D.C. Circuit Court Strikes down Provisions of EPA’s 2015 Changes to the Definition of Solid Waste

On July 7, 2017 the U.S. Court of Appeals for the District of Columbia struck down provisions of the the EPA’s 2015 update to the Definition of Solid Waste (“DSW”).  In 2015, EPA enacted a final rule governing when certain hazardous materials qualify as “discarded”, thus subjecting the materials to EPA’s regulatory authority.  In this ruling, the court addressed industry concerns about Legitimacy Criteria of 40 CFR 260.43(a)(1)-(4), and the Verified Recycler Exclusion.

Legitimacy Criteria:

The court struck down the fourth part of a 4 part legitimacy test.  The referenced legitimacy test, under 40 CFR 260.43(a)(1)-(4), meant that a generator must prevail on the following:

  1. The hazardous secondary material must “provide a useful contribution to the recycling process.”
  2. The “recycling process must produce a valuable product or intermediate.”
  3. The persons controlling the secondary material must “manage the hazardous secondary material as a valuable commodity.”
  4. The “product of the recycling process must be comparable to a legitimate product or intermediate.”

Factors 1 and 3 address the process, Factors 2 and 4 the product.

Industry petitioners took issue with Factors 3 and 4.  On Factor 3, petitioners argued against EPA regulation of how materials are stored based on a prior ruling of the court.  However, the court agreed with EPA on this point and held that

“EPA can impose a containment requirement so long as it is such that an inference of “sham” or illegitimacy would logically flow from a firm’s non-compliance. And given EPA’s explanation that a material may be “contained” if it is simply piled on the ground, [the Final Rule] meets specific requirements that petitioners do not challenge as unreasonable…”

Factor 4 was more of a challenge for the court.  In considering the details of this rule, industry made many arguments against the rule.  The court sided with EPA on many of these arguments, but the court ultimately rejected the rule because, when considered with the rest of the rules, it meant that failure to follow EPA prescribed procedures would mean that a non-waste would become a waste, stating:

“But paperwork is not alchemy; a legitimate product will not morph into waste if its producer fails to file a form (or loses a copy two years later). EPA insists that it can impose burden-shifting rules even in drawing the line between what it may and may not regulate.”

and ultimately, the court states…

“For these reasons Factor 4 is unreasonable as a requirement applied, through 40 C.F.R. § 261.2(g), to all hazardous secondary material recycling.”

Verified Recycler Exclusion

The 2015 Final Rule amended EPA’s stand on “reclamation”.  EPA defines reclamation as a type of recycling that occurs when secondary materials are “processed to recover a usable product, or . . .regenerated.” The other modes of recycling are “use” or “reuse” which occur when materials are used as effective substitutes for commercial products or when they are employed as ingredients in industrial processes to make products.

In its 2015 final rule, EPA adopted two general exclusions that depend on whether the recycling is performed by a third-party.  The so-called “Generator-Controlled Exclusion” governs reclamation “under the control of the generator.” [§ 261.4(a)(23)].  That exclusion was not challenged in the current court case.  The second exclusion, called the “Verified Recycler Exclusion” replaced a prior rule known as the “Transfer-Based Exclusion”.  With the earlier Transfer Based Exclusion, generators were required to evaluate prospective reclamation company by asking and evaluating the following 5 questions:

  1. is the reclamation company employing a legitimate recycling process;
  2. had the reclamation company notified regulators of its operations and its financial stability;
  3. has the reclamation company been the subject of recent enforcement actions;
  4. does the reclamation company have adequate skill and equipment to perform the recycling safely; and
  5. does the reclamation company have adequate processes for disposing of any residual wastes generated during the recycling.

Once the generator satisfactorily evaluated these questions, they could proceed with the reclamation of the hazardous secondary material.  However, the new Verified Recycler Exclusion rule added other burdens, including registration with EPA.  Opponents to the new rule argued that the EPA had no basis for making the change.  Ultimately, the court agreed.  The court did rule that two parts of the new requirements could stand – a requirement for emergency preparedness planning and a requirement for containment.  However, the rest of the rule was thrown out by the court, meaning the rule would defer back to the Transfer-Based Exclusion.

Conclusion:

The court summarized its ruling with the following statement:

“The Final Rule is upheld in part and vacated in part as consistent with this opinion. Briefly put: Factor 3 is upheld; Factor 4 is vacated insofar as it applies to all hazardous secondary materials via § 261.2(g); the Verified Recycler Exclusion is vacated except for its emergency preparedness provisions and its expanded containment requirement; and the Transfer-Based Exclusion is reinstated. As a consequence of the latter, the removal of that exclusion’s bar on spent catalysts is vacated, subject, as we noted above, to such arguments as parties may raise supporting a different outcome.

Advertisements

Author: Todd Pencarinha

Todd Pencarinha is an expert in beneficial reuse and product recovery and is currently president of Altiras Holdings in Houston, Texas. Mr. Pencarinha holds a Bachelor of Science degree in Chemical Engineering from the Ohio State University and a Masters in Business Administration from the University of Texas. Todd began his career at Exxon Chemical Company in a group knows as the Basic Chemicals Technology group in Baytown, TX. Within the technology group, Pencarinha started as a process engineer in the area of pyrolysis furnace design and troubleshooting and and olefins recovery. He later became a project engineer, continuing to work in olefins hot ends and cold ends. Pencarinha later served in project management roles with Stone & Webster Engineering and then with Lyondell Chemical Company (now LyondellBasell) in Channelview, Texas. During his time at Lyondell, Todd managed multiple chemical plant development and enhancement projects. In 1999, Pencarinha took on the management of the company’s 800 MW Channelview Congeneration Project in collaboration with Reliant Energy to take advantage of new Texas energy deregulation laws. Upon successful completion and start-up of the project, in August of 2000, Pencarinha advanced to the position of lead internal business consultant, supporting the company’s executive leaders of three different business units: Oxygenated Fuels including MTBE, Styrene Monomer and Aromatics, and Toluene Diisocyanate (TDI). After five years at Lyondell, Pencarinha co-founded his first beneficial reuse company in January 2003. That company was Emergent Industrial Solutions. At Emergent, Pencarinha developed processes and methodologies for safe, legitimate, and responsible beneficial reuse of coproduct chemicals, byproduct chemicals, and previously used chemicals. Over the course of eight years, Mr. Pencarinha continually refined the business model and grew the business from nothing to nearly $10 million in annual sales. Pencarinha staffed and trained the company’s sales team, developed safety protocols, established a product stewardship program, managed marketing, and directed all business operations related to beneficial use activities. In December 2010, in order to grow a more national and professional business, Pencarinha joined with long-time friend and fellow entrepreneur Steven Marshall to found Altiras Industrial Services. Altiras started as a company focused buying and selling used, coproduct, and byproduct chemicals and petroleum products “as is” to companies that could use them without modification. The company also provided industrial waste services for small and mid-sized waste generators in the US gulf coast. In 2013, Pencarinha and Marshall decided to re-structure the company for better branding and to better segregate the various business interests of the company. At that time, Altiras Holdings was created as the parent company, Altiras Industrial Services became the entity focused on providing industrial waste services, and Altiras Chemicals and Altiras Fuels were created to serve the chemicals and fuels markets, respectively. At the same time, Pencarinha and Marshall also saw the need to create another new company, Altiras Recovery, to focus on beneficial reuse opportunities where materials could not be used “as is”. Altiras Recovery was created to provide research, development, and capital to unlock intrinsic value from materials that would otherwise be waste. All four of the operating companies (Chemicals, Fuels, Industrial Services, and Recovery) became wholly owned subsidiaries of Altiras Holdings. Pencarinha became president of the parent company and Marshall serves as Chief Executive Officer. In 2016, the company added Altiras Energy as a fifth subsidiary, which focuses on export of alternative fuel and energy products such as distillate blendstocks, petcoke, and biosolids to markets in Mexico and Asia. Mr. Pencarinha has spent his entire career in the chemical industry developing projects and new business opportunities. His areas of expertise include chemical recycling and beneficial reuse, waste reduction and waste minimization, sustainability in secondary chemicals, and beneficial recovery of otherwise unusable products, to name just a few. Both Todd Pencarinha and Steven Marshall serve on Altiras’ Board and both reside in Houston, TX. For more information on either Pencarinha or Marshall, please call 713-568-361 or email Altiras at info@altiras.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s