fuels” (40 CFR
261.2(c)(2)). Today’s supplemental proposal is not intended to affect
how these recycling practices are regulated.  However, we  request
comment on whether such practices should be eligible for the
case-specific non-waste determinations.

F. Petition Process

The petition process for the non-waste determination would be the same
as that for the solid waste variances found in 40 CFR 260.31. In order
to obtain a non-waste determination, a facility that manages a hazardous
secondary material that would otherwise be regulated under 40 CFR 261 as
either a solid waste, or as a conditionally excluded waste, must apply
to the Administrator or the authorized state per the procedures
described in 40 CFR 260.33.  EPA proposes to amend section 260.33 to
apply to non-waste determinations also. The application must address the
relevant criteria (discussed in further detail above). The Administrator
would evaluate the petition and issue a draft notice tentatively
granting or denying the application.  Notification of this tentative
decision will be provided by newspaper advertisement or radio broadcast
in the locality where the facility is located.  The Administrator would
accept comment on the tentative decision for 30 days, and also may hold
a public hearing. The Administrator would issue a final decision after
receipt of comments and after the hearing (if any). If the application
is denied, the facility may still pursue a solid waste variance or
exclusion (for example, one of the solid waste variances under 40 CFR
260.31 or solid waste exclusions under 40 CFR 261.4).  EPA also may
choose to specify the Regional Administrator as the appropriate level of
review for this process.

As discussed in more detail in section XV of today’s supplemental
proposal, under section 3006 of RCRA, EPA would authorize states to
administer the non-waste determinations as part of their base RCRA
program.  Because states are not required to implement Federal
requirements that are less stringent or narrower in scope than current
requirements, authorized states are not required to adopt the non-waste
determination process, and ordinarily the proposed provision could not
go into effect in an authorized state until it does choose to adopt it.
However, because the non-waste determination process is a formalization
of  determinations that states may already perform on an ad hoc basis,
EPA is proposing to allow states that have not yet formally adopted the
proposed regulation in 40 CFR 260.34 to participate in non-waste
determinations if the following conditions are met:  (1) the state
determines that the hazardous secondary material meets the criteria in
either paragraph (b), (c) or (d) of proposed section 40 CFR 260.34; (2)
the state requests EPA to review its determination; and (3) EPA approves
the State determination.

G. Enforcement

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

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

XIII. Effect of This Proposal on Other Programs

A. Other Exclusions

	In the October 2003 proposal, EPA proposed a number of specific
“conforming changes” to existing exclusions (68 FR 61578-61580).
The purpose of these conforming changes was to simplify and clarify the
regulations.  EPA did not intend to make any substantive changes as to
how currently excluded materials would need to be managed or regulated.
However, comments to the proposed changes were overwhelming in favor of
retaining the existing exclusions.  These existing exclusions are
familiar to both the States and the regulated community, and making
wholesale adjustments appears to have had unintended consequences in
many cases.