Auditing: Taking Steps in Environmental Compliance

One of the best ways scrap recyclers can keep their businesses environmentally sound is by conducting a self-audit of their operations and recordkeeping procedures. These tips should help.

Liability can arise from failure to comply with any of the Environmental Protection Agency's other regulatory programs, including the Resource Conservation and Recovery Act (RCRA), the Superfund Amendments and Reauthorization Act (SARA), the Clean Water Act (CWA), the Clean Air Act (CAA), the Toxic Substances Control Act (TSCA), and the Safe Drinking Water Act (SDWA). Each of these programs can levy substantial fines for violations of its provisions, some up to $25,000 per day per violation. Violations also may lead to criminal convictions.

Federal regulations are just one side of the coin. Remember that you also must comply with state and local environmental laws and regulations.

Beyond Environmental Concerns

Developing an environmental compliance strategy also can prevent waste management the inability to sell property because of regulatory agency restrictions or buyers' concerns about environmental risk and liability. In addition, implementing an environmental strategy may help you avoid potential insurance claim denials because of unknown conditions that may void insurance coverage.

Performing an internal environmental audit is one of the best ways to control risks and reduce liability. An audit of your facility will help you identify and assess all existing and potential environmental problems through a careful review of your facility's operations, waste streams, and recordkeeping systems. The person you select to audit your facility should be knowledgeable of both your facility and all applicable environmental laws. Outside consultants with expertise in environmental auditing may be useful to smaller companies that lack in-house expertise.

Typically, the audit process involves the following steps:

Review of legal requirements and liabilities;

Records review;

Employee notification;

Site inspection; and

Evaluation.

Review of Legal Requirements and Liabilities

It is important that the person auditing your facility reviews and understands--before the audit--all applicable regulatory requirements and potential liabilities, and examines all regulatory programs for applicability. The auditor should take a multimedia approach (including air, water, and land), evaluating regulations so as to ensure that all potential pathways are considered.

As part of this review, the auditor also should determine which state and local agencies regulate your facility's operations. In many cases, state and local regulations are more stringent than federal requirements. Determining the regulations to which your facility is subject at the beginning of the audit will help focus the audit.

Records Review

Existing facility records--such as purchasing records, environmental permits and licenses, manifests, water discharge inventories, and material safety data sheets--are a valuable source of data on current environmental operating practice s and existing contamination levels. These sources also provide insight on your facility's potential for future environmental problems. For this reason, the auditor should review all applicable facility, records before the site inspection. Other valuable data sources include tank testing results, product and raw material inventory records, production schedules, purchasing records, and disposal records. Although some of these records may not be available, you should attempt to gather as much information as possible prior to the site inspection. This information gathering process helps to further focus the audit and to establish specific goals.

Are all required records in your files? Your facility's management and recordkeeping systems are as important as the physical condition of equipment or operations. EPA has broad authority to require reporting and recordkeeping, and many of the federal and state environmental statutes require facilities to compile, store, and report data to verify compliance. These records should be regularly reviewed for accuracy and completeness. Even in situations in which recordkeeping is not required, such a system helps to demonstrate compliance.

Employee Notification

The person conducting the audit should review with all employees company policies on environmental Compliance. Employees should understand why waste management and related procedures are in place within a facility. Well-informed employees are better able to make suggestions and are more willing to follow sound environmental practices.

Audit Inspection

The on-site inspection is one of the most important steps in the audit process. It provides the auditor with the opportunity to verify that all equipment and operations are functioning as intended without any adverse environmental effects. Even if the auditor is an employee who is familiar with the facility and its operations, a separate walkthrough devoted to environmental issues is helpful. Surprisingly, the employee may notice problems during an audit that he or she never noticed before.

If possible, schedule the audit inspection to coincide with particularly sensitive operations. For example, if your facility operates a shredder, try to conduct the inspection when the shredder is operating in order to observe actual practices, potential emissions, and waste generation. This may not be possible at all times due to potential conflicts with production schedules or unplanned shutdowns.

The auditor should "walk the line" from the point of raw materials receipt and storage through all process steps, including the point at which products and wastes leave the facility and are shipped offsite to customers, storage, or disposal facilities.

Identify each process or practice that could release a hazardous substance to your land, adjacent land, the air, or surface- or groundwater. For example, is scrap or waste stored closer than necessary to an adjacent body of water? Can you better control used oil? Are you screening out sources of potential polychlorinated biphenyl (PCB) contamination from inbound material? Walk the fence line and observe nearby features such as streams, wetlands, and residential neighborhoods.

Ask yourself if you can modify any practices to reduce risks. Specifically, the auditor should pay attention to the following.

Materials handling. During the inspection, the auditor should identify each type of material your operation handles or generates, including all types of inbound scrap, processed scrap, and any processing residues or by-products. The auditor also should determine if any of the materials could be hazardous. Under RCRA, a material is hazardous if it exhibits any of the four characteristics of a hazardous waste and exceeds the specific limits for toxicity, corrosivity, flammability, and reactivity; has been named and listed as a hazardous waste; is a mixture containing a listed hazardous waste; or is derived from the treatment of a hazardous waste. Scrap metal that is recycled is virtually exempt from the hazardous waste regulations of RCRA. But other materials typically generated by processors, such as by-products, are not excluded from RCRA regulations. If the auditor locates a hazardous material, you must determine if you are managing the waste in accordance with EPA regulations.

The auditor should identify problem inbound materials such as tanks, batteries, certain containers, and transformers. Of particular concern are tanks and certain containers that, although labeled "empty," may contain residual amounts of hazardous materials. Releases of residual hazardous materials during processing could subject you to a cleanup. If possible, inbound materials should be certified nonhazardous.

Used oil. Used oil is another potential compliance problem for scrap processors. An audit should identify all sources of used oil releases during operation. Is the oil being collected or controlled? If not, is it technically and economically feasible to collect or control it? Free-flowing waste oil should be captured; incidental waste oil is not regulated. However, a variety of requirements apply under RCRA and TSCA for oils burned for energy recovery and oils containing PCBs so proper disposal or recycling must be in accordance with these rules. In addition, the potential for liability for waste oil spills exists.

Air emissions. The audit should identify all potential sources of air pollution at your facility. These may include processing equipment, such as shredder cyclones or sweat furnaces, or intermittent operations such as wire burning and torch cutting. Is a federal, state, or local permit or authorization required for any of these units or operations? If so, do you have the permit? Are you in compliance with the permit?

Water discharge. Identify all water discharge sources at your facility, including sanitary sewers, rainwater, snowmelt, and any process-related water. Do you discharge to any body of water or any ditch or channel that leads to a body of water? If so, do you have a permit from the federal or state government? EPA has proposed new stormwater permit requirements that apply to scrap processors. Do you discharge water to a municipal sewer? If so, the auditor should verify that the discharge complies with local ordinances or service agreements. The discharge also may be subject to pretreatment requirements.

Storage tanks. Locate all above- and underground storage tank areas and waste and raw material container storage areas. RCRA subjects underground storage tanks (USTs) to rigid performance standards and subjects owners and operators of USTs to financial responsibility requirements.

PCBs. Does your facility handle known or suspected sources of PCBs, such as transformers or large capacitors? If so, do you know the PCB concentration of each of these units? Become familiar with TSCA requirements for proper handling of these potential sources of PCBs.

Radiation. Does your facility receive scrap from sources that could reasonably be expected to contain radioactive contaminants, such as certain industrial plant demolitions or medical facilities? If so, what measures have you taken to detect radioactive items before they are received? Before processing them? It is essential to the safe operation of all scrap processing facilities that employees be knowledgeable about the many forms of radioactive materials that could appear in inbound loads.

Batteries. Does your facility handle lead-acid batteries? If so, remember that although lead-acid batteries are exempt from federal hazardous waste regulation up to the "breaking" stage, the threat of Superfund looms large and should be addressed.

Contaminated areas. In areas where spills have occurred, it may be necessary to determine if the soil has been contaminated. The extent and depth of the investigation will depend upon the site and the amount and type of contaminant released. Take soil samples and analyze them by using appropriate protocols.

Off-site areas. When possible and appropriate, the auditor should inspect off-site areas, such as waste disposal operations. Do you know where your wastes are ending up? Are they being properly managed? If your facility uses haulers to move nonhazardous waste to landfills, be careful to ensure that the haulers are, in fact, delivering to your specified destination. Processors have found themselves facing significant liability problems because haulers disposed of their waste at nondesignated, improper locations.

In addition to the above considerations, you should become familiar with the notification and recordkeeping requirements under EPA's Community-Right-to-Know program. Enacted as part of the Superfund reauthorization in 1986, this program includes detailed requirements for reporting hazardous chemicals used, handled, or stored in a given facility. Many of the requirements apply to scrap processors, so compliance with these requirements should be part of your facility's overall environmental compliance strategy.

Evaluation

Finally, you should prepare an evaluation of the facility and make recommendations for future studies or courses of action to be taken. Identify changes you need to make and develop a schedule for them. EPA is a good source of technical assistance, through guidance documents and hotlines, which can respond to technical questions. A listing of these hotlines is available through the Recycling Materials Association

One of the best ways scrap recyclers can keep their businesses environmentally sound is by conducting a self-audit of their operations and recordkeeping procedures. These tips should help.

Liability can arise from failure to comply with any of the Environmental Protection Agency's other regulatory programs, including the Resource Conservation and Recovery Act (RCRA), the Superfund Amendments and Reauthorization Act (SARA), the Clean Water Act (CWA), the Clean Air Act (CAA), the Toxic Substances Control Act (TSCA), and the Safe Drinking Water Act (SDWA). Each of these programs can levy substantial fines for violations of its provisions, some up to $25,000 per day per violation. Violations also may lead to criminal convictions.

Federal regulations are just one side of the coin. Remember that you also must comply with state and local environmental laws and regulations.

Beyond Environmental Concerns

Developing an environmental compliance strategy also can prevent waste management the inability to sell property because of regulatory agency restrictions or buyers' concerns about environmental risk and liability. In addition, implementing an environmental strategy may help you avoid potential insurance claim denials because of unknown conditions that may void insurance coverage.

Performing an internal environmental audit is one of the best ways to control risks and reduce liability. An audit of your facility will help you identify and assess all existing and potential environmental problems through a careful review of your facility's operations, waste streams, and recordkeeping systems. The person you select to audit your facility should be knowledgeable of both your facility and all applicable environmental laws. Outside consultants with expertise in environmental auditing may be useful to smaller companies that lack in-house expertise.

Typically, the audit process involves the following steps:

Review of legal requirements and liabilities;

Records review;

Employee notification;

Site inspection; and

Evaluation.

Review of Legal Requirements and Liabilities

It is important that the person auditing your facility reviews and understands--before the audit--all applicable regulatory requirements and potential liabilities, and examines all regulatory programs for applicability. The auditor should take a multimedia approach (including air, water, and land), evaluating regulations so as to ensure that all potential pathways are considered.

As part of this review, the auditor also should determine which state and local agencies regulate your facility's operations. In many cases, state and local regulations are more stringent than federal requirements. Determining the regulations to which your facility is subject at the beginning of the audit will help focus the audit.

Records Review

Existing facility records--such as purchasing records, environmental permits and licenses, manifests, water discharge inventories, and material safety data sheets--are a valuable source of data on current environmental operating practice s and existing contamination levels. These sources also provide insight on your facility's potential for future environmental problems. For this reason, the auditor should review all applicable facility, records before the site inspection. Other valuable data sources include tank testing results, product and raw material inventory records, production schedules, purchasing records, and disposal records. Although some of these records may not be available, you should attempt to gather as much information as possible prior to the site inspection. This information gathering process helps to further focus the audit and to establish specific goals.

Are all required records in your files? Your facility's management and recordkeeping systems are as important as the physical condition of equipment or operations. EPA has broad authority to require reporting and recordkeeping, and many of the federal and state environmental statutes require facilities to compile, store, and report data to verify compliance. These records should be regularly reviewed for accuracy and completeness. Even in situations in which recordkeeping is not required, such a system helps to demonstrate compliance.

Employee Notification

The person conducting the audit should review with all employees company policies on environmental Compliance. Employees should understand why waste management and related procedures are in place within a facility. Well-informed employees are better able to make suggestions and are more willing to follow sound environmental practices.

Audit Inspection

The on-site inspection is one of the most important steps in the audit process. It provides the auditor with the opportunity to verify that all equipment and operations are functioning as intended without any adverse environmental effects. Even if the auditor is an employee who is familiar with the facility and its operations, a separate walkthrough devoted to environmental issues is helpful. Surprisingly, the employee may notice problems during an audit that he or she never noticed before.

If possible, schedule the audit inspection to coincide with particularly sensitive operations. For example, if your facility operates a shredder, try to conduct the inspection when the shredder is operating in order to observe actual practices, potential emissions, and waste generation. This may not be possible at all times due to potential conflicts with production schedules or unplanned shutdowns.

The auditor should "walk the line" from the point of raw materials receipt and storage through all process steps, including the point at which products and wastes leave the facility and are shipped offsite to customers, storage, or disposal facilities.

Identify each process or practice that could release a hazardous substance to your land, adjacent land, the air, or surface- or groundwater. For example, is scrap or waste stored closer than necessary to an adjacent body of water? Can you better control used oil? Are you screening out sources of potential polychlorinated biphenyl (PCB) contamination from inbound material? Walk the fence line and observe nearby features such as streams, wetlands, and residential neighborhoods.

Ask yourself if you can modify any practices to reduce risks. Specifically, the auditor should pay attention to the following.

Materials handling. During the inspection, the auditor should identify each type of material your operation handles or generates, including all types of inbound scrap, processed scrap, and any processing residues or by-products. The auditor also should determine if any of the materials could be hazardous. Under RCRA, a material is hazardous if it exhibits any of the four characteristics of a hazardous waste and exceeds the specific limits for toxicity, corrosivity, flammability, and reactivity; has been named and listed as a hazardous waste; is a mixture containing a listed hazardous waste; or is derived from the treatment of a hazardous waste. Scrap metal that is recycled is virtually exempt from the hazardous waste regulations of RCRA. But other materials typically generated by processors, such as by-products, are not excluded from RCRA regulations. If the auditor locates a hazardous material, you must determine if you are managing the waste in accordance with EPA regulations.

The auditor should identify problem inbound materials such as tanks, batteries, certain containers, and transformers. Of particular concern are tanks and certain containers that, although labeled "empty," may contain residual amounts of hazardous materials. Releases of residual hazardous materials during processing could subject you to a cleanup. If possible, inbound materials should be certified nonhazardous.

Used oil. Used oil is another potential compliance problem for scrap processors. An audit should identify all sources of used oil releases during operation. Is the oil being collected or controlled? If not, is it technically and economically feasible to collect or control it? Free-flowing waste oil should be captured; incidental waste oil is not regulated. However, a variety of requirements apply under RCRA and TSCA for oils burned for energy recovery and oils containing PCBs so proper disposal or recycling must be in accordance with these rules. In addition, the potential for liability for waste oil spills exists.

Air emissions. The audit should identify all potential sources of air pollution at your facility. These may include processing equipment, such as shredder cyclones or sweat furnaces, or intermittent operations such as wire burning and torch cutting. Is a federal, state, or local permit or authorization required for any of these units or operations? If so, do you have the permit? Are you in compliance with the permit?

Water discharge. Identify all water discharge sources at your facility, including sanitary sewers, rainwater, snowmelt, and any process-related water. Do you discharge to any body of water or any ditch or channel that leads to a body of water? If so, do you have a permit from the federal or state government? EPA has proposed new stormwater permit requirements that apply to scrap processors. Do you discharge water to a municipal sewer? If so, the auditor should verify that the discharge complies with local ordinances or service agreements. The discharge also may be subject to pretreatment requirements.

Storage tanks. Locate all above- and underground storage tank areas and waste and raw material container storage areas. RCRA subjects underground storage tanks (USTs) to rigid performance standards and subjects owners and operators of USTs to financial responsibility requirements.

PCBs. Does your facility handle known or suspected sources of PCBs, such as transformers or large capacitors? If so, do you know the PCB concentration of each of these units? Become familiar with TSCA requirements for proper handling of these potential sources of PCBs.

Radiation. Does your facility receive scrap from sources that could reasonably be expected to contain radioactive contaminants, such as certain industrial plant demolitions or medical facilities? If so, what measures have you taken to detect radioactive items before they are received? Before processing them? It is essential to the safe operation of all scrap processing facilities that employees be knowledgeable about the many forms of radioactive materials that could appear in inbound loads.

Batteries. Does your facility handle lead-acid batteries? If so, remember that although lead-acid batteries are exempt from federal hazardous waste regulation up to the "breaking" stage, the threat of Superfund looms large and should be addressed.

Contaminated areas. In areas where spills have occurred, it may be necessary to determine if the soil has been contaminated. The extent and depth of the investigation will depend upon the site and the amount and type of contaminant released. Take soil samples and analyze them by using appropriate protocols.

Off-site areas. When possible and appropriate, the auditor should inspect off-site areas, such as waste disposal operations. Do you know where your wastes are ending up? Are they being properly managed? If your facility uses haulers to move nonhazardous waste to landfills, be careful to ensure that the haulers are, in fact, delivering to your specified destination. Processors have found themselves facing significant liability problems because haulers disposed of their waste at nondesignated, improper locations.

In addition to the above considerations, you should become familiar with the notification and recordkeeping requirements under EPA's Community-Right-to-Know program. Enacted as part of the Superfund reauthorization in 1986, this program includes detailed requirements for reporting hazardous chemicals used, handled, or stored in a given facility. Many of the requirements apply to scrap processors, so compliance with these requirements should be part of your facility's overall environmental compliance strategy.

Evaluation

Finally, you should prepare an evaluation of the facility and make recommendations for future studies or courses of action to be taken. Identify changes you need to make and develop a schedule for them. EPA is a good source of technical assistance, through guidance documents and hotlines, which can respond to technical questions. A listing of these hotlines is available through the Recycling Materials Association