Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

Last week, Judge William Griesbach, of the Federal District Court for the Eastern District of Wisconsin, issued an important Superfund contribution decision, which shows just how much equitable discretion judges have in resolving contribution claims. In Appleton Papers v. George Whiting Paper, Judge Griesbach ruled, on summary judgment, that one equitable factor, knowledge of the potential environmental harm caused by PCBs, trumped all others, and that the plaintiffs, who had manufactured carbonless copy paper, or CCP, had no right to contribution from paper companies which used CCP and as a result discharged substantial amounts of PCBs into the Fox River.

The basis for Judge Griesbach’s holding was that “between parties who produced the product and those who merely processed it and recycled it along with all other paper products or water sources, these latter parties are significantly less blameworthy.” (The Judge’s italics, not mine.) This is not necessarily an unreasonable conclusion and probably within the Judge’s discretion to make, but does it follow that that is a sufficient basis to determine, without a trial, that the defendants were – literally – infinitely less blameworthy?

Interestingly, the plaintiffs had produced evidence that the defendants’ discharges had polluted the Fox River, even aside from PCBs. The Judge held that, because such other pollution did not cause response costs, it was irrelevant to the equitable judgment regarding who should pay to clean up PCBs.

The Judge also acknowledged that much of the contamination occurred before the plaintiffs themselves knew of the environmental risks posed by PCBs. Notably, however, the Judge did not discuss whether response costs would have been any different had discharges ceased as soon as the plaintiffs gained knowledge of the risks.

I’m not surprised that the plaintiffs in this contribution action are being held to bear the lion’s share of response costs. I am surprised that, on summary judgment, the court was able to conclude that the defendants’ share, notwithstanding their knowing pollution of the Fox River, and notwithstanding that much of the harm was caused before anyone had knowledge of the risks posed by PCBs, was a big, fat, zero.

What’s the real lesson here? The real lesson is that, while Judge Griesbach both noted that his equitable power is “broad and loose,” and acknowledged that it is “not unfettered,” the emphasis is greatly on the side of "broad and loose," and less so on the side of “not unfettered.” 

I’ve made this point in the past, but lesson one of Superfund contribution actions remains – Get The Judge On Your Side.

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In an interesting decision issued a few weeks ago, a District Court in Georgia held that a property manager at a strip mall could not be held liable as an owner of a facility under CERCLA. However, the court held that the property manager could be liable as an operator of the facility. I don't think that the decision is correct, but if it is the law, then property managers would be wise to consider carefully what responsibilities they are willing to assume and what sort of indemnification agreements may be required with the actual property owners.

The case, Scarlett & Associates v. Briarcliff Center Partners, involved a strip mall which had as one of its tenants – surprise, surprise – a dry cleaning operation. The owner had almost no connection to the property. It had leased the entire strip mall. When the lessee ran into financial problems, its lender took over the property and engaged Faison & Associates to manage the property for it. Faison managed the property for approximately two years, until the bank sold the lease.

It seems obvious that Faison was not an owner of the property, since it neither owned nor leased the property, and the court agreed.

However, the court denied Faison’s motion for summary judgment on operator liability. Looking to the Bestfoods decision, the court concluded that there was sufficient evidence that Faison "manage[d], direct[ed], or conduct[ed] operations specifically related to pollution….” The evidence cited by the court, however, is troubling, to say the least. In ruling against Faison, the court noted that Faison had informed the dry cleaner of certain EPA requirements and requested documentation that the dry cleaner was in compliance. There was also evidence that Faison “generally was responsible for managing and maintaining the shopping Center and performing all acts necessary to effect [the bank’s] compliance with all laws….”

I don’t think that that’s enough. In fact, the reverse seems to be the case. Don’t we want property managers to be taking steps to ensure that operating lessees comply with applicable regulations? If that can be evidence that the manager is an operator, the only result will be to cause property managers to be more hands off, which means less oversight, which means less compliance. The law has to be that property managers can take steps to ensure that lessees are in compliance without such steps being interpreted as “operation” of the facility by the manager.

Nonetheless, with this decision out there, if I were a property manager, I’d be very carefully reviewing my contracts both to ensure that I have minimized the likelihood that I will be considered an operator and to ensure that I have received proper indemnifications from the property owner.

Good luck.

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Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

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As a confirmed optimist and believer in technology, I’ve long thought that we can meet the challenge posed by global climate change – as long as we implement the right policies to provide incentives to develop the necessary technologies. Having the wide engineering knowledge that being a lawyer – as well as one of six political science graduates from MIT my year – provides, I have assumed that nanotechnology would play a substantial part in whatever the ultimate solution turns out to be.

Climate change is a big problem and we’re not there yet – especially since the incentives aren’t yet in place. Contaminated site remediation presents a more manageable set of problems, and nanotechnology finally does seem to be making significant headway in the remediation arena. According to a report just published in Environmental Health Perspectives, in-situ nanotechnology can reduce soil and groundwater remediation costs, as well as help to reach the cleanup end point more quickly. The study identifies a number of nano-scale materials that are being used for remediation, but the most common at this point and the one discussed in most detail in the study is zero valent iron.  The study is not definitive, but is based on a review of 45 sites at which nanotechnology has been used or is in process.

In conjunction with the study, the Project on Emerging Nanotechnologies has also produced a map showing the location of sites at which nanotechnology has been used as a remediation technology and providing some information about each site.

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In an interesting case, the Court of Appeals for the First Circuit this week vacated most of a preliminary injunction issued by a federal judge in Puerto Rico, because, the Court concluded, the lower court had wrongly, and without doing so explicitly, converted a PI hearing into a hearing on the merits.

In Sanchez v. Esso, a gasoline station operator brought RCRA citizen suit claims against Esso, which supplied gasoline to the station, and which actually was the owner of the USTs in which the gasoline was stored. Plaintiffs requested a PI requiring Esso both to assess and to remediate the contamination resulting from leaks in the tanks. After the District Court issued the PI, Esso sought interlocutory relief.  The Court of Appeals vacated most of the injunction.

As the Court of Appeals noted:

[w]hen a trial court ‘disposes of a case on the merits after a preliminary-injunction hearing … it is likely that one or more of the parties will not present their entire case….  Therefore, it is ordinarily improper to decide a case solely on such a basis. 

Reviewing the District Court proceedings, the Court of Appeals pointed to District Court’s statement that the Esso “appear[ed] to be in continuous violation” of the applicable regulations.  Moreover, following issuance of the injunction, Esso had asked the District Court to require the plaintiffs to post a bond.  The District Court denied the request on the ground that:

"'the grant of the preliminary injunction carried[d] no risk of monetary loss" for Esso in the face of the "documented" contamination resulting from Esso’s "violation of regulatory safeguards."

The District Court also made statements to the effect that the only issue going forward was the “extent” of Esso’s liability.

The Court of Appeals concluded that it was “inescapable” that the District Court pre-judged Esso’s ultimate liability.  Aside from the District Court’s conclusory statements about liability, the District Court also failed to address the traditional factors required for issuance of a PI.  This was “a clear error of law.”

It is unclear what impact this case will have. However, RCRA, like most environmental statutes, has an element of strict liability.  The strict liability nature of these statutes often makes it too easy for courts – and perhaps regulators at times? – simply to assume that a defendant is liable, without worrying about the sometimes messy process of discovery and the taking of evidence.  Sanchez v. Esso thus serves as a welcome reminder that even in a world of strict liability, a defendant remains entitled to his day in court.

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For those of you who cannot get enough of Superfund, I spoke at a Boston Bar Association panel on this subject yesterday about the implications of the Supreme Court’s Burlington Northern decision. Thanks to EPA Region I and Joanna Jerison, head of the Region I Superfund Legal Office, for being willing to speak on so obviously sore a subject. And thanks to Craig Campbell for participating on the panel as well.

As you can see from her presentation and mine, it appears that EPA and the private bar do not yet have a common understanding of the implications of the case. Isn’t that a surprise?

I still think, as I said at the meeting, that never has the Supreme Court done so much by doing so little. With respect to the divisibility issue, which is of the greatest long-run significance, the Court explicitly did not change the law at all. And yet …. We all know that they did. Now, instead of divisibility being an insuperable hurdle, it should become something like routine.

Or so I hope.  

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One more note on the Burlington Northern decision.  A client of mine has already noted that one impact of the decision will be to result in more litigation over divisibility, which will be good for private lawyers (ouch!).  She’s right, as my clients always are, but she shouldn’t be.

Litigation should only increase if EPA does not adjust its settlement demands. If EPA responds appropriately, and makes demands which reflect a fair resolution of a divisible liability, then there shouldn’t necessarily be more litigation than there is today.  However, if EPA continues to negotiate with PRPs as though liability is always joint and several, then there will certainly be more litigation – and EPA will start to lose some more cases.  

Anyone care to bet which response by EPA is more likely?

If EPA adjusts its settlement demands downward in response to the decision – or if we start to see litigation in which courts find liability to be divisible – then EPA’s ability to fund Superfund cleanups will be under even more pressure.  This could provide some additional momentum behind the current Congressional effort to reinstitute the Superfund tax.

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As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo. 

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.

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For those following developments in Superfund cost recovery and contribution case law after the Atlantic Research decision, it seemed worth noting that the Second Circuit Court of Appeals recently held, in W.R. Grace & Co. – Conn. v. Zotos International, Inc., that a party who incurs response costs pursuant to a state consent order has a right to bring an action to recover those response costs under § 107 of CERCLA.

Thus, the 2^nd Circuit has answered the question left open by note 6 in Atlantic Research, and come down on the side of actions under § 107, rather than § 113. Although it is only dicta in Zotos, the 2^nd Circuit also seemed to support the view the claims under § 113 will be narrowly limited to those that really are traditional contribution claims, i.e., actions in which the contribution plaintiff seeks to recover from one party payments that it made to another party – usually the United States or a State – to address the contribution plaintiff’s potential liability under CERCLA.

I’m tempted to say that this result is unsurprising and perhaps even obvious – except that nothing is unsurprising or obvious under CERCLA. As I have previously noted, only the Supreme Court seems to think that interpreting CERCLA is a straightforward exercise, so there is no assurance that the Zotos interpretation will sweep the land.

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Attorneys who have litigated citizen suits under RCRA have often wondered if there is any possible risk that would not qualify as an “imminent and substantial endangerment,” thus subjecting the person who “contributed” to such endangerment to liability under RCRA.

In Scotchtown Holdings v. Town of Goshen, the District Court for the Southern District of New York earlier this month established at least some outer parameters for this seemingly boundless phrase. In Scotchtown Holdings, the owner of land allegedly contaminated by the defendant’s use of sodium chloride – also known as salt to the uninitiated – caused groundwater contamination that precluded development of the plaintiff’s property for residential use.

The court granted the defendant’s motion to dismiss on the ground that, because the property had not already been developed – and because the contamination meant that it would not be developed – there was no imminent and substantial endangerment.

It may be that this decision is obvious and unremarkable. It is certainly distinguishable from cases where at least a potential future exposure exists if no cleanup were to occur and current land uses remain unchanged.  In Scotchtown Holdings, no exposure would occur unless land use were to change.  Nonetheless, for those of us who thought that the presence of contamination almost meant that an imminent and substantial endangerment existed, QED, the decision is a breath of fresh air.

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Those of us who litigate know that, with all respect to our expert colleagues, pulling a necessary opinion out of an expert can be very difficult. Experts like adjectives and adverbs, particularly if those modifiers help the expert avoid saying anything meaningful. A recent decision from the Court of Appeals for the Fourth Circuit makes clear the limits of such timidity.

In Miller v. Mandrin Homes, the plaintiffs alleged that the defendants sold them a house that was subject to contamination. The plaintiffs brought several claims, including one under CERCLA, which they admitted was the crux of the case. As our readers know, one of the elements of a prima facie case under CERCLA is proof that there has been a release or threatened release of a hazardous substance. 

Unfortunately for the plaintiffs’, their expert only stated that contamination detected in a sump at the house was “indicative” of a release. The court found such testimony speculative, stating that this phrase “does not show that [the expert] … could testify that it was his scientific opinion that groundwater contamination existed. [The expert] stated his opinion in a passive manner that suggests his finding falls in the realm of the possible rather than the probable.”

The lesson here is critical, if basic. Know the elements of your case. If they are subject to expert opinion, make sure that your expert is willing to state that it is more likely than not that the relevant fact is true. I have often had the precise experience of working with experts to change their use of “indicates” to “demonstrates” or similar such language. If you are in litigation or at risk of litigation, ignore this issue at your peril.

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The magnitude of the recent release of coal ash from the TVA dam is hard to fathom, though the pictures certainly give some sense of its magnitude. Now, as regulators and Congress attempt to get their collective arms around the import of the release, some of the regulatory implications of the release are starting to emerge. According to a report in yesterday’s Greenwire, Congressional hearings this week may include a discussion regarding whether coal ash should continue to be exempt from regulation as a hazardous waste under RCRA

The exemption of coal ash is critical to coal-fired power plants. According to the article, 130 million tons of fly ash were generated last year, 42 percent of which were beneficially reused. Moreover, there are approximately 600 landfills and containment ponds holding fly ash. Having helped a coal-fired power plant defend a law suit involving an on-site ash landfill some years ago, I can tell you from personal experience that placing fly ash within the ambit of RCRA hazardous waste rules would be a major headache for coal-fired power plants – and a major new weapon in the armory of those who want to shut down coal plants any way possible.

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For those of you who haven’t been keeping up with the law on private cost recovery and contribution claims under CERCLA, following the decision in Atlantic Research, I recently participated in a panel discussion on the issue. A copy of my presentation can be found here.

The most contentious issue during the discussion was whether private parties who have settled with the government and performed direct cleanups – as opposed to reimbursing the government – as a result of such settlements have an action for cost recovery under § 107 of CERCLA or an action for contribution under § 113 of CERCLA. 

My own view is that the Supreme Court has backed itself into a corner by so narrowly associating claims under § 113 with traditional contribution claims. It seems to me that the Court has limited contribution claims to situations where one liable party has reimbursed the original plaintiff for more than the contribution plaintiff’s fair share of the common liability. Thus, in a situation where the private plaintiff has directly incurred response costs – even if following a consent decree – no contribution claim lies. This is also consistent with a plain reading of § 107 – and we know that the Supreme Court loves plain language interpretations of CERCLA – which provides for claims for response costs, without any distinction being drawn between whether those costs were incurred voluntarily or not.

As I said at the panel, I just wish that the language of CERCLA was as clear to me and all of the practitioners with whom I work as it apparently is to Justice Thomas and the rest of the Supreme Court.

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The Environmental Protection Agency (EPA) is set to publish a Final Rule creating an optional, alternative set of generator requirements for hazardous waste generated or accumulated in laboratories at “eligible academic entities”: (1) colleges and universities; (2) non-profit research institutes owned or affiliated with a college or university; or (3) teaching hospitals owned or affiliated with a college or university. 

The Rule will append a new subpart, Subpart K, to the Resource Conservation and Recovery Act (RCRA) hazardous waste generator regulatory requirements of 40 CFR 262. Eligible academic entities may choose to have their laboratories subject to Subpart K in lieu of existing generator requirements. Notable provisions of Subpart K, include the following:

(1) Rather than requiring a hazardous waste determination at the time of generation, Subpart K allows eligible academic entities to make hazardous waste determinations when the waste is removed from the laboratory or within four days of arriving at an on-site central accumulation area (CAA) or on-site interim status or permitted treated, storage, or disposal facility (TSDF).

(2) Eligible academic entities will need to create Laboratory Management Plans (LMPs), a portion of which will be enforceable by EPA, describing how the entity will label containers and manage “unwanted materials” prior to hazardous waste determinations.

(3) Once every twelve (12) months, each laboratory will have thirty (30) days to clean-out any hazardous waste that consists of unused or commercial chemical products and will not have to count such waste towards the entity’s generator status. 

Eligible entities that have developed successful programs consistent with the existing generator regulations may choose not to become subject to the increased burden of Subpart K. I believe, however, that the Rule will be a welcome option for entities that have had a difficult time managing large numbers of laboratories (and students) generating small amounts of hazardous wastes that vary in type by semester.   

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Two recent federal decisions may aid regulators and activists seeking to hold companies liable under the Resource Conservation & Recovery Act (RCRA) for historical soil or groundwater contamination that could migrate as vapor and contaminate indoor air.

On July 28, 2008, in United States v. Apex Oil Company, Inc., the U.S. District Court for the Southern District of Illinois found the owner of a petroleum pipeline strictly liable under RCRA for pipeline leaks that contaminated soil and groundwater decades prior, and granted injunctive relief requiring the owner to abate the contamination. In Apex Oil, the Department of Justice filed suit under § 7003(a) of RCRA, which enables the federal government to force remedial actions when contamination may present an "imminent and substantial endangerment to health or the environment."  The Court found that vapors emanating from petroleum hydrocarbon contamination in soils could present an imminent and substantial endangerment to health under RCRA because residents could suffer adverse health effects when exposed to the vapors or be harmed by fires or explosions caused by the vapors. Of significance, the court noted that an “endangerment” need not be quantifiable, definite, or pose an emergency situation for it to be substantial and thus actionable under RCRA. An appeal of the Apex Oil decision is pending in the Seventh Circuit.

On June 12, 2008, in Grace Christian Fellowship v. KJG Investments, the U.S. District Court for the Eastern District of Wisconsin allowed, in part, rebuttal testimony supporting a RCRA claim that vapors from soil contaminated by a gasoline leak at an adjacent gas station were entering the basement of a church and threatening the health and safety of the occupants. The Grace court has yet to issue a final decision as to whether the gas station is actually liable under RCRA or required to remediate the underlying contamination. 

Both decisions could provide support for regulators and activists arguing that vapor intrusion meets RCRA’s standards for imminent and substantial endangerment to health or the environment. The Apex Oil decision also indicates that the underlying contamination need not be recent for RCRA standards to be satisfied. As liability under RCRA is strict, these cases highlight the importance of assessing whether a potential vapor intrusion condition exists on already-contaminated property or property that is the subject of a real estate transaction. 

Locally, the Massachusetts Department of Environmental Protection (MassDEP) recently promulgated regulations and standards under the Massachusetts Contingency Plan (MCP), governing the mitigation of potential indoor contamination caused by vapor intrusion. These state regulatory developments only underscore the fact that potential vapor intrusion issues must be addressed. Property owners will ignore these issues at their financial and legal peril.

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In a recent decision, the 7^th Circuit Court of Appeals confirmed that neither CERCLA nor RCRA provide convenient ways for the buyer of a building containing asbestos to finance the abatement of that asbestos. In Sycamore Industrial Park Associates v. Ericsson, the seller of the building replaced the old heating equipment shortly prior to sale, but left the old system, including piping, in place. The buyer sought to make the seller pay for the asbestos abatement on the ground that the seller has disposed of the old equipment by abandoning it in place when it installed the new system. The 7^th Circuit didn’t buy it.

The Court acknowledged that there might be a close question as to whether the asbestos constituted a solid or hazardous waste or RCRA and CERCLA. However, the Court concluded that it need not answer the question, because the seller had not “disposed” of the material. The Court concluded that, where all of the asbestos was either inside the building or inside a pipe chase, there “is no real threat that asbestos ‘or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters….” 

The Court did indicate that the intent of the seller may be relevant; it gave the example that a person looking to avoid liability for a toxic retaining pond, could not sell the entire property, including the pond, as a means of avoiding such liability. It described this situation as the “malicious motive case.” Absent such a malicious motive, however, sale of property including toxic or hazardous material does not put a person into the category of potentially responsible parties.

Similar to its analysis of the “disposal” question, the Court also concluded that there was no release or threat of release that would subject a person to CERCLA liability. “We reaffirm that when there is no emission into the outside environment,… there is no release or threatened release, and thus there can be no liability under CERCLA. 

The Court reached the same conclusion under RCRA. First, utilizing the same analysis as under CERCLA, it found that there had been no disposal by the seller. It also rejected the allegation that the seller had handled or stored the asbestos, concluding that “RCRA requires active involvement in handling or storing of materials for liability.”

In short, if the asbestos isn’t walking out the door, it may be a problem inside a building, but CERCLA and RCRA won’t help the building owner pay to fix that problem.

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On October 7, 2008, the Environmental Protection Agency (EPA) issued a new final rule (the “Rule”) that exempts certain recycled hazardous secondary materials from RCRA’s “cradle to the grave” regulatory system.

Hazardous waste is regulated under Subtitle C of the Resource Conservation and Recovery Act (RCRA). A hazardous secondary material can only be classified as a hazardous waste if it is first determined to be a solid waste as defined in Section 261.2 of the RCRA regulations. Previously, Section 261.2 classified some hazardous secondary materials, but not others, as solid wastes even when recycled. As complying with RCRA can be expensive and burdensome, Section 261.2 likely deterred many companies from recycling hazardous secondary materials deemed to be solid waste.  

The new Rule now explicitly excludes from the definition of solid waste three categories of hazardous secondary materials that are “legitimately” recycled. First, the Rule excludes hazardous secondary materials that are generated and reclaimed under the control of the generator (i.e., generated and reclaimed on-site, by the same company, or under “tolling” agreements). Second, the Rule excludes materials that are transferred by a generator to a reclamation facility (or an intermediate facility prior to recycling at a reclamation facility), provided that certain conditions are met. Finally, the Rule provides a procedure for applying for a case-by-case “non-waste determination” when the hazardous secondary material is legitimately recycled in a continuous industrial process or indistinguishable in all relevant aspects from a product or intermediate. The new exclusions and non-waste determination are, however, not available for materials that are: (1) considered inherently waste-like; (2) used in a manner constituting disposal; or (3) burned for energy recovery.       

For a hazardous secondary material to be “legitimately” recycled under the new exclusions or a non-waste determination, the following factors must be met: (1) the material must provide a useful contribution to the recycling process; and (2) the recycling process must make a valuable new intermediate or final product. Two additional factors must be considered, but are not mandatory: (3) whether the recycled material is managed as a valuable commodity; and (4) whether the recycled product contains toxic constituents at significantly greater levels than a non-recycled product made from virgin materials. EPA has long assessed the legitimacy of recycling activities under RCRA based on substantially these same four factors. See 53 FR 522. This Rule merely codifies the factors with minor adjustments.

Overall, the Rule is a helpful example of deregulation that should facilitate recycling without sacrificing environmental protection. The facilities most likely to benefit from the rule will include manufacturers that generate or already recycle hazardous secondary materials.  The most common types of recyclable materials that would be affected by the rule are metal-bearing secondary materials and solvents.

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As pretty much everyone knows, in order to improve its prospects for passage, the Senate added certain tax provisions to the financial bailout bill – also know as the Emergency Economic Stabilization Act of 2008, or H.R. 1424 – enacted earlier this month. One of the provisions included in the EESA was an extension of the brownfields tax incentive.

The brownfields tax incentive, originally enacted as part of the Taxpayer Relief Act of 1997, and codified as Section 198 of the internal revenue code, allows developers to immediately expense the cost of remedial work at brownfields sites, rather than having to capitalize such costs. The incentive actually expired as of December 31, 2007, but the EESA provision extends that date to December 31, 2009.

Historically, this tax incentive has been used only rarely used. In a report from 2007, the Congressional Research Service identified several possible reasons why. One issue is that the taxpayer must obtain certification from the relevant state environmental agency that the property qualifies as a brownfields site. However, more relevant here, the report noted that Congress’s failure to make the provision permanent – it has expired and been renewed several times at this point – is a significant factor in its limited utility. 

Given that the EESA renewal of the provision only continues this stop and start quality, it is not obvious that the provision will find any greater utility now than previously. Nonetheless, for those who are aware of it and whose property qualifies, extension of the provision is certainly good news.

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