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Revisions to the Definition of Solid Waste

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PDF Version (50 pp, 419K, About PDF)

[Federal Register: October 30, 2008 (Volume 73, Number 211)]
[Rules and Regulations]
[Page 64667-64716]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30oc08-13]
[[Page 64668]]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 260, 261, and 270
[EPA-HQ-RCRA-2002-0031; FRL-8728-9]
RIN 2050-AG31

Revisions to the Definition of Solid Waste

AGENCY: Environmental Protection Agency.
ACTION: Final rule.

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

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

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-RCRA-2002-0031. All documents in the docket are listed on
the http://www.regulations.gov Web site. Although listed in the index,
some information is not publicly available, e.g., Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is
not placed on the Internet and will be publicly available only in hard
copy form. Publicly available docket materials are available either
electronically in http://www.regulations.gov or in hard copy at the
OSWER Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW.,
Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding legal holidays. The telephone
number for the Public Reading Room is (202) 566-1744, and the telephone
number for the OSWER Docket is 202-566-0270.

FOR FURTHER INFORMATION CONTACT: For more detailed information on
specific aspects of this rulemaking, contact Marilyn Goode, Office of
Solid Waste, Hazardous Waste Identification Division, MC 5304P,
Environmental Protection Agency, 1200 Pennsylvania Ave., NW.,
Washington, DC 20460, (703) 308-8800 (goode.marilyn@epa.gov) or Tracy
Atagi, Office of Solid Waste, Hazardous Waste Identification Division,
MC 5304P, Environmental Protection Agency, 1200 Pennsylvania Ave., NW.,
Washington, DC 20460, at (703) 308-8672 (atagi.tracy@epa.gov).

SUPPLEMENTARY INFORMATION:

A. Does This Action Apply to Me?

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

B. Why Is EPA Taking This Action?

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

Preamble Outline

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

[[Page 64669]]

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

I. Statutory Authority

    These regulations are promulgated under the authority of sections
2002, 3001, 3002, 3003, 3004, 3007, 3010, and 3017 of the Solid Waste
Disposal Act of 1970, as amended by the Resource Conservation and
Recovery Act of 1976 (RCRA), as amended by the Hazardous and Solid
Waste Amendments of 1984 (HSWA), 42 U.S.C. 6912, 6921, 6922, 6923,
6924, 6927, 6930, and 6938. These statutes, combined, are commonly
referred to as ``RCRA.''

II. Which Revisions to the Regulations Is EPA Finalizing?

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

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

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

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

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

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

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

[[Page 64670]]

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

D. Codification of Legitimacy

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

E. Non-Waste Determinations

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

III. What Is the History of These Rules?

A. Background

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

[[Page 64671]]

6939e. ``Subtitle C'' regulations are found at 40 CFR Parts 260 through
279. ``Hazardous wastes'' are the subset of solid wastes that present
threats to human health and the environment (see RCRA section 1004(5)).
EPA also may address solid and hazardous wastes under its endangerment
authorities in section 7003. (Similar authorities are available for
citizen suits under section 7002.)
    Materials that are not solid wastes are not subject to regulation
as hazardous wastes under RCRA Subtitle C. Thus, the definition of
``solid waste'' plays a key role in defining the scope of EPA's
authorities under Subtitle C of RCRA. The statute defines ``solid
waste'' as ``* * * any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility
and other discarded material * * * resulting from industrial,
commercial, mining, and agricultural operations, and from community
activities * * *'' (RCRA Section 1004 (27) (emphasis added)).
    Since 1980, EPA has interpreted ``solid waste'' under its Subtitle
C regulations to encompass both materials that are destined for final,
permanent treatment and placement in disposal units, as well as certain
materials that are destined for recycling (45 FR 33090-95, May 19,
1980; 50 FR 604-656, Jan. 4, 1985 (see in particular pages 616-618)).
EPA has offered three arguments in support of this approach:
    • The statute and the legislative history suggest that
Congress expected EPA to regulate as solid and hazardous wastes certain
materials that are destined for recycling (see 45 FR 33091, citing
numerous sections of the statute and U.S. Brewers' Association v. EPA,
600 F. 2d 974 (DC Cir. 1979); 48 FR 14502-04, April 3, 1983; and 50 FR
616-618).
    • Hazardous secondary materials stored or transported prior
to recycling have the potential to present the same types of threats to
human health and the environment as hazardous wastes stored or
transported prior to disposal. In fact, EPA found that recycling
operations have accounted for a number of significant damage incidents.
For example, hazardous secondary materials destined for recycling were
involved in one-third of the first 60 filings under RCRA's imminent and
substantial endangerment authority, and in 20 of the initial sites
listed under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) (48 FR 14474, April 4, 1983). Congress also
cited some damage cases which involve recycling (H.R. Rep. 94-1491,
94th Cong., 2d Sess., at 17, 18, 22). More recent data (i.e.,
information on damage incidents occurring after 1982) included in the
rulemaking docket for today's final rule corroborate the fact that
recycling operations can result in significant damage incidents.
    • Excluding all hazardous secondary materials destined for
recycling would allow materials to move in and out of the hazardous
waste management system depending on what any person handling the
hazardous secondary material intended to do with them. This seems
inconsistent with the mandate to track hazardous wastes and control
them from ``cradle to grave.''
    Hence, EPA has interpreted the statute to confer jurisdiction over
at least certain hazardous secondary materials destined for recycling.
The Agency has therefore developed in part 261 of 40 CFR a definition
of ``solid waste'' for Subtitle C regulatory purposes. (Note: This
definition is narrower than the definition of ``solid waste'' for RCRA
endangerment and information-gathering authorities. (See 40 CFR
261.1(b)). Also Connecticut Coastal Fishermen's Association v.
Remington Arms Co., 989 F.2d 1305, 1315 (2d Cir. 1993) holds that EPA's
use of a narrower and more specific definition of solid waste for
Subtitle C purposes is a reasonable interpretation of the statute. See
also Military Toxics Project v. EPA, 146 F.3d 948 (DC Cir. 1998).)
    EPA has always asserted that hazardous secondary materials are not
excluded from its jurisdiction simply because someone claims that they
will be recycled. EPA has consistently considered hazardous secondary
materials destined for ``sham recycling'' to be discarded and, hence,
to be solid wastes for Subtitle C purposes (see 45 FR 33093, May 19,
1980; 50 FR 638-39, Jan. 4, 1985). The U.S. Court of Appeals for the DC
Circuit has agreed that materials undergoing sham recycling are
discarded and, consequently, are solid wastes under RCRA (see American
Petroleum Institute v. EPA, 216 F.3d 50, 58-59 (DC Cir. 2000)).

B. A Series of DC Circuit Court Decisions on the Definition of Solid Waste

    Trade associations representing mining and oil refining interests
challenged EPA's 1985 regulatory definition of solid waste. In 1987,
the DC Circuit held that EPA exceeded its authority ``in seeking to
bring materials that are not discarded or otherwise disposed of within
the compass of `waste' '' (American Mining Congress v. EPA (``AMC I''),
824 F.2d 1177, 1178 (DC Cir. 1987)).
    The Court held that certain of the materials EPA was seeking to
regulate were not ``discarded materials'' under RCRA section 1004(27).
The Court also held that Congress used the term ``discarded'' in its
ordinary sense, to mean ``disposed of'' or ``abandoned'' (824 F.2d at
1188-89). The Court further held that the term ``discarded materials''
could not include materials ``* * * destined for beneficial reuse or
recycling in a continuous process by the generating industry itself
(because they) are not yet part of the waste disposal problem'' (824
F.2d at 1190). The Court held that Congress had directly spoken to this
issue, so that EPA's definition was not entitled to deference under
Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984) (824 F.2d at 1183,
1189-90, 1193).
    At the same time, the Court did not hold that recycled materials
could not be discarded. The Court mentioned at least two examples of
recycled materials that EPA properly considered within its statutory
jurisdiction, noting that used oil can be considered a solid waste (824
F.3d at 1187 (fn 14)). Also, the Court suggested that materials
disposed of and recycled as part of a waste management program are
within EPA's jurisdiction (824 F. 2d at 1179).
    Subsequent decisions by the DC Circuit also indicate that some
materials destined for recycling are ``discarded'' and therefore within
EPA's jurisdiction. In particular, the Court held that emission control
dust from steelmaking operations listed as hazardous waste ``K061'' is
a solid waste, even when sent to a metals reclamation facility, at
least where that is the treatment method required under EPA's land
disposal restrictions program (American Petroleum Institute v. EPA
(``API I''), 906 F.2d 729 (DC Cir. 1990)). In addition, the Court held
that it is reasonable for EPA to consider as discarded (and solid
wastes) listed wastes managed in units that are in part wastewater
treatment units, especially where it is not clear that the industry
actually reuses the materials (AMC II, 907 F. 2d 1179 (DC Cir. 1990)).
    It also is worth noting that two other Circuits also have held that
EPA has authority over at least some materials destined for reclamation
rather than final discard. The U.S. Court of Appeals for the 11th
Circuit found that ``[i]t is unnecessary to read into the term
`discarded' a congressional intent that the waste in question must
finally and forever be discarded'' (U.S. v. ILCO, 996 F.2d 1126, 1132
(11th Cir. 1993) (finding that used lead batteries sent to

[[Page 64672]]

a reclaimer have been ``discarded once'' by the entity that sent the
battery to the reclaimer)). In addition, the Fourth Circuit found that
slag held on the ground untouched for six months before sale for use as
road bed could be a solid waste (Owen Electric Steel Co. v. EPA, 37
F.3d 146, 150 (4th Cir. 1994)).
    In 1998, EPA promulgated a rule in which EPA claimed Subtitle C
jurisdiction over hazardous secondary materials recycled by reclamation
within the mineral processing industry, the ``LDR Phase IV rule'' 
(63 FR 28556, May 26, 1998). In that rule, EPA promulgated a conditional
exclusion for all types of mineral processing hazardous secondary
materials destined for reclamation. EPA imposed a condition prohibiting
land-based storage prior to reclamation because it considered hazardous
secondary materials from the mineral processing industry that were stored 
on the land to be part of the waste disposal problem (63 FR 28581). 
The conditional exclusion decreased regulation over spent
materials stored prior to reclamation, but increased regulation over
by-products and sludges that exhibit a hazardous characteristic, and
that are stored prior to reclamation. EPA noted that the statute does
not authorize it to regulate ``materials that are destined for
immediate reuse in another phase of the industry's ongoing production
process.'' EPA, however, took the position that materials that are
removed from a production process for storage are not ``immediately
reused,'' and therefore are ``discarded'' (63 FR 28580).
    The mining industry challenged the rule, and the DC Circuit vacated
the provisions that expanded jurisdiction over characteristic by-
products and sludges destined for reclamation (Association of Battery
Recyclers v. EPA (``ABR''), 208 F.3d 1047 (DC Cir. 2000)). The Court
held that it had already resolved the issue presented in ABR in its
opinion in AMC I, where it found that ``* * * Congress unambiguously
expressed its intent that `solid waste' (and therefore EPA's regulatory
authority) be limited to materials that are `discarded' by virtue of
being disposed of, abandoned, or thrown away'' (208 F.2d at 1051). It
repeated that materials reused within an ongoing industrial process are
neither disposed of nor abandoned (208 F.3d at 1051-52). It explained
that the intervening API I and AMC II decisions had not narrowed the
holding in AMC I (208 F.3d at 1054-1056).
    Notably, the Court did not hold that storage before reclamation
automatically makes materials ``discarded.'' Rather, it held that ``* *
* at least some of the secondary material EPA seeks to regulate as
solid waste (in the mineral processing rule) is destined for reuse as
part of a continuous industrial process and thus is not abandoned or
thrown away'' (208 F.3d at 1056).
    In its most recent opinion dealing with the definition of solid
waste, Safe Food and Fertilizer v. EPA (``Safe Food''), 350 F.3d 1263
(DC Cir. 2003), the Court upheld an EPA rule that excludes from the
definition of solid waste hazardous secondary materials used to make
zinc fertilizers, and the fertilizers themselves, so long as the
recycled materials meet certain handling, storage and reporting
conditions and the resulting fertilizers have concentration levels for
lead, arsenic, mercury, cadmium, chromium, and dioxins that fall below
specified thresholds (Final Rule, ``Zinc Fertilizers Made From Recycled
Hazardous Secondary Materials'' (``Fertilizer Rule''), 67 FR 48393,
July 24, 2002). EPA determined that if these conditions are met, the
hazardous secondary materials used to make the fertilizer have not been
discarded. The conditions apply to a number of recycled materials not
produced in the fertilizer production industry, including certain zinc-
bearing hazardous secondary materials, such as brass foundry dusts.
    EPA's reasoning was that market participants, consistent with the
EPA-required conditions in the rule, would treat the exempted materials
more like valuable products than like negatively-valued wastes and,
thus, would manage them in ways inconsistent with discard. In addition,
the fertilizers derived from these recycled feedstocks are chemically
indistinguishable from analogous commercial products made from raw
materials (350 F.3d at 1269). The Court upheld the rule based on EPA's
explanation that market participants manage materials in ways
inconsistent with discard, and the fact that the levels of contaminants
in the recycled fertilizers were ``identical'' to the fertilizers made
with virgin raw materials. The Court held that this interpretation of
``discard'' was reasonable and consistent with the statutory purpose.
The Court noted that the identity principle was defensible because the
differences in health and environmental risks between the two types of
fertilizers are so slight as to be substantively meaningless.
    However, the Court specifically stated that it ``need not consider
whether a material could be classified as a non-discard exclusively on
the basis of the market-participation theory'' (350 F.3d at 1269). The
Court only determined that the combination of market participants'
treatment of the materials, EPA required management standards, and the
``identity principle'' are a reasonable set of tools to establish that the
recycled hazardous secondary materials and fertilizers are not discarded.

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

    Prompted by concerns articulated in various Court opinions decided
up to that point, in October 2003, EPA proposed a rule that material
generated and reclaimed in a continuous process within the same
industry is not discarded for purposes of Subtitle C, provided the
recycling process is legitimate (68 FR 61558, October 28, 2003). ``Same
industry'' was defined as industries sharing the same 4-digit North
American Industry Classification System (NAICS) code.
    In the same notice, EPA also solicited comment on several different
alternatives to the proposed exclusion. The first alternative was
whether to exclude from the definition of solid waste those hazardous
secondary materials that are generated and reclaimed in a continuous
process on-site (as defined in 40 CFR 260.10), even if different
industries were involved. This exclusion would be based on the premise
that materials recycled on-site in a continuous process are unlikely to
be discarded because they would be closely managed and monitored by a
single entity that is intimately familiar with both the generation and
reclamation of the hazardous secondary material. In addition, no off-
site transport of the hazardous secondary material (with its attendant
risks) would occur, and there would be few questions about potential
liability in the event of mismanagement or mishap.
    The second alternative was an exclusion for certain situations
within the chemical manufacturing industry that might present unique
recycling situations. Specifically, within the chemical manufacturing
industry, the first manufacturer contracts out production of certain
chemicals to another manufacturer (referred to as batch or tolling
operations). The second manufacturer may generate hazardous secondary
materials that could be returned to the first chemical manufacturer for
reclamation.
    The third alternative would have provided a broader conditional
exclusion from the RCRA hazardous waste regulations for essentially all
hazardous secondary materials that are legitimately recycled by
reclamation. The purpose of this broader exclusion

[[Page 64673]]

would have been to encourage reclamation by lowering costs of
recycling, while still protecting human health and the environment. The
Agency suggested that additional requirements or conditions might be
appropriate to protect human health and the environment for this
broader exclusion, compared to the same-industry exclusion that we
proposed. Examples of such additional conditions could include
recordkeeping and reporting requirements, along with safeguards on
storage or handling.
    In response to the October 2003 proposal, a number of commenters
criticized the Agency specifically for not having conducted a study of
the potential impacts of the proposed regulatory changes. These
commenters expressed the general concern that deregulating hazardous
secondary materials that are reclaimed in the manner proposed could
result in mismanagement of these materials and, thus, could create new
cases of environmental damage that would require remedial action under
federal or state authorities. Some of the commenters further cited a
number of examples of environmental damage that were attributed to
hazardous secondary material recycling, including a number of sites
listed on the Superfund National Priorities List (NPL).
    However, other commenters to the October 2003 proposal expressed
the view that the great majority of these cases of recycling-related
environmental problems occurred before RCRA, CERCLA, or other
environmental programs were established in the early 1980s. These
commenters further argued that these environmental programs--most
notably, RCRA's hazardous waste regulations and the liability
provisions of CERCLA--have created strong incentives for proper
management of recyclable hazardous secondary materials and recycling
residuals. Several commenters further noted that, because of these
developments, industrial recycling practices have changed substantially
since the early 1980s and present day generators and recyclers are much
better environmental stewards than in the pre-RCRA/CERCLA era. Thus,
they argued, cases of ``historical'' recycling-related environmental
damage are not particularly relevant or instructive with regard to
modifying the current RCRA hazardous waste regulations for hazardous
secondary materials recycling.

D. Recycling Studies

    In light of these comments on the October 2003 proposal, and in
deliberating on how to proceed with this rulemaking effort, the Agency
decided that additional information on hazardous secondary material
recycling would benefit the regulatory decision-making process, and
would provide stakeholders with a clearer picture of the hazardous
secondary material recycling industry in this country. Accordingly, the
Agency examined three basic issues that we believed were of particular
importance to informing this rulemaking effort:
    • How do responsible generators and recyclers of hazardous secondary
materials ensure that recycling is done in an environmentally safe manner?
    • To what extent have hazardous secondary material recycling
practices resulted in environmental problems in recent years, and why?
    • Are there certain economic forces or incentives specific to
hazardous secondary material recycling that can explain why environmental
problems can sometimes originate from such recycling activities?
    Reports documenting these studies have been available for comment
in the docket for this rulemaking, under the following titles:
    • An Assessment of Good Current Practices for Recycling of
Hazardous Secondary Materials (EPA-HQ-RCRA-2002-0031-0354 )
(``successful recycling study'').
    • An Assessment of Environmental Problems Associated With
Recycling of Hazardous Secondary Materials (EPA-HQ-RCRA-2002-0031-0355)
(``environmental problems study'').
    • A Study of Potential Effects of Market Forces on the
Management of Hazardous Secondary Materials Intended for Recycling
(EPA-HQ-RCRA-2002-0031-0358) (``market forces study'').

The results of these three studies have informed and supported EPA's
decision making in today's final rule.
    The successful recycling study has provided information to the
Agency that has helped us determine what types of controls would be
appropriate for hazardous secondary materials sent for reclamation to
determine that they are handled as commodities rather than wastes. EPA
found that responsible recycling practices used by generators and
recyclers to manage hazardous secondary materials fall into two general
categories. The first category includes the audit activities and
inquiries performed by a generator of a hazardous secondary material to
determine whether the entity to which it is sending such material is
equipped to responsibly manage it without the risk of releases or other
environmental damage. These recycling and waste audits of other
companies' facilities form a backbone of many of the transactions in
the hazardous secondary materials market. The second category of
responsible recycling practices consists of the control practices that
ensure responsible management of any given shipment of hazardous
secondary material, such as the contracts under which the transaction
takes place and the tracking systems in place that can inform a
generator that its hazardous secondary material has been properly managed.
    As discussed later in today's preamble, these findings helped
inform EPA's decision to require that a hazardous secondary material
generator conduct reasonable efforts to ensure its materials are
properly and legitimately recycled, and to require certain
recordkeeping requirements.
    The goal of the environmental problems study was to identify and
characterize environmental problems that have been attributed to some
types of hazardous secondary material recycling activity that are
relevant for the purpose of this rulemaking effort. To address
commenters' concerns that historic damages are irrelevant to current
practices, EPA only included cases where damages occurred after 1982
(post-RCRA and -CERCLA implementation). The study identifies 208 cases
in which environmental damages of some kind occurred from some type of
recycling activity and that otherwise fit the scope of the study. The
Agency believes that the occurrence of certain types of environmental
problems associated with current recycling practices shows that discard
has occurred. In particular, instances where materials were abandoned
(e.g., in warehouses) and which required removal overseen by a
government agency and expenditure of public funds clearly demonstrate
that the hazardous secondary material was discarded. Of the 208 damage
cases, 69 cases (33%) involve abandoned materials. The relatively high
incidence of abandoned materials likely reflects the fact that
bankruptcies or other types of business failures were associated with
138 (66%) of the cases.
    In addition, the pattern of environmental damages that resulted
from the mismanagement of recyclable materials (including contamination
of soils, groundwater, surface water and air) is a strong indication
that the hazardous secondary materials were generally not managed as
valuable commodities and were discarded. Of the 208 damage cases, 81
cases (40%) primarily resulted from the

[[Page 64674]]

mismanagement of recyclable hazardous secondary materials.
Mismanagement of recycling residuals was the primary cause in 71 cases
(34%). Often, in the case of mismanagement of recycling residues,
reclamation processes generated residuals in which the toxic components
of the recycled materials were separated from the non-toxic components,
and these portions of the hazardous secondary material were then
mismanaged and discarded. Examples of this include a number of drum
reconditioning facilities, where large numbers of used drums were
cleaned out to remove small amounts of remaining product such as
solvent, and these wastes were then improperly stored or disposed.
    As discussed later in today's preamble, these findings helped
inform EPA's decision to require that the hazardous secondary material
be contained in the unit and managed in a manner that is at least as
protective as an analogous raw material (where there is an analogous
material), that the recycling residuals be properly managed, and that
the reclamation facility and any intermediate facilities have financial
assurance. In addition, the relatively small proportion of cases of
damages from on-site recycling (13 of the 208 cases (6%)) lends support
for EPA's decision to include fewer limitations on the exclusion for
hazardous secondary materials recycled under the control of the generator.
    The market forces study uses accepted economic theory to describe
how various market incentives can influence a firm's decision-making
process when the recycling of hazardous secondary materials is
involved. This study helps explain some of the possible fundamental
economic drivers of both the successful and unsuccessful recycling
practices, which, in turn, helped the Agency to design the exclusions
being finalized today.
    As pointed out by some commenters to the October 2003 proposed
rule, the economic forces shaping the behavior of firms that recycle
hazardous secondary materials are often different from those at play in
manufacturing processes using virgin materials. The market forces study
uses economic theory to provide information on how certain
characteristics can influence three different recycling models to
encourage or discourage an optimal outcome. The three recycling models
examined are: (1) Commercial recycling, where the primary business of
the firms is recycling hazardous secondary materials that are accepted
for recycling from off-site industrial sources (which usually pay a
fee); (2) industrial intra-company recycling, where firms generate
hazardous secondary materials as by-products of their main production
processes and recycle the hazardous secondary materials for sale or for
their own reuse in production; and (3) industrial inter-company
recycling, where firms whose primary business is not recycling, but
either use or recycle hazardous secondary materials obtained from other
firms, with the objective of reducing the cost of their production
inputs. The report looks at how the outcome from each model is
potentially affected by three market characteristics: (1) Value of the
recycled product, (2) price stability of recycling output or inputs,
and (3) net worth of the firm.
    While an individual firm's decision-making process is based on many
factors and attempting to extrapolate a firm's likely behavior from a
few factors could be an over-simplification, when used in conjunction
with other pieces of information, the economic theory can be quite
illuminating. For example, according to the market forces study, the
industrial intra- and inter-company recyclers have more flexibility in
adjusting to unstable recycling markets (e.g., during price
fluctuations, these companies can more easily switch from recycling to
disposal or from recycled inputs to virgin inputs). Therefore, they
would be expected to be less likely to have environmental problems from
over-accumulated materials. On the other hand, certain specific types
of commercial recycling, where the product has low value, the prices
are unstable, and/or the firm has a low net worth, could be more
susceptible to environmental problems from the over-accumulation of
hazardous secondary materials, especially when compared to recycling by
a well-capitalized firm that yields a product with high value. In both
cases, these predicted outcomes appear to be supported by the results
of the environmental problems study, which show the majority of
problems occur at off-site commercial recyclers.
    However, as shown by the successful recycling study, generators who
might otherwise bear a large liability from poorly managed recycling at
other companies have addressed this issue by carefully examining the
recyclers to which they send their hazardous secondary materials to
ensure that they are technically and financially capable of performing
the recycling. In addition, we have seen that successful recyclers
(both commercial and industrial) have often taken advantage of
mechanisms, such as long-term contracts to help stabilize price
fluctuations, allowing recyclers to plan their operations better.
    Further discussion of the recycling studies, including the
methodology and limitations of the studies, can be found in the March
2007 supplemental proposal (72 FR 14178-83), and the studies themselves
can be found in the docket for today's rulemaking.

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

    To provide public notice on the recycling studies discussed above,
in March 2007, EPA published a supplemental proposal (72 FR 14172,
March 26, 2007). In addition, based on the comments received on the
October 2003 proposal, EPA also decided to restructure our approach to
revising the definition of solid waste to more directly consider
whether particular materials are not considered ``discarded'' and thus
are not solid and hazardous wastes subject to regulation under Subtitle
C of RCRA. We agreed with the many commenters on the October 2003
proposal who said that whether materials are recycled within the same
NAICS code is not an appropriate indication of whether they are
discarded. NAICS designations are designed to be consistent only with
product lines, so that the effect of our October 2003 proposal would be
that hazardous secondary materials generated and reclaimed under the
control of the generator would not be excluded, even though the
generator has not abandoned the material and has every opportunity and
incentive to maintain oversight of, and responsibility for, the
material that is reclaimed (see ABR, 208 F.2d at 1051 (noting that
discard has not taken place where the producer saves and reuses
secondary materials)).
    Instead, in March 2007, EPA proposed two exclusions for hazardous
secondary materials recycled under the control of the generator (one
exclusion would apply to hazardous secondary materials managed in non-
land-based units, whereas the other exclusion would apply to hazardous
secondary materials managed in land-based units) and an additional
exclusion for hazardous secondary materials transferred to another
party for reclamation.
    For the exclusions for hazardous secondary materials reclaimed
under the control of the generator, EPA described three circumstances
under which we believe that discard does not take place and where the
potential for environmental releases is low to non-existent. The three
situations involve legitimate recycling of hazardous secondary
materials that are generated and reclaimed at the generating facility,
at a different facility within the same

[[Page 64675]]

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

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

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

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

    In the March 2007 supplemental proposal, EPA explained how the
concept of ``discard'' is the central organizing idea behind the
revisions to the definition of solid waste being finalized today (72 FR
14178). Basing the revisions on ``discard'' reflects the fundamental
logic of the RCRA statute. As stated in RCRA Section 1004(27), ``solid
waste'' is defined as ``* * * any garbage, refuse, sludge from a waste
treatment plant, or air pollution control facility and other discarded
material * * * resulting from industrial, commercial, mining and
agricultural activities. * * *'' Therefore, in the context of this
final rule, a key issue is the circumstances under which a hazardous
secondary material that is recycled by reclamation is or is not discarded.

[[Page 64676]]

    The March 2007 supplemental proposal represented a shift from the
approach taken in the October 2003 proposal, which proposed to exclude
from the definition of solid waste any hazardous secondary material
generated and reclaimed in a continuous process within the same
industry, provided the reclamation was legitimate. ``Same industry''
was defined as industries sharing the same 4-digit NAICS code. The
basis for that proposed exclusion was the holding in American Mining
Congress v. EPA (``AMC I''), 824 F.2d 1177 (DC Cir. 1987) that
materials destined for beneficial reuse in a continuous process by the
generating industry are not discarded (68 FR 61563, 61564-61567).
    Commenters critical of the October 2003 proposal argued, among
other things, that EPA failed to present a reasoned analysis of the
indicia of discard (72 FR 14184-14185). In evaluating these comments,
EPA determined that the effect of our October 2003 proposal would be
that some hazardous secondary materials generated and reclaimed under
the control of the generator would not be excluded, even though the
generator had not abandoned the material and had every opportunity and
incentive to maintain oversight of, and responsibility for, the
hazardous secondary material being reclaimed. Under these
circumstances, we determined in March 2007 that discard has generally
not occurred (72 FR 14185). Therefore, in the March 2007 supplemental
proposal, EPA decided to examine the concept of discard, which is the
driving principle behind the court's holdings on the definition of
solid waste, rather than trying to fit materials into specific fact
patterns addressed by the court (see 72 FR 14175).
    EPA continues to believe that the concept of discard is the most
important organizing principle governing the determinations we have
made in today's final rule. In the series of decisions discussed above
relating to the RCRA definition of solid waste, the Court of Appeals
for the DC Circuit has consistently cited a plain language definition
of discard, as meaning ``disposing, abandoning or throwing away.''
Today's final rule is consistent with that definition. Below is a
discussion of each provision of the final rule with an explanation of
how it relates to discard. Further discussion of the concept of discard
and its relationship to specific provisions and ways of implementing
this rule is found in sections V.A through V.D, below.
    The Agency also incorporates in this preamble to the final rule all
determinations in the March 2007 supplemental proposal, except to the
extent they are inconsistent with the determinations in this preamble,
regarding the conditions for the solid waste exclusions. In addition,
EPA notes that it did not reopen the specific details of the
speculative accumulation regulation regarding the time periods under
which materials are to be recycled, since these periods have been part
of the Agency's regulations for many years and are familiar to persons
who are affected by the regulations.

A. Discard and the Generator-Controlled Exclusions

    In the March 2007 supplemental proposal, EPA determined that if the
generator maintains control over the recycled hazardous secondary
material, the material is legitimately recycled under the standards
established in the proposal, and the material is not speculatively
accumulated within the meaning of EPA's regulations, then the hazardous
secondary material is not discarded. This is because the hazardous
secondary material is being treated as a valuable commodity rather than
as a waste. By maintaining control over, and potential liability for,
the recycling process, the generator ensures that the hazardous
secondary materials are not discarded (see ABR 208 F.3d 1051 (``Rather
than throwing these materials [destined for recycling] away, the
producer saves them; rather than abandoning them, the producer reuses
them.'')) (72 FR 14178).
    EPA continues to believe that when a generator legitimately
recycles hazardous secondary material under its control, the generator
has not abandoned the material and has every opportunity and incentive
to maintain oversight of, and responsibility for, the hazardous
secondary material that is reclaimed.
    In determining when recycling occurs ``under the control'' of the
generator, EPA looked at three scenarios: Recycling performed on-site,
recycling performed within the same company, and recycling performed
under certain specific tolling arrangements.
    In the March 2007 supplemental proposal, EPA noted that, of the 208
recycling cases that caused environmental damage, only 13
(approximately 6%) occurred as a result of on-site recycling. We also
agreed with commenters on the October 2003 proposal who asserted that
``generators who recycle materials on-site (even if the reclamation
takes place in a different NAICS code) are likely to be familiar with
the material and more likely to maintain responsibility for the
materials'' (72 FR 14185).
    EPA also determined that this rationale applies to legitimate
reclamation taking place within the same company. In the case of same-
company recycling, both the generating facility and the reclamation
facility (if they are different) would be familiar with the hazardous
secondary materials and the company would be ultimately liable for any
mismanagement of the hazardous secondary materials. Under these
circumstances, the incentive to avoid such mismanagement would be so
strong that mismanagement also would be unlikely.
    In the case of certain tolling operations, EPA determined in the
March 2007 supplemental proposal that a certain specific type of
tolling arrangement provides equivalent assurance that recycling is
performed ``under the control of the generator'' and does not
constitute discard. Under this type of arrangement, one company (the
tolling contractor) contracts with a second company (the toll
manufacturer) to produce a specialty chemical from specified unused
materials identified in the tolling contract. The toll manufacturer
produces the chemical and the production process generates a hazardous
secondary material (such as a spent solvent) which is routinely
reclaimed at the tolling contractor's facility. The typical toll
manufacturing contract contains detailed specifications about the
product to be manufactured, including management of any hazardous
secondary materials that are produced and returned to the tolling
contractor for reclamation. Under this scenario, the hazardous
secondary material continues to be managed as a valuable product, so
discard has not occurred. Moreover, because the contract specifies that
the tolling contractor retains ownership of, and responsibility for,
the hazardous secondary materials, there is a strong incentive to avoid
any mismanagement or release. In essence, the tolling contractor has
outsourced a step in its manufacturing process, but continues to take
responsibility and maintain control of the process as a whole,
including both the unused materials going into the process and the
product and hazardous secondary materials resulting from the process.
    For all three of these generator-controlled exclusions--reclamation
performed on-site, within the same company, and via certain tolling
arrangements--EPA continues to find that the facility owner still finds
value in the hazardous secondary materials, has retained control over
them, and intends to reclaim them. Therefore, EPA

[[Page 64677]]

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

    \1\ As discussed in section VII.C., persons taking advantage of
the generator-controlled option must also notify the regulatory
authority. This notification requirement is needed to enable
credible evaluation of the status of hazardous secondary materials
under RCRA and to ensure the terms of the exclusions are being met
by generators and reclaimers. These types of notification requirements in
this rule are being promulgated under the authority of RCRA section 3007.
---------------------------------------------------------------------------

B. Discard and the Transfer-Based Exclusion

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

[[Page 64678]]

recycling and normal manufacturing. As opposed to manufacturing, where
the cost of raw materials or intermediates (or inputs) is greater than
zero and revenue is generated primarily from the sale of the output,
hazardous secondary materials recycling can involve generating revenue
primarily from receipt of the hazardous secondary materials (72 FR
14182). Recyclers of hazardous secondary materials in this situation
may thus respond differently from traditional manufacturers to economic
forces and incentives, accumulating more inputs (hazardous secondary
materials) than can be processed (reclaimed). In addition, commercial
recyclers appear to have less flexibility than in-house recyclers
(e.g., during price fluctuations, in-house recyclers can more easily
switch from recycling to disposal or from recycled inputs to virgin
inputs, which commercial recyclers cannot) (72 FR 14183).
    After reviewing public comments on the recycling studies (see
section XV.D. of today's preamble), EPA continues to believe that
conditions are needed under the transfer-based exclusion for the Agency
to determine that these hazardous secondary materials are not discarded.\2\
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    \2\ These are conditions beyond the prohibition on speculative
accumulation, the requirement that the hazardous secondary material
be contained, and the requirement that the materials be legitimately
recycled, as described in section VII.C., which would also apply to
the transfer-based exclusion. The transfer-based exclusion also
includes a notification requirement, which is needed to enable
credible evaluation of the status of hazardous secondary materials
under section 3007 of RCRA and to ensure the terms of the exclusions
are being met by generators, intermediate facilities, and reclaimers.
---------------------------------------------------------------------------

    One key condition that reflects the basic premise underlying the
exclusion is the condition that the hazardous secondary material
generator perform and document reasonable efforts to ensure that its
hazardous secondary material will be properly and legitimately
recycled. As EPA explained in the March 2007 supplemental proposal, in
order to demonstrate that hazardous secondary materials will not be
discarded, generators who transfer their hazardous secondary materials
to a third party must have a reasonable understanding of who will be
reclaiming the materials and how they will be managed and reclaimed and
a reasonable assurance that the recycling practice is safe and
legitimate (72 FR 14194). In order for a generator to determine whether
its hazardous secondary materials are not solid wastes because they are
not discarded, the generator must make a reasonable effort to ensure
that the reclaimer intends to legitimately recycle the material and not
discard it, and that the reclaimer (and any intermediate facility) will
properly manage the material.
    EPA continues to find that the reasonable efforts condition is
critical in determining when hazardous secondary materials sent to
another party for reclamation are not discarded. According to the
successful recycling study found in the docket for today's rulemaking,
generators of hazardous secondary materials frequently perform audit
activities and inquiries to determine whether the entity to which they
are sending hazardous secondary materials is equipped to responsibly
and legitimately reclaim and manage those materials without the risk of
releases or other environmental damage. These recycling and waste
audits of other companies' facilities form a backbone of many of the
transactions in the hazardous secondary materials markets. As noted in
the March 2007 supplemental proposal, EPA's successful recycling study
quotes one large recycling and disposal vendor as stating that of its
new customers, 60% of the large customers and 30-50% of the smaller
customers now perform audits on them (72 FR 14191). Thus, although
these practices are not universal, they do indicate that there are
currently many generators who recognize the risk of third-party
recyclers discarding their hazardous secondary materials and who take
responsibility to ensure that this discard does not occur. By codifying
the reasonable efforts condition of the transfer-based exclusion, EPA
believes that hazardous secondary materials generated by companies who
take this type of responsibility are not being discarded.
    EPA has developed a reasonable efforts condition that is objective
and is based on the types of information that are typically gathered in
environmental audits currently performed by generators. However, one
piece of information that is not included under the reasonable efforts
provision being finalized today is the financial health of the
reclamation facility. While EPA agrees with comments received that
state that evaluating the financial health of a company can be a useful
exercise, and encourages companies to do so, it is not an activity that
lends itself to an objective standard that would be workable in a solid
waste identification regulation.
    However, the financial health of a reclamation facility can still
be a crucial consideration in determining whether discard is taking
place. According to the successful recycling study, an examination of a
company's finances is an important part of many environmental audits.
In addition, the environmental problems study showed that bankruptcies
or other types of business failures were associated with 138 (66%) of
the damage cases, and the market forces study identified a low net worth
of a firm as a strong indication of a sub-optimal outcome of recycling.
    To address the issue of the correlation of financial health with
the absence of discard, EPA proposed in the March 2007 supplemental
proposal to require that reclamation facilities obtain financial
assurance. The financial assurance requirements are designed to help
EPA determine that the hazardous secondary material generator is not
discarding the hazardous secondary material by sending it to a
reclamation facility that is financially unsound.
    In addition, by obtaining financial assurance, the owner/operator
of the reclamation facility (or intermediate facility) is making a
direct demonstration that it will not abandon the hazardous secondary
material. Discard through abandonment was a major cause of damages
identified in the environmental problems study. Of the 208 damage
cases, 69 (33%) cases involved abandoned materials. By obtaining
financial assurance, a reclaimer (or intermediate facility) is
demonstrating that even if events beyond its control make its operations
uneconomical, the hazardous secondary material will not be abandoned.
    Another major cause of damages identified in the environmental
problems study was mismanagement of recyclable materials, constituting
the primary cause of damage in 81 (40%) of the 208 cases. Accordingly,
in the March 2007 supplemental proposal, EPA proposed a condition for
reclaimers that they must manage the hazardous secondary materials in
at least as protective a manner as they would an analogous raw
material, and in such a way that the hazardous secondary materials
would not be released into the environment (72 FR 14195). After
reviewing the comments, EPA continues to find that such a condition is
needed for the Agency to determine that the hazardous secondary
materials are not discarded.
    The third major source of damages identified in the environmental
problems study was mismanagement of residuals generated from the
reclamation activity, constituting the primary cause of damage in 71
(34%) of the 208 cases. As discussed in the March 2007 supplemental
proposal, EPA found that in many cases, the

[[Page 64679]]

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

C. Discard and Non-Waste Determinations

    In addition to the exclusions discussed above, the Agency is also
finalizing a process for obtaining a case-specific non-waste
determination for certain hazardous secondary materials that are
recycled. This process allows a petitioner to receive a formal
determination from EPA (or the state, if the state is authorized for
this provision) that its hazardous secondary material is not discarded
and therefore is not a solid waste. The procedure allows EPA or the
authorized state to take into account the particular fact pattern of
the reclamation operation to determine that the hazardous secondary
material in question is not a solid waste.
    The determination is available to applicants who demonstrate (1)
that their hazardous secondary materials are reclaimed in a continuous
industrial process, or (2) that the materials are indistinguishable in
all relevant aspects from a product or intermediate.
    As discussed earlier, court decisions have made it clear that
hazardous secondary materials reclaimed in a continuous industrial
process are not discarded and, therefore, are not solid waste. As
discussed in the March 2007 supplemental proposal, EPA believes that
the generator-controlled exclusion also excludes from the definition of
solid waste hazardous secondary materials recycled in a continuous
industrial process (72 FR 14202). In effect, hazardous secondary
materials reclaimed in a continuous process are a subset of the
hazardous secondary materials reclaimed under the control of the
generator that are excluded under today's rule.
    However, EPA also recognized in the March 2007 supplemental
proposal that production processes can vary widely from industry to
industry. Thus, in some cases, EPA may need to evaluate case-specific
fact patterns to determine whether an individual hazardous secondary
material is reclaimed in a continuous industrial process, and therefore
not a solid waste.\3\ EPA continues to believe that this is best done
through a case-by-case procedure and is, therefore, finalizing the non-
waste determination process today.
---------------------------------------------------------------------------

    \3\ See, for example the ABR decision, where the Court
acknowledged that the term ``discard'' could be ``ambiguous as
applied to some situations, but not as applied to others,'' and
particularly cited the difficulty in examining the details of the
many processes in the mineral processing industry (208 F.3d at
1056). While the court overturned EPA's regulations for casting too
wide a net over continuous industrial processes, it acknowledged
that there are a large number of processes, some of which may be
continuous and some of which may not. Determining what is a
continuous process in the mineral processing industry, according to
the Court, would require examination of the details of the processes
and does not lend itself, well, to broad abstraction. Specifically,
the Court stated,
    ``Some mineral processing secondary materials covered under the
Phase IV Rule may not proceed directly to an ongoing recycling
process and may be analogous to the sludge in AMC II. The parties
have presented this aspect of the case in broad abstraction,
providing little detail about the many processes throughout the
industry that generate residual material of the sort EPA is
attempting to regulate under RCRA, * * *'' 208 F.3d at 1056.
    In the case of today's final rule, which applies across
industries, there are far larger and more diverse processes. While
EPA believes it is establishing a reasonable set of principles, they must
still be applied to the details of the industrial processes in question.

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

VI. When Will the Final Rules Become Effective?

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

[[Page 64680]]

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

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

A. What Is the Purpose of This Exclusion?

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

B. Scope and Applicability

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

C. Restrictions and Requirements

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

[[Page 64681]]

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

[[Page 64682]]

and/or 40 CFR 261.4(a)(23) for hazardous secondary materials managed in
a land-based unit);
    • When the facility expects to begin managing the hazardous
secondary materials in accordance with the exclusion;
    • A list of hazardous secondary materials that will be
managed according to the exclusion (reported as the EPA hazardous waste
numbers that would apply if the hazardous secondary materials were
managed as hazardous waste);
    • For each hazardous secondary material, whether the
material, or any portion thereof, will be managed in a land-based unit;
    • The quantity of each hazardous secondary material to be
managed annually; and
    • The certification (included in EPA Form 8700-12) signed
and dated by an authorized representative of the facility.
    Generators and reclaimers are required to notify on a per facility
basis. In other words, facilities managing hazardous secondary
materials will need to submit a notification form in accordance with
the exclusion. One notification cannot cover two or more facilities.
Furthermore, each facility need only use one notification form to list
all of the hazardous secondary materials to be managed under the
exclusion (i.e., facilities need not file separate notifications for
each hazardous secondary material).
    We are also requiring facilities that stop managing hazardous
secondary materials in accordance with the exclusion to notify the
Regional Administrator within 30 days using the same EPA Form 8700-12.
Notification in this instance serves two objectives: (1) It allows
states to follow up with the facility to verify that the hazardous
secondary material has not been discarded; and (2) it maintains the
usability of the database to enable states to monitor compliance and,
for today's transfer-based exclusion, to assist generators with
performing reasonable efforts on potential reclaimers. We consider a
facility to have `stopped' managing hazardous secondary materials when
a facility no longer generates, manages and/or reclaims hazardous
secondary materials under the exclusion and does not expect to manage
any amount of hazardous secondary material under the exclusion for at
least one year. This includes if the facility chooses to manage the
hazardous secondary materials as hazardous waste or the facility
chooses to temporarily suspend management of hazardous secondary
materials and does not expect to manage any amount of hazardous
secondary materials for at least one year. For example, a facility that
has previously notified it is managing hazardous secondary materials
under the exclusion, but then subsequently chooses to stop managing all
hazardous secondary materials for a period of at least one year, must
notify the Regional Administrator. However, if this same facility only
stopped managing one type of hazardous secondary material (but
continued to manage another type of hazardous secondary material under
the exclusion) it would not need to notify, and could just update its
list of hazardous secondary materials during the next periodic re-
notification submitted every two years. Additionally, if a reclaimer or
intermediate facility managing hazardous secondary materials under the
transfer-based exclusion requests release of financial assurance under
40 CFR 261.143(h), it is clear the facility has `stopped' managing
hazardous secondary materials, and, therefore, must notify the Regional
Administrator (for additional clarification, notification does not
`trigger' the process for releasing financial assurance; instead, a
facility wishing to be released from financial assurance obligations
must notify it has `stopped' managing hazardous secondary materials).
Of course, a facility could certainly choose to begin managing
hazardous secondary materials again and would simply have to submit a
notification in compliance with 40 CFR 260.42.
    We note that the requirement to provide this notification is not a
condition of the exclusion. Thus, failure to comply with the
requirement constitutes a violation of RCRA, but does not affect the
excluded status of the hazardous secondary materials.
    We believe our authority to request such information is inherent in
our authority to determine whether a material is discarded, and we
consider this to be the minimum information needed to enable credible
evaluation of the status of hazardous secondary materials under section
3007 of RCRA and to ensure that the terms of the exclusions are being
met by generators and reclaimers. EPA further believes that RCRA
section 3007 allows us to gather information about any material when we
have reason to believe that it may be a solid waste and possibly a
hazardous waste within the meaning of RCRA section 1004(5). Section
2002 also gives EPA authority to issue regulations necessary to carry
out the purposes of RCRA.
    We also note that after EPA promulgates regulations listing a
material as a hazardous waste or identifying it by its characteristics,
section 3010 of RCRA requires generators of such materials to submit a
notification to EPA within 90 days. Since the changes finalized today
could substantially affect the universe of facilities in the Subtitle C
system, we believe the notifications are appropriate.
    The intent of this notification requirement is to provide basic
information to the regulatory agencies about who will be managing
hazardous secondary materials under the exclusion. The specific
information included in today's notification requirement will enable
regulatory agencies to monitor compliance adequately and to ensure
hazardous secondary materials are managed according to the exclusion
and not discarded. For example, in the notification, EPA requires
facilities to include the quantity of hazardous secondary materials
that will be managed according to the exclusion and whether certain
types of hazardous secondary materials will be managed in land-based
units. This information can be used to assist RCRA inspectors in
determining which facilities may warrant greater oversight and provides
a basis for setting enforcement priorities. Furthermore, requiring
facilities to notify when they have stopped managing hazardous
secondary materials allows states to follow-up and ensure that
hazardous secondary materials were not discarded. Notification
information is collected in EPA's RCRAInfo database, which is the
national repository of all RCRA Subtitle C site identification
information, whether collected by a state authority or EPA. EPA
provides public access to this information through EPA's public Web site
at http://www.epa.gov/enviro/html/rcris/ (or other successor Web site).
    This notification requirement is the same as the notification
requirement for today's transfer-based exclusion found in section
VIII.C. of today's preamble. Sending to an intermediate facility. We
note that under this exclusion, hazardous secondary materials may not
be sent to an intermediate facility as defined in 40 CFR 260.10 (i.e.,
a facility, other than a generator or reclaimer, that stores hazardous
secondary materials for more than 10 days). If hazardous secondary
materials are sent to intermediate facilities, they would not meet the
definition of hazardous secondary materials reclaimed under the control
of the generator, and they are subject to the conditions of the
transfer-based exclusion, discussed below.

[[Page 64683]]

D. Terminating the Exclusion

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

E. Enforcement

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

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

    Today, EPA is also finalizing an exclusion from the definition of
solid waste for hazardous secondary materials that are generated and
subsequently transferred to another company or person for the purpose
of reclamation (i.e., ``transfer-based exclusion''), provided that
certain conditions are met. Reclamation that conforms to these
conditions would not involve discard, and therefore the hazardous
secondary materials would not be regulated as solid waste. As with all
recycling-related exclusions and exemptions, such excluded hazardous
secondary materials would also need to be recycled legitimately. For
further discussion on how the transfer-based exclusion relates to the
concept of discard, see section V.B. of this preamble.
    The conditions that must be met for this exclusion are based on our
analysis of how successful third-party recycling currently operates
(and, conversely, how unsuccessful third-party recycling practices can
result in recyclable hazardous secondary materials being discarded),
and are supported by the information contained in the rulemaking
record, including the recycling studies found in the public docket for
today's rulemaking and discussed previously in section III.D. of
today's preamble and in the preamble to the March 2007 supplemental
proposal at 72 FR 14178-14183. For example, the successful recycling
study indicates that many responsible generators examine the recycler's
technical capabilities, business viability, environmental track record,
and other relevant questions before sending hazardous secondary
materials for recycling. Currently, these recycler audits, which can be
thought of as a form of environmental ``due diligence,'' are in essence
a precaution to minimize the prospect of incurring CERCLA liability in
the event that the recycling, or lack thereof, results in the release
of material to the environment. The fact that these companies are
willing to incur the expense of auditing recyclers as a business
practice is of itself a marketplace affirmation that sending hazardous
secondary materials to other companies for recycling involves some
degree of risk. Although these risks may be small when the recycler is
a well-established, successful enterprise with a good record of
environmental stewardship, it also is apparent that not all recyclers
fit this profile, as evidenced in the study of environmental problems
associated with hazardous secondary materials recycling. Thus, we
believe that there is sufficient basis for the Agency to place certain
conditions on this exclusion for the generator to determine that the
hazardous secondary material is not discarded, particularly since we
expect that this rulemaking could encourage

[[Page 64684]]

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

A. What Is the Purpose of This Exclusion?

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

B. Scope and Applicability

    The conditional exclusion for the transfer-based approach applies
to hazardous secondary materials that are currently regulated as
hazardous wastes because their recycling involves reclamation--
specifically, spent materials, listed sludges, and listed by-products.
It would not be available for hazardous secondary materials that are
regulated as hazardous wastes for other reasons, such as ``inherently
waste-like materials,'' materials that are ``used in a manner
constituting disposal,'' or ``materials burned for energy recovery.''
The conditional exclusion also does not apply to materials that are
currently excluded from the definition of solid waste according to
other, existing provisions of 40 CFR part 261. For example, the
exclusion for broken cathode ray tubes requires them to be transported
in closed containers per 40 CFR 261.4(a)(22). Today's exclusion does
not supersede or otherwise affect these other exclusions, and such
hazardous secondary materials will need to be managed in accordance
with those existing exclusions. For a discussion of how this exclusion
relates to particular existing exclusions and additional details
involving these exclusions, see section XI of today's preamble.
    This exclusion is available to hazardous secondary material
generators, transporters, intermediate facilities, or reclaimers. In
the March 2007 supplemental proposal, EPA proposed that the hazardous
secondary material must be transferred directly from the generator to
the reclaimer and not be handled by anyone else other than a
transporter. Thus, as proposed, a generator that wished to maintain the
excluded status of its hazardous secondary materials would not be able
to ship those materials to a middleman, such as a broker. We said that
we believed that a generator who ships materials to a middleman, such
as a broker typically does not know who will ultimately manage and
reclaim them, or how they will be reclaimed (72 FR 14189). However, we
requested comment on allowing middlemen to participate in the exclusion.
    Comments on the proposal disputed the assumption that the generator
does not know the final destination when shipping to an intermediate
facility, saying, that in certain cases, the generator works with an
intermediate facility to choose the reclamation facility and the final
destination is arranged by contract before the hazardous secondary
materials are shipped. Commenters also asserted that such arrangements
allow for consolidation of shipments, making recycling economical for
small businesses who generate hazardous secondary materials.
    EPA agrees with the comments that some types of intermediate
facilities could participate in the exclusion, while still allowing the
hazardous secondary material generator to perform reasonable efforts to
ensure that the hazardous secondary material is properly and
legitimately recycled. Thus, in the final rule, EPA has determined that
intermediate facilities will be allowed under the transfer-based
exclusion. However, to limit the exclusion to those intermediate
facilities where discard will not occur, if the hazardous secondary
material will be passing through an intermediate facility, the
hazardous secondary material generator must make contractual
arrangements with the intermediate facility to ensure that the
hazardous secondary material is sent on to the reclamation facility or
facilities identified by the generator and must perform reasonable
efforts on the intermediate facility, as well as on the reclamation
facility. Also, the intermediate facility must send the hazardous
secondary material to the reclaimer(s) designated by the generator.
    In addition, the intermediate facility must meet the same
conditions as the reclamation facility for the same reasons the
reclamation facility must meet them. Section VIII.C.4. below discusses
additional details as to why these conditions need to apply to the
reclamation facilities and this reasoning applies equally to
intermediate facilities involved in the process. Of the 208 damage
cases in the environmental problems study, 45 (22%) cases were from
intermediate facilities. Therefore, EPA believes the record for
requiring the conditions for the reclamation facility also supports
promulgation of the same conditions for intermediate facilities.
    In addition, in the March 2007 supplemental proposal, the Agency
recognized that, in some cases, recycling of an excluded hazardous
secondary material may involve more than one reclamation step. For
example, a recyclable hazardous secondary material, such as an
electroplating secondary material, might have a relatively high
moisture content and a somewhat variable chemical composition. Such
materials might need to be dried and blended to a suitable, consistent
specification before they are amenable to a ``final'' reclamation
process (e.g., metals smelting). In this example, the two different
reclamation processes might be conducted by different companies and/or
at different facilities. The Agency continues to see no reason to
discourage this kind of recycling. The transfer-based exclusion
finalized today is available for hazardous secondary materials that are
recycled by means of one or more reclamation processes, including when
they occur at more than one reclamation facility.
    The conditions for generators and reclaimers 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.
For example, if the excluded hazardous secondary material was 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 involved in the reclamation process to ensure that the
hazardous secondary materials would be properly and legitimately
recycled. We believe that this is a consistent application of the idea
of requiring ``reasonable efforts'' as a condition of this exclusion.
Where recycling of a hazardous secondary material involves more than
one reclamation step at more than one facility, generators should be
well informed as to how the materials will be reclaimed, and by whom,
throughout the recycling process. Additionally, each reclaimer
(including `partial reclaimers') managing hazardous secondary materials
must meet all the reclaimer conditions listed under 40 CFR
261.4(a)(24), as well as the recordkeeping requirements.

[[Page 64685]]

C. Conditions and Requirements

1. Provisions Applicable to the Hazardous Secondary Materials
Generator, the Reclamation Facility, and Any Intermediate Facility
    Prohibition on speculative accumulation. As a condition of the
transfer-based exclusion, hazardous secondary materials cannot be
speculatively accumulated (40 CFR 261.1(c)(8)) at the hazardous
secondary material generator, reclamation facility, or intermediate
facility. Restrictions on speculative accumulation have been an
important element of the RCRA hazardous waste recycling regulations
since they were promulgated on January 4, 1985. According to this
regulatory provision, hazardous secondary materials are accumulated
speculatively if the person accumulating them 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 is at least 75% by weight
or volume of the amount of the hazardous secondary material present at
the beginning of the period. It is also the same prohibition that is
being promulgated today for the generator-controlled exclusions.
    Legitimate recycling. Under the transfer-based exclusion, hazardous
secondary materials must be legitimately reclaimed, as specified under
40 CFR 260.43. Legitimate recycling must involve a hazardous secondary
material that provides a useful contribution to the recycling process
or product and the recycling process must produce a valuable product or
intermediate. In addition, as part of a legitimacy determination,
persons must consider whether the hazardous secondary material is
managed as a valuable product and must consider the levels of toxics in
the product of the recycling process as compared to analogous products
made from virgin materials. The details of the legitimacy provision are
discussed in section IX of this preamble.
    Notification. Under today's transfer-based exclusion, hazardous
secondary material generators, reclaimers, and intermediate facilities
are required to send a notification prior to operating under this
exclusion and by March 1 of each even numbered year thereafter to the
EPA Regional Administrator using EPA Form 8700-12. In states authorized
by EPA to administer the RCRA Subtitle C hazardous waste program,
notifications may be sent to the state Director. The notice must include:
    • The name, address, and EPA ID number (if applicable) of the facility;
    • The name and telephone number of a contact person;
    • The NAICS code of the facility;
    • The exclusion under which the hazardous secondary
materials will be managed (e.g., whether the hazardous secondary
materials are managed under the transfer-based exclusion in 40 CFR
261.4(a)(24) and/or under the exclusion for hazardous secondary
materials exported for reclamation in 40 CFR 261.4(a)(25));
    • For reclaimers and intermediate facilities managing
hazardous secondary materials, whether the reclaimer or intermediate
facility has financial assurance for the management of such hazardous
secondary materials (not applicable for hazardous secondary material
generators);
    • When the facility expects to begin managing the hazardous
secondary materials in accordance with the exclusion;
    • A list of hazardous secondary materials that will be
managed according to the exclusion (reported as the EPA hazardous waste
numbers that would apply if the hazardous secondary materials were
managed as hazardous waste);
    • For each hazardous secondary material, whether the
material, or any portion thereof, will be managed in a land-based unit;
    • The quantity of each hazardous secondary material to be
managed annually; and
    • The certification (included in EPA Form 8700-12) signed
and dated by an authorized representative of the facility.
    If a facility has submitted a notification, but then subsequently
stops managing hazardous secondary materials in accordance with the
exclusion, the facility must re-notify the Regional Administrator
within 30 days using the same EPA Form 8700-12. We consider a facility
to have `stopped' managing hazardous secondary materials when a
facility no longer generates, manages and/or reclaims hazardous
secondary materials under the exclusion and does not expect to manage
any amount of hazardous secondary material under the exclusion for at
least one year. Of course, a facility could certainly choose to begin
managing hazardous secondary materials again and would simply have to
submit a notification in compliance with 40 CFR 260.42.
    The requirement to provide this notification is not a condition of
the exclusion. Thus, failure to comply with the requirement constitutes
a violation of RCRA, but does not affect the excluded status of the
hazardous secondary materials.
    This notification requirement is the same as the notification
requirement for the generator-controlled exclusion. For further
discussion on the notification, including examples of when a facility
must re-notify that it has stopped managing hazardous secondary
materials, see section VII.C. of today's preamble.
    Hazardous secondary materials must be contained. Another condition
of the transfer-based exclusion applicable to hazardous secondary
material generators, reclamation facilities, and intermediate
facilities is that the hazardous secondary materials must be contained
in their management units. Hazardous secondary materials released to
the environment from any unit are discarded and would be subject to the
hazardous waste regulations, unless they are immediately cleaned up.
Hazardous secondary materials remaining in a unit that experiences a
release may also be considered discarded in certain cases. This is the
same as the restriction that is being promulgated for the generator-
controlled exclusions. For further discussion on the containment
provisions, including examples of how they might be applied in case-
specific situations, see section VII.C. of today's preamble.
2. Provisions Applicable to the Hazardous Secondary Material Generator
    Reasonable efforts. Today's final rule requires generators to make
reasonable efforts to ensure that their hazardous secondary materials
are properly and legitimately recycled before shipping or otherwise
transferring them to a reclamation facility or any intermediate
facility. As discussed previously, this condition effectively requires
that generators perform a type of environmental ``due diligence'' on a
reclaimer or any intermediate facility to ensure that those facilities
intend to properly manage the hazardous secondary materials as
commodities and legitimately recycle rather than discard them. We
believe that this condition reflects the existing best practices of
many responsible generators who audit and assess recyclers to maintain
their commitment to sound environmental stewardship, minimize their
potential regulatory and liability exposures, and make decisions about
with whom they should do business.
    Our successful recycling study quotes one large recycling and
disposal vendor

[[Page 64686]]

as stating that with respect to its new customers, 60% of its large
customers and 30%-50% of its 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. (Note: Audits that are currently conducted may or may not
cover all of these areas.) Through the codification of this condition,
we want to reinforce this best practice among all generators who use
the transfer-based exclusion to send hazardous secondary materials to
reclamation and intermediate facilities. We believe that this condition
is critical for generators who currently may not evaluate reclaimers
and intermediate facilities because this condition provides these
generators with a framework for making reasonable efforts to ensure
their hazardous secondary materials are properly managed and reclaimed,
and not discarded.
    Currently, under 40 CFR part 262, a generator must make a hazardous
waste determination and, thus, already has an obligation to determine
whether the waste is subject to regulation as a hazardous waste. EPA
believes that to make a parallel determination under 40 CFR
261.4(a)(24) that hazardous secondary materials are not solid wastes
because they are destined for reclamation and are not discarded, the
generator must meet the reasonable efforts condition. A reasonable
efforts inquiry by the hazardous secondary material generator ensures
that the reclaimer intends to recycle the hazardous secondary material
legitimately pursuant to 40 CFR 260.43 and not discard it, and that the
reclaimer or any intermediate facility will manage the hazardous
secondary materials in compliance with 40 CFR 261.4(a)(24)(vi).
    The reasonable efforts condition for generators applies when
hazardous secondary materials are transferred to intermediate
facilities (as defined in 40 CFR 260.10) and reclamation facilities
operating without a RCRA Part B permit or under the interim status
standards that extend to management of the hazardous secondary
materials in question. If the permit or interim status standards
address the units being used to manage the hazardous secondary
materials, we do not require generators to conduct reasonable efforts
because we believe that a Part B permit or the interim status standards
provide some assurance to generators that the facility has a measure of
financial stability and that the hazardous secondary materials will be
well managed. RCRA permitted or interim status facilities where the
permit or interim status standards extend to the management of the
hazardous secondary materials being reclaimed are already subject to
stringent design and operating standards, must demonstrate financial
assurance, and are subject to the corrective action requirements in the
event of environmental problems. Not requiring reasonable efforts for
generators that transfer hazardous secondary materials to these RCRA
permitted or interim status recycling or intermediate facilities would
likely be of particular benefit to relatively smaller volume generators
who may not have the resources required to satisfy this condition.
    Of course, if a permitted facility later modifies its permit terms
in a way that the permit no longer extends to the management of the
hazardous secondary materials, the generator would need to perform
reasonable efforts in accordance with this exclusion. EPA recommends
that any hazardous secondary material generator transferring hazardous
secondary materials to a permitted facility request that it get placed
on the facility mailing list, so they can then receive notice of
changes to the permit status of the reclaimer or intermediate facility
(see 40 CFR 270.42 and 40 CFR 124.10).
    In contrast, if the permit or interim status standards do not
extend to the hazardous secondary materials being reclaimed, the same
level of assurance is not guaranteed. Therefore, if a reclamation or
intermediate facility only has a RCRA permit or complies with the
interim status standards for another on-site operation unrelated to the
hazardous secondary materials of interest to the generator, then the
hazardous secondary material generator is required to make a reasonable
efforts inquiry of the facility as if it were a non-permitted facility.
    EPA believes that a generator should be allowed to use any credible
evidence available in making reasonable efforts, including information
gathered by the generator, provided by the reclaimer or intermediate
facility, and/or provided by a third party, in lieu of personally
performing an assessment. For example, the hazardous secondary material
generator might hire an independent auditor to review the operations,
produce audit reports as a consortium of generators, or rely on an
assessment of a recycler or intermediate facility by a parent
corporation or trade association that is used by several generating
facilities. In fact, EPA believes that many reputable third-party
auditors, parent companies, and trade associations already assemble the
types of information based on credible evidence that would be needed
for a generator to satisfy the reasonable efforts condition. EPA would
encourage this type of pooling of information to reduce the burden on
generators and to take advantage of specialized technical expertise.
    EPA is also finalizing in the regulatory text a series of
questions, which together represent a minimum standard for reasonable
efforts, to provide generators and overseeing agencies with regulatory
certainty regarding fulfillment of the condition. We believe that these
questions are objective and must be answered affirmatively. Hazardous
secondary material generators wishing to take advantage of the
exclusion must be able to answer all questions affirmatively to
determine that their hazardous secondary materials are or will be
properly and legitimately recycled and will not be discarded. The
reasonable efforts questions are straight-forward by design and will
allow generators to use a common sense approach in answering the
questions and satisfy the condition. These questions can be found at 40
CFR 261.4(a)(24)(v)(B) and are discussed below.
    Of course, a generator could choose to seek additional information
or ask additional questions to determine that its hazardous secondary
materials will not be discarded due to concerns about CERCLA liability.
One example of additional information that many responsible generators
currently seek from recyclers, but that EPA is not including in today's
final rule, is information about a reclamation facility's financial
health. Based on EPA's successful recycling study and comments on the
proposed rule, we know that responsible generators often inquire about
a reclamation facility's financial health. These inquiries can include
reviews of liability insurance coverage, company annual reports,
bankruptcy filings, investments in capital improvements, markets for
recycled products, and business reports, such as Dun & Bradstreet
reports. EPA believes that evaluating the financial health of a company
can benefit a generator's reasonable efforts inquiry of a reclamation
or intermediate facility and encourages generators to do so, although
we acknowledge that it is not an activity that lends itself to an
objective standard that would be appropriate for regulation. Instead,
EPA is requiring that, under the transfer-based exclusion and
reasonable efforts condition, reclamation and intermediate

[[Page 64687]]

facilities have financial assurance and generators affirm that
facilities have notified the appropriate authorities that the financial
assurance condition is satisfied.
    EPA intends that if a hazardous secondary material generator has
met the reasonable efforts condition prior to transferring hazardous
secondary materials to the reclamation or intermediate facility, then
the reclaimer or intermediate facility, not the generator, would be
liable under RCRA if the materials were discarded (i.e., not properly
and legitimately recycled). However, if the generator does not meet the
reasonable efforts condition, then the generator is ineligible for the
transfer-based exclusion and would be potentially liable in the event
its hazardous secondary materials were discarded by a reclamation or
intermediate facility. (See section VIII.E. for more information.) EPA
acknowledges that meeting this condition will not affect CERCLA
liability. (See section XIII for more information on CERCLA liability.)
    The following five questions represent a minimum standard for
satisfying the reasonable efforts condition:
    (1) Does the available information indicate that the reclamation
process is legitimate pursuant to Sec.  260.43? In answering this
question, the hazardous secondary material generator can rely on its
existing knowledge of the physical and chemical properties of the
hazardous secondary material, as well as information from other sources
(e.g., the reclamation facility, audit reports, etc.) about the
reclamation process. (By responding to this question, the hazardous
secondary material generator has also satisfied its requirement in
Sec.  260.43(a) to be able to demonstrate that the recycling is legitimate.)
    (2) Does the publicly available information indicate that the
reclamation facility and any intermediate facility that is used by the
hazardous secondary material generator have notified the appropriate
authorities of hazardous secondary materials reclamation activities
pursuant to 40 CFR 260.42 and have they notified the appropriate
authorities that the financial assurance condition is satisfied per 40
CFR 261.4(a)(24)(vi)(F)? In answering these questions, the hazardous
secondary material generator can rely on the available information
documenting the reclamation facility's and any intermediate facility's
compliance with the notification requirements per Sec.  260.42,
including the requirement in Sec.  260.42(a)(5) to notify EPA whether
the reclaimer or intermediate facility has financial assurance.
    (3) Does publicly available information indicate that the
reclamation facility or any intermediate facility that is used by the
hazardous secondary material generator has not had any formal
enforcement actions taken against the facility in the previous three
years for violations of the RCRA hazardous waste regulations and has
not been classified a significant noncomplier with RCRA Subtitle C? In
answering this question, the hazardous secondary material generator can
rely on the publicly available information from EPA or the state. If
the reclamation facility or any intermediate facility that is used by
the hazardous secondary material generator has had a formal enforcement
action taken against the facility in the previous three years for
violations of the RCRA hazardous waste regulations and has been
classified as a significant non-complier with RCRA Subtitle C, does the
hazardous secondary material generator have credible evidence that the
facilities will manage the hazardous secondary materials properly? In
answering this question, the hazardous secondary material generator can
obtain additional information from EPA, the state, or the facility
itself that the facility has addressed the violations, taken remedial
steps to address the violations and prevent future violations, or that
the violations are not relevant to the proper management of the
hazardous secondary materials.
    (4) Does the available information indicate that the reclamation
facility and any intermediate facility that is used by the hazardous
secondary material generator have the equipment and trained personnel
to safely recycle the hazardous secondary material? In answering this
question, the generator may rely on a description by the reclamation
facility or by an independent third party of the equipment and trained
personnel to be used to recycle the generator's hazardous secondary
material.
    (5) If residuals are generated from the reclamation of the excluded
hazardous secondary materials, does the reclamation facility have the
permits required (if any) to manage the residuals? If not, does the
reclamation facility have a contract with an appropriately permitted
facility to dispose of the residuals? If not, does the hazardous
secondary material generator have credible evidence that the residuals
will be managed in a manner that is protective of human health and the
environment? In answering these questions, the hazardous secondary
material generator can rely on publicly available information from EPA
or the state, or information provided by the facility itself.
    Question (1) focuses on whether the reclamation facility receiving
hazardous secondary materials from a generator legitimately recycles
such materials. EPA believes that any generator ``regulated under Sec. 
260.34 or claiming to be excluded from the hazardous waste regulations
under Sec.  261.2(a)(2)(ii), Sec.  261.4(a)(23), (24), or (25) because
they are engaged in recycling, must be able to demonstrate that the
recycling is legitimate'' (40 CFR 260.43). Determining whether a
recycling operation is legitimate is a fundamental basis for
establishing that a generator's hazardous secondary materials will not
be discarded after being transferred to a reclamation facility.
    Since reclaimers must also be able to demonstrate that the
recycling is legitimate under 40 CFR 260.43, EPA believes that
generators can work with the owner or operator of the reclamation
facility to verify that they have made a determination that the
recycling is legitimate, which would answer question (1) for the
purposes of satisfying the condition. We would expect that a reclaimer
would be willing and able to adequately explain to the hazardous
secondary material generator how the recycling activity satisfies the
legitimacy requirements pursuant to 40 CFR 260.43, such that we would
not expect that a generator would have to examine in detail the
legitimacy factors. Of course, in order to answer question (1), a
generator may also rely on its existing knowledge of the physical and
chemical properties of the hazardous secondary material. Based on our
discussions with the generating industry, we would expect that a
hazardous secondary material generator that produces and manages a
material that is more like an ingredient (i.e., a hazardous secondary
material to be recycled) than a waste to be discarded would have a good
understanding of the material's valuable components and useful
contribution to a process. Since the generator manages the process that
generates the hazardous secondary material, it would be knowledgeable
about the makeup of the material and the value and usefulness of its
components.
    However, if questions or concerns remain regarding the legitimacy
of the recycling activity, a generator could request additional
information on how the definition of legitimacy is met. (See section IX
of this rulemaking preamble for a discussion of determining legitimacy.)
    Question (2) concentrates on whether the recycler or intermediate
facility (to

[[Page 64688]]

the extent that the hazardous secondary material generator uses an
intermediate facility) has met the following obligations under the
exclusion before accepting hazardous secondary materials: Notification
of the appropriate regulatory authorities that it plans to reclaim (or,
in the case of the intermediate facility, properly store the hazardous
secondary material) excluded hazardous secondary materials, and
notification of the appropriate regulatory authorities that the
facility has the necessary financial assurance to cover the costs of
managing any hazardous secondary materials that remain if the facility
closes. If a facility was found to have failed to meet the notification
requirement and condition to have financial assurance, then it also
would have failed to show a good faith effort towards demonstrating
that it intends to recycle the hazardous secondary materials (or, in
the case of the intermediate facility, properly store the hazardous
secondary material) and not discard them.
    For the purposes of reasonable efforts, generators will be able to
determine that a facility has satisfied both the notification
requirement and financial assurance condition if the reclamation or
intermediate facility has submitted a notification. The notification
form will include a section indicating the facility has satisfied the
financial assurance condition. Generators may access the notification
information, including the facility's notification that it has
financial assurance, through EPA's public Web site at 
http://www.epa.gov/enviro/html/rcris/ or other successor Web sites.
    Question (3) focuses on the compliance history of the recycler or
the intermediate facility (to the extent that the hazardous secondary
material generator uses an intermediate facility). Although
consideration of compliance data is an imperfect tool for determining
whether a recycler would properly manage the hazardous secondary
materials, we believe that publicly available compliance data are a
reasonable starting point for evaluating a facility's environmental
performance. Facility-specific enforcement data on compliance status,
ongoing enforcement actions by both EPA and states, and specific case
information for formal enforcement actions are readily available on
EPA's public Web site at http://www.epa.gov/echo. ``Formal
enforcement'' is a written document that mandates compliance and/or
initiates a civil or administrative process, with or without appeal
rights before a trier of fact that results in an enforceable agreement
or order and an appropriate sanction. For EPA, formal enforcement
action is a referral to the U.S. Department of Justice for the
commencement of a civil action in the appropriate U.S. District Court,
or the filing of an administrative complaint, or the issuance of an
order, requiring compliance and a sanction. For states, formal
enforcement action is a referral to the state's Attorney General for
the commencement of a civil or administrative action in the appropriate
forum, or the filing of an administrative complaint, or the issuance of
an order, requiring compliance and a sanction. ``Significant non-
complier'' is a defined term in EPA's Hazardous Waste Civil Enforcement
Response Policy and means the violators have caused actual exposure or
a substantial likelihood of exposure to hazardous waste or hazardous
waste constituents; are chronic or recalcitrant violators; or deviate
substantially from the terms of a permit, order, agreement, or from the
RCRA statutory or regulatory requirements. In evaluating whether there
has been actual or likely exposure to hazardous waste or hazardous
waste constituents, EPA and the states consider both the environmental
and human health concerns, including the potential exposure of workers
to hazardous waste or hazardous waste constituents. For both terms, see
EPA's Hazardous Waste Civil Enforcement Response Policy (Dec. 2003) at
http://www.epa.gov/compliance/resources/policies/civil/rcra/
finalerp1203.pdf.
    We do not believe that evaluating this publicly available
information, which a generator would likely already be familiar with
based on its own regulated activities, is difficult for a generator,
nor is interpreting the data and deriving conclusions about facilities,
since the database specifically notes whether a facility is alleged to
be a ``significant non-complier'' (i.e., identified as a ``SNC'' or in
``significant non-compliance''). We also note that since many states
already provide compliance information to EPA and the public through
the EPA Web site, we do not believe that requiring hazardous secondary
material generators to review such information would pose a significant
new burden for state agencies.
    While a facility designated as a significant non-complier and the
subject of a formal enforcement action does not mean that the facility
would not reclaim the hazardous secondary materials properly, it does
raise questions that we believe the hazardous secondary material
generator should investigate. That is, if any formal enforcement
actions were taken against the facility in the previous three years for
such non-compliance and the facility was alleged to be a significant
non-complier, we would expect that the reclaimer would adequately
explain to the hazardous secondary material generator how it has
resolved any issues or how the reclamation facility will properly
manage the hazardous secondary materials to avoid future violations
and/or enforcement actions. Additionally, if the generator obtains
reasonable information that the enforcement matters are unrelated to
the facility's commitment to manage the hazardous secondary materials
properly 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 generator also may wish to make a
similar investigation of facilities designated as significant non-compliers
by EPA or a state even if no formal enforcement action has been taken.
    Question (4) concentrates on the technical capability of the
recycler or intermediate facility, the most basic requirement for
ensuring proper and legitimate recycling of hazardous secondary
materials. If a reclamation or intermediate facility was found to have
no equipment or inadequate equipment for storing the hazardous
secondary material or was found to have personnel who have not been
trained for reclaiming the hazardous secondary materials, it raises
serious questions as to whether the facility would properly manage such
materials and avoid discarding them to the environment.
    In public comments on this question, which was included in the
preamble to the proposed rule, commenters pointed out that a
determination of what specific equipment and training would be
appropriate to safely recycle hazardous secondary materials may be
beyond the expertise of some generators. EPA agrees that, as drafted in
the proposed rule, answering this question may require specialized
knowledge and expertise. Accordingly, EPA is changing this question to
allow the generator to rely on the reclamation facility to explain why
its equipment and personnel are appropriate. Of course, the generator
must have an objectively reasonable belief based on this information
that the reclamation facility's equipment and trained personnel are
adequate for safe recycling. Accordingly, if the equipment and
personnel described by the reclamation facility would be, to an
objective and reasonable person, clearly inadequate for safe recycling
of the generator's hazardous secondary material, then the generator
would not have met this condition. However, EPA

[[Page 64689]]

does not require or expect the generator to have specialized knowledge
or expertise of the recycling process.
    Of course, generators of hazardous secondary materials also are
already familiar with equipment and personnel needed to manage their
hazardous secondary materials properly at their own site. Therefore, a
generator may also choose to answer question (4) using its existing
knowledge of the physical and chemical properties of the hazardous
secondary materials, technologies involved with managing and recycling
such materials, and applicable regulations or industry standards based
on the generator's experience producing and managing such materials.
    Generators may also at their discretion use relevant third-party
information sources to answer questions about a facility's equipment
and personnel, including audit reports; information provided by
industry or waste management associations related to the reclamation or
intermediate facility; documents provided by the reclaimer or
intermediate facility; and as noted in the successful recycling study,
an evaluation by a qualified engineer.
    Question (5) focuses on another major cause of environmental
problems from recycling hazardous secondary materials: The management
of residuals. This question relates to discard through the concept that
a generator or reclaimer may actually be discarding hazardous secondary
materials through the release of residuals from the recycling process.
While the product made from recycling may be a legitimate product, the
whole recycling process could be considered a discard activity if
hazardous constituents from the recycled hazardous secondary materials
are released to the environment. Roughly one-third of the damage cases
documented in EPA's environmental problems study 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
hazardous secondary material generator understands how a reclamation
facility will manage any residuals generated.
    Many generators of hazardous waste already understand and comply
with the requirements for residuals management. Therefore, they may
rely on their existing knowledge to answer question (5) and we do not
anticipate that answering it will pose a significant challenge to them.
We also anticipate that new generators will use the same resources that
are publicly available to current hazardous secondary material
generators for determining applicable regulatory requirements. In
addition, a reclamation facility would likely assist the generator in
understanding any requirements applicable to residuals management. For
example, the reclamation facility could identify the types of residuals
generated by the recycling process and explain to the generator how
they are managed, whether any requirements apply, and how the
requirements are met.
    To answer question (5), a generator should determine that the
reclamation facility has practices in place to ensure that residuals
are managed in a manner that is protective of human health and the
environment and according to applicable federal or state standards. For
example, residuals may or may not be regulated hazardous wastes. If a
residual is a hazardous waste, generators could access information
about a facility's permit for managing the material on EPA's public Web
site at http://www.epa.gov/enviro/html/rcris (or successor Web sites)
or through a state Web site if such information is made publicly
available. If a residual is a non-hazardous waste, a generator could
access permit information from state agencies or a state Web site if
available. A reclamation facility may also send its residuals to a
waste management facility, in which case, a generator could ask about
contracts with appropriately permitted disposal facilities. If a
reclamation facility does not have permits for managing residuals or
disposal contracts with permitted facilities, then the generator should
determine that a reclamation facility has a system in place for
managing residuals in a manner that is protective of human health and
the environment.
    Any inquiry into a reclamation facility's system for analyzing
options for residuals management should acknowledge that various
options do exist and that price fluctuations may be a determining
factor for selecting an option.
    In today's final rule, EPA is requiring that hazardous secondary
material generators make reasonable efforts every three years, at a
minimum, in order to ensure that the generators adequately manage their
risk and are attune to changes at reclamation and intermediate
facilities with which they are partners. We believe that this schedule
reflects an average time frame for re-evaluating facilities, based on
public comments, although we acknowledge that shorter time frames could
be appropriate for certain industries, as suggested by some commenters.
By specifying periodic updates for reasonable efforts every three years
at a minimum, EPA in no way intends to limit a generator to conducting
evaluations only every three years. In fact, EPA expects that any
generator who has concerns about a reclamation or intermediate
facility, or who gains new knowledge of significant changes or
extraordinary situations at such facilities, would conduct reasonable
efforts regardless of the required schedule. For example, if a
hazardous secondary material generator conducted reasonable efforts in
the first year it took advantage of the exclusion, prior to
transferring materials to an intermediate facility, and then again
conducted reasonable efforts in the second year upon learning about a
significant change at the intermediate facility (such as bankruptcy),
the hazardous secondary material generator would be required to update
reasonable efforts three years later during the generator's fifth year
of taking advantage of the exclusion.
    EPA is requiring that generators maintain documentation showing
that they satisfied the reasonable efforts condition under 40 CFR
261.4(a)(24)(v)(B) prior to transferring the hazardous secondary
materials to the intermediate facility or the reclamation facility.
Such records could include copies of audit reports and/or other
relevant information that was used as the basis for affirmatively
responding to inquiries about a reclamation or intermediate facility.
Specifying that hazardous secondary material generators document these
questions helps EPA and authorized states determine whether the
generator made reasonable efforts to ensure that the hazardous
secondary materials were not discarded. Documenting reasonable efforts
is also beneficial for generators because EPA intends that if a
generator has met the reasonable efforts condition prior to
transferring the hazardous secondary materials to the reclamation or
intermediate facility, then the reclaimer or intermediate facility, not
the generator, would be liable under RCRA if the materials were
discarded (see section VIII.E. for more information).
    Generators are also required to certify for each reclamation and
intermediate facility that reasonable efforts were made to ensure that
hazardous secondary materials will be properly and legitimately
recycled, and not discarded. This certification should be signed and
dated by an authorized representative of the generating company prior
to transferring the excluded hazardous secondary materials to a
reclamation or intermediate facility under 40 CFR 261.4(a)(24). The

[[Page 64690]]

certification should also incorporate the certification language in 40
CFR 261.4(a)(24)(v)(C)(2). EPA believes that requiring a certification
creates a necessary level of oversight from an authorized
representative, who can be any appointed company representative, and
who must affirm that the condition is met and that hazardous secondary
materials will not be discarded.
    Documentation and certification are both necessary requirements of
the reasonable efforts condition. Documentation of questions (1)-(5)
will support a hazardous secondary material generator's assertion that
it affirmatively answered the questions and is in compliance with the
regulations. It will also facilitate any review by regulatory
authorities investigating whether the conditions of the transfer-based
exclusion are satisfied and help delineate liability under RCRA if the
materials were discarded. Having an authorized representative certify
reasonable efforts is critical for guaranteeing accountability at the
generator facility for meeting the condition and for ensuring that the
act of making reasonable efforts is in fact genuine. The certification
is also necessary in order to allow for the ``flexible'' documentation
requirement that does not specify a particular format. Since individual
generators may use any form of documentation, we believe it is critical
for all generators to uniformly certify that the condition is
satisfied. Furthermore, we find both reasonable efforts requirements
(documentation and certification) to be appropriate based on our
understanding that third-party auditors do not generally draw any
conclusions based on their audits, but simply report the results to
generators. While a generator may use any information for making
reasonable efforts, the certification statement would affirm that a
generator used information that is gathered and documented during the
reasonable efforts inquiry, similar to how generators currently draw
conclusions based on third-party audit documents.
    The requirement for documentation and certification of reasonable
efforts is not unlike existing forms of RCRA documentation that
incorporate certifications, such as the RCRA Site ID Form, RCRA
financial assurance requirements, and the Uniform Hazardous Waste Manifest.
    Documentation of reasonable efforts and the certification statement
must be maintained by the generator for a minimum of three years and it
must be made available upon request by a regulatory authority within 72
hours, or within a longer period of time as specified by the regulatory
authority. Requiring documentation will help EPA and authorized states
to determine that hazardous secondary material generators have made
reasonable efforts to ensure that hazardous secondary materials were
reclaimed and not discarded. We understand that many generators may
maintain this kind of documentation and certification at their company
headquarters or at another off-site facility; therefore, we are not
requiring that they be maintained on-site. However, we do believe that
generators, having satisfied the reasonable efforts condition and
certified reasonable efforts prior to transferring the hazardous
secondary materials, should be able to produce the documentation and
certification readily. Moreover, we understand that since generators
today conduct business in an age of near-instantaneous communication,
retrieving documentation from company headquarters or another off-site
facility should be relatively easy. EPA also notes that time frames for
producing documentation are generally determined by regulatory
authorities on a case-by-case basis and time frames are clearly outlined
by authorities within RCRA section 3007 information request letters.
    Recordkeeping. In addition to documentation and certification of
reasonable efforts (discussed above in section VIII.C.2.), EPA is
requiring hazardous secondary material generators to maintain at the
generating facility certain records that document off-site shipments
(i.e., transfers) of hazardous secondary materials for a period of
three years. Specifically, for each shipment of hazardous secondary
material, the generator must maintain documentation of when the
shipment occurred, who the transporter was, the name and address of the
reclaimer(s) and, if applicable, each intermediate facility, and the
type and quantity of the hazardous secondary materials in the shipment.
This recordkeeping requirement may be fulfilled by ordinary business
records, such as bills of lading.
    In addition, hazardous secondary material generators are required
to maintain confirmations of receipt from each reclaimer and
intermediate facility for all off-site shipments of hazardous secondary
materials in order to verify that the hazardous secondary materials
reached their intended destination and were not discarded. These
receipts must be maintained at the generating facility for a period of
three years. Specifically, the hazardous secondary material generator
must maintain documentation of receipt that includes the name and
address of the reclaimer or intermediate facility, the type and
quantity of hazardous secondary materials received, and the date which
the hazardous secondary materials were received. The Agency is not
requiring a specific template or format for confirmations of receipt
and anticipates that routine business records (e.g., financial records,
bills of lading, copies of Department of Transportation (DOT) shipping
papers, electronic confirmations of receipt) would contain the
appropriate information sufficient for meeting this requirement.
    We recognize that, in some cases, reclamation of a hazardous
secondary material may involve more than one reclamation step. In these
cases, the recordkeeping conditions for generators and reclaimers under
the terms of the exclusion applies for each reclaimer and intermediate
facility, regardless of how many reclamation steps were involved. For
example, if a hazardous secondary material generator transferred
hazardous secondary materials to one reclaimer for partial reclamation
and then arranged for the partially-reclaimed material to be
subsequently transferred to another reclaimer for `final' reclamation,
the generator must maintain confirmations of receipt from each
reclaimer involved in the reclamation process.
    The Agency believes that the recordkeeping requirements in today's
rule comprise the minimum information needed to enable effective
oversight to ensure the hazardous secondary materials were transferred
for reclamation and were not discarded.
3. Provisions Applicable to the Transportation of Hazardous Secondary
Materials
    Hazardous secondary materials may be stored for up to 10 days at a
transfer facility and still be considered in transit. The 10-day
storage standard for defining transfer facilities is the same as that
used for hazardous waste transportation, and EPA has revised the
definition of ``transfer facility'' at 40 CFR 260.10 to clarify that
such facilities may store hazardous secondary materials, as well as
hazardous waste. However, if the facility stores the hazardous
secondary materials for more than 10 days, then it would be considered
an intermediate facility and subject to the conditions in 40 CFR
261.4(a)(24)(vi). While at the transfer facility, the hazardous
secondary materials must continue to meet all applicable DOT standards.
Hazardous secondary materials may be consolidated for shipping, but
cannot be intermingled in a way that would constitute waste management.

[[Page 64691]]

4. Provisions Applicable to the Reclamation Facility and Any
Intermediate Facilities
    Recordkeeping. Reclaimers and intermediate facilities who operate
under the transfer-based exclusion must maintain certain records,
similar to the records we are requiring for hazardous secondary
material generators. Specifically, reclaimers and intermediate
facilities must maintain at their facilities for a period of three
years records of all shipments of hazardous secondary materials that
were received at the facility and, if applicable, of all shipments of
hazardous secondary materials sent off-site from the facility. For
hazardous secondary materials received at the reclamation and
intermediate facility, such records must document the name and address
of the hazardous secondary material generator, the type and quantity of
hazardous secondary materials received at the facility, any
intermediate facilities that managed the hazardous secondary materials,
the name of the transporter that brought the hazardous secondary
materials to the facility, and the date such materials were received at
the facility.
    For hazardous secondary materials that, after being received by the
reclaimer or intermediate facility, are subsequently transferred off-
site for further reclamation, reclaimers and intermediate facilities
must document the name and address of the hazardous secondary material
generator, when the shipment occurred, who the transporter was, the
name and address of the (subsequent) reclaimer and, if applicable, each
(subsequent) intermediate facility, and the type and quantity of
hazardous secondary materials in the shipment. This recordkeeping
requirement may be fulfilled by ordinary business records, such as
bills of lading.
    Reclaimers and intermediate facilities must also send confirmations
of receipt to the hazardous secondary material generator for all off-
site shipments of hazardous secondary materials received at the
facility in order to verify for the hazardous secondary material
generator that their materials reached the intended destination and
were not discarded. Specifically, the reclaimer (or each reclaimer,
when more than one reclamation step is required) and, if applicable,
each intermediate facility, must send documentation of receipt to the
hazardous secondary material generator that includes the name and
address of the reclaimer or intermediate facility, the type and
quantity of the hazardous secondary materials received and the date
which the hazardous secondary materials were received. The Agency is
not requiring a specific template or format for confirmations of
receipt and anticipates that routine business records (e.g., financial
records, bills of lading, copies of DOT shipping papers, electronic
confirmations of receipt) would contain the appropriate information
sufficient for meeting this requirement.
    In addition, reclaimers and intermediate facilities must also meet
the recordkeeping requirements under financial assurance discussed
below in this section.
    Storage of Recyclable Hazardous Secondary Materials. In addition to
the condition that the hazardous secondary materials must be contained
(40 CFR 261.4(a)(24)(v)(A)), reclamation facilities and intermediate
facilities must also manage the hazardous secondary materials in a
manner that is at least as protective as that employed for the
analogous raw material, where there is an analogous raw material. An
``analogous raw material'' is a material for which a hazardous
secondary material substitutes and which 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, hazardous secondary materials with high levels of
toxic volatile chemicals would not be considered analogous to a raw
material that does not have these volatile chemicals or that has only
minimal levels of volatile chemicals.
    Storage conditions for reclamation facilities and intermediate
facilities that operate under today's exclusion will show that the
materials are not discarded, but instead are treated as commodities
which the handler considers valuable and would be used and not be lost
to the environment. The great majority of damage cases documented in
the environmental problems study occurred at commercial reclamation and
intermediate storage facilities, and mismanagement of hazardous
secondary materials was found to be a cause of environmental problems
in 40% of the incidents. Accordingly, EPA believes that this condition
for storage is necessary and appropriate for reclamation facilities and
intermediate facilities that take advantage of this exclusion to show
that storage of these materials is not just another way of disposing of
them. In addition, it will establish an expectation for the owner/
operators of such facilities 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.
    Management of recycling residuals. Another condition of the
transfer-based exclusion is that any residuals that are generated from
the reclamation processes must 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 273.
    The purpose of this condition is to clarify the regulatory status
of these waste materials and to emphasize in explicit terms that
residuals that are generated from the reclamation of hazardous
secondary materials must be managed properly so that the reclamation
operation does not become another way of avoiding waste management and
simply becomes another way of discarding unwanted material. The study
of recent (i.e., post-CERCLA and 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 the 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 of on-site with little regard for the environmental
consequences of such mismanagement or possible CERCLA liabilities
associated with cleanup of these releases. By making proper management
of the recycling residuals a condition of the exclusion, EPA ensures
that the reclamation operation is not just another way of discarding
hazardous constituents. This has the added benefit of ensuring that the
reclamation operation does not pose a significant risk to human health
and the environment.

[[Page 64692]]

    EPA notes that the ``derived from'' rule articulated in 40 CFR
261.3(c)(2) does not apply to residuals from the reclamation of
hazardous secondary materials excluded under today's rule. These
residuals are a new point of generation for the purposes of applying
the hazardous waste determination requirements of 40 CFR 262.11. If the
residuals exhibit a hazardous characteristic, or they themselves are a
listed hazardous waste, they would be considered hazardous wastes
(unless otherwise exempted) 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.
Financial Assurance
    For the transfer-based exclusion, EPA proposed in its March 2007
supplemental proposal that reclamation facilities comply with the 40
CFR part 265 subpart H financial assurance requirements as a condition
of the exclusion. As discussed in section V.B of this preamble, by
obtaining financial assurance, the reclamation or intermediate facility
is making a direct demonstration that it will not abandon the hazardous
secondary materials, it will properly decontaminate equipment, and it
will clean up any unacceptable releases, even if events beyond its
control make its operations uneconomical. Moreover, financial assurance
also addresses the issue of the correlation of the financial health of
a reclamation or intermediate facility with the absence of discard. In
essence, financial assurance will help demonstrate that the reclamation
or intermediate facility owner/operators who would operate under the
terms of this exclusion are financially sound and will not discard the
hazardous secondary materials.
    An implementation issue for the financial assurance condition stems
from the fact that the 40 CFR part 265 subpart H financial assurance
requirements directly reference and rely on the provisions of the 40
CFR part 265 subpart G closure requirements. For example, in 40 CFR
part 265 subpart H, a facility owner uses the ``closure plan'' in 40
CFR part 265 subpart G to calculate closure cost estimates, which then
set the amount of financial assurance required under subpart H.
Similarly, the financial assurance requirements remain in place until
EPA has reviewed the closure plan, and the facility has closed
according to the plan. At that point, EPA releases the financial
assurance instruments. Commenters expressed some confusion on this
issue and requested that EPA clarify that the provisions of subpart G
which are required to implement financial assurance be made explicit.
    Thus, in today's final rule, for the convenience of the regulated
community, EPA has detailed the applicable requirements in a separate
regulation, subpart H of 40 CFR part 261, using terminology appropriate
for excluded facilities, that specifically identifies the processes by
which a facility determines the amount of financial assurance required
and by which it secures release of financial assurance when it no
longer wishes to operate under the transfer-based exclusion. The
financial assurance requirements detailed in 40 CFR part 261 subpart H
incorporate those aspects of the hazardous waste closure and financial
assurance regulations as they apply to the financial assurance
condition for excluded hazardous secondary material reclamation and
intermediate facilities. However, since these facilities are not
regulated hazardous waste facilities, new subpart H does not include a
stand-alone closure requirement, although some aspects of the closure
process (described below) are included as being necessary for the
implementation of the financial assurance condition.
    Substantively, these requirements generally mirror the interim
status standards in 40 CFR part 265 for hazardous waste treatment,
storage and disposal facilities (TSDFs), but have been tailored for
hazardous secondary material reclamation and intermediate facilities.
The provision in the new subpart H in 40 CFR part 261 are linked to
equivalent provisions under 40 CFR part 265, which, as we noted in the
March 2007 supplemental proposal, ``outline how owners and operators
should determine cost estimates, explain the acceptable mechanisms for
providing financial assurance, and set the minimum amounts of liability
coverage required'' (see 72 FR 14196).
    In addition to the closure requirements, 40 CFR part 265 subpart H
includes requirements for post-closure care. Post-closure care (e.g.,
groundwater monitoring, maintenance of waste containment systems) only
applies to land disposal units, where hazardous waste remains in the
unit or other contamination is present after Subtitle C closure.
However, the conditional exclusion being promulgated today only applies
to hazardous secondary materials intended for reclamation. In no cases
should the storage of these materials be designed or managed with the
intent of leaving these hazardous secondary materials in place. Unlike
the need for closure, which could occur at a reclamation or
intermediate facility which meets all the conditions of the exclusion,
but then becomes subject to forces beyond its control (such as a sudden
downturn in the market for its recycled product), the need for post-
closure care would only apply to a facility that does not meet the
condition that the hazardous secondary materials are contained in the
unit. Thus, the Agency has determined that the issue of post-closure
care is most appropriately dealt with by enforcement of the condition
that the hazardous secondary materials must be contained. If, during
the life of the unit, there is a significant release that indicates
that the hazardous secondary materials are discarded, and thus are
wastes, then such waste is subject to the RCRA Subtitle C requirements,
including the post-closure care requirements. See discussion of the
condition that the hazardous secondary materials must be ``contained''
found in section VII.C.
Cost Estimate
    Under subpart H of 40 CFR part 261, as it is under subpart H of 40
CFR part 265 for hazardous waste treatment storage and disposal
facilities, the first step in obtaining financial assurance is to
develop a detailed written estimate on the amount of financial
assurance required. The cost estimate determines the amount of
financial assurance that will be available to the state or EPA for a
third party to close a facility if the owner or operator fails to do
so. The requirements for a cost estimate in 40 CFR 261.142 generally
tracks the procedures in 265.142 with changes to accommodate the
absence of a closure plan. Because hazardous secondary materials that
lose the exclusion may have to be disposed of as a hazardous waste and
the facility may have to be closed as a hazardous waste facility in
accordance with the requirements of 40 CFR part 265, the owner or
operator must have a detailed written estimate in current dollars of
performing this work. The detailed cost estimate should include all
necessary information which will allow the state or EPA to assess
whether the assumptions underlying the estimate are consistent with
what could be required to close the facility. For example, do the
estimates for disposal, including transportation charges, reflect the
distance to available disposal facilities? What level of personal
protective equipment is needed to protect workers? Is there sufficient
sampling of equipment to determine that it has been decontaminated? Where

[[Page 64693]]

there is uncertainty about the scope of the work, is there a reasonable
contingency factor included? While not required by this rule for
developing a cost estimate, some owners or operators may find that
developing a plan similar to the requirements in 40 CFR 265.112 would
be beneficial for assessing the potential costs of closing the
facility. (Note, however, that the cost estimate must reflect the costs
of closure under the Subtitle C hazardous waste requirements, and any
remaining hazardous secondary material must be managed as a hazardous
waste, and therefore the procedures used as the basis of the cost
estimate may differ from the actual procedures a compliant facility
will carry out when it completes operations and exits from the
exclusion.) The owner or operator can be required to provide the
documentation of the cost estimate upon request.
    The cost estimating requirements in 40 CFR 265.142 and 40 CFR
261.142 are designed so that if a state or EPA must close a facility
because of an owner or operator's failure, there will be adequate funds
to do so. The requirements for the cost estimate are therefore based
upon the point when the extent and manner of the facility's operation
would make these activities the most expensive.
    The cost estimate must, at minimum, be based on the costs of hiring
a third party or parties to conduct these activities. The cost estimate
may not include any salvage value for the hazardous secondary materials
as hazardous waste or non-hazardous waste and the owner or operator may
not incorporate a zero cost for such materials that might have economic
value.
    The financial assurance provisions are intended, in part, to
demonstrate that the owner and operator is not discarding the hazardous
secondary materials. As noted earlier, 69 of the 208 incidents of
environmental damage identified in EPA's environmental problems study
involve abandonment of the hazardous secondary materials as the primary
cause of damage. These cost estimate provisions, found in 40 CFR
261.142(a) are equivalent to those required to estimate financial
assurance under 40 CFR 265.142(a).
    In addition, the financial assurance cost estimate must be revised
and additional financial assurance must be obtained to adjust annually
for inflation or in the event that changes in the reclaimer's or
intermediate facility's operations or unexpected events result in an
increase in the cost of managing any hazardous secondary materials that
are not reclaimed and the cost of removing or decontaminating all
hazardous residues. These cost estimate provisions, found in 40 CFR
261.142(b) and 40 CFR 261.142(c) are equivalent to those required under
40 CFR 265.142(b) and 40 CFR 265.142(c), and incorporates language from
40 CFR 265.112(c)(2) requiring the owner or operator to amend the
estimates at least 60 days prior to a planned change in facility design
or operation or no later than 60 days after an unexpected event has
occurred that affects cost estimates. The financial assurance cost
estimate must be documented and this documentation maintained at the
facility. This information must be furnished upon request, and made
available at all reasonable times for inspection. The requirement in 40
CFR 261.142(d) to maintain documentation at the facility is from the
requirement in 40 CFR 265.142(d) and 40 CFR 265.73(b)(7), and the
responsibility to make it available upon request, which will allow
Agency representatives to review the cost estimate, is from 40 CFR
265.74(a) which covers information required in 40 CFR 265.73.
Interaction of the Cost Estimate and the Financial Assurance Instruments
    As with the interim status regulations in 40 CFR part 265 subpart
H, the interaction of the cost estimating requirements in 40 CFR
261.142 and the instrument requirements in 40 CFR 261.143 result in
adjustments in the amount of financial assurance as facility operations
change. If changes in the reclaimer's or intermediate facility's
operations result in a reduction in the cost estimate, the owner or
operator may submit a new cost estimate. If the new cost estimate is
less than the amount of financial assurance provided, the amount of the
financial assurance instrument may be reduced to the amount of the new
cost estimate following written approval by the Regional Administrator
(see, for example, 40 CFR 261.143(b)(7)). For example, a facility with
three units managing hazardous secondary materials that use a single
surety bond could close one unit according to the plan in 40 CFR
261.143(h). With a new cost estimate submitted by the facility that
reflects the lower costs for the two remaining units, the Regional
Administrator can approve a reduction in the value of the surety bond.
On the other hand, a change in the facility's operating plan or design
that increases the cost of closing necessitates a new cost estimate (40
CFR 261.142(c)) and an increase in the amount of financial assurance
(see, for example, 40 CFR 261.143(b)(7)).
Establishment of the Instrument, Plan for Removal of All Hazardous
Secondary Material Residues, and Release From Financial Assurance
    Under 40 CFR 261.4(a)(24)(vi)(F), an owner or operator of a
reclamation or intermediate facility must establish financial assurance
as a condition of the exclusions under 40 CFR 261.4(a)(24) and
261.4(a)(25). The same general types of instruments that are available
for interim status facilities under 40 CFR part 265 subpart H are also
available to owners or operators of reclamation or intermediate
facilities. Owners or operators may use trust funds, payment surety
bonds, letters of credit, insurance, or a financial test and corporate
guarantee to demonstrate financial assurance.
    The regulations governing the financial assurance instruments that
an owner or operator must provide to qualify for the exclusions have
been modified to reflect that they apply to hazardous secondary
materials and not hazardous wastes. The financial assurance instruments
for the trust fund, surety bond, letter of credit, and corporate
guarantee have been revised so that EPA can direct the financial
assurance funds at the point the hazardous secondary material
reclamation or intermediate facility no longer meets the exclusion and,
therefore, is managing a hazardous waste. As long as a facility is
operating under the transfer-based exclusion so that the hazardous
secondary material is not being discarded, there would be no need to
invoke the financial assurance instruments.
    The regulations allow the same flexibility as in 40 CFR part 265
subpart H for using a combination of trust funds, surety bonds, letters
of credit and insurance at a single facility (see 40 CFR 261.143(f)),
and allow the use of a single mechanism for multiple facilities (see 40
CFR 261.143(g)).
    The provisions for releasing the reclamation or intermediate
facility from the financial assurance requirements, found in 40 CFR
261.143(h), are functionally equivalent to those under 40 CFR
265.143(h). ``Within 60 days after receiving certifications from the
owner or operator and a qualified Professional Engineer that all
hazardous secondary materials have been removed from the unit and the
unit has been decontaminated in accordance with the approved plan per
paragraph (i), the Regional Administrator will notify the owner or
operator in writing that he is no longer required under Sec. 
261.4(a)(24)(vi)(F) to maintain financial assurance for that

[[Page 64694]]

unit, unless the Regional Administrator has reason to believe that that
all hazardous secondary materials have not been removed from the unit
or that the unit has not been decontaminated in accordance with the
approved plan.''
    Under 40 CFR part 265 subpart H, the provisions for releasing
financial assurance rely on receiving a certification that the unit was
closed per the approved closure plan in 40 CFR 265.112. However, as
noted earlier, under today's exclusion, units managing hazardous
secondary materials are not subject to closure. Thus, the provision for
releasing financial assurance for these units adapts language from the
closure plan requirement found in 40 CFR 265.112 and from the
certification requirement found in 40 CFR 265.115. Instead of a
hazardous waste ``closure plan,'' the 40 CFR 261.143(i) provisions for
releasing financial assurance require submission of a plan for removing
hazardous secondary materials and decontaminating the unit at least 180
days prior to the date that owner or operator expects to cease
operating under the exclusion. The contents of the plan are detailed in
40 CFR 261.153(i)(2) and have been tailored to reflect the fact that,
although the hazardous secondary material management units are not
subject to closure, when reclamation operations or storage operations
(in the case of an intermediate facility) ceases, the hazardous
secondary materials must be removed or the unit would become subject to
the Subtitle C hazardous waste requirements (see section VIII.D).
Briefly, the plan must include, at least, (a) a description of how all
excluded hazardous secondary materials will be reclaimed or sent for
reclamation and how all residues, contaminated containment systems
(liners, etc), contaminated soils, subsoils, structures, and equipment
will be removed or decontaminated as necessary to protect human health
and the environment (for guidance, see the March 16, 1998, memorandum
entitled ``Risk-Based Clean Closure,'' from Elizabeth Cotsworth, Acting
Director, Office of Solid Waste, to RCRA Senior Policy Advisors.
Available at http://www.epa.gov/correctiveaction/resource/guidance/
risk/cclosfnl.pdf; (b) a description of the steps necessary to remove
or decontaminate all hazardous secondary material residues and
contaminated containment system components, equipment, structures, and
soils including, but not limited to, procedures for cleaning equipment
and removing contaminated soils, methods for sampling and testing
surrounding soils, and criteria for determining the extent of
decontamination necessary to protect human health and the environment;
(c) a description of any other activities necessary to protect human
health and the environment during this time frame, including, but not
limited to, leachate collection, run-on and run-off control, etc.; and
(d) a schedule for conducting the activities.
    This plan, which is essentially the subset of information required
in a 40 CFR part 265 closure plan that would apply to excluded
hazardous secondary material units, would still need to be reviewed by
the Regional Administrator (or State Director, in authorized states)
because that would ensure that EPA would agree that the hazardous
secondary materials, or equipment contaminated with hazardous secondary
materials, will not remain unregulated at the facility after it is no
longer operating under an exclusion and no longer maintains financial
assurance. As with the financial assurance release provision of 40 CFR
part 264, the Regional Administrator will provide notice to the owner
or operator and the public and an opportunity to submit written
comments on the plan and request modifications to the plan. The
Regional Administrator will approve, modify, or disapprove the plan
within 90 days of its receipt.
    Once residuals (and any hazardous secondary materials) have been
removed and the unit has been decontaminated according to the plan, the
facility would send a certification to that effect from the owner or
operator and a qualified Professional Engineer to the regulatory
agency, and that agency would then authorize the release of the
financial assurance for those specific units, unless there is reason to
believe that the hazardous secondary materials and residues were not
removed (in which case the regulatory authority would send a written
explanation of this fact). Again, this process is similar to that
required under 40 CFR 265.115, as referenced in 40 CFR part 265 subpart H.
Operation of the Instruments if the Exclusion Is No Longer Applicable
    As noted above, as long as a facility is operating under the
transfer-based exclusion and the hazardous secondary material is not
being discarded, there would be no need to invoke the financial
assurance instruments. However, if the exclusion is no longer
applicable, then the hazardous secondary material is a hazardous waste
subject to the Subtitle C requirements and the Regional Administrator
can invoke the instruments consistent with RCRA 3004(t) and related
laws. Similarly, as in 40 CFR part 265, if an owner or operator fails
to obtain an approved replacement instrument within 90 days after a
notice of cancellation from a surety, issuer of a letter of credit,
insurer, or guarantor, the Regional Administrator can invoke the
instrument. The following descriptions of the instruments contain
additional information on how the instruments operate under this rule.
Trust Funds
    If facilities choose to use a trust fund, they must fully fund the
trust before they can rely on it for financial assurance. This is
consistent with the proposal, which was based on the pay-in provisions
under 40 CFR part 265. In part 265, the pay-in period for trust funds
is limited to the remaining operating life of a facility or 20 years
from the effective date of the 40 CFR part 265 regulations, which
became effective in 1982. Thus, under the exclusion, the pay-in period,
which would allow a trust to build over time, is not available. This
means that facilities that are not financially strong enough to qualify
for the financial test and that cannot obtain a guarantee, such as a
surety bond or a letter of credit from a third party (potentially
because the surety or bank is not confident that it will be repaid if
the instrument is called upon) will need to fully fund the trust before
qualifying for the exclusion.
    While the hazardous secondary materials retain the exclusion, EPA
has no access to these funds. The trustee must meet the qualifications
in 40 CFR 261.143(a)(1) and the wording of the trust agreement must be
identical to the wording specified in Sec.  261.151(a)(1). The trust
agreement must include a Schedule A that lists each facility, including
the units with hazardous secondary materials, and the amounts of the
current cost estimates, or portions thereof, for which financial
assurance is demonstrated by the trust. Schedule A of the trust
agreement must be updated within 60 days after a change in the amount
of the current cost estimate covered by the agreement.
    Whenever the current cost estimate changes, the owner or operator
must compare the new estimate with the trustee's most recent annual
valuation of the trust fund. If the value of the fund is less than the
amount of the new cost estimate, the owner or operator, within 60 days
after the change in the cost estimate, must either (1) deposit an
amount into the trust fund so that its value after this deposit at
least equals the amount of the current cost estimate, or (2) obtain
other financial assurance,

[[Page 64695]]

such as a letter of credit, to cover the difference.
    There are also circumstances when the owner or operator may request
a release of funds from the trust fund. If the value of the trust fund
is greater than the total amount of the current cost estimate, the
owner or operator may submit a written request to the Regional
Administrator for release of the amount in excess of the current cost
estimate. This could occur as a result of the closing of a unit at the
facility and the submission of a revised cost estimate. Alternatively,
the earning of the trust fund could exceed the increase in the cost
estimate due to inflation. Further, if an owner or operator substitutes
other financial assurance as specified in the regulations for all or
part of the trust fund, he may submit a written request to the Regional
Administrator for release of the amount in excess of the current cost
estimate covered by the trust fund.
    Within 60 days after receiving a request from the owner or operator
for release of funds, the Regional Administrator will instruct the
trustee to release to the owner or operator such funds that exceed the
amount of the current cost estimate, as the Regional Administrator
deems appropriate and specifies in writing. Alternatively, in the event
that the owner or operator begins final closure of the unit under
subpart G of 40 CFR part 264 or 265, an owner or operator may request
reimbursements for partial or final closure expenditures by submitting
itemized bills to the Regional Administrator.
    The Regional Administrator will agree to termination of the trust
fund when the owner or operator substitutes alternate financial
assurance, such as receiving approval for an insurance policy to
replace the trust, or if the owner or operator demonstrates that he
meets the requirements of the financial test. It should be noted that
both surety bonds and letters of credit require a standby trust, as
discussed below. The Regional Administrator will also agree to the
termination of the trust fund when he releases the owner or operator
from the requirements of this section in accordance with 40 CFR 261.143(i).
    The preceding discussion explained the operation of the regulations
during the exclusion. The regulations also address the situation where
the hazardous secondary materials lose their exclusion. The
requirements in 40 CFR 261.151(a) for the trust fund provide that if
the hazardous secondary materials lose their exclusion, EPA becomes the
beneficiary of the trust, consistent with RCRA section 3004(t) and
federal law. The trust fund also receives the proceeds of a payment
surety bond or letter of credit if the hazardous secondary materials
lose the exclusion. The trustee shall make payments from the Fund as
the EPA shall order or direct, in writing, to provide for the payment
of the costs of the performance of closure activities required under
subpart G of 40 CFR parts 264 or 265 for the facilities covered by the
trust agreement. This provision allows funds from the trust to be used
to close facilities as hazardous waste facilities.
    An owner or operator whose hazardous secondary materials have lost
their exclusion, but subsequently meets the requirements for the
exclusion, including establishing financial assurance in accordance
with the provisions of 40 CFR 261.143, may request a reduction in the
amount of the trust fund and the Regional Administrator may instruct
the trustee to return funds to the owner or operator under Section 4 of
the trust agreement in 40 CFR 261.151(a). For example, hazardous
secondary materials could lose their exclusion and the Regional
Administrator could draw upon a letter of credit being used to
establish financial assurance and have it deposited into the trust
fund. If the hazardous secondary materials regained their exclusion and
the owner or operator substituted a new approved letter of credit, the
Regional Administrator may direct the trustee to refund funds to the
owner or operator.
Surety Bonds
    The surety bond operates similarly to the payment surety bond in 40
CFR part 265, with some modifications to reflect the differences
between a conditionally exempt hazardous secondary material and a
hazardous waste. The surety bond must conform to the requirements of 40
CFR 261.143(b) and the owner or operator must submit the bond to the
Regional Administrator. The surety company issuing the bond must, at a
minimum, be among those listed as acceptable sureties on federal bonds
in Circular 570 of the U.S. Department of the Treasury. The wording of
the surety bond must be identical to the wording specified in 40 CFR
261.151(b).
    The owner or operator who uses a surety bond must also establish a
standby trust fund and submit an originally signed duplicate of the
trust agreement with the surety bond. Under the terms of the bond, all
payments made thereunder will be deposited by the surety directly into
the standby trust fund in accordance with instructions from the
Regional Administrator. This standby trust fund must meet the
requirements specified in Sec.  261.143(a), except that until the
standby trust fund is funded pursuant to the requirements of this
section, the following are not required by these regulations:
    (A) Payments into the trust fund as specified in Sec.  261.143(a);
    (B) Updating of Schedule A of the trust agreement (see Sec. 
261.151(a)) to show current cost estimates;
    (C) Annual valuations as required by the trust agreement; and
    (D) Notices of nonpayment as required by the trust agreement.
    The penal sum of the bond must be in an amount at least equal to
the current cost estimate, except as provided in 40 CFR 261.143(f). The
regulations at 40 CFR 261.143(f) allow the use of certain combinations
of instruments so long as their sum is at least equal to the total cost
estimates.
    Whenever the current cost estimate increases to an amount greater
than the penal sum, the owner or operator, within 60 days after the
increase, must either cause the penal sum to be increased to an amount
at least equal to the current cost estimate and submit evidence of such
increase to the Regional Administrator or obtain other financial
assurance as specified in the regulations in 40 CFR 261.143 to cover
the increase. Whenever the current cost estimate decreases, the penal
sum may be reduced to the amount of the current cost estimate following
written approval by the Regional Administrator. So long as the owner or
operator meets the exclusion, the Regional Administrator will not
access the bond.
    The Regional Administrator will agree to termination of the surety
bond when the owner or operator substitutes alternate financial
assurance, such as an approved insurance policy to replace the surety
bond, or if the owner or operator demonstrates that he meets the
requirements of the financial test. The Regional Administrator will
also agree to the termination of the surety bond when he releases the
owner or operator from the requirements of this section in accordance
with 40 CFR 261.143(i). Under 40 CFR 261.151(b), the Principal may
terminate this bond by sending written notice to the Surety(ies),
provided, however, that no such notice shall become effective until the
Surety(ies) receive(s) written authorization for termination of the
bond by the EPA Regional Administrator(s) of the EPA Region(s) in which
the bonded facility(ies) is (are) located.
    Under 40 CFR part 261, the surety becomes liable for funding the
trust if the owner or operator has failed to fund the trust before the
loss of the exclusion. The cancellation provisions for the

[[Page 64696]]

surety bond in 40 CFR part 261 operate similarly to the provisions in
40 CFR part 265. If the surety has issued a notice of cancellation, and
the owner or operator has not funded the trust or obtained approval by
the Regional Administrator of a replacement instrument within 90 days,
the surety becomes liable for payment into the trust fund. Under the
hazardous waste rules, if the surety issues a notice of cancellation
and the owner or operator does not fund the trust or obtain approved
alternative financial assurance within 90 days, the Regional
Administrator may access the funds.
    Reclamation and intermediate facilities, as under 40 CFR part 265,
may not use a performance surety bond because there is no closure plan
that has undergone review under the permitting process. The performance
surety bond, which is allowed under the permitting standards in 40 CFR
part 264 subpart H, requires the surety, in the event of a failure by
the owner or operator to comply with the requirements of the closure
requirements of 40 CFR part 264, to perform closure in accordance with
the closure plan and permitting requirements or to deposit the penal
sum of the bond into the standby trust. Closure plans for permitted
facilities undergo detailed review as part of the permitting process,
so it is appropriate to allow a surety to perform closure in this
circumstance. However, like interim status facilities, reclamation and
intermediate facilities do not have closure plans that undergo this
type of review. ``During interim status, the closure and post-closure
plans for a facility are generally not reviewed by the Regional
Administrator until shortly before the time of closure. Upon such
review, the Regional Administrator may find that major changes are
needed in the plans. The Agency believes a performance bond is not
appropriate when the actual required performance for the particular
facility may not be specified in any detail during most of the term of
the bond'' (47 FR 15040).
Letters of Credit
    The letter of credit requirements generally operate similarly to
the requirements in 40 CFR part 265, except that they reflect the
status of conditionally exempt hazardous secondary materials. An owner
or operator may satisfy the requirements of 40 CFR 261.143 by obtaining
an irrevocable standby letter of credit which conforms to the
requirements of 40 CFR 261.143(c) and submitting the letter to the
Regional Administrator. The issuing institution must be an entity which
has the authority to issue letters of credit and whose letter-of-credit
operations are regulated and examined by a federal or state agency.
    The wording of the letter of credit must be identical to the
wording specified in Sec.  261.151(c). As with the surety bond, an
owner or operator who uses a letter of credit must also establish a
standby trust fund and submit to the Regional Administrator an
originally signed duplicate of the trust agreement with the letter of
credit. Under the terms of the letter of credit, all amounts paid
pursuant to a draft by the Regional Administrator will be deposited by
the issuing institution directly into the standby trust fund in
accordance with instructions from the Regional Administrator. This
standby trust fund must meet the requirements specified in Sec. 
261.143(a), except that until the standby trust fund is funded pursuant
to the requirements of this section, the requirements, as noted above,
that are not necessary for a surety bond are also not required for a
letter of credit.
    The letter of credit must be issued in an amount at least equal to
the current cost estimate, except as provided in 40 CFR 261.143(f). The
regulations in 40 CFR 261.143(f) allow the use of certain combinations
of instruments so long as their sum is at least equal to the total cost
estimates.
    Whenever the current cost estimate increases to an amount greater
than the amount of the letter of credit, the owner or operator, within
60 days after the increase, must either cause the amount of the letter
of credit to be increased so that it at least equals the current cost
estimate and submit evidence of such increase to the Regional
Administrator or obtain other financial assurance as specified in the
regulations in 40 CFR 261.143 to cover the increase. Whenever the
current cost estimate decreases, the amount of the letter of credit may
be reduced to the amount of the current cost estimate following written
approval by the Regional Administrator.
    The Regional Administrator will return the letter of credit to the
issuing institution for termination when an owner or operator
substitutes alternate financial assurance as specified in 40 CFR
261.143, or when the Regional Administrator releases the owner or
operator from the requirements of this section in accordance with Sec. 
261.143(i).
    So long as the owner or operator meets the exclusion and maintains
financial assurance, the Regional Administrator will not access the
letter of credit. Access to the letter of credit only occurs upon the
loss of the exclusion. For the letter of credit, in the event that the
hazardous secondary materials at the covered reclamation or
intermediate facilities no longer meet the conditions of the exclusion,
EPA may draw upon the letter of credit. If the owner or operator does
not establish alternate financial assurance and obtain written approval
of such alternate assurance from the Regional Administrator within 90
days after a notice from the issuing institution that it has decided
not to extend the letter of credit beyond the current expiration date,
the Regional Administrator will draw on the letter of credit. When the
Regional Administrator draws on the letter of credit, the proceeds are
deposited into the standby trust fund, and the funds in the trust
become available for the payment of the costs of closure in compliance
with subpart G of 40 CFR parts 264 or 265.
Insurance
    Insurance operates similarly to the insurance instrument in 40 CFR
part 265, with some modifications to reflect differences between
conditionally exempt hazardous secondary materials and hazardous
wastes. An owner or operator may satisfy the requirements of 40 CFR
261.143 by obtaining insurance that conforms to the requirements of 40
CFR 261.143(d) and submitting a certificate of such insurance to the
Regional Administrator At a minimum, the insurer must be licensed to
transact the business of insurance or be eligible to provide insurance
as an excess or surplus lines insurer, in one or more states.
    The wording of the certificate of insurance must be identical to
the wording specified in Sec.  261.151(d). As part of the certificate,
the insurer warrants that the policy conforms in all respects with the
requirements of 40 CFR 261.143(d), as applicable, and agrees that any
provision of the policy inconsistent with 40 CFR 261.143(d) is hereby
amended to eliminate such inconsistency. The insurer also agrees to
furnish to the EPA Regional Administrator(s) a duplicate original of
the policy listed above, including all its endorsements, whenever
requested by the Regional Administrator.
    The insurance policy must be issued for a face amount at least
equal to the current cost estimate, except as provided in Sec. 
261.143(f), which allows the use of certain combinations of instruments
so long as their sum is at least equal to the total cost estimates.
    Whenever the current cost estimate increases to an amount greater
than the face amount of the policy, the owner or operator, within 60
days after the increase, must either cause the face amount to be
increased to an amount at least equal to the current cost estimate

[[Page 64697]]

and submit evidence of such increase to the Regional Administrator or
obtain other financial assurance as specified in 40 CFR 261.143 to
cover the increase. Whenever the current cost estimate decreases, the
face amount may be reduced to the amount of the current cost estimate
following written approval by the Regional Administrator.
    In 40 CFR 261.143(d)(4), the insurance policy must guarantee that
funds will be available to pay the cost of removal of all hazardous
secondary materials from the unit, to pay the cost of decontamination
of the unit, and to pay the costs of the performance of any activities
required under subpart G of 40 CFR parts 264 or 265 for the facilities
covered by this policy, if they become necessary. This provision, as
that in 40 CFR part 265, allows the owner or operator to recover the
costs of removing hazardous secondary materials and is similar to the
provisions in Sec.  265.143(d) that allow the owner or operator of a
facility to be reimbursed for the costs of closure. This provision also
allows the Regional Administrator to allow reimbursement for the same
activities that are allowed under the trust fund. The insurance
provisions that allow for reimbursement for the cost of removal of
hazardous secondary materials are broader than the provisions in 40 CFR
261.151(a) for payment from the trust fund. This difference is due to
the fact that the monies in the trust fund are returned to the owner or
operator once the facility exits the exclusion, but there is no such
provision for insurance; in order to make the insurance provisions
functionally equivalent to their counterparts in 40 CFR part 265, the
insurance provisions must cover the cost of removing the hazardous
secondary materials when the unit exits the exclusion. However, the
owner or operator may request reimbursements only if the remaining value
of the policy is sufficient to cover the maximum costs for the facility.
    The Regional Administrator will give written consent to the owner
or operator that he may terminate the insurance policy when the owner
or operator substitutes alternate financial assurance as specified in
Sec.  261.143, or the Regional Administrator releases the owner or operator
from the requirements of this section in accordance with Sec.  261.143(i).
    Under 40 CFR 261.143(d)(8), cancellation, termination, or failure
to renew may not occur and the policy will remain in full force and
effect in the event that on or before the date of expiration, the
conditional exclusion terminates or is revoked. This is analogous to
the provisions for surety bonds and letters of credit that ensure that
payments under those instruments will occur if the conditionally
excluded hazardous secondary materials lose the exclusion.
    Under the insurance provisions of Sec.  265.143, failure of the
owner or operator to pay the premiums of a policy without the
substitution of an alternative mechanism constitutes a significant
violation of the regulations. EPA was faced with a decision of how to
implement that provision here. Since the exclusion relies upon
compliance with the conditions, failure to pay the premium is
significant and may result in loss of the exclusion. Similarly, loss of
the exclusion will preclude the cancellation or termination of the
policy. Under the circumstances, EPA recognizes that insurers may
carefully screen applicants to ensure that they will meet the
requirements of the exclusion and establish premiums, possibly with a
substantial portion up front or collateralized, that reduce the
insurer's risk of non-payment.
    In 40 CFR 265.143(d)(1), there is a provision allowing an owner or
operator of a treatment, storage, and disposal facility an additional
90 days from the effective date of the regulations to provide a
certificate of insurance. The effective date of the interim status
regulations was in 1982, and therefore this provision is no longer
applicable and today's rule does not allow this additional 90 days. In
keeping with the proposal to use requirements in subpart H of 40 CFR part
265, the additional 90-day period has been deleted from these regulations.
Financial Test
    EPA had solicited comment on whether to use the financial assurance
provisions in the standardized permit rule rather than those in 40 CFR
part 265, but commenters generally did not support the standardized
permit rule alternative. Therefore, certain provisions that are
available under the standardized permit rule will not be available to
reclamation and intermediate facilities, with one exception. The
financial test provision referenced by subpart H of 40 part CFR 265
includes an obsolete requirement that the Certified Public Accountant's
report state that ``[i]n connection with that procedure, no matters
came to his attention which caused him to believe that the specified
data should be adjusted.'' This is referred to by the auditing
profession as a ``negative assurance.'' However, the American Institute
of Certified Public Accountants, Inc.'s (AICPA's) Statement on Auditing
Standards no longer permits independent auditors to express negative
assurance. Thus, to ensure that today's final rule conforms with
current professional auditing standards, EPA is using the language from
the standardized permit rule for this aspect of the financial test.\4\
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    \4\ For current EPA guidance for companies using the financial
test in 40 CFR part 264 or 265, please see the February 27, 1997
Memorandum from Elizabeth Cotsworth to Senior RCRA Policy Advisors
entitled ``Obsolete Language in the Financial Test for Subtitle C
Treatment Storage and Disposal Facilities,'' at http://
yosemite.epa.gov/osw/rcra.nsf/ea6e50dc6214725285256bf00063269d/
C68C99D730932BE28525670F006C2B4A/$file/14066.pdf.
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    As noted in the March 2007 supplemental proposal, the Agency
currently has underway a review of the subpart H financial assurance
regulations, which will address this issue among others in the broader
context of 40 CFR parts 264 and 265. As part of any rulemaking that
addresses the results of that review, EPA will include any necessary
changes to the financial assurance condition being finalized today.
    In today's regulation, the letter from the chief financial officer
(see Sec.  261.151(e) or (f)) contains a requirement to account for
obligations assured through a financial test or corporate guarantee for
facilities handling conditionally excluded hazardous secondary
materials. This addition is necessary because the chief financial
officer's letter required in the 40 CFR part 265 regulations does not
anticipate these obligations.
    The financial test and the letter from the chief financial officer
use accounting terms, such as current assets, current liabilities, and
liabilities. Under 40 CFR 261.141, which defines the terms used in this
subpart, these and other accounting terms follow their definition in 40
CFR 265.141(f). As noted in 40 CFR 265.141(f), ``The definitions are
intended to assist in the understanding of these regulations and are
not intended to limit the meanings of terms in a way that conflicts
with generally accepted accounting practices.'' This is an important
provision of the financial assurance regulations because it allows the
terms used in the test to reflect evolving definitions. For example, if
the accounting standards covering retiree obligations change, this
provision ensures that the accounting in the financial test submission
to EPA reflects the new standards. Companies may not use an obsolete
definition of these terms.
    Like the 40 CFR part 265 regulations, this regulation includes a
provision

[[Page 64698]]

allowing an owner or operator to obtain a corporate guarantee as a
method of complying with the financial assurance requirements. The
provisions governing who may extend a guarantee are the same as those
in 40 CFR part 265. Since there is no requirement for an up-front
closure plan, the text of the guarantee in 40 CFR part 261 differs
somewhat from the language in 40 CFR part 265. In Sec.  261.151(g)(1),
the guarantor ``guarantees that in the event of a determination by the
Regional Administrator that the hazardous secondary materials at the
owner or operator's facility covered by this guarantee do not meet the
conditions of the exclusion under Sec.  261.4(a)(24), the guarantor
will manage any hazardous secondary material in accordance with
applicable regulations and close the facility in accordance with
closure requirements found in parts 264 and 265 of this chapter or
establish a trust fund as specified in Sec.  261.143(a) in the name of
the owner or operator in the amount of the current cost estimate.''
Liability Requirements
    The liability coverage requirements for sudden and nonsudden
accidental occurrences in subpart H of 40 CFR part 261 are essentially
the same as those for TSDFs in 40 CFR 265.147, with revised terminology
so that the regulatory language applies to hazardous secondary material
reclamation and intermediate facilities. Sudden accidental coverage for
bodily injury and property damage to third parties is required for all
units, and nonsudden accidental coverage is required for land-based
units. Land-based units are defined in 40 CFR 260.10 as an area where
hazardous secondary materials are placed in or on the land before
recycling and are functionally equivalent to the units required to have
nonsudden accidental coverage under 40 CFR 265.147(b) (e.g., surface
impoundments). In addition, the provisions for requesting a variance or
adjusting the coverage are the same as 40 CFR 265.147(c) and (d)
respectively, except the reference that ties these procedures to the
Subtitle C permit modification procedures under 40 CFR 270.41(a)(5) and
40 CFR 124.5 has been removed, because these provisions would not apply
to excluded hazardous secondary material.
Other Financial Assurance Provisions
    Finally, the provisions for incapacity of owners or operators,
guarantors, or financial institutions (40 CFR 261.148), use of state-
required mechanisms (40 CFR 261.149), and state assumption of
responsibility (40 CFR 261.150) are essentially the same as their
counterparts in 40 CFR part 265, with one exception. The state-required
mechanism provisions have been expanded to indicate that states may
allow facilities to use their existing Subtitle C financial assurance
policies to address the financial assurance condition of 40 CFR
261.4(a)(24)(vi)(F), provided they can ensure that the instruments
actually cover the financial assurance cost estimate.
5. Provisions Applicable to Hazardous Secondary Materials That Are
Exported and Imported
    Under today's final rule, generators who export hazardous secondary
materials are required to notify the receiving country through EPA and
obtain consent from that country before shipment of the hazardous
secondary materials takes place (see 40 CFR 261.4(a)(25)). These notice
and consent requirements provide notification to the receiving country
so that it can ensure that the hazardous secondary materials are
reclaimed rather than disposed of or abandoned. As an additional
benefit, these requirements allow the receiving country the opportunity
to consent or not consent based on its analysis of whether the
reclamation facility can properly recycle the hazardous secondary
materials and manage the 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.
    Specifically, hazardous secondary materials that are exported from
the United States and its territories and recycled at a reclamation
facility located in a foreign country are not solid wastes, provided
the hazardous secondary material generator complies with the requirements
of 40 CFR 261.4(a)(25), including notifying EPA of the proposed export
and obtaining subsequent consent from the receiving country.
    Included by reference in 40 CFR 261.4(a)(25), the generator must
comply with the requirements of 40 CFR 261.4(a)(24)(i)-(v), which
comprise the hazardous secondary material generator requirements under
the transfer-based exclusion, such as speculative accumulation and
reasonable efforts. However, hazardous secondary material generators
who export hazardous secondary materials for reclamation are not
required to comply with 40 CFR 261.4(a)(24)(v)(B)(2) for foreign
reclaimers and intermediate facilities because, as part of satisfying
reasonable efforts, this question requires the generator to
affirmatively answer if the reclaimer or intermediate facility has
notified the appropriate authorities pursuant to Sec.  260.42 and if
the reclaimer or intermediate facility has financial assurance as
required under Sec.  261.4(a)(24)(vi)(F). Since foreign reclaimers and
foreign intermediate facilities are not subject to U.S. regulations,
they cannot comply with the notification and financial assurance
requirements under today's rule (however, hazardous secondary material
generators must affirmatively answer this question for domestic
intermediate facilities).
    The provisions that we are finalizing today in 40 CFR 261.4(a)(25)
require hazardous secondary material generators 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 for the hazardous secondary material
generator, as well as for the reclaimer and intermediate facility,
including any alternate reclaimer or alternate intermediate
facilities.\5\ The notification must also include a description of the
type(s) of hazardous secondary materials and the manner in which the
hazardous secondary materials will be reclaimed, 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 hazardous secondary materials will pass.
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    \5\ Hazardous secondary material generators may choose, in the
notice of export, to designate alternate reclaimers or alternate
intermediate facilities to which the hazardous secondary materials
may be exported in the event that delivery to the primary reclaimer
or intermediate facility cannot take place. Hazardous secondary
material generators, of course, must comply with all conditions
(e.g., reasonable efforts) for each alternate reclaimer and
alternate intermediate facility as with a primary reclaimer and
intermediate facility.
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    Notifications must be sent to EPA's Office of Enforcement and
Compliance Assurance,\6\ which will then notify the receiving country
and any transit countries. For purposes of 40 CFR 261.4(a)(25), the
terms ``Acknowledgement of Consent,'' ``receiving country,'' and
``transit country'' are used as defined in 40 CFR 262.51 with the
exception that the terms in this section refer to hazardous

[[Page 64699]]

secondary materials, rather than hazardous waste.
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    \6\ The Office of Enforcement and Compliance Assurance (OECA) is
the office within EPA that implements the notice and consent process
for exports.
---------------------------------------------------------------------------

    When the receiving country consents (or objects) to the receipt of
the hazardous secondary materials, EPA will inform the hazardous
secondary material generator, through an Acknowledgement of Consent, of
the receiving country's response, as well as any response from any
transit countries.
    For exports to Organization for Economic Cooperation and
Development (OECD) Member countries, the receiving country may choose
to respond to the notification with tacit, rather than written,
consent. With respect to exports to such OECD Member countries, if no
objection has been lodged by the receiving country or transit countries
to a notification within 30 days after the date of issuance of the
acknowledgement of receipt of notification by the competent authority
of the receiving country, the U.S. understands that an export may
commence at that time. In such cases, EPA will send an Acknowledgment
of Consent to inform the hazardous secondary material generator that
the receiving country and any relevant transit countries have not
objected to the shipment, and are thus presumed to have consented
tacitly. Tacit consent expires one calendar year after the close of the
30-day period; re-notification and renewal of all consents is required
for exports after that date. This tacit consent procedure for exports
of hazardous secondary materials to OECD Member countries in this rule
is similar to the tacit consent procedure for hazardous waste exports
to OECD Member countries under 40 CFR part 262 subpart H. We note that
Canada and Mexico, though they are OECD Member countries, typically
require written consent for exports to their countries.
    The hazardous secondary material generator may proceed with the
shipment of the hazardous secondary materials only after it has
received an Acknowledgment of Consent from EPA indicating the receiving
country's consent (actual or tacit). If the receiving country does not
consent to the receipt of the hazardous secondary materials or
withdraws a prior consent, EPA will notify the hazardous secondary
material generator in writing. EPA also will notify the hazardous
secondary material generator of any responses from transit countries.
Hazardous secondary material generators must keep copies of any
notifications and consents for a period of three years following
receipt of the consent.
    Hazardous secondary material generators must also file with the
Administrator, no later than March 1 of each year, a report containing
its name, mailing and site address, and EPA ID number (if applicable);
the calendar year covered by the report; the name and site address of
each reclaimer and intermediate facility; and, for each hazardous
secondary material exported, a description of the hazardous secondary
material, the type of hazardous secondary material (reported as the EPA
hazardous waste numbers that would apply if the hazardous secondary
materials were managed as hazardous wastes), the DOT hazard class, the
name and U.S. EPA ID number (where applicable) for each transporter
used, the total amount of hazardous secondary material shipped and the
number of shipments pursuant to each notification. Hazardous secondary
material generators must also sign a certification statement (found
under 40 CFR 261.4(a)(25)(xi)(E)). These procedures are similar to
those required for exports of hazardous waste under 40 CFR part 262
subpart E, except for the use of the hazardous waste manifest which is
not required under today's exclusions.
    Imports of hazardous secondary materials are eligible for today's
transfer-based exclusion, provided that the person who imports the
hazardous secondary material fulfills all requirements and conditions
(e.g., notification, reasonable efforts, recordkeeping) for a hazardous
secondary material generator under 40 CFR 261.4(a)(24) of today's rule.
Persons who import hazardous secondary materials are not eligible for
today's generator-controlled exclusion since EPA would not be able to
ensure the close management and monitoring of the hazardous secondary
materials by a single entity in a foreign country.

D. Termination of the Exclusion

    As with the generator-controlled exclusion, units managing
hazardous secondary materials excluded under the transfer-based
exclusion are not subject to the closure regulations in 40 CFR parts
264 and 265 subpart G. However, when the use of these units is
ultimately discontinued, all owners and operators must manage any
remaining hazardous secondary materials that are not reclaimed and
remove or decontaminate all hazardous residues and contaminated
containment system components, equipment structures, and soils. These
hazardous secondary materials and residues, if no longer intended for
reclamation, would also no longer be eligible for the exclusion (which
only applies to hazardous secondary materials that will be reclaimed).
Failure to remove these materials within a reasonable time frame after
operations cease could cause the facility to become subject to the full
Subtitle C requirements if the Agency determines that reclamation is no
longer feasible. While this final rule does not set a specific time
frame for these activities, the Agency believes that they typically
should be completed within the time frames established for analogous
activities. For example, the requirements for product tanks under 40
CFR 261.4(c) allow 90 days for removal of hazardous material after the
unit ceases to be operated for manufacturing. This time frame should
serve as a guideline for regulators in determining, on a case-by-case
basis, whether owners and operators have completed these activities
within in a reasonable time frame. In any event, these hazardous
secondary materials remain subject to the speculative accumulation
restrictions in 40 CFR 261.4(a)(8), which includes both a time
limitation of recycling 75% of the hazardous secondary material within
a year and a requirement that the facility be able to show there is a
feasible means of recycling the hazardous secondary material.
    In addition, as described in section VIII.C. above, in order to be
released from the financial assurance condition, intermediate and
reclamation facilities will need to submit for approval a plan for
removing the hazardous secondary material and decontaminating the unit,
and then, when the work is completed, submit a certification from a
qualified Professional Engineer that all hazardous secondary materials
have been removed from the unit and the unit has been decontaminated.

E. Enforcement

    Hazardous secondary materials transferred to a third party for the
purpose of reclamation are excluded from RCRA Subtitle C regulation
under certain conditions and restrictions. If a hazardous secondary
material generator fails to meet any of the above-described conditions
that are applicable to the generator, then the hazardous secondary
materials would be considered discarded by the generator and would be
subject to the RCRA Subtitle C requirements from the point at which
such material was generated. In addition, if a reclaimer or an
intermediate facility failed to meet any of the above-described
conditions, then the hazardous secondary materials would be considered
discarded by the reclaimer or intermediate facility and would be
subject to the RCRA Subtitle C requirements from the point at which the
reclaimer or intermediate facility

[[Page 64700]]

failed to meet a condition or restriction, thereby discarding the material.
    It should be noted that the failure of the reclaimer or
intermediate facility to meet the conditions of the exclusion does not
mean that the hazardous secondary material was considered waste when
handled by the generator, as long as the generator can adequately
demonstrate that it has met its obligations, including the obligation
under 40 CFR 261.4(a)(24)(v)(B) to make reasonable efforts to ensure
that the hazardous secondary material will be reclaimed legitimately
and properly managed. A hazardous secondary material generator that met
its reasonable efforts obligations could, in good faith, ship its
excluded materials to a reclamation facility or intermediate facility
where, due to circumstances beyond its 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 or
intermediate facility is based on an objectively reasonable belief that
the hazardous secondary materials would be reclaimed legitimately and
otherwise managed in a manner consistent with this regulation, the
generator would not have violated the terms of the exclusion.
    In addition, the Agency affirms in this preamble that Sec. 
261.2(f) applies to all claims that hazardous secondary materials are
not solid waste because they are being legitimately recycled, including
those that are not specifically addressed in this final rule.
Respondents in enforcement cases should be prepared to demonstrate that
they meet the terms of the exclusion or exemption, which includes
demonstrating that the recycling is legitimate. Appropriate
documentation must be provided to the enforcing agency to demonstrate
that the material is not a solid waste or is exempt from regulation. In
addition, the recycler of the hazardous secondary material should be
prepared to show it has the necessary equipment to perform the
recycling operation. Furthermore, any release of the hazardous
secondary materials to the environment that is not immediately cleaned
up would be considered discarded and, thus, the hazardous secondary
material that was released would be a solid waste and potentially
subject to the RCRA hazardous waste regulations.

IX. Legitimacy

    As part of this final rulemaking, EPA has decided to codify in 40
CFR 260.43 the requirement that materials be legitimately recycled as a
requirement for the exclusion for hazardous secondary materials that
are legitimately reclaimed under the control of the generator (40 CFR
261.2(a)(2)(ii) and 40 CFR 261.4(a)(23)) and as a condition of the
exclusion for hazardous secondary materials that are transferred for
the purpose of legitimate reclamation (40 CFR 261.4(a)(24) and 40 CFR
261.4(a)(25)). EPA is also requiring that hazardous secondary materials
must be legitimately recycled under the final non-waste determinations
(40 CFR 260.34) for hazardous secondary materials that are (a)
reclaimed in a continuous industrial process and (b) indistinguishable
in all relevant aspects from a product or intermediate.
    In addition, in Section IX.B.3, EPA has included a discussion of
how the current legitimacy policy continues to apply to existing
exclusions and how the four factors being added to 40 CFR 260.43 are
substantively the same as the current legitimacy policy.

A. Background of Legitimacy

    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 a significant
economic incentive to manage hazardous secondary materials outside the
RCRA regulatory system, there is a potential for some handlers to claim
that they are recycling, when, in fact, they are conducting waste
treatment and/or disposal in the guise of recycling.\7\ To guard
against this, EPA has long articulated the need to distinguish between
``legitimate'' (i.e., true) recycling and ``sham'' (i.e., fake)
recycling, beginning with the preamble to the 1985 regulations that
established the definition of solid waste (50 FR 638, January 4, 1985).
---------------------------------------------------------------------------

    \7\ As an example of sham recycling, in a recent case the owner
of a facility in Mississippi was found to be illegally burying
hazardous waste on his property, where it was leaching into the
surrounding soil and groundwater, while he was telling regulators
and customers that he was recycling it into a salable product
(Department of Justice, ``Mississippi Hazardous Waste Operator
Sentenced to 41 Months in Prison for Environmental Crimes,'' news
release, February 7, 2008, http://www.epa.gov/compliance/resources/
cases/criminal/highlights/2008/pridemore-02-07-08.pdf).
---------------------------------------------------------------------------

    In the October 28, 2003, proposal at 68 FR 61581-61588, EPA
discussed its position on the relevance of legitimacy 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
the supplemental proposal of March 26, 2007, at 72 FR 14197-14201, we
proposed two changes to the 2003 proposed legitimacy criteria and asked
for public comment on those changes. The changes were (1) a
restructuring of the proposed criteria, called ``factors'' in this
proposal, to make two of them mandatory, while leaving the other two 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.
    The concept of legitimacy being finalized in today's rule as a
restriction or a condition for the final exclusions and the non-waste
determinations is not substantively different from the Agency's
longstanding policy that has been expressed in our earlier preamble
discussions and policy statements. The October 28, 2003, definition of
solid waste proposal discussed the history of the guidance EPA has
provided to the regulated community on the question of what it means to
legitimately recycle. To summarize that discussion, the January 4,
1985, preamble to the final rule that promulgated the original
definition of solid waste regulations established EPA's concept of
legitimacy and described several indicators of sham recycling. A
similar discussion that addressed legitimacy as it pertains to burning
hazardous secondary materials for energy recovery was presented in the
preamble to the January 8, 1988, proposed amendments to the definition
of solid waste (53 FR 522).
    On April 26, 1989, the Office of Solid Waste (OSW) issued a
memorandum that consolidated preamble statements concerning legitimate
recycling that had been articulated previously into a list of criteria
to be considered in evaluating legitimacy [OSWER directive
9441.1989(19)]. This memorandum, known to many as the ``Lowrance
Memo,'' has been a primary source of guidance for the regulated
community and for implementing agencies in distinguishing between
legitimate and sham recycling for many years.
    The legitimacy provision applicable to these exclusions and non-
waste determinations is based on the October 2003 proposal and March
2007 supplemental proposal and all relevant information available to
EPA as contained in the rulemaking record. The basis for how the
legitimacy requirement in 40 CFR 260.43 works

[[Page 64701]]

includes the reasoning in the October 2003 and March 2007 preambles to
the proposal and supplemental proposal, respectively, and consideration
of all significant public comments as discussed in section XVIII of
this preamble, as well as in the response to comment document.
    Following the detailed discussion of the structure of the 40 CFR
260.43 legitimacy factors and each individual factor in this preamble,
EPA has included a discussion of how the current legitimacy policy
continues to apply to existing exclusions and how the four factors
being added to 40 CFR 260.43 compare to the questions in the Lowrance
Memo and the discussions in the preambles identified above.

B. How To Determine When Recycling Is Legitimate

1. What Is the Purpose of Legitimacy?
    As discussed in the October 2003 proposal and the March 2007
supplemental proposal to this rulemaking, the Agency has a long-
standing policy that all recycling of hazardous secondary materials
must be legitimate, including both excluded recycling and the recycling
of regulated hazardous wastes. The legitimacy provision in today's
final exclusions and non-waste determinations is designed to
distinguish between real recycling activities--legitimate recycling--
and ``sham'' recycling, an activity undertaken by an entity to avoid
the requirements of managing a hazardous secondary material as a
hazardous waste. Because of the economic advantages in managing
hazardous secondary materials as recycled materials rather than as
wastes, there is an incentive for some handlers to claim they are recycling
when, in fact, they are conducting waste treatment and/or disposal.
2. Legitimacy Requirements
    In this action, EPA is finalizing requirements that reclamation
being undertaken under the exclusions at Sec.  261.2(a)(2)(ii), Sec. 
261.4(a)(23), (24), and (25) and the non-waste determinations at Sec. 
260.30(d) and (e) be legitimate. These requirements can be found in the
final regulatory text at Sec.  260.34(b), Sec.  261.2(a)(2)(ii), Sec. 
261.4(a)(23)(v), and Sec.  261.4(a)(24)(iv). Each of these provisions
refers to Sec.  260.43, where the full requirements for determining the
legitimacy of the reclamation operation can be found.
    The design of legitimacy in the final rule has two parts. The first
is a requirement that hazardous secondary materials being recycled
provide 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 legitimacy factors make up
the core of legitimacy and, therefore, a process that does not conform
to them cannot be a legitimate recycling process, but would be
considered sham recycling.
    The second part of legitimacy is two factors that must be
considered when a recycler is making a legitimacy determination. EPA
believes that these two factors are important in determining
legitimacy, but has not made them factors that must be met because the
Agency knows that there will be some situations in which a legitimate
recycling process does not conform to one or both of these two factors,
yet the reclamation activity would still be considered legitimate. EPA
does not believe that this will be a common occurrence, but in
recognition that legitimate recycling may occur in these situations,
EPA has made management of the hazardous secondary materials and the
presence of hazardous constituents in the product of the recycling
process to be factors that must be considered in the overall legitimacy
determination, but not factors that must always be met.
    Structure of legitimacy provision. Under the first paragraph of 40
CFR 260.43, hazardous secondary materials that are not legitimately
recycled are discarded materials and, therefore, are solid wastes. This
paragraph also states that anyone claiming an exclusion at Sec. 
261.2(a)(2)(ii), Sec.  261.4(a)(23), Sec.  261.4(a)(24), or Sec. 
261.4(a)(25) or using a non-waste determination at Sec.  260.30(d) or
(e) must be able to demonstrate that its recycling activity is
legitimate. The Agency has included the language ``In determining if
their recycling is legitimate, persons must address the requirements of
Sec.  260.43(b) and must consider the requirements of Sec.  260.43(c)''
to make it clear that the factors in paragraph (b) must be met, while
the factors in paragraph (c) must be considered and evaluated in
determining whether the recycling activity overall is legitimate.
    Although there is no specific recordkeeping requirement that goes
with the ability to demonstrate legitimacy, EPA would expect that in
the event of an inspection or an enforcement action by an implementing
agency, the recycler would be able to show how it made the overall
legitimacy determination per Sec.  261.2(f).\8\ In the event that the
process does not conform to one of the two factors under Sec. 
260.43(c), the facility should be able to show that it considered that
factor and why the recycling activity overall remains legitimate. For
example, under existing exclusions from the definition of solid waste,
reuse of lead contaminated foundry sands may or may not be legitimate,
depending on the use. The use and reuse of foundry sands for mold
making in a facility's sand loop under normal industry practices has
been found to be legitimate because the sand is part of an industrial
process where there is little chance of the hazardous constituents
being released into the environment or causing damage to human health
and the environment when it is kept inside, because there is lead
throughout the foundry's process, and because there is a clear value to
reusing the sand.\9\ However, in the case of lead contaminated foundry
sand used as children's play sand, the same high levels of lead would
disqualify this use from being considered legitimate recycling.\10\ the
same result would be reached when applying Factor 4.
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    \8\ Under the transfer-based exclusion being finalized in
today's rule, a reclaimer should also anticipate that a hazardous
secondary material generator may inquire as to whether the
reclamation process is legitimate (40 CFR 261.4(a)(24)(v)(B)(1)).
Reasonable effort inquiries will vary by generator and may include a
request for information or documentation of legitimacy.
    \9\ Letter. Elizabeth Cotsworth, Director Office of Solid Waste,
to Amy Blankenbiller, American Foundry Society, March 28, 2001.
http://yosemite.epa.gov/osw/rcra.nsf/
0c994248c239947e85256d090071175f/4C9A2EEE6E5F859B85256AC5004FC1C2/
$file/14534.pdf
    \10\ One of the profiles in the docket shows that from 1997-
1998, a horticultural nursery purchased approximately 375 tons of
foundry sand that contained lead above the regulatory limits and
that was then bagged and sold as play sand to approximately 40
different retailers. (U.S. EPA, An Assessment of Environmental Problems
Associated with Recycling of Hazardous Secondary Materials, Appendix 2).
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    Factor 1--Useful Contribution. ``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 * * *
The hazardous secondary material provides a useful contribution if it
(i) contributes valuable ingredients to a product or intermediate; or
(ii) replaces a catalyst or carrier in the recycling process; or (iii)
is the source of a valuable constituent recovered in the recycling
process; or (iv) is recovered or regenerated by the recycling process;
or (v) is used as an effective substitute for a commercial product''
(40 CFR 260.43(b)(1)).
    This factor, one of the two core legitimacy factors, expresses the
principle that hazardous secondary materials should contribute value to
the recycling process. This factor is an

[[Page 64702]]

essential element to legitimate recycling because real recycling is not
occurring if the hazardous secondary materials being added or recovered
do not add anything to the process. This factor is intended to prevent
the practice of adding to or recovering hazardous secondary materials
from a manufacturing operation simply as a means of disposing of them,
or recovering only small amounts of a constituent, which EPA would
consider sham recycling.
    In response to comments received on this factor asking for more
clarification on what useful contribution means, the regulatory text
includes an explanation of how useful contribution might be achieved in
(i) through (v) of Sec.  260.43(b)(1). EPA stresses that the ways in
which hazardous secondary materials can add value and be useful in a
recycling process are (i) contributing valuable ingredients to a
product or intermediate; (ii) replacing a catalyst or carrier in the
recycling process; (iii) providing a valuable constituent to be
recovered; (iv) being regenerated; or (v) being used as an effective
substitute for a commercial product. The preamble to the October 2003
proposed rule gave full descriptions of these five situations (68 FR
61585), but the Agency has also included them in the regulatory text to
clarify this factor for the regulated community.
    The Agency also wants to restate for clarification that for
hazardous secondary materials to meet the useful contribution factor,
not every constituent or component of the hazardous secondary material
has to make a contribution to the recycling activity. For example, a
legitimate recycling operation involving precious metals might not
recover all of the components of the hazardous secondary material, but
would recover precious metals with sufficient value to consider the
recycling process legitimate. In addition, the recycling activity does
not have to involve the hazardous component of the hazardous secondary
materials if the value of the contribution of the non-hazardous
component justifies the recycling activity. One example of this factor
from an existing exemption is where hazardous secondary materials
containing large amounts of zinc, a non-hazardous component, are
recycled into zinc micronutrient fertilizers. In cases where the
hazardous component is not being used or recycled, the Agency stresses
that the recycler is responsible for the management of any hazardous
residuals of the recycling process.
    In a situation where more than one hazardous secondary material is
used in a single recycling process and the hazardous secondary
materials are mixed or blended as a part of the process, each hazardous
secondary material would need to satisfy the useful contribution
factor. This requirement prevents situations where a worthless
hazardous secondary material could be mixed with valuable and useful
hazardous secondary materials in an attempt to disguise and dispose of
it. In addition, a situation in which hazardous secondary materials
that can be useful to a process are added to that process in much
greater amounts than are needed to make the end-product or to otherwise
provide its useful contribution would also be sham recycling.
    Another way the usefulness of the hazardous secondary material's
contribution could be demonstrated is by looking at the efficiency of
the material's use in the recycling process--that is, how much of the
constituent in a hazardous secondary material is actually being used.
As an example, if there is a constituent in the hazardous secondary
material that could add value to the recycling process, but, due to
process design, most of it is not being recovered but is being disposed
of in the residuals, this would be a possible indicator of sham
recycling. However, there are certainly recycling scenarios where a low
recovery rate could still be legitimate. For example, under an existing
exclusion, if the concentration in a metal-bearing hazardous secondary
material is low (2%-4%) and a recycling process was able to recover a
large percentage of the target metal, this factor could be met and the
recycling may be legitimate (depending on the outcome of the analysis
of the other legitimacy factors).
    One way to use the efficiency of the recycling process to evaluate
legitimacy is to compare the process to typical industry recovery rates
from raw materials to determine if the recycling process is reasonably
efficient. This method should involve an examination of the overall
process, not just a single step of the process. For example, if one
step in the process recovers a small percentage of the constituent, but
the overall process recovers a much larger percentage, the Agency would
consider the overall efficiency of the recycling process in determining
whether hazardous secondary materials are providing a useful contribution.
    There are various ways in which hazardous secondary materials can
be useful to a recycling process and various ways are laid out in this
discussion of how a facility might demonstrate conformity with this
factor. In addition, we provided a number of different ways a material
could contribute to the process in the regulatory text describing this
factor. Any one of these would be sufficient to demonstrate that the
hazardous secondary material provides a useful contribution. Overall,
the Agency considers this factor to be a critical element in
determining legitimacy and any recycling process that does not meet
this factor cannot be considered legitimate recycling.
    Factor 2--Valuable Product or Intermediate. ``The recycling process
must produce a valuable product or intermediate * * * The product or
intermediate is valuable if it is (i) sold to a third party or (ii)
used by the recycler or the generator as an effective substitute for a
commercial product or as an ingredient or intermediate in an industrial
process'' (40 CFR 260.43(b)(2)).
    This factor, one of the two core legitimacy factors, expresses the
principle that the product or intermediate of the recycling process
should be a material of value, either to a third party who buys it from
the recycler, or to the generator or recycler itself, who can use it as
a substitute for another material that it would otherwise have to buy
or obtain for its industrial process. This factor is also an essential
element of the concept of legitimate recycling because recycling cannot
be occurring if the product or intermediate of the recycling process is
not of use to anyone and, therefore, is not a real product. This factor
is intended to prevent the practice of running a hazardous secondary
material through an industrial process to make something just for the
purpose of avoiding the costs of hazardous waste management, rather
than for the purpose of using the product or intermediate of the
recycling activity. Such a practice would be sham recycling.
    Most commenters on the proposed rule for this factor stated that
this is a useful way of gauging whether recycling is actually taking
place, but requested that the Agency clarify the meaning of the term
valuable, as it is used in the regulatory text. EPA is repeating and
clarifying today that for the purpose of this factor, a recyclable
product may be considered ``valuable'' if it can be shown to have
either economic value or a more intrinsic value to the end user.
Evaluations of ``valuable'' for the purpose of this factor should be
done on a case-by-case basis, but one way to demonstrate that the
recycling process yields a valuable product would be the documented
sale of a product of the recycling process to a third party. Such
documentation could be in the form of

[[Page 64703]]

receipts or contracts and agreements that establish the terms of the
sale or transaction. This transaction could include money changing
hands or, in other circumstances, may involve trade or barter. A
recycler that has not yet arranged for the sale of its product to a
third party could establish value by demonstrating that it can replace
another product or intermediate that is available in the marketplace. A
product of the recycling process may be sold at a loss in some
circumstances, but the recycler would have to be prepared to show how
the product is clearly valuable to the purchaser.
    However, many recycling processes produce outputs that are not sold
to another party, but are instead used by the generator or recycler. A
product of the recycling process may be used as a feedstock in a
manufacturing process, but have no established monetary value in the
marketplace. Such recycled products or intermediates would be
considered to have intrinsic value, though demonstrating intrinsic
value may be less straightforward than demonstrating value for products
that are sold in the marketplace. Demonstrations of intrinsic value
could involve showing that the product of the recycling process or
intermediate replaces an alternative product that would otherwise have
to be purchased or could involve a showing that the product of the
recycling process or intermediate meets specific product specifications
or specific industry standards. Another approach could be to compare
the product's or intermediate's physical and chemical properties or
efficacy for certain uses with those of comparable products or
intermediates made from raw materials.
    Some recycling processes may consist of multiple steps that may
occur at separate facilities. In some cases, each processing step will
yield a valuable product or intermediate, such as when a metal-bearing
hazardous secondary material is processed to reclaim a precious metal
and is then put through another process to reclaim a different mineral.
When each step in the process yields a valuable product or intermediate
that is salable or usable in that form, the recycling activity would
conform to this factor.
    Like the other factors, this factor should be examined and
evaluated on a case-by-case basis looking at the specific facts of a
recycling activity. If, for instance, a recycling activity produces a
product or intermediate that is used by the recycler itself, but does
not serve any purpose and is just being used so that the product or
intermediate appears valuable, that would be an indicator of sham
recycling. An example of this would be a recycler that reclaims a
hazardous secondary material and then uses that material to make blocks
or building materials for which it has no market and then ``uses''
those building materials to make a warehouse in which it stores the
remainder of the building materials that it is unable to sell.
    Factor 3--Managed as a Valuable Commodity. ``The generator and the
recycler should manage the hazardous secondary material as a valuable
commodity. Where there is an analogous raw material, the hazardous
secondary material should be managed, at a minimum, in a manner
consistent with the management of the raw material. Where there is no
analogous raw material, the hazardous secondary material should be
contained. Hazardous secondary materials that are released to the
environment and are not recovered immediately are discarded'' (40 CFR
260.43(c)(1)).
    The first of the additional factors that must be considered
expresses the principle that hazardous secondary materials being
recycled should be managed in the same manner as other valuable
materials. This factor requires those making a legitimacy determination
to look at how the hazardous secondary material is managed before it
enters the recycling process. In EPA's view, a recycler will value
hazardous secondary materials that provide an important contribution to
its process or product and, therefore, will manage those hazardous
secondary materials in a manner consistent with how it manages a
valuable feedstock. If, on the other hand, the recycler does not manage
the hazardous secondary materials as it would a valuable feedstock,
that behavior may indicate that the hazardous secondary materials may
not be recycled, but rather released into the environment and discarded.
    This factor may be particularly appropriate in the case where a
recycler has been paid by a generator to take its materials as a result
of the economic incentives in the hazardous secondary materials market.
By looking at the management of the hazardous secondary material before
it enters the recycler's process, the entity making the legitimacy
determination can tell that a material being managed like an analogous
raw material is, in fact, valued by the recycler. If the hazardous
secondary material is not being managed like a valuable raw material
because it is uncontrolled or is being released, that indicates that
the fee the recycler obtains for taking the hazardous secondary
material may be its only value to that recycler. If the fee received
were the only value to the recycler, it would mean that discard was
taking place.
    This factor addresses the management of hazardous secondary
materials in two distinct situations. The first situation is when a
hazardous secondary material is analogous to a raw material which it is
replacing in the process. In this case, the hazardous secondary
material should be managed prior to recycling similarly to the way the
analogous raw materials are managed in the course of normal
manufacturing. EPA expects that all parties handling hazardous
secondary materials destined for recycling--generators, transporters,
intermediate facilities and reclamation facilities--will handle them in
generally the same manner in which they would handle the valuable raw
materials they might otherwise be using in their process. ``Analogous
raw material,'' as defined elsewhere in this preamble, is a raw
material for which the hazardous secondary material substitutes and
which serves the same function and has similar physical and chemical
properties as the hazardous secondary material.
    The second situation the factor addresses is the case where there
is no analogous raw material that the hazardous secondary material is
replacing. This could be either because the process is designed around
a particular hazardous secondary material--that is, the hazardous
secondary material is not replacing anything--or it could be because of
physical or chemical differences between the hazardous secondary
material and the raw material that are too significant for them to be
considered ``analogous.''
    Hazardous secondary materials that have significantly different
physical or chemical properties when compared to the raw material would
not be considered analogous even if they serve the same function
because it may not be appropriate to manage them in the same way. In
this situation, the hazardous secondary material would have to be
contained for this factor to be met. A hazardous secondary material is
``contained'' if it is placed in a unit that controls the movement of
that material out of the unit. This requirement is consistent with the
idea that normal manufacturing processes are designed to use valuable
material inputs efficiently rather to than allow them to be released
into the environment.
    For example, if a manufacturer has an ingredient that is a dry raw
material managed in supersacks, the Agency would expect that a
hazardous secondary material that is a similar dry

[[Page 64704]]

material also would be managed in supersacks or in a manner that would
provide equivalent protection. If, on the other hand, the hazardous
secondary material was instead managed in an outdoor pile without
appropriate controls in place to address releases to the environment,
it may indicate that it was not being handled as a valuable commodity.
If, however, the manufacturer decided to replace the dry raw material
in its process with a liquid having the same constituents, it would not
be sufficient, nor would it make sense, for the liquid to be managed in
supersacks. Instead, the liquid would have to be ``contained'' (for
example in a tank or surface impoundment).
    An important part of this factor is the statement in the regulatory
text clarifying that hazardous secondary materials that are released to
the environment and not recovered immediately are discarded. Valuable
products should not be allowed to escape into the environment through
poor management and this factor clarifies that those hazardous
secondary materials that do escape (and are not immediately recovered)
are clearly discarded. Either a large release or ongoing releases of
smaller amounts could indicate that, in general, the hazardous
secondary material is not being managed as a valuable product, which
could potentially lead to the recycling process being found not to be
legitimate. Hazardous secondary materials that are immediately
recovered before they disperse into the environment--air, soil, or
water--and are reintroduced in the recycling process are not discarded.
This determination must be made on a case-by-case basis, however.
    EPA has determined that it is appropriate that this factor is one
of the two that must be considered rather than a factor that must be
met because there are situations in which this factor is not met, but
recycling appears to be legitimate. An example of this kind of
situation is described in the March 2007 supplemental proposal (72 FR
14199). In the example, a hazardous secondary material that is a
powder-like material is shipped in a woven super sack and stored in an
indoor containment area, whereas the analogous raw material is shipped
and stored in drums. A strict reading of this factor may determine that
the hazardous secondary material is not being managed in a manner
consistent with the raw material even if the differences in management
are not actually impacting the likelihood of a release. By designing
the legitimacy factors so that this one has to be considered, but not
necessarily met, the individual facts of situations like the one
described here can be evaluated on a case-by-case basis to determine if
they affect the legitimacy of the recycling activity.
    In summary, given the nature of the legitimacy factors and their
need to apply to all the practices covered by the exclusions in this
final rule, it is not appropriate or practicable for EPA to develop a
specific management standard. In the absence of such a management
standard, EPA is using this factor: materials must be managed as
analogous raw materials or, if there are no analogous raw materials,
the materials must be contained. EPA's intent with this factor is that
hazardous secondary materials are managed in the same manner as
materials that have been purchased or obtained at some cost, just as
raw materials are. Just as it is good business practice to ensure that
raw materials enter the manufacturing process rather than being spilled
or released, we would expect hazardous secondary materials to be
managed effectively and efficiently in order that their full value to
the manufacturing process would be realized.
    Factor 4--Comparison of Toxics in the Product. ``The product of the
recycling process does not (i) contain significant concentrations of
any hazardous constituents found in Appendix VIII of part 261 that are
not found in analogous products; or (ii) contain concentrations of any
hazardous constituents found in Appendix VIII of part 261 at levels
that are significantly elevated from those found in analogous products;
or (iii) exhibit a hazardous characteristic (as defined in part 261
subpart C) that analogous products do not exhibit'' (40 CFR 260.43(c)(2)).
    The second of the additional factors that must be considered
requires those making a legitimacy determination to look at the
concentrations of the hazardous constituents found in the product made
from hazardous secondary materials and compare them to the
concentrations of hazardous constituents in analogous products. Any of
the following three situations could be an indicator of sham recycling:
a product that contains significant levels of hazardous constituents
that are not found in the analogous products; a product with hazardous
constituents that were in the analogous products, but contains them at
significantly higher concentrations; or a product that exhibits a
hazardous characteristic that analogous products do not exhibit. Any of
these situations could indicate that sham recycling is occurring
because in lieu of proper hazardous waste disposal, the recycler could
have incorporated hazardous constituents into the final product when
they are not needed to make that product effective in its purpose. This
factor, therefore, is designed to determine when toxics that are
``along for the ride'' are discarded in a final product and, therefore,
the hazardous secondary material is not being legitimately recycled.
    To evaluate this factor, a recycler will ordinarily compare the
product of the recycling process to an analogous product made of raw
materials. For example, if a recycling process produced paint, the
levels of hazardous constituents in the paint will be compared with the
levels of the same constituents found in similar paint made from virgin
raw materials.
    A recycler is also allowed to perform this evaluation by comparing
the hazardous constituents in the hazardous secondary material
feedstock with those in an analogous raw material feedstock. If the
hazardous secondary material feedstock does not contain significantly
higher concentrations of hazardous constituents than the raw material
feedstock, then the end product of the recycling process would not
contain excess hazardous constituents ``along for the ride'' either.
EPA is clarifying here that this method of showing that the product
does not have ``toxics along for the ride'' is acceptable. There may be
cases in which it is easier to compare feedstocks than it is to compare
products because the recycler knows that the hazardous secondary
material is very similar in profile to the raw material. A comparison
of feedstocks may also be easier in cases where the recycler creates an
intermediate which is later processed again and may end up in two or
more products, when there is no analogous product, or when production
of the product of the recycling process has not yet begun.
    This factor identifies three ways to evaluate whether or not
unacceptable amounts of hazardous constituents are passed through to
the products of the recycling process. (As explained above, these
methods also could be used to compare the hazardous secondary material
feedstock to a raw material feedstock, if the recycler prefers.) The
first method specifies that when analogous products made from raw
materials do not contain hazardous constituents, the product of the
recycling process should not contain significant amounts of hazardous
constituents. For example, if paint made from reclaimed solvent
contains significant amounts of cadmium, but the same type of paint
made from virgin raw materials does not contain cadmium, it could
indicate that the cadmium serves

[[Page 64705]]

no useful purpose and is being passed though the recycling process and
discarded in the product.
    The second method addresses analogous products that do contain
hazardous constituents and asks whether the concentrations of those
hazardous constituents are significantly higher in the product of the
recycling process than in the product made from raw materials.
Concentrations of hazardous constituents in the product of the
recycling process that are significantly higher than in the product
made from virgin raw materials could again be an indicator of sham
recycling. For example, if a lead-bearing hazardous secondary material
was reclaimed and then that material was used as an ingredient in
making ceramic tiles and the amount of lead in the tiles was
significantly higher than the amount of lead found in similar tiles
made from virgin raw materials, the recycler should look more closely
at the factors to determine the overall legitimacy of the process.
    The third method under this factor is whether the product of the
recycling process exhibits a hazardous characteristic that analogous
products do not exhibit. Requiring an evaluation of hazardous
characteristics ensures that products of the recycling process do not
exhibit the characteristics of toxicity, ignitability, corrosivity, or
reactivity when the analogous products do not. The Agency believes that
most issues associated with ``toxics along for the ride'' will involve
the presence of toxic constituents, which are addressed under the first
two parts of the factor. That is, we believe that it is likely that
there are few instances where hazardous secondary materials are used in
the process and hazardous constituents are not present at significantly
higher levels, but the product made from the hazardous secondary
material nevertheless exhibits the hazardous characteristic of toxicity
when the analogous product does not. It is possible, though, that the
use of hazardous secondary materials as an ingredient could cause a
product to exhibit a hazardous characteristic, such as corrosivity,
that is not exhibited by analogous products.
    The Agency has determined that it is appropriate for this factor to
be considered in legitimacy determinations under the final exclusions
and in the non-waste determinations in this action, but thinks that
there may be situations in which the factor is not met but the
recycling would still be considered legitimate. An example of this kind
of situation that has been addressed by the Agency under the current
regulatory scheme would be in the use and reuse of foundry sands for
mold making in a facility's sand loop. Because of repeated exposure to
metals in a foundry's process, the sands used to make the molds may
have significantly higher concentrations of hazardous constituents than
virgin sand. However, because the sand is part of an industrial process
where there is little chance of the hazardous constituents being
released into the environment or causing damage to human health and the
environment when it is kept inside, because there is lead throughout
the foundry's process, and because there is a clear value to reusing
the sand, this would be an example of a situation where this factor is
not met, but it does not affect the legitimacy of the recycling process.
    In fact, EPA has concluded as a general matter that foundries
engaged in the reuse of lead-containing foundry sands are recycling
those sands legitimately and these sands would not be regulated under
RCRA Subtitle C (under the circumstances described in EPA's March 2001
memorandum on this subject).\11\ Thus, while the used sands in the sand
loop arguably have toxics-along-for-the ride, EPA did not raise
questions about the legitimacy of the recycling, given the overall
nature of the operations. If the used foundry sand were being recycled
into a different product, such as a material used on the ground or in
children's play sand, the legitimacy determination would be very
different and significant levels of metals would likely render the
recycling illegitimate. The same conclusions would be reached applying
the factors codified in 260.43.
---------------------------------------------------------------------------

    \11\ Letter. Elizabeth Cotsworth, Director Office of Solid
Waste, to Amy Blankenbiller, American Foundry Society, March 28,
2001. http://yosemite.epa.gov/osw/rcra.nsf/
0c994248c239947e85256d090071175f/4C9A2EEE6E5F859B85256AC5004FC1C2/
$file/14534.pdf
---------------------------------------------------------------------------

    Another example of recycling that may be legitimate although this
factor has not been met could be when the material has concentrations
of toxics that could be considered ``significantly higher'' than the
analogous product, but meets industry specifications for the product
that include specific specifications for the hazardous constituent of
concern. Meeting accepted industry standards would be a strong
indication that this material is being legitimately recycled. A third
example could be in the mining and mineral processing industry. In many
mineral processing operations, the very nature of an operation results
in hazardous constituents concentrating in the product as it proceeds
through the various steps of the process. In many cases, there is not
an analogous product to compare the products of these processes so this
factor may not be relevant because of the nature of the operations. As
with the above example, if a facility considers a factor and decides
that it is not applicable to its process, the Agency suggests that the
facility evaluate the presence of hazardous constituents in its product
and be prepared to demonstrate both that it considered this factor and
the reasons it believes the factor is not relevant.
    As discussed in more detail in the comments section of this
preamble (section XVIII) and in the response to comments document in
the docket, commenters on this factor requested clarification
concerning what EPA meant by the terms used in this factor. In response
to some of these comments, EPA has made two clarifications in the
regulatory text by (1) specifying that the hazardous constituents
referred to in the regulation are those that are found in Appendix VIII
to 40 CFR part 261 and (2) clarifying that the hazardous
characteristics to which EPA is referring to are those in 40 CFR part
261 subpart C.
    The Agency also received much comment on the term ``significant''
and what the Agency intended by this term. EPA has decided to keep the
term in the final rule. The alternative to using ``significant'' or a
similarly flexible term to determine when there may be hazardous
constituents in the product made from recycled hazardous secondary
materials that are not in the analogous products made from raw
materials would be to set an absolute standard. In its discussion of
legitimacy in the October 2003 proposed rule, EPA discussed possible
``bright line'' or risk-based approaches as a way to set absolute lines
to define ``significant'' based on either a numerical limit or a risk
level (68 FR 61587-61588). EPA recognizes that the ``bright line'' or
the risk-based approach may provide greater clarity and predictability
to the regulated community, but that in both cases the Agency would
have to establish a line for what is acceptable and the line may either
be somewhat arbitrary or it may exclude recycling practices that, if
carefully considered, should be considered legitimate. Based on the
comments received on those approaches, we are convinced that they would
not be workable.
    On the other hand, a case-by-case analysis of a recycling process
can take into consideration the relevant principles and facts for that
activity,

[[Page 64706]]

leading to a determination of significance based on the facts of the
activity. Because this factor must apply to various different recycling
activities, we believe the case-by-case approach is most appropriate.
    EPA, therefore, is finalizing its proposed option of using the term
``significant'' in 40 CFR 260.43(c)(2)(i) and (ii). Evaluating the
significance of levels of hazardous constituents in products of the
recycling process may involve taking into consideration several
variables, such as the type of product, how it is used and by whom,
whether or not the elevated levels of hazardous constituents compromise
the efficacy of the product, the availability of the hazardous
constituents to the environment, and others. For example, if a
hazardous secondary material has been reclaimed and made into a product
that will be used by children, and that product contains hazardous
constituents that are not in analogous products, that product will
likely need to be closely scrutinized. On the other hand, low levels of
a hazardous constituent in a product from that same reclamation
operation that is used as an ingredient in an industrial process or for
another industrial application may not be significant and must be
evaluated in the context of the product's use.
    EPA provided several additional examples in implementing this
factor in the October 2003 proposed rule which will be repeated here.
If zinc galvanizing metal made from hazardous secondary materials that
were reclaimed contains 500 parts per million (ppm) of lead, while the
same zinc product made from raw materials typically contains 475 ppm,
this difference in concentration would likely not be considered
``significant'' in the evaluation of this factor. If, on the other
hand, the lead levels in the zinc product made from reclaimed hazardous
secondary materials were 1,000 ppm, it may indicate that the product
was being used to illegally dispose of lead and that the activity is
sham recycling, unless other factors would demonstrate otherwise.
    In another example, if a ``virgin'' solvent contains no detectable
amounts of barium, while spent solvent that has been reclaimed contains
a minimal amount of barium (e.g., 1 ppm), this difference might not be
considered significant. If, however, the barium in the reclaimed
solvent were at much higher levels (such as 50 ppm), it may indicate
discard of the barium and sham recycling.
    Unfortunately, because of the variety of possible recycling
scenarios under the exclusions and in the non-waste determinations
covered by this final rule, we cannot provide examples for how this
factor might work for all possible recycling situations. The Agency
stresses that the determination of legitimacy for this factor should
consider both the use and the users of the product in addition to the
concentration of the hazardous constituents or the presence of a
hazardous characteristic, as well as other relevant information. In
addition, in some cases, the implementing agency may accept a risk
argument from a recycler to show that the recycling activity meets this
factor. If the recycler can show that despite elevated concentrations
of hazardous constituents, such constituents pose little or no risk to
human health or the environment, the implementing agency may consider
that as evidence that the elevated concentrations are not significant.
How consideration of economics applies to legitimacy. Consideration of
economics has long been a part of the Agency's concept of legitimacy,
as is 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 (DC Cir.
2000)). This final rule does not codify specific regulatory language on
economics as part of the legitimacy provision, but EPA offers further
guidance and clarification on how economics may be considered in making
legitimacy determinations, which is similar to the preamble discussion
in the March 2007 supplemental proposal.
    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 further evaluation of the recycling
operation may be warranted in assessing the legitimacy factors.
    Considering the economics of a recycling activity can also inform
whether the hazardous secondary material inputs provide a useful
contribution and whether the product of recycling is of value. Economic
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, but even when the hazardous
secondary materials are recycled under the control of the generator,
the generator must still show that the hazardous secondary materials
are, at a minimum, providing a useful contribution and producing a
valuable product.
Useful Economic Information
    (1) The amount paid or revenue generated by the recycler for
recycling hazardous secondary materials is one example of how economic
information can help support a legitimacy determination. We have three
primary illustrations to exemplify this. First, 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. A general accounting of the major costs, revenues, and economic
flows for a recycling operation over a reasonable period of time can
provide information for considering 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 hazardous
secondary materials would 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 over a reasonable
timeframe, 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). This is consistent with the factor requiring that the
hazardous secondary material must be recycled to make a valuable
product or intermediate.
    Two scenarios illustrate this first example: A recycling operation
that generates revenues from the sale of recycled products that greatly
exceed the costs of the operation is an indication of a process that
turns the hazardous secondary materials into useful products, and is
unlikely to over accumulate them. 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

[[Page 64707]]

unprocessed hazardous secondary materials. This operation could
potentially fail the ``useful contribution'' and ``produces a valuable
product or intermediate'' legitimacy factors, and would draw closer
attention to determine whether it is engaged in treatment and/or
abandonment in the guise of recycling.
    Second, when the economics of a recycling operation that uses
hazardous secondary materials to produce and sell final products are
similar to a manufacturing operation using raw materials to produce and
sell final products, we believe that such an operation is likely to be
legitimate. For instance, if 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 from manufacturing, and the revenues generated equal or exceed
costs, then the hazardous secondary materials appear to be valuable
(i.e., the recycler is willing to pay for them) and appear to make a
useful contribution to a valuable recycled product.
    However, we also recognize that the economics of many legitimate
recycling operations that utilize hazardous secondary materials differ
from the economics of more traditional manufacturing operations. For
example, many recyclers are paid by generators to accept hazardous
secondary materials. Generators may be willing to pay recyclers because
generators can save money if the recycling is less expensive than
disposing of the hazardous secondary materials in landfills or
incinerators. Also, some recyclers receive subsidies that may be
designed to develop recycling infrastructure and markets or to achieve
other benefits of recycling. For instance, the recycling of electronic
materials can be legitimate even when the recycler is subsidized for
processing the material.
    Third, 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. 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, treatment, 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.
    Recognizing that such a dynamic exists can assist those making
legitimacy determinations in evaluating recycling operations. For
example, if a recycler is charging generators fees (or receiving
subsidies from elsewhere) for taking hazardous secondary materials and
receives a far greater proportion of its revenue from acceptance of the
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 may 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 the useful contribution factor.
    (2) A comparison of revenue from sales of recycled products to
payments by generators is another example of how economic information
can help support an evaluation of ``valuable product.'' It is possible
that product sales revenues could be dwarfed by the acceptance of fees
because markets for particular products are highly competitive or
because high alternative disposal costs allow for high acceptance fees.
However, relatively low sales revenues could also require a review of
other factors, such as whether product sales prices 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 indicators may suggest that
the product of the recycling process is not valuable and, thus, sham
recycling may be occurring.
    (3) A consideration of the future cost of processing or
alternatively managing existing inventories of hazardous secondary
material inputs is another example of how economic information can
inform a legitimacy determination. When hazardous secondary materials
make a significant useful contribution to the recycling process, a
recycler will have an economic incentive to process the input materials
relatively quickly and efficiently, rather than to maintain large
inventories. While recyclers often need to acquire sufficient amounts
of hazardous secondary materials to make it economically feasible to
recycle them, 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 hazardous
secondary 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 may be faced with an unsound recycling
operation in the future. However, it is important to keep in mind that
possible explanations for this may exist. For example, the recycler may
have acquired a large stock of hazardous secondary materials because
the price was unusually low or perhaps the hazardous secondary
materials are generated episodically and the recycler has few
opportunities to acquire them.
    (4) An analysis of costs and revenues specific to on-site recycling
is an additional, albeit specific, example of economic information to
consider. 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 on-site recycler (under the control
of the generator) will evaluate the basic economic factors as a part of
doing business. One such factor could be an accounting of 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 support the valuable
product criterion.
3. Legitimacy Policy for Other Exclusions and Exemptions
    EPA is codifying a legitimacy provision in this final rule as part
of the final exclusions and non-waste determinations, but stresses that
EPA retains its long-standing policy that all recycling of hazardous
secondary materials must be legitimate. If a facility is engaged in
sham recycling, this, by definition, is not real recycling and that
material is being discarded. The legitimacy policy continues to apply
to all hazardous secondary materials that are excluded or exempted from
Subtitle C regulation because they are recycled and to recyclable
hazardous wastes that remain subject to the hazardous waste
regulations. This policy is well-

[[Page 64708]]

understood throughout the regulated community and among the state
implementing agencies.
    EPA believes that the four legitimacy factors being codified in 40
CFR 260.43 are substantively the same as the existing legitimacy
policy. These factors are a simplification and clarification of the
policy statements in the 1989 Lowrance Memo and in various Definition
of Solid Waste Federal Register notices.
    Nonetheless, to avoid confusion among the regulated community and
state and other implementing regulatory agencies about the status of
recycling under the existing exclusions, the Agency has decided not to
codify the legitimacy factors for existing exclusions and, thus, states
and other implementing agencies will continue to apply the existing
legitimacy policy to all recycling as they have in the past in order to
ensure that recycling is real and not a sham. The legitimacy provisions
of the final rule are codified only for the exclusions and non-waste
determinations being promulgated today. In developing the codified
legitimacy language, we did not intend to raise questions about the
status of legitimacy determinations that underlie existing exclusions
from the definition of solid waste, or about case-specific
determinations that have been made by EPA or the states. Current
exclusions and other prior solid waste determinations or variances,
including determinations made in letters of interpretation and
inspection reports, remain in effect.
    A number of commenters raised concerns with the application of the
codified legitimacy factors to these existing waste-specific and
industry-specific exclusions. In particular, as we noted in the October
2003 proposal, EPA has examined in depth a number of waste-specific and
industry-specific recycling activities and has promulgated specific
regulatory exclusions or provisions that address the legitimacy of
these practices in much more specific terms than the general factors
being finalized as part of the exclusions and non-waste determination
process today. One example is the regulation for zinc fertilizers made
from recycled hazardous secondary materials. In the zinc fertilizer
regulation, among the requirements established by EPA are specific
numerical limits on five heavy metal contaminants and dioxins in the
zinc fertilizer product exclusion at 40 CFR 261.4(a)(21). Other
examples are shredded circuit boards excluded under 40 CFR
261.4(a)(14), which must be free of mercury switches, mercury relays
and nickel-cadmium and lithium batteries, and comparable fuels excluded
under 40 CFR 261.4(a)(16), which must meet specific levels for
hazardous constituents. The conditions developed for the recycling
exclusions in Sec.  261.4(a) were found to be necessary under material-
specific rulemakings that determined when the particular hazardous
secondary material in question is not a solid waste. When EPA
originally made the decision that these materials are not solid waste,
the Agency took into account the relevant factors about the hazardous
secondary materials, including how the material was managed and what
toxic chemicals were present. By limiting the codified legitimacy
provision to the exclusions and non-waste determinations in today's
final rule, EPA is avoiding any implication that we are revisiting
these determinations.
    However, at the same time, these material-specific exclusions from
the definition of solid waste do not negate the basic requirement that
the hazardous secondary material must be ``legitimately'' recycled.
Recycling that is not legitimate is not recycling at all, but rather
``sham recycling''--discard in the guise of recycling.
    For example, under EPA's historic guidance, particularly questions
(1) and (3) in OSWER Directive 9441.1989(19), the ``Lowrance Memo,'' a
facility could not plausibly claim the zinc fertilizer product
exclusion at 40 CFR 261.4(a)(21) for a hazardous secondary material
that contained absolutely no or minimal levels of zinc, even if all the
conditions of the zinc fertilizer exclusion were met. The exclusion was
developed to encourage legitimate recycling of zinc-containing
hazardous secondary materials, not to allow any hazardous waste to be
discarded to purported fertilizer in the name of recycling when the
hazardous secondary material provided no recognizable benefit to the
product.
    Similarly, if a facility accepted zinc-containing hazardous waste,
claiming to make zinc fertilizer, but failed to produce a product that
was actually sold or was otherwise valuable, such a process would not
be legitimate recycling (under question (4) of the Lowrance Memo in the
historic legitimacy guidance), even if the management conditions or the
constituent levels in the zinc fertilizer exclusion were met. The
consequences of the latter example are illustrated in one of the damage
cases in the environmental problems study. A facility whose primary
business was mixing electric arc furnace dust (K061) with agricultural
lime for sale as a micronutrient lost its customers and could not sell
its product. However, the facility continued to accept EPA Hazardous
Waste K061, and, in approximately seven months, the facility had
accepted over 60,000 tons of this hazardous waste and stored it on the
ground in piles up to 30 feet high, with no prospect of it being used
to produce a product and, thus, legitimately recycled. While the
initial recycling of the K061 hazardous waste was legitimate, when the
facility failed to produce a product that was actually sold, the K061
could no longer be considered legitimately recycled.
    In summary, all hazardous secondary materials recycling and
hazardous waste recycling, whether such recycling remains under
hazardous waste regulations or is excluded from the definition of solid
waste, must be legitimate. This has been our long-standing policy and
it is well understood throughout the regulated community and the
implementing state regulatory agencies. In order to be clear that the
legitimacy provision codified at 40 CFR 260.43 under today's final rule
would not affect how the current legitimacy policy applies to recycling
under existing exclusions, the legitimacy provision at 40 CFR 260.43 is
explicitly designated as applying only to the exclusions and non-waste
determinations being finalized in today's rule.
    EPA also maintains that the legitimacy provision being finalized as
part of the exclusions and non-waste determinations is substantively
the same as existing policy because we developed the legitimacy factors
in 40 CFR 260.43 by closely examining the questions and sub-questions
in the Lowrance Memo and in the Federal Register preambles and
converting them into four more direct questions. The following
explanations show how each of the four factors is derived from the
Lowrance Memo and other existing policy statements.
Factor 1--The Hazardous Secondary Material Provides a Useful Contribution
Relevant Lowrance Memo Questions
(1) Is the secondary material similar to an analogous raw material or
product?
    Is much more of the secondary material used as compared with the
analogous raw material/product it replaces? Is only a nominal amount of
it used?
    Is the secondary material as effective as the raw material or
product is replaces?

[[Page 64709]]

(3) What is the value of the secondary material?
    Is it listed in industry news letters, trade journals, etc.?
    Does the secondary material have economic value comparable to the
raw material that normally enters the process?
Discussion
    The factor addressing ``useful contribution'' has been distilled
from and clarifies concepts in the Agency's existing policy for
legitimate recycling. For example, the preamble to the January 4, 1985,
recycling regulations noted that if a hazardous secondary material is
``ineffective or only marginally effective for the claimed use, the
activity is not recycling but surrogate disposal.'' Similarly, the
January 8, 1988, proposed rule discussed ``how much energy or material
value each waste contributes to the recycling purpose.''
    In the 1989 Lowrance Memo, the issue of effectiveness was addressed
by the following questions: ``Is much more of the secondary material
used as compared with the analogous raw material/product it
replaces?''; ``Is only a nominal amount used?''; and ``Is the secondary
material as effective as the raw material or product it replaces?'' The
memo also addressed the value of the secondary material by asking, ``Is
[the secondary material] listed in industry news letters, trade
journals, etc.?'' and ``Does the secondary material have economic value
comparable to the raw material that normally enters the process?''
    Factor 1 takes these broad concepts of effectiveness and value and
turns them into the requirement that the hazardous secondary material
in the process must provide a ``useful contribution'' to the recycling
process, that is, it must actually be adding something to the process
into which they are being put. The factor provides more specifics than
the Memo or preamble by providing a list of ways that a hazardous
secondary material could provide that useful contribution to the
process. EPA requested comment on other ways in which a hazardous
secondary material might provide a useful contribution, but did not
receive any from commenters.
Factor 2--The Recycling Process Produces a Valuable Product or Intermediate
Relevant Lowrance Memo Questions
(4) Is there a guaranteed market for the end product?
    Is there a contract in place to purchase the ``product'' ostensibly
produced from the hazardous secondary materials?
    If the type of recycling is reclamation, is the product used by the
reclaimer? The generator? Is there a batch tolling agreement? (Note
that since reclaimers are normally TSDFs, assuming they store before
reclaiming, reclamation facilities present fewer possibilities of
systemic abuse).
    Is the reclaimed product a recognized commodity?
    Are there industry-recognized quality specifications for the product?
Discussion
    Factor 2 distills several of the questions posed by the 1989
legitimacy memo. The memo addressed the value of recycled products sold
to third parties by posing the questions, ``Is there a guaranteed
market for the end product?'' and ``Is there a contract in place to
purchase the ``product'' ostensibly produced from the hazardous
secondary materials?'' The memo addressed the value of recycled
products used by the recycler or the generator as process ingredients
by posing the questions, ``Is the product used by the (recycler)? The
generator? Is there a batch tolling agreement?'' The ``usefulness'' of
a recycled material was addressed by posing the questions, ``Is the
(recycled) product a recognized commodity?'' and ``Are there industry-
recognized quality specifications for the product?''
    The language of the factors in the legitimacy provision in the
final rule reflects these concepts in a concrete manner by, for
example, making it clear that the indicator of legitimacy is that a
recycling process results in a valuable product or intermediate and
that the product or intermediate is valuable if it is ``(i) sold to a
third party or (ii) used by the recycler or the generator as an
effective substitute for a commercial product or as an ingredient or
intermediate in an industrial process.''
    The Lowrance Memo posed additional questions aimed at
distinguishing recycling operations that involve direct use or reuse of
secondary materials from recycling operations that involve reclamation.
These concepts, however, are not particularly relevant to
distinguishing legitimate from sham recycling and are not generally
used by implementing agencies in legitimacy analyses, so we therefore
did not attempt to capture them in the codified regulatory text.
Factor 3--Managed as a Valuable Commodity
Relevant Lowrance Memo Questions
(5) Is the secondary material handled in a manner consistent with the
raw material/product it replaces?
    Is the secondary material stored in a similar manner as the
analogous raw material (i.e., to prevent loss?)
    Are adequate records regarding the recycling transactions kept?
    Do the companies involved have a history of mismanagement of
hazardous wastes?
Discussion
    Although worded somewhat differently, this factor is essentially
the same as the fifth question in the Lowrance Memo. Similarly, the
1985 preamble asked whether recyclable hazardous secondary materials
were ``handled in a manner consistent with their use as raw materials
or commercial product substitutes.''
    In one respect, however, Factor 3 is less restrictive than the
Lowrance Memo--the memo posed an additional question, ``Is the
secondary material stored on the land?'' This could be read as implying
that storage on the land is an indication of sham recycling. Of course,
this question is just one of the more than two dozen questions from the
Lowrance memo, that, when taken as a whole, help draw the distinction
between legitimate recycling and sham recycling. Also, the Agency is
aware of situations where storage of raw materials on the land is a
normal part of the manufacturing process. Thus, Factor 3 does not
identify land storage as a specific indicator of sham recycling.
Factor 4--The Product Does Not Contain Significant TARs
Relevant Lowrance Memo Questions
(1) Is the secondary material similar to an analogous raw material or
product?
    Does it contain Appendix VIII constituents not found in the
analogous raw material/product (or at higher levels)?
    Does it exhibit hazardous characteristics that the analogous raw
material/product would not?
    Does it contain levels of recoverable material similar to the
analogous raw material/product?
(6) Other Relevant Factors
    Are the toxic constituents actually necessary (or of sufficient
use) to the product or are they just ``along for the ride''?

[[Page 64710]]

Discussion
    The Lowrance Memo and the definition of solid waste preamble
statements from which it was developed have addressed the question of
``toxics along for the ride'' in a slightly different way than the
factor in the final rule. The Lowrance Memo, for example, allows for
examination of toxic constituents in the hazardous secondary material
destined for recycling and/or in the recycled product. As noted above,
Factor 4 is intended to primarily address the question of ``toxics
along for the ride'' in the products of recycling. We believe that the
presence of toxic constituents in recyclable hazardous secondary
materials is less relevant to assessing the legitimacy of recycling,
primarily because much if not most recycling (as well as manufacturing)
involves removing or destroying such harmful materials. As reflected in
the factor, the central question is whether or not (and in what amount)
hazardous constituents pass through the recycling process and become
incorporated into the products of recycling. While some may argue that
the approach of focusing on toxic constituents in recycled products may
be somewhat less restrictive than the policy it would replace, we
believe it is a better indicator of legitimate recycling. In cases
where a recycler would prefer to compare the virgin feedstock to the
hazardous secondary material going into the process, the rule makes it
clear that this would be an adequate stand-in for the comparison
described in the regulatory text.
Lowrance Memo Questions Not Covered in Factors
    A few of the questions from the Lowrance Memo are not covered by
the factors in the regulatory text for the legitimacy provision in
Sec.  260.43. The above discussions address why EPA believes this is
appropriate. In the case of the role economics can play in a legitimacy
determination, this preamble has discussed how it can inform an overall
legitimacy determination, but there is no particular factor on economics.
Relevant Lowrance Memo Questions
(2) What degree of processing is required to produce a finished product?
    Can the secondary material be fed directly into the process (i.e.,
direct use) or is reclamation (or pretreatment) required?
    How much value does final reclamation add?
    Is the secondary material stored on the land? (a sub-question of
(5) Is the secondary material handled in a manner consistent with the
raw material/ product it replaces?)
(6) Other Relevant Factors
    What are the economics of the recycling process? Does most of the
revenue come from charging generators for managing their wastes or from
the sale of the product?
    For the reasons outlined above, EPA believes that the legitimacy
factors in 260.43 are equivalent to the existing legitimacy policy that
applies to all recycling.

X. Non-Waste Determination Process

A. What Is the Purpose of This Provision?

    The purpose of the non-waste determination process is to provide
persons with an administrative procedure for receiving a formal
determination that their hazardous secondary materials are not
discarded and, therefore, are not solid wastes when recycled. This
process is available in addition to the solid waste exclusions in
today's rule. Once a non-waste determination has been granted, the
hazardous secondary material is not subject to the limitations and
conditions discussed elsewhere in today's rule (e.g., prohibition on
speculative accumulation, storage standard, or, for the transfer-based
exclusion, recordkeeping, reasonable efforts, financial assurance, and
export notice and consent); however, the regulatory authority may
specify that a hazardous secondary material meet certain conditions and
limitations as part of the non-waste determination.
    The non-waste determination process is voluntary. Facilities may
choose to continue to use the self-implementing portions of any
applicable waste exclusions and, for the vast majority of cases, where
the regulatory status of the hazardous secondary material is evident,
self-implementation will still be the most appropriate approach. In
addition, facilities may continue to contact EPA or the authorized
state to ask for informal assistance in making these types of non-waste
determinations. However, for cases where there is ambiguity about
whether a hazardous secondary material is a solid waste, today's formal
process can provide regulatory certainty for both the facility and the
implementing agency.
    EPA is finalizing two types of non-waste determinations: \12\ (1) A
determination for hazardous secondary materials reclaimed in a
continuous industrial process; and (2) a determination for hazardous
secondary materials indistinguishable in all relevant aspects from a
product or intermediate. The process for applying for a non-waste
determination is found at 40 CFR 260.34.
---------------------------------------------------------------------------

    \12\ In the March 2007 supplemental proposal, EPA also proposed
(but is not finalizing) a third type of non-waste determination for
hazardous secondary materials reclaimed under the control of the
generator via a tolling arrangement or similar contractual
arrangement. EPA, however, did not identify any comments that
described specific types of contractual arrangements that would meet
the proposed criteria for this non-waste determination. See section
XIX for more information.
---------------------------------------------------------------------------

    The Agency confirms today's process for non-waste determinations is
not intended to affect any existing exclusion under 40 CFR 261.4. The
process is also not intended to affect any variance already granted
under 40 CFR 260.30 or other EPA or authorized state determination. In
other words, generators or reclaimers operating under an existing
exclusion, variance, or other EPA, or authorized state, determination
do not need to apply for a formal non-waste determination under today's
rule. This process also does not affect the authority of EPA or an
authorized state to revisit past determinations according to
appropriate procedures, if they so choose.

B. Scope and Applicability

    Hazardous secondary materials presented for a non-waste
determination must be legitimately recycled and, therefore, must meet
the legitimacy factors under 40 CFR 260.43 of today's rule. For further
discussion of legitimacy and the factors to be considered, see section
IX of today's preamble.
    In addition, today's rule limits non-waste determinations to
reclamation activities and does 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)); or for ``burning of materials for energy recovery'' or
materials ``used to produce a fuel or otherwise contained in fuels''
(40 CFR 261.2(c)(2)). Today's rule does not affect how these recycling
practices are regulated.

C. Types of Non-Waste Determinations

1. Non-Waste Determination for Hazardous Secondary Materials Reclaimed
in a Continuous Industrial Process
    As discussed earlier in today's preamble, previous court decisions
have indicated that hazardous secondary

[[Page 64711]]

materials that are reclaimed in a continuous industrial process are not
discarded and, therefore, not a solid waste. EPA believes, in most
instances, hazardous secondary materials reclaimed in a continuous
process would be excluded under today's self-implementing exclusions.
However, production processes can vary widely from industry to industry
and it is possible that the regulatory status of certain materials may
be unclear under a self-implementing exclusion (including those
exclusions finalized today). Thus, to determine whether individual
hazardous secondary materials are reclaimed in a continuous industrial
process, and, therefore, not a solid waste, EPA has developed the non-
waste determination process to evaluate case-specific fact patterns.
    EPA is finalizing four criteria for making the non-waste
determination for hazardous secondary materials reclaimed in a
continuous industrial process. The first is the extent that the
management of the hazardous secondary material is part of the
continuous production process and is not waste treatment. At one end of
the spectrum, if the hazardous secondary material is handled in a
manner identical to virgin feedstock, then it would appear to be fully
integrated into the production process. At the other end of the
spectrum, hazardous secondary materials that are indisputably discarded
prior to being reclaimed are not a part of the continuous primary
production process, (``AMC II''), 907 F. 2d 1179 (DC 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, persons applying for a non-waste determination
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.
It is important to note that this non-waste determination is not
necessarily limited to cases under the control of the generator. For
example, hazardous secondary materials that are hard piped from one
facility to another facility that is under separate control would
appear to be fully integrated into the production process and may
therefore be eligible for this non-waste determination, provided the
other criteria are met.
    The second criterion examined under this non-waste determination is
the capacity of the production process to use the hazardous secondary
material in a reasonable time frame and ensure that it will not be
abandoned. This criterion can be satisfied by a consideration of past
practices, market factors, the nature of the hazardous secondary
material, or any contractual arrangements. Abandonment of stockpiled
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 materials as the primary cause of damage. For today's self-
implementing exclusions for hazardous secondary materials, EPA is using
speculative accumulation (as defined in 40 CFR 261.1(c)(8)) as the
method for determining when a hazardous secondary material is discarded
by abandonment. For the non-waste determination, a person does not need
to demonstrate that the hazardous secondary material meets the
speculative accumulation limits per 40 CFR 261.1(c)(8), but he must
provide sufficient information about the hazardous secondary material
and the process to demonstrate that the hazardous secondary material
will in fact be reclaimed in a reasonable time frame and will not be
abandoned. EPA is not explicitly defining ``reasonable time frame''
because such time frames could vary according to the hazardous
secondary material and industry involved and, therefore, determining
this time frame should be made on a case-specific basis. However, a
person may still choose to use the speculative accumulation time frame
as a default.
    The third criterion for this non-waste determination is whether the
hazardous constituents in the hazardous secondary material are
reclaimed 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. To the extent that the hazardous
constituents are an extension of the original hazardous secondary
material, their release to the environment is an indicator of discard.
The Agency recognizes that normal production processes may also result
in a certain level of releases and, in evaluating this criteria, would
not deny a non-waste determination if the increase in releases is not
significantly different from either a statistical or risk perspective.
However, when unacceptably high levels of the hazardous constituents in
the hazardous secondary material 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 in fact being ``reclaimed in a
continuous 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 person to provide any case-specific information
deemed important and relevant in making the case that the hazardous
secondary material is not discarded and, therefore, not a solid waste.
2. Non-Waste Determination for Hazardous Secondary Materials
Indistinguishable in All Relevant Aspects From a Product or Intermediate
    Although the courts have indicated that hazardous secondary
materials recycled within a continuous industrial process are not
discarded and, therefore, are not solid wastes, they have also said
that hazardous secondary materials destined for recycling in another
industry are not automatically discarded. However, there may be some
situations where the regulatory status of a certain material is unclear
under a self-implementing exclusion and thus may benefit from a non-
waste determination that evaluates case-specific fact patterns. EPA is
finalizing five 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
(e.g., based on the current positive value of the hazardous secondary
material, stability of demand, and any contractual arrangements). This
evaluation of market participation is a key element for determining
whether companies view these hazardous secondary materials like
products rather than negatively-valued wastes. EPA's market forces
study 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 hazardous
secondary materials, thus maximizing the likelihood that the hazardous
secondary materials will be reclaimed 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

[[Page 64712]]

intermediates. This ``identity principle'' is a second key factor that
the Court in Safe Foods 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 should not be significant from
either a statistical or from a health and environmental risk perspective.
    The third criterion for making this non-waste determination is the
capacity of the market to use the hazardous secondary material in a
reasonable time frame and ensure that it will not be abandoned.
Abandonment of stockpiled hazardous secondary materials is one way that
discard can occur at recycling operations and is one of the major
causes of environmental problems (a key finding from the recycling
studies discussed earlier). For today's self-implementing exclusions
for hazardous secondary materials, EPA is using speculative
accumulation (as defined in 40 CFR 261.1(c)(8)) as the method for
determining when a hazardous secondary material is discarded by
abandonment. For the non-waste determination, a person does not need to
demonstrate that the hazardous secondary material meets the speculative
accumulation limits per 40 CFR 261.1(c)(8), but he must provide
sufficient information about the hazardous secondary material and the
market demand for it to demonstrate that the hazardous secondary
material will in fact be reclaimed in a reasonable time frame and will
not be abandoned. EPA is not explicitly defining ``reasonable time
frame'' because such time frames could vary according to the hazardous
secondary material and industry involved, and therefore determining
this time frame should be made on a case-specific basis. However, a
person may still choose to use the speculative accumulation time frame
as a default.
    The fourth criterion for this non-waste determination is whether
the hazardous constituents in the hazardous secondary materials are
reclaimed 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 an extension 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 non-waste determination if
the increase in releases is not significant from either a statistical
or a health and environmental risk perspective. However, when
unacceptably high levels of the hazardous constituents in the hazardous
secondary material are released to the environment rather than
reclaimed, then that material (or at least the portion of the hazardous
secondary 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 fifth 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 person
to provide any case-specific information it deems important and
relevant in making the case that its hazardous secondary material is
not discarded.

D. Non-Waste Determination Process

    The process for the non-waste determination is the same as that for
the solid waste variances found in 40 CFR 260.30. In order to obtain a
non-waste determination, a facility that manages hazardous secondary
materials that would otherwise be regulated under 40 CFR part 261 as
either a solid waste or an excluded waste must apply to the
Administrator or the authorized state per the procedures described in
40 CFR 260.33, which EPA is amending today to apply to non-waste
determinations. The application must address the relevant criteria
discussed in detail above. The Administrator will evaluate the
submission 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 will accept comment on the
tentative decision for 30 days, and may also hold a public hearing. The
Administrator will issue a final decision after receipt of comments and
after the hearing (if held). 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 260.30 or solid waste
exclusions under 40 CFR 261.4).
    After a formal non-waste determination has been granted, if a
change occurs that affects how a hazardous secondary material meets the
relevant criteria contained in 40 CFR 260.34, persons must re-apply to
the Administrator for a formal determination that the hazardous
secondary material continues to meet the relevant criteria and is not
discarded and not a solid waste.
    As discussed in more detail in section XX of today's preamble,
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 the current requirements,
authorized states are not required to adopt the non-waste determination
process. Ordinarily this provision could not go into effect in an
authorized state until the state chooses to adopt it. However, because
the non-waste determination process is a formalization of
determinations that states may already perform, states that have not
formally adopted this non-waste determination process may participate
if the following conditions are met: (1) The state determines that the
hazardous secondary material meets the criteria in either paragraph (b)
or (c) of 40 CFR 260.34; (2) the state requests EPA to review its
determination; and (3) EPA approves the state determination. In
addition, of course, states may continue to make regulatory
determinations under their authorized state regulations, as they do now.

E. Enforcement

    If a regulatory authority determines that a hazardous secondary
material is not a solid waste through the non-waste determination
process, the hazardous secondary material is not subject to the RCRA
Subtitle C hazardous waste requirements. However, as part of this
process, the applicant has an obligation to submit, to the best of his
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 the RCRA
Subtitle C requirements and EPA or the authorized state could choose to
bring an enforcement action under RCRA section 3008(a). Moreover, if
the person submitting the non-waste determination is found to have
knowingly submitted false information, then he also may be subject to
criminal penalties under RCRA section 3008(d).
    Once a non-waste determination has been granted, the applicant is
obligated

[[Page 64713]]

to ensure the hazardous secondary material continues to meet the
criteria of the non-waste determination, including any conditions
specified therein by the regulatory authority. If a change occurs that
affects how a hazardous secondary material meets the relevant criteria
and (if applicable) any conditions as specified by the regulatory
authority and the applicant fails to re-apply to the Administrator for
a formal determination, the hazardous secondary material may be
determined to be a solid and hazardous waste and subject to the RCRA
Subtitle C hazardous waste requirements.

XI. Effect on Other Exclusions

    The final rule will not supersede any of the current exclusions or
other prior solid waste determinations or variances, including
determinations made in letters of interpretation and inspection
reports. If a hazardous secondary material has been determined not to
be a solid waste, for whatever reason, such a determination will remain
in effect, unless the regulatory agency decides to revisit the
regulatory determination under their current authority. In addition, if
a hazardous secondary material has been excluded from hazardous waste
regulations--for example, under the Bevill exclusion in 40 CFR
261.4(b)(7)--the regulatory status of that material will not be
affected by today's rule.
    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, it appears, would have had unintended
consequences in many cases.
    Thus, in the March 2007 supplemental proposal, we proposed to
retain the existing exclusions exactly as written (72 FR 14205). In
addition, recycling of such hazardous secondary materials at new
facilities, or at existing facilities that are not currently operating
under the terms of an existing exclusion, would also be subject to the
existing applicable regulatory exclusions, rather than the proposed
exclusions.
    We did request comment, however, on the option of allowing a
regulated entity to choose which exclusion it is subject to in those
cases where more than one exclusion could apply and, if so, whether
that entity should be required to document the choice made. One state
supported allowing a regulated entity to choose if that entity
documents its choice and the few comments that were submitted by
industry on this matter, generally, preferred to have the option to
choose which exclusion they would be subject to. EPA has determined,
however, that the conditions that were developed for the existing
exclusions were found to be necessary under case-specific rulemakings
that determined when the hazardous secondary material in question is
not a solid waste. For example, broken cathode ray tubes must be
transported in closed containers (40 CFR 261.4(a)(22)) and shredded
circuit boards need to be free of mercury switches and relays (40 CFR
261.4(a)(14)).
    Therefore, the final rule requires that hazardous secondary
materials specifically subject to the existing exclusions must continue
to meet the existing conditions or requirements in order to be excluded
from the definition of solid waste. Moreover, industry and the states
are familiar with these requirements and EPA believes that changing
them would only lead to confusion in the regulated community. In
addition, the current exclusions would apply to facilities not
currently operating under terms of an existing exclusion. They would
also be subject to the conditions for that exclusion if they decide to
recycle the particular excluded wastes in the future.
    In the March 2007 supplemental proposal, we also requested comment
on whether any specific regulatory exclusion would need revision in
order to avoid confusion or contradictions. With a few exceptions,
public comments did not discuss this issue in depth. Only three states
commented on this issue. One supported the requirement that currently-
excluded facilities must stay under their specific exclusions and two
requested clarifications on how such a requirement would be
implemented. Industry, in a few cases, had specific comments on the
provisions already in place.
    One commenter asked that EPA clarify that wood preserving waste be
allowed to be reclaimed off-site under the new exclusion. This would be
an expansion of the existing exclusion, which is limited to on-site
reuse. Another comment was in regards to whether hazardous secondary
materials currently regulated under the closed-loop exclusion would be
eligible for the new exclusions that do not require closed-loop
operations. The third comment, from both reclaimers of spent lead-acid
batteries and spent lead-acid battery manufacturers requested that EPA
clarify that spent lead-acid battery recycling continue to be regulated
under 40 CFR 266.80 or as a universal waste at 40 CFR part 273. The
mining industry requested that EPA clarify that the proposed exclusions
would have ``no impact'' on 40 CFR 266.70 (precious metals exclusion)
and 40 CFR 266.100(d) and (g) (conditional exclusions from boiler and
industrial furnace (BIF) regulations for ``smelting, melting, and
refining furnaces'' and precious metals recovery furnaces).

A. Solid Waste Exclusions Found in 40 CFR 261.4(a)

    Under today's final rule, if a hazardous secondary material is
subject to material-specific management conditions under 40 CFR
261.4(a) when reclaimed, such a material is not eligible for the final
rule exclusions. For most of the exclusions in 40 CFR 261.4(a), this
provision will have no practical effect because the current exclusion
either (1) has no conditions, (2) has conditions that overlap with
those of the final rule exclusions (i.e., no speculative accumulation,
or land disposal),\13\ (3) does not involve reclamation, or (4)
involves hazardous secondary materials burned for energy recovery or
used in a manner constituting disposal. These include the exclusions in
40 CFR 261.4(a)(1)-(7), 40 CFR 261.4(a)(10)-(13), 40 CFR 261.4(a)(15)-
(16), 40 CFR 261.4(a)(18), and 40 CFR 261.4(a)(20)-(21).
---------------------------------------------------------------------------

    \13\ ``Disposal'' is defined in 40 CFR 260.10 as ``the
discharge, deposit, injection, dumping, spilling leaking or placing
of any solid waste or hazardous waste into or on any land or water
so that such solid waste or hazardous waste or any constituent
thereof may enter the environment or be emitted into the air or
discharged into any waters, including ground waters.'' Thus a
hazardous secondary material that is land disposed would presumably
not meet the ``contained'' standard.
---------------------------------------------------------------------------

    The exclusions in 40 CFR 261.4(a) that are for a specific material
and include conditions that are more specific than those included for
the exclusions being finalized today are those for (1) spent wood
preserving solutions (40 CFR 261.4(a)(9)), (2) shredded circuit boards
(40 CFR 261.4(a)(14)), (3) mineral processing spent materials (40 CFR
261.4(a)(17)), (4) spent caustic solutions from petroleum refining
liquid treating processes (40 CFR 261.4(a)(19)), and (5) cathode ray
tubes (40 CFR 261.4(a)(22)). For each of these cases, EPA has made a
material-specific determination of

[[Page 64714]]

when such a material is not discarded and therefore not a solid waste
and such a determination is more appropriately applied to these
materials than the general conditions of today's final rule. The
conditions of the material-specific exclusion essentially help define
when that material is legitimately recycled and not discarded.
    However, in the case of the spent wood preserving exclusion (40 CFR
261.4(a)(9)), EPA agrees with the comments that this exclusion is
limited to on-site recycling. Thus, if managed on-site, these materials
would need to comply with the existing conditions to be eligible for an
exclusion from the definition of solid waste. However, since the
current exclusion does not apply to hazardous secondary materials sent
off-site, and the substance of the exclusion (i.e., drip pad
requirements) applies to a management method not applicable to off-site
transfers, the new exclusion in today's rule would apply to hazardous
secondary materials that are sent off-site for reclamation. Thus, if
sent off-site for legitimate reclamation, these materials could be
eligible for today's exclusion if the restrictions and/or the
conditions are met.
    Finally, the closed-loop exclusion 40 CFR 261.4(a)(8) is not
specific to a material, but rather identifies a recycling process. EPA
agrees with comments stating that hazardous secondary materials
recycled via the closed-loop exclusion at 40 CFR 261.4(a)(8) could be
recycled under a different process and still be eligible for today's
exclusions. The closed-loop exclusion is based on the premise that
hazardous secondary materials reclaimed in a continuous process within
an industry are not discarded and, therefore, are not solid wastes
subject to EPA's RCRA jurisdiction (See AMC I.) In fact, closed loop
recycling is a subset of materials reclaimed in a continuous industrial
process, since materials may be reclaimed in a continuous process
outside of a closed loop system. EPA did not make a finding that any
particular hazardous secondary material must be reclaimed in a
continuous process. The Agency only determined that closed-loop
recycling, in general, should be excluded. Today's exclusions, however,
allow any hazardous secondary materials to be excluded if reclamation
meets the restrictions and/or conditions set forth in the rules. Thus,
a facility currently engaged in closed-loop recycling could change
their processes and still be excluded, as long as all applicable
restrictions and/or conditions are met.
    In addition to the solid waste exclusions currently in 40 CFR
261.4(a), EPA is planning to propose--in a separate rulemaking from
today's final rule--to amend its hazardous waste regulations to
conditionally exclude from the definition of solid waste spent
hydrotreating and hydrorefining catalysts generated in the petroleum
refining industry when these hazardous secondary materials are
reclaimed (see entry in the Introduction to the Fall 2007 Regulatory
Plan, 72 FR 69940, December 10, 2007). Spent hydrotreating and
hydrorefining catalysts generated in the petroleum refining industry
are routinely recycled by regenerating the catalyst so that it may be
used again as a catalyst. When regeneration is no longer possible,
these spent catalysts are either treated and disposed of as listed
hazardous wastes or sent to RCRA-permitted reclamation facilities,
where metals, such as vanadium, molybdenum, cobalt, and nickel are
reclaimed from the spent catalysts.
    EPA originally added spent hydrotreating and hydrorefining
catalysts (waste codes K171 and K172) to the list of RCRA hazardous
wastes found in 40 CFR 261.31 on the basis of toxicity (i.e., these
materials were shown to pose unacceptable risk to human health and the
environment when mismanaged) (63 FR 42110, August 6, 1998). In
addition, EPA based its decision to list these materials as hazardous
due to the fact that these spent catalysts can at times exhibit
pyrophoric or self-heating properties.
    It is largely because of these pyrophoric properties that EPA is
considering a separate proposal to conditionally exempt these catalysts
from hazardous waste regulation. This future proposal will allow the
agency to consider and seek comment on specific conditions to address
the pyrophoric properties of these hazardous secondary materials,
particularly during transportation and storage prior to reclamation, in
order for the Agency to determine that they are not being discarded. As
a result of this separate effort, these spent catalysts will not be
eligible for today's exclusions. Once EPA has proposed a conditional
exclusion specifically for these spent catalysts, and after
consideration of public comments, EPA will either finalize a
conditional exclusion specific to these spent catalysts or may decide
that the conditions being promulgated in today's final rule are fully
adequate for the management of these spent catalysts when recycled, and
therefore would remove the restriction preventing these spent catalysts
from being eligible for today's exclusions.

B. Spent Lead-Acid Battery Recycling and Precious Metals Reclamation

    EPA also agrees that spent lead-acid battery recycling should
continue to be regulated under 40 CFR 266.80 or 40 CFR part 273. This
is because these regulations are actually hazardous waste regulations
and are not solid waste exclusions. Continuing the regulation of spent
lead-acid battery (SLAB) recycling as hazardous waste is necessary due
to the unique nature of these batteries. Also, as noted by the
commenters, the current battery recycling regulations are working well.
More than 95% of SLABs are currently recycled and generators of SLABs
are exempt from Superfund liability under the Superfund Recycling
Equity Act (SREA), provided that they meet the requirements of the
exemption, including the requirement to take ``reasonable care'' to
determine that the accepting facility is in compliance with the
substantive environmental regulations.
    Because SREA was based on the current SLAB hazardous waste
regulations under RCRA, changing the regulation of SLABs could have
unintended consequences. For example, the current regulations prohibit
battery-breaking without a permit because such battery-breaking
operations have been high-risk activities. In addition, as noted in the
environmental problems study, 12% of our damage cases were from
battery-breaking operations. Moreover, the high value of the lead
plates and low entry cost for a battery-breaking facility provides a
strong market incentive for facilities to recycle without investing in
adequate management systems for the discarded battery acid and casings.
    In addition, because the RCRA-regulated ``generator'' of a SLAB is
often the garage or junkyard that removed the battery from the
automobile (rather than the original owner who discarded the battery),
the generator-controlled exclusion could be read to apply to these
operations. Therefore, the reasonable efforts and financial assurance
conditions that are a part of the transfer-based exclusion would not
apply, despite the fact that their activities would resemble waste
management rather than production. Because, in these cases, the SLABs
have effectively already been discarded by the original owners before
they enter the RCRA hazardous waste regulatory system, EPA will
continue to regulate SLABs as solid and hazardous waste under 40 CFR
266.80 or 40 CFR part 273.
    EPA also agrees with comments that the exclusions should have no
impact on 40 CFR 266.70 (precious metals

[[Page 64715]]

exclusion) and 40 CFR 266.100(d) and (g) (conditional exclusions from
the boiler and industrial furnace (BIF) regulations for ``smelting,
melting, and refining furnaces'' and precious metals recovery
furnaces). Because these exclusions are exclusions from certain
hazardous waste regulations, not solid waste exclusions, as a general
matter, EPA believes that facilities should have a choice of whether
they manage their materials as hazardous waste under these exclusions
or seek an exclusion from the definition of solid waste through today's
final rule.
    However, part of what 40 CFR 266.100(d) accomplishes is to define
when an operation involving burning is solely a metals recovery
operation rather than a burning for energy recovery or destruction
operation, neither of which is eligible for today's exclusions. This
distinction is an important one to make, and EPA did not intend to
revise how such material recovery operations were identified, nor did
EPA ask for comment on such a revision.
    Thus, for the purpose of defining the type of burning for metals
recovery to be allowed under these exclusions, EPA will reference the
requirements in 40 CFR part 266 subpart H that defines when a
``smelting, melting, and refining'' furnace is solely engaged in metals
recovery, but will not require the other conditions that are not
related to distinguishing legitimate materials recovery from burning.
Therefore, under today's final rule, hazardous secondary materials
burned for metals recovery would still be required to meet the minimum
metals and maximum toxic organic metals content specified in 40 CFR
part 266 (as part of the definition of this activity), and would
continue to be exempt from BIF permits, but they would not be subject
to hazardous waste manifests and storage permits, as long as the
conditions of the exclusions promulgated in today's rule are met.

C. Other Recycling Exclusions

    For other hazardous secondary materials currently eligible for
management under other exclusions or alternative regulatory structures
that do not include an exclusion from the definition of solid waste
(such as the universal waste regulations in 40 CFR part 273), the
facility would have the choice of either continuing to manage the
hazardous secondary material as a hazardous waste under the existing
regulations or under today's exclusions from the definition of solid waste.
    In addition, it should be noted that, for the purposes of Sec. 
261.2(a)(2)(ii) and Sec.  261.4(a)(2)(23), when a facility collects
hazardous secondary materials from other persons (for example, when
mercury-containing equipment is collected through a special collection
program), it is not the hazardous secondary material generator.
Therefore, a universal waste handler who collects hazardous secondary
materials from other persons would not be eligible for the generator-
controlled exclusion, even if it would be considered a ``generator''
for purposes of the Universal Waste regulations.

XII. Effect on Permitted and Interim Status Facilities

A. Permitted Facilities

    Facilities that currently have RCRA permits or interim status and
manage hazardous wastes that are excluded under today's final rule will
be affected in a number of ways, depending on the situation at the
facility. At some facilities, some of the hazardous waste management
units will be converted solely to manage excluded hazardous secondary
materials, and other units may continue to manage hazardous wastes. At
other facilities, all of the hazardous waste management units will be
converted to manage wastes excluded under today's final rule. In still
other cases, individual units may manage both excluded materials and
hazardous wastes. In all cases, the owner or operator of the facility
must comply with the applicable conditions and limitations of the
exclusion (including the containment of the hazardous secondary
material in units operating under the exclusion, recycling
legitimately, and the prohibition against speculative accumulation of
excluded hazardous secondary materials) to maintain the exclusion.
    Permitted facilities that continue to manage hazardous wastes in
addition to managing hazardous secondary materials excluded under this
final rule must continue to maintain their Part B permits. Individual
units may be converted solely to manage excluded hazardous secondary
materials; however, the permit requirements applicable to the newly
excluded units will remain in effect until they are removed from the
permit. Owners and operators that seek to remove permit conditions
applicable to units that are no longer hazardous waste management units
must submit a permit modification request to the implementing agency.
In the March 26, 2007, supplemental proposed rule, the Agency requested
comment on requiring owners and operators seeking to modify their
permits to remove units that are no longer regulated to follow the
procedures of 40 CFR 270.42(a) for Class 1 permit modifications, with
prior Agency approval. The Agency received few comments on this issue,
and is proceeding in this final rule with the proposed approach. Thus,
this final rule modifies 40 CFR 270.42 by adding an entry to Appendix 1
that classifies permit modifications to remove units that are no longer
regulated as a result of this rule as Class 1 with prior Agency approval.
    As was discussed in the preamble of the March 26, 2007,
supplemental proposal, under the Class 1 with prior Agency approval
approach, the owner or operator must submit notification of the permit
modification to the implementing agency, along with documentation
demonstrating that the operations at the unit meet the conditions of
the exclusion and that the unit is used solely to manage excluded
hazardous secondary materials. In addition, the owner or operator must
comply with the requirements of 40 CFR 270.42(a)(ii) for public
notification. Under Sec.  270.42(a)(ii), the permit modification will
not become effective until the owner or operator receives written
approval by the implementing agency. The implementing agency will
approve the permit modification so long as the owner or operator has
complied with the procedural requirements of Sec.  270.42(a) and has
demonstrated that the operations meet the conditions of the exclusion,
and that the unit does not manage non-excluded hazardous wastes.
    One commenter disagreed with the Agency's approach, and believed
that the Class 2 permit modification procedures were necessary to
provide the public an opportunity to comment on the removal of the unit
from the permit. The Agency disagrees with this commenter. The
regulations that govern permit modification classify modifications to
the permit term, to allow for earlier permit termination, as Class 1
with prior Agency approval. The Agency believes that removing permit
conditions for units that are no longer regulated is, in effect,
allowing earlier permit termination at those units. Thus, the Agency
believes that Class 1 with prior Agency approval is the appropriate
designation for these permit modifications.
    In the preamble of the March 26, 2007, supplemental proposal, the
Agency discussed the issue of whether closure requirements at formerly
regulated units would be triggered when this rule becomes effective and
the hazardous secondary materials they are receiving is no longer
hazardous waste. This issue was also discussed in the October 2003
proposal, in which EPA

[[Page 64716]]

expressed the view that requiring closure of units in these situations
would serve little environmental purpose, since after closure the unit
would be immediately reopened and used to store the same (now excluded)
hazardous secondary material (68 FR 61580-61581).
    In today's final rule, a permitted unit that is converted solely to
manage excluded hazardous secondary materials will not be subject to
the 40 CFR part 264 closure requirements, since, typically, it will be
managing the same material, with the only difference being that the
material is now excluded from regulation as a hazardous waste. However,
we expect that any funds in the closure or post-closure financial
assurance mechanisms will be converted to provide financial assurance
under today's exclusion, assuming the facility is operating under the
transfer-based exclusion. In addition, as described in sections VII.D.
and VIII.D of this preamble, at the end of the operating life of these
units, all owners and operators (i.e., of units operating under either
exclusion promulgated in this final rule) must manage any hazardous
secondary materials that are not recycled, and remove or decontaminate
all hazardous residues and contaminated containment system components,
equipment structures, and soils.
    A permitted facility that converts to manage only hazardous
secondary materials excluded under this final rule, and is, therefore,
no longer a hazardous waste management facility, will no longer be
required to maintain a hazardous waste operating permit (although, as
discussed below, may still be subject to corrective action).\14\
However, permits issued to these facilities remain in effect until they
are terminated.
---------------------------------------------------------------------------

    \14\ Again, the owner/operator of the facility must comply with
the applicable conditions and limitations of the exclusion
(including the containment of the hazardous secondary material in
the unit, legitimate recycling, and the prohibition against
speculative accumulation) to maintain the exclusion.
---------------------------------------------------------------------------

    In the March 2007 supplemental proposal, the Agency also requested
comment on requiring owners and operators seeking to terminate their
operating permits (as opposed to just removing units from their permit)
by modifying the permit term to follow the procedures of 40 CFR
270.42(a) for Class 1 permit modifications, with prior Agency approval.
The Agency received few comments on this issue, and is proceeding in
this final rule with the proposed approach. Thus, this final rule
modifies Sec.  270.42 by adding an entry to Appendix 1 that classifies
permit modifications to terminate operating permits by modifying the
permit term, at facilities at which all units are excluded as a result
of this final rule, as Class 1 with prior Agency approval. Under this
approach, owners and operators seeking to terminate their operating
permits must submit a permit modification request to the overseeing
agency following the procedures of Sec.  270.42(a) for Class 1
modifications with prior Agency approval, as described above.\15\
---------------------------------------------------------------------------

    \15\ The commenter discussed above who disagreed with the
Agency's approach for permit modifications to remove units that are
no longer regulated, also believed that Class 2 permit modification
procedures were necessary to provide the public an opportunity to
comment on the owner or operator's request to terminate a permit by
modifying the permit term. The Agency disagrees with this commenter.
As was discussed above, the regulations governing permit
modifications classify changes to the expiration date to allow
earlier permit termination as Class 1 with prior Agency approval.
---------------------------------------------------------------------------

    To support a request for permit termination by modifying the permit
term, the owner or operator must demonstrate that the operations meet
the conditions of the exclusion, and that the facility does not manage
non-excluded hazardous wastes.
    In addition, as was explained in the October 28, 2003, proposal
(see 68 FR 61580) and again in the March 26, 2007, supplemental
proposal (72 FR 14206), the obligation of 40 CFR 264.101 to address
facility-wide corrective action at permitted facilities, is not
affected by this final rule, and remains in effect.\16\ Therefore, an
owner or operator of a facility that manages only hazardous secondary
materials excluded under this final rule, who seeks to terminate the
facility's permit by modifying the permit term, must demonstrate as
part of the permit modification request that the corrective action
obligations at the facility have been addressed or where corrective
action obligations remain, that continuation of the permit is not
necessary to assure that they will be addressed. The Agency's
corrective action authority at such facilities is not affected by this
rulemaking and the Agency thus retains its authority to address
corrective action at such facilities using all authorities applicable
prior to this rulemaking.
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    \16\ Owners and operators of permitted and interim status
facilities with corrective action obligations should refer to the
Agency's February 25, 2003, guidance entitled ``Final Guidance on
Completion of Corrective Action Activities at RCRA Facilities,''
(see 68 FR 8757) for a detailed discussion of corrective action completion.
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    At some facilities, corrective action obligations will likely
continue to be addressed through the corrective action provisions of
the permit. In these cases, maintenance of the permit would ensure that
facility-wide corrective action will be addressed. Thus, in these
cases, the permit would not be terminated by modifying the permit term,
but would be modified to remove the provisions that applied to the now-
excluded hazardous secondary material. The facility's permit would,
thereafter, only address corrective action.
    In other cases, however, EPA or an authorized state may have
available an alternative federal or state enforcement mechanism or
other federal or state cleanup authority, through which it could choose
to address the facility's cleanup obligations, rather than continue to
pursue corrective action under a permit. In these cases, where the
alternate authority would ensure that facility-wide corrective action
will be addressed, maintenance of the permit would not be necessary.

B. Interim Status Facilities

    A facility that is operating under interim status will be affected
by this final rule in much the same way as is a permitted facility and
the issue of corrective action will be addressed in a similar manner.
At an interim status facility that converts to managing only hazardous
secondary materials that become excluded under this final rule, the
part 265 interim status standards that applied to the hazardous waste
management units at the facility, as well as the general facility
standards in part 265, will no longer apply. At the same time, the
Agency's authority to address corrective action at the facility is not
affected by this final rule, and the owner or operator retains
responsibility for unaddressed corrective action obligations at the
facility.

C. Releases From Excluded Units at Interim Status or Permitted Facilities

    Commenters on the October 28, 2003, proposal stated that one of the
main purposes of the RCRA Subtitle C closure requirements is to
identify and remediate any releases originating from the units. In
response, the Agency noted in the March 26, 2007, supplemental proposal
that releases from these units are discarded solid wastes and,
therefore, potentially hazardous wastes, and agreed with the
commenter's concern that such releases should be addressed. The Agency
suggested in that preamble that the specific Subtitle C closure
requirements may not be the most appropriate means of addressing
cleanup of releases from these units, if any have occurred. Rather, the
Agency suggested that a better approach to address historical releases
from these

[[Continued on page 64717]]

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