The U.S. Court of Appeals for the District of Columbia recently vacated two key elements of EPA's rules defining hazardous waste and in doing so may provide additional flexibility (and lower the costs) for companies that recycle or reclaim hazardous secondary materials. See American Petroleum Institute v. EPA, No. 09-0138 (D.C. Cir. July 7, 2017). Hazardous secondary materials are materials generated as the remainder from industrial processes (e.g. spent materials, byproducts, and sludges) that if discarded would be identified as hazardous waste.

In its decision, the Court struck down the 4th factor of the 4-factor “legitimacy test” that the Agency had promulgated to distinguish between “legitimate recycling” and “sham recycling” of hazardous secondary materials. The Court also struck certain conditions, known as the “Verified Recycler Exclusion,” that the agency attempted to impose before generators could send hazardous secondary materials to third-parties for reclamation.

In regard to the 4th factor of the 4-factor legitimacy test, the Court found that the EPA had failed to provide a reasonable basis for assuming that hazardous secondary materials destined for recycling that contain hazardous constituents at concentrations that exceed the concentrations of hazardous constituents in analogous products are being discarded and thus subject to EPA regulation. Therefore, the Court struck the 4th factor.

Similarly, the court found that EPA's Verified Recycler Exclusion requirement that mandates a third-party reclaimer of hazardous secondary materials obtain a regulatory variance or pre-approval if the reclaimer lacks a RCRA permit, lacked a reasonable basis. In its stead, the court reinstated the EPA's prior Transfer-Based Exclusion which does not require the reclaimer to get advanced administrative approval before accepting hazardous secondary material.

Impact of the Court's Decision

In general, this decision should result in greater incentives, fewer barriers, and lower costs to recycling hazardous secondary materials. The extent to which it will impact your company, however, likely depends on the state(s) your company operates, whether that state is authorized to implement the federal RCRA program, and if so, if the state had previously adopted EPA's 4-factor “legitimacy test” or Verified Recycler Exclusion provisions. As a result, companies, including manufacturers and recyclers, should consult their environmental counsel or the appropriate regulators to anticipate how this decision will impact their operations.