BY LINDSAY HOLST
You’re confident that your scrapyard meets all required environmental standards: You know and comply with the regulations for stormwater, clean air, and other issues, and you haven’t had a problem in years. That’s why you’re shocked to get a letter telling you that your company is being held liable for hundreds of thousands of dollars in damages at a Superfund site. Sure, your facility has been vigilant—but your customers have not.
Under the Superfund Recycling Equity Act, it isn’t enough for a scrap operation to merely prove its own environmental compliance. If it doesn’t have proof that its consuming facilities are in compliance with relevant environmental laws and regulations, disaster can be just a subpoena away.
The scrap industry’s Superfund victory was great news for all scrap handlers, but SREA still requires vigilance from each recycler to maintain its Superfund exemption. ISRI’s SREA reasonable care compliance program provides comprehensive reports by request on consuming facilities, enabling members to satisfy a portion of the SREA law with relative ease and cost effectiveness. In an interview, Steve Hirsch, ISRI’s associate counsel and director of state and local programs, describes the program.
What is the history of the scrap industry’s Superfund exemption?
When ReMA members became involved in a significant number of Superfund sites at substantial costs in the late 1980s and early 1990s, ReMA launched a long legislative effort to show that its members were product manufacturers—something entirely different from hazardous waste disposal, which was the intended subject of the Superfund law. ReMA argued that, as part of the manufacturing process, scrap recyclers were performing a valuable energy- and resource-saving service and shouldn’t be punished for others’ mistakes.
The Superfund Recycling Equity Act, enacted in November 1999, provided an exemption from Superfund liability for scrap recyclers, but there was a catch: Recyclers could only achieve this exemption by fulfilling certain requirements. For example, recycled material must meet a commercial specification grade, a market must exist for the material, and a substantial portion of the recycled material must be made available for use as a feedstock in the manufacture of a new, saleable product, all of which ReMA members should be capable of proving with their ordinary expertise. Another requirement, the one this program addresses, is that they have taken “reasonable care” to determine that their consumers are in compliance with relevant environmental laws or regulations.
How does ISRI’s reasonable care compliance program help satisfy that SREA requirement?
The reasonable care compliance evaluation—sometimes referred to as “due diligence”—requires that scrapyards inquire into their consuming facilities’ environmental records based on publicly available information. This is something that members don’t deal with every day, and this is the portion of the law that ISRI’s reasonable care compliance program helps to satisfy. About three years ago, the ReMA staff worked with the SREA task force to figure out what information companies need to satisfy this portion of the SREA law, and we developed a template for a standard report.
How does ReMA create the reports?
ISRI has contracted with a team at Marsh, a consulting, insurance, and risk-management firm, to produce the reports. Periodically ReMA places an order with Marsh, sending the firm a list of facilities for which members have requested reports. At no point in the process does ReMA identify which member has ordered a report on which facility; this adds an additional layer of confidentiality.
Marsh follows a three-step process in producing each report. First, it gets information about the facility from publicly available databases, some of which the EPA maintains, that have information on Superfund, RCRA, Clean Water Act, and Clean Air Act violations, as well as a long list of other environmental laws. Second, it writes letters to the appropriate federal, state, and local environmental officials to request information about the particular facility. Marsh gives these officials 45 days to respond to the letters. The third step is writing to the actual consuming facility, giving it the opportunity to provide its own environmental-status information. That collected information is assembled into a report that is usually about 11 pages long.
What information do the reports contain?
ISRI’s reports list each facility’s substantive and applicable violations, substantive and nonapplicable violations, and nonsubstantive administrative/procedural violations of environmental laws or regulations.
SREA distinguishes between “substantive and applicable” requirements and “administrative and procedural” requirements. Substantive violations are those that violate essential sections of a law or regulation. For example, if a facility has a Clean Water Act permit and is discharging a contaminant above the limit allowed by its permit, the facility may be committing a substantive violation.
Applicable violations, essentially, are those that indicate that recyclable material sent to the consuming facility was directly and distinctly related to the pollution, in contrast with a violation that could have occurred as a result of using other feedstocks, such as virgin materials. For instance, a stormwater runoff violation that resulted from how a consuming facility stored recyclable materials could be an applicable violation. The picture is less clear for environmental violations that occur after recycled and virgin materials are mixed together. The courts have yet to rule on whether those are applicable.
The SREA law says that you are supposed to evaluate a facility’s “substantive and applicable” violations, the idea being that you want to know whether the place where you’re sending your recyclable material is complying with the relevant laws and regulations. A violation that is substantive and not applicable—one that’s not related to the recyclable material it has received from your company—is not directly within the scope of your SREA liability, but that information might still be useful in determining how well the facility complies with environmental regulations overall.
Both of these types of violations are different from administrative or procedural violations. If a company is supposed to file a report on May 14, for example, but it files it on May 15, and an enforcement agency is being very strict and says, “You were a day late,” that’s a procedural or administrative violation. The reasonable care requirement does not take these types of violations into account.
What do the reports cost?
The price per report varies depending on how many reports a company purchases. If a company orders up to 20 reports, they’re $250 each; for 21 to 100 reports, they’re $170 each; and for more than 100 reports, they’re $140 each.
Companies could easily pay $500 to $1,000 per report if they hired an environmental consultant to do, say, 10 of them. The program takes advantage of economies of scale and benefits from the fact that several companies might order a report on the same facility, allowing Marsh to develop one report to meet those companies’ needs.
How difficult would it be for a company to produce its own reports?
If a company wanted to conduct this research on its own, it would be relatively easy to find the right contact person at the appropriate state and federal agencies. Actually producing the letters, following up on requests, and tracking down the information would be more difficult. But finding the relevant local environmental official could be a real challenge: It might be a fire chief, or it might be someone at the local health department. Even if you find the right agency, it isn’t always clear who’s the right person to speak to, so tracking that person down at a local agency somewhere across the country often requires a specialist—or lots of time and patience.
In theory, this is something that a company could do in-house or could do with the help of an environmental consultant, but the Marsh consultants that conduct these inquiries for ISRI’s program are trained to perform these tasks. At this point, they have developed reports on 700 or 800 different facilities, and they have the benefit of already having identified the appropriate local agencies in many instances. Marsh is not preparing 10 reports, but hundreds. It is simply more efficient because it has the form letter, and it already knows the federal, state, and local contacts. And it’s much easier to gather, format, and produce the report when you’re doing it hundreds of times as opposed to starting from scratch each time. Because a lot of our members sell to the same consuming facilities, we have been able to minimize the challenges of collecting this information.
How often do you plan to update the reports?
We don’t have a lot of guidance from the EPA or from past court decisions, so at this point it’s primarily a judgment call on how often to do it. We know that updating them once every 10 years is not reasonable, but neither is updating them every day or every month. Though we can’t provide clear advice on how frequently companies must collect this information, we know that there are similar situations where it was determined that every year or two was appropriate.
How long does it take to generate a report?
If we already have a report on the facility in stock, we can get that report out promptly. Each order requires a certain amount of processing time to be certain that the report identifies the facility accurately by name and street address. Often we will receive 100 or 200 reports for several different companies at one time, and we need to check through them to ensure that each company is receiving what it asked for. Once we do that we can proceed with printing the report. When we print a report, we print it specifically for the company that ordered it, even if three or four different companies have ordered that report. We imprint each report with a watermark of the company’s name.
If we get an order for a report on a facility that we don’t already have in stock, it can take as long as four or five months. The Marsh consultants begin pulling together the data from various databases right away, but they’re also writing the letters to various officials, typically giving them 45 days to respond. Frequently they will get a response that requires them to seek clarification or file a Freedom of Information Act request, and that can extend the amount of time it requires. Then the consultants assemble the report, and it goes through a quality-control procedure. They transmit it to us, and we again very carefully check to make sure that we’re sending the right report to the right place.
Will the consuming company that’s the subject of the report find out which company requested the report?
No. One of the advantages of ordering the reports through the ReMA program is the confidentiality it provides. A report order can be a very sensitive document. In a way, the order is a rough cut of a company’s customer list. It’s often a complete list of where the company sends its prepared recyclable material. So we treat that as highly confidential business information; only a limited number of ReMA staff members know which company ordered reports for which consuming facilities. And we don’t tell Marsh which ReMA member placed the order.
Another benefit of the ReMA program is that, because good practice requires contacting the actual consuming facility itself, some of our members are more comfortable with our contractors making that contact. Say XYZ Consumer gets a letter from Marsh that says that it has received a request for a report on the facility’s environmental compliance. That consumer doesn’t know which of its suppliers is requesting the information, and for some of our members, that’s a huge benefit. The company has a commercial relationship with that consuming facility, and it might be awkward to say, “We want to check up on your environmental status.” This program provides anonymity and confidentiality because the requests are coming from Marsh, not from the member company.
What types of facilities are most affected by the SREA law?
Certain types of facilities historically have been more likely than others to become Superfund sites. For example, in the 1980s and ’90s, there were several Superfund sites related to battery recycling. But consuming facilities of many other types of recyclables have become Superfund sites as well. Who would have imagined that suppliers of scrap paper would be held liable for a Superfund site cleanup? Several ReMA members faced just that liability for materials they sent to mills on the Fox River, which had become polluted by PCBs decades earlier.
The bottom line here is that all recyclers need to be vigilant and protect the hard-won exemption they gained in SREA.
What are the potential consequences of failing to comply with this requirement of the SREA law?
The main consequence is that the company could lose the benefit of the SREA exemption, thus it could be held liable for potential Superfund liabilities at one of its consumers. It is very important for a company to have some tangible information and proof in its files that it has researched its consuming facilities’ environmental compliance. If it doesn’t, one day the EPA or a potentially responsible party at a Superfund site could claim that the company is partially responsible for that site’s cleanup costs and must pay X dollars. That amount could easily be five, six, or seven figures; the cost of Superfund cleanup historically has been high. Then add on whatever legal and professional fees the company must pay as part of the litigation, and you’re talking real money.
The main point at the heart of ISRI’s program is that, in order to maintain this hard-won exemption from Superfund liability, a company has to complete, in one way or another, this compliance inquiry. As the saying goes, “If it’s not in writing, it didn’t happen.” There is an element of that here. These reports are self-contained, dated documents that prove that a company looked into a facility’s environmental compliance.
What happens after a company receives its reports?
The report is not the end of the analysis. It is a key part, and it is a part that we think will be of value to many companies because it’s something that might be difficult or expensive for them to contract or do in-house, but it is not the end of the inquiry.
If a company gets a report that indicates that one of its consuming facilities has a very large number of prior or ongoing substantive and applicable environmental violations, the company then has a business decision to make: Does it make sense to perhaps risk the protection from Superfund liability to continue this business relationship? And that’s something that ReMA can’t decide for its members. It is an individual company’s analysis and business decision to make.
We don’t want people to just get the report and then stick it in a file. It’s important for a company to read, analyze, and understand each report. In terms of the Superfund requirements and the analysis, the reports are part of the answer, but they are not the entirety of the answer.
What are your goals for the program?
We are continually modifying and improving this program. Though scores of our members have ordered more than a thousand reports over the past year and a half, we would still like to reach more. We believe this is a cost-effective way for members to fulfill their obligation under the law. SREA is a benefit, but there is a responsibility that comes with it. A lot of people fought long and hard to get that Superfund exemption, and to have it taken away because a company doesn’t have the in-house capability or the financial wherewithal to conduct the inquiries the law requires would be a shame.
EXPEDITING THE PROCESS
When requesting a report on a facility that is not listed on the SREA brochure, be sure to provide the following details in your request:
• a complete physical address for the requested facility, not the mailing address.
• the facility’s specific name, which might differ from the parent company’s name.
• if the requested facility belongs to a company that has recently merged with or been purchased by another company, include both the company’s new name and its previous name.
Lindsay Holst is assistant editor of Scrap.
Publisher’s Note: For questions about Superfund, the SREA law, or the ReMA reasonable care compliance program, contact Steve Hirsch at 202/662-8516 or stevehirsch@
isri.org.
Members can request reports using the program’s brochure, which lists the names of facilities for which ReMA already has or is expecting reports, or by going to www.isri.org/srea. For specific questions about the status of an order, contact Edie Burkhead at edieburkhead@isri.org.