November/December 1989
Understanding the fundamentals of environmental regulations can help you pilot your business to successful compliance. Here’s some background on the laws that are increasingly affecting the scrap recycling industry.
By J. Thomas Wolfe
J. Thomas Wolfe is counsel/manager of government relations for the Institute of Scrap Recycling Industries, Washington, D.C.
Environmental law is not a new invention. People have sued each other over choking fumes, fouled water, poisoned livestock, and the like for centuries. These suits generally have arisen from competing claims made for use of a natural resource such as air or water that both parties probably assumed to be free and uncontested. The earliest environmental claims, called nuisance actions, asserted that the activities of one individual unreasonably interfered with the right of another individual or of the public in general to live in peace. The focus of a nuisance suit was almost always on the question of whether the complaining individual had suffered "substantial harm" rather than whether the accused had a right to pollute. Unless harm was done, everyone had a right to pollute.
Nuisance cases generally occur when two ways of life collide. In the scrap processing and consuming industry this has commonly occurred where urban development has grown up around an existing scrap facility. Industrial activity also has proved to be incompatible, in many ways, with more traditional ways of life such as farming and fishing. Nuisance law evolved as these conflicts became more difficult and more numerous and courts began to weigh factors such as the benefit to society of the competing claims on the air or water, or the superiority of one party's claim because its activity occurred, or at least began, first. This balancing of claims based on common rules of fairness and local self-interest remained the governing principle in environmental law until recently.
A Change in the Weather
Roughly 20 years ago, a change in public perception of man's relationship to his natural environment began to cause major changes in the law. Where forests, water, air, and minerals had previously been viewed as resources to be used, by 1970 a sizeable portion of the population viewed them as a natural heritage to be preserved. The resulting soul searching gave rise to laws based on very different principles. Activities previously presumed to be acceptable (absent a showing of harm) were defined by law as unacceptable and allowed to continue only if a government permit was granted. Although it quickly became apparent that the costs of stricter environmental controls would significantly increase the prices of goods and services, both the public and its elected representatives have remained strongly committed to this course of action.
Along with the recognition of the growing societal commitment to a cleaner environment came a recognition that the mechanisms in place to deal with pollution were inadequate. Local ordinances and local judges restricted some commercial activities, greatly increasing costs to businesses in their jurisdiction. At the same time, just across the county or state line, competing businesses were free from such costs. The effects of pollution do not respect jurisdictional boundaries and it became very difficult for those downwind or downriver from a pollution source in another state to convince that state to take action on their grievances. The result of these inequities was a broad-based environmental movement that was surprisingly effective in achieving a consensus in favor of federal legislation on environmental issues.
Unfortunately, there are disadvantages to pushing problems from the local to the national arena. Most of these disadvantages are political. Congress has found it difficult to act on issues as economically sensitive and scientifically complex as environmental concerns have proved to be. In order to accurately address the health effects resulting from pollution, solid scientific information relating a specific health problem to a particular emission or exposure is required. Mediating questions of this type is beyond the capabilities of most of our legislators. As a result, Congress has responded to pressures for action on perceived environmental crises by enacting into law broad regulatory schemes that rely predominantly on the Environmental Protection Agency for their details. In doing so, Congress has virtually removed itself by one layer from any economically disruptive consequences of a new statute. Any blame is placed on implementation regulations written by EPA.
To demonstrate the desire for rapid solution§ (of some kind), most federal environmental laws impose deadlines on EPA for identifying current levels of risk, setting standards, and achieving results. As an example, the Clean Air Act of 1970 required that all unhealthy concentrations of ambient air in the United States be remedied by 1977. The current administration's proposal to amend the act extends that date to 2010. Twenty years of experience have put the enormity of this task into perspective. At the same time, the cost of that experience to the U.S. economy in litigation and general public sector/private sector discord over those 20 years has been incalculable.
The scrap processing industry has not generally been the direct focus of attention of either Congress or EPA as they have pursued their environmental agenda. A number of factors are currently at work to change this. For example, most of the principal environmental laws have been around long enough for the enforcement personnel to begin to look beyond first-tier, more obvious polluters for violations. Also, most of these laws provide for the delegation to willing states of the authority to initiate enforcement actions. In addition, the involvement of citizens' groups and news media in pursuing environmental claims has stepped up markedly in the past few years. With these factors in mind, it would be advisable for a scrap processor to evaluate his current operations against current and anticipated environmental requirements. Unless he has been closely following state and federal rules, he should not assume that a lack of interest in his operations by environmental enforcement officials is tantamount to a stamp of approval.
The two principal federal statutes of concern to scrap processors are the Resource Conservation and Recovery Act (RCRA), which regulates solid and hazardous wastes, and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund, which controls the cleanup of hazardous spills. RCRA is important because it sets up a complex federal regulatory program that requires a lot of paperwork. CERCLA can be much more devastating because it establishes broad liability for the cleanup of sites contaminated in the past by actions that, at the time, may have been wholly legal.
RCRA: A Question of Definition
The detailed RCRA rules outline a "cradle-to-grave" accounting system for each unit of hazardous waste handled. The point of this control system is to ensure these dangerous waste materials are disposed of in a way that presents no current or future threat to public health.
The danger for the scrap industry lies in the broad reach EPA gives to the term hazardous waste. In order to fit the definition of that term, a material must be considered a "solid waste" and either be specifically listed by EPA or have EPA-established characteristics of a hazardous nature. Unfortunately, a number of metals and metal by-products that many scrap processors handle (batteries, drosses, and others) have been found to be "hazardous." A material is defined by RCRA as a "solid waste" if it is discarded, has served its intended purpose, or is a manufacturing or mining by-product ("solid waste" includes liquids and contained gases). Scrap metal in the recycling process is specifically defined by EPA regulations as a discarded material. Thus, under EPA's current rules, most scrap processors are considered handlers of hazardous waste.
Fortunately, the rules also contain a provision, added in January 1985, that exempts recyclable material (particularly scrap metal and used batteries) from the hazardous-waste handling rules. As a result, scrap operations are not currently required to keep the voluminous records otherwise mandated. Be warned, however, that the preamble to the 1985 provision describes this exemption as "interim" in nature.
Liability and Superfund
CERCLA, or Superfund, was enacted in 1980 to serve three basic purposes. First, it gave the federal government the authority to enter property from which hazardous substances are being released into the environment for the purpose of cleaning them up. Second, it established the "Superfund" of monies (currently at $8.5 billion) to pay for the cleanups. Finally, it empowered EPA to search out private parties identified as having contributed to a particular site and pursue legal action to recoup monies spent for cleanup from the Superfund. Those potentially liable for site clean-up costs are the current owner or operator of the site, the owner or operator at the time the site was contaminated, those who transported hazardous substances to the site (as long as they also had a role in selecting the site for disposal), and those who otherwise arranged for disposal of hazardous substances at the site (generally including the "generator" of the material).
At the typical Superfund site involving scrap processors, a large number of companies are named by EPA as "potentially responsible parties" ("PRPs"). It usually follows that most of these "PRPs" were responsible for a very small percentage of the total volume of waste found at the site. One of the most frightening features of Superfund, however, is that it imposes liability for the entire site cleanup on each of the parties, so that EPA may pick and choose whom it wishes to sue. In addition, the liability of a "PRP" is "strict," meaning that it is not related to fault. Thus, a businessman may ship materials for disposal (or in the case of the scrap processor, for sale) and end up being liable for contamination that is the direct result of the negligence of a downstream party.
It should also be remembered that responsibility for Superfund contamination reaches back to past activities, without a time limit. Although these activities may have been entirely legal and even standard industrial practice in their time, the law holds those connected with the activities responsible for any current resultant threat to public health. The courts have held this effect of the statute to be wholly within the bounds of the U.S. Constitution.
In short, notification from EPA that one is being considered a "PRP" under Superfund is very serious news. Whereas a violation of some regulatory standard can net you a fine of a few thousand dollars, involvement in a Superfund site can have the potential to cost you your business.
Air and Water Limits and Permits
Federal regulation of air and water pollution has had limited effects to date on the scrap industry, but for a number of reasons, this situation is likely to change. Under the current Clean Air Act only major sources (more than 100 tons per year of one of the primary air pollutants) trigger the principal EPA permit apparatus. Similarly, under the Clean Water Act, the key has been a point-source discharge (generally wastewater or cooling water from an industrial process) to a water body.
However, Congress is currently considering a number of bills to amend the Clean Air Act. The most comprehensive and influential of these was drafted by the Bush administration (S 1490 in the Senate and HR 3030 in the House of Representatives). As currently drafted, the bill's section on hazardous air pollutants may involve some scrap processors in the EPA permit process. It calls for all facilities that emit more than 10 tons per year of any of the 191 chemical compounds listed in the bill or 25 tons per year of any combination of these chemicals to meet an emission standard to be set by EPA. This standard must re resent the "maximum achievable control technology" that can be applied to the source of the emissions. The list of hazardous air pollutants includes asbestos; benzene, toluene, and xylene (or BTX, the basic components of gasoline); ethylene glycol and glycol ether (the prime constituents of antifreeze); polychlorinated biphenyls; radionuclides; and any compounds of antimony, arsenic, beryllium, cadmium, chromium, cobalt, lead, manganese, mercury, nickel, selenium, and mineral fibers.
The Clean Water Act was amended in 1987 and a new requirement added by those amendments is likely to have significant impact on the scrap processing industry. Where in the past the EPA permit system for water discharges applied only to industrial process waters, the new law requires permits for storm water runoff. EPA proposed regulations on the subject in December 1988; a final set of rules is anticipated in the next several months. The permit procedures to be followed by individual scrap processing facilities will depend on several variables. Those that drain into a municipal storm sewer need not make a permit application. Instead, the municipality will be responsible. However, within 180 days of EPA's issuance of its final rules, the facility operator must submit to the municipality detailed information on facility operations, the nature and drainage points of the runoff, and the results of tests performed on the run-off water. The runoff is not allowed to contain any hazardous substances.
If the facility's runoff discharges directly into a water body, the operator must either participate in a "group application" for a permit or submit an individual application. Group applications will be accepted from operators of facilities with "sufficiently similar" operations and are to be filed in two parts: preliminary information within 120 days of publication of the EPA rule and more detailed data within 18 months. Individual permit applications must be filed within one year of publication of the rule. Applications must include detailed descriptions of the facility involved, including topographical maps and test data on the chemical composition of the runoff.
Momentum is currently building in the environmental community and within the Bush administration for new legislation to protect groundwater. Early this year, the National Water Alliance, whose board of directors contains a number of federal legislators, issued a report laying out the case for an all-encompassing groundwater statute. The prime threats to drinking water aquifers specified by the report are landfills, storage tanks, and poorly managed waste materials. A likely outcome of congressional action would be a federal prohibition of any spillage of hazardous substances (including gasoline, motor oil, solvents, and others) onto bare sod. In early August, EPA's new deputy administrator convened a new task force on groundwater protection to organize the agency's existing resources and authorities to begin a nationwide groundwater initiative. The task force also will consider proposing legislation. Although regulatory action on this front is probably several years away, it is never too soon for prudent scrap processors to begin examining their work practices and their property.
The Recycler's Paradox
Perhaps the most recent facet of the environmental movement to gain popularity with the public is recycling consumer waste. Municipalities and community groups have responded to the emerging shortage of landfill space with a myriad of source-separation programs. Current bills in Congress to reauthorize RCRA contain various provisions intended to urge this process on.
To date, however, little recognition has been given to the vast amount of material recycled by the scrap processing industry every year. Scrap processors' work has long contributed environmental benefits to the American way of life. The current mounting interest in recycling at the federal, state, and community levels indicates that the rest of the country is learning the value of this industry.
The bleaker side of this growing environmental consciousness lies in the increasingly pervasive regulatory controls over scrap processors and other small industries. As the drive toward reuse of "waste" materials becomes more defined and the economics of cost-effective recycling gain wider understanding, both the public and its policymakers will, by necessity, gain a better appreciation of the paradoxical situation in which for-profit recyclers find themselves: providing an environmentally beneficial community service that is constantly growing in value, while facing mounting costs and constraints due to regulations springing from the same environmentalism.
These costs have the potential for changing the face of the entire industry. The more farsighted and inventive recyclers will use this period of transition to their advantage. The mingling of entrepreneurialism with environmentalism should make for some interesting times ahead. Of course the Chinese have, for centuries, used the curse: "May you live in interesting times."•