January/February 1997
Though federal issues often dominate the scrap industry's legislative agenda, it's equally essential to keep abreast of recycling-related issues on the local and state levels. This primer looks at what could be important and where it could be relevant in 1997.
By Kristina Rundquist
Kristina Rundquist is an associate editor of Scrap.
It wasn’t so long ago that Los Angeles’ recycling industry was faced with a proposed local ordinance so strict that all recycling centers, including scrap processors, would have been required to operate entirely under cover. In addition, all shipping and loading activities would have been confined to between the hours of 5 and 6 p.m.—weekdays only.
Fortunately, industry lobbyists such as Joe Massey, executive director of ISRI’s Northern California and Southwestern chapters, squelched the ordinance almost as soon as it arose.
Still, even though this crisis was averted long before the final hour, that’s not to say similar legislation won’t crop up again—and this time with success.
Such is the nature of local and state legislation. What starts out as a seemingly innocuous proposal can grow to a disaster of epic proportions if unchecked. It’s essential, therefore, for scrap recyclers to be vigilant in keeping up not only with federal recycling-related issues, but local and state proposals as well.
This survey of a handful of states provides a feel for some of the general legislative topics that could bear watching in 1997.
Going Against the Flow
It’s no surprise that flow control is again expected to be a hot topic, particularly in states such as California, Florida, New York, New Jersey, and Texas.
Year after year, flow control continues to return to the legislative forefront because of its financial ramifications for many states, especially those needing flow control to fulfill financial obligations at their own or other solid waste transfer stations, waste-to-energy facilities, material recovery facilities, and landfills. Even so, flow control is currently considered a violation of the commerce clause of the Constitution, thanks to a 1994 U.S. Supreme Court decision.
In the past few years, however, some states have sought federal legislation that would grant them the authority to control the flow of municipal solid waste or, at the very least, grandfather existing flow control laws. To date, these efforts have been unsuccessful—which explains, at least in part, why flow control continues to be revisited and further, why states and local jurisdictions have devised ways to circumvent the current prohibition against flow control. The first of these schemes is known as franchising.
In exercising their public health and safety powers, some jurisdictions establish collection districts within which only exclusive franchisees are permitted to collect solid waste. The problem for recyclers comes when the franchisee tries to extend this exclusive collection right to recyclables. To date, the scrap industry has been successful in arguing that recyclables are not solid waste and that by denying a generator of recyclables the right to give, sell, or donate its recyclables to any party of its choosing the jurisdiction is guilty of unconstitutionally seizing property without due process.
Recognizing that franchising is not the panacea they thought it would be, jurisdictions have instead come up with a new approach, permitting them to exercise flow control as a “market participant.” In this instance, a jurisdiction creates a solid waste collection district and in doing so gives a contract hauler the exclusive right to collect within the district. At the same time, the jurisdiction implements a user fee, which is commensurate to a tax in that all property owners must pay the fee regardless of whether they use the service or not. The jurisdiction then uses this fee to pay the hauler and gives the company the right to dump at a designated landfill either at no cost or at a significantly reduced one.
The problems for recyclers begin when a jurisdiction includes the collection of recyclables under its contract with the hauler. Though generators of recyclables may be allowed to opt out of the collection system, they must still pay the user fee. It’s not hard to see, then, that a generator has a strong incentive to use the contract hauler over its existing recycler.
In addition, if generators opt out, they commonly must do so for all recyclables, not just certain ones. This poses a formidable challenge for scrap recyclers that specialize in certain recyclables and are unable to provide full-service collection. Although this concept is fairly new it will likely be tested in courtrooms across the country as it is examined by increasing numbers of jurisdictions.
Members in California resolved the issue of recyclables and franchises several years ago, but a recent case there threatens the industry once more. According to Massey, the concept of “fee for service” will now be part of any state flow control discussion. In California, the assumption is that if you pay a company a fee to collect a material, that material is solid waste. But that fee may not be an actual levied fee. For example, it could be a “negative value” fee in which a recycler pays for material, but the cost of transporting it is greater than its value. Fortunately for recyclers, there remains a property right in the material being sold and there is no intent to discard it, meaning the material is not solid waste. Still, the fee-for-service concept blurs the line between solid waste and recyclables and, thus, potential problems are created.
In the Southeast, some recyclers have managed to insert protective language into state laws to forestall some of the problems associated with flow control. The need for such language becomes clear in an example from Steve Levetan, legislative affairs director for ISRI’s Southeastern Chapter: A local government body banned an ReMA member from collecting scrap within its jurisdiction, claiming exclusive control. Luckily, notes Levetan, “Based on language that we’ve worked on—certainly in Georgia, Florida, and Tennessee—such an instance is precluded from happening again.” That isn’t to say, however, that municipalities won’t attempt again to look for a way to secure materials for bond-backed solid waste facilities and the like.
To wit, Levetan points to a meeting he recently attended during which an attendee brought up the idea of, as he puts it, “taking over all this stuff [municipal waste], controlling it, and getting better prices.” When this suggestion met with approval from a state official in attendance, Levetan jumped to his feet. “I gave my ‘It’s unconstitutional and un-American’ speech, and they backed off,” he says.
In Pennsylvania, meanwhile, “most of our municipal ordinances provide for recycling collection but don’t prohibit recyclers from doing what they choose with it, and industrial material isn’t even considered,” says Rick Allan, executive director of ISRI’s Keystone Chapter.
Allan is more anxious about the issue of interstate waste transportation. “With the impending increase of waste shipments from New York to Pennsylvania, the state government wants some control over what flows in, and, of course, we always wonder if that will include recyclables,” Allan says.
Wiping the Slate Clean
Recyclers who haven’t heard of audit privilege bills will probably hear a lot about them in 1997 and beyond. Audit privilege bills treat the findings of self-audits as legally privileged information that can’t be introduced in court in a legal proceeding against the company itself. A number of states have already enacted these bills and it’s expected that the coming year will bring a flurry of proposed legislation.
These bills would also grant varying degrees of immunity from civil and/or criminal penalties for environmental violations uncovered during the course of an industrial facility’s self-audit, including those of scrap operations. Basically, companies that come clean to the state regulatory agency and agree to an acceptable cleanup proposal—one that is actually implemented—can take advantage of the privilege and earn immunity.
“Legislatures and regulatory agencies are taking an enlightened approach to environmental protection,” states Scott Horne, ReMA director of state and local programs. “They’re saying that, if you take the initiative, discover a problem, and are willing to take responsibility, you shouldn’t be hammered for it.”
This may be good news for the company doing the cleanup, but environmental groups and trial lawyers oppose the privilege, viewing it as tantamount to hiding information, not to mention a hindrance to uncovering additional sources of information. The EPA is also unhappy, Horne adds, noting that the agency has, in fact, “threatened to withdraw the delegation of authority for certain programs from states with more liberal audit privilege bills.”
Levetan points out that the privilege codified in audit privilege bills is no different than that afforded by a long-standing common law—the attorney work-product. “Companies insert an attorney at a cost of several thousands of dollars to provide privacy,” notes Levetan. “This legislation would merely allow scrap recyclers to do the same thing without spending thousands. And if you can bring down the cost of an audit, the more companies will voluntarily conduct them and the more potential problems can be corrected.”
Late last year, Ohio had self-audit legislation pending and, according to Mary Wiard, government affairs coordinator for the Ohio/ISRI joint legislative committee, “If it doesn’t pass, we will certainly continue to push it.”
As for Pennsylvania, Allan expects self-audit legislation to be considered early in the year. Yet, even if the measure doesn’t pass, Pennsylvania recyclers can turn to an existing audit exemption offered by the state’s environmental agency for relief. This measure protects a company’s processing permit if a violation is found and corrected during the course of a self-audit.
In a related vein, brownfields restoration and voluntary cleanup laws will also continue to be an important issue throughout 1997. Such laws encourage companies to redevelop and reuse abandoned and underutilized, urban industrial areas by providing economic incentives, qualified liability protection, and reduced regulatory oversight for remedial activities.
Currently, nearly half the states have brownfield legislation on the books, and more—such as Florida—are considering it. “We dealt with it in Georgia last year, and it could certainly provide a benefit for scrap recyclers by making additional property available that otherwise they wouldn’t go near,” Levetan says.
It’s important to note, however, that owners responsible for the contamination on their sites are unable to take advantage of the provisions of brownfields laws, Horne says.
Up in the Air
Another important topic for scrap recyclers to watch this year is truly up in the air—that is, related to Clean Air Act requirements as they apply to emissions from their trucks and other processing and handling equipment.
This year, industry lobbyists in Pennsylvania will be watching closely to see what happens regarding Title V of the Clean Air Act, with Allan expecting to see further regulations. Currently, he notes, the state requires Title V permits for all stationary sources of emissions and all auto shredders must have attached cleaning systems.
Meanwhile, Ohio scrap recyclers have been dealing with the effects of emissions checks, under which all vehicles in nonattainment areas—those that have consistently failed to meet U.S. EPA standards—must have their emissions checked regularly. “This has been going on in Cleveland, Dayton, and Cincinnati, where it’s been hotly contested,” says Wiard, who notes that companies have complained about long lines at emission check stations and added expenses, in addition to expressing doubts about the program’s effectiveness.
Still, despite the system’s drawbacks, recyclers are concerned that the emissions check program might be replaced with even more stringent regulations. Currently, Wiard notes, many Ohio recyclers are not required by law to obtain emissions permits. If the state eliminates the emissions check program, that could mean that more recyclers “have to be in a permitted program,” she says. “Not that anyone is particularly thrilled with getting their tailpipes checked, but if the program is abolished, then something else will take its place and that could potentially be much worse,” Wiard warns.
Holding on to Tag-and-Hold
Some state legislative issues never seem to die, and one of those for scrap recyclers is tag-and-hold. For decades, localities have considered tag-and-hold legislation in an effort to combat the theft of recyclable materials and subsequent sale of the material to recycling operations. While tag-and-hold measures vary in terms of the extent of their stipulations, they generally require recyclers to keep voluminous records, tag material that they buy, and then hold it for anywhere from 3 to 15 days.
Recyclers have persistently argued that such requirements are an administrative, logistical, and financial burden in that, as Horne notes, “Even if a recycler had the space to hold materials for that length of time, which most don’t, the recycler can take a financial bath during the tag-and-hold period if there is a sudden turn in the scrap markets.”
While only a few states and local jurisdictions have succeeded in passing such legislation, the issue continues to crop up, particularly when scrap prices—and, hence, scrap thefts—are high. “Mostly, tag-and-hold laws don’t work, and we’re all aware of that,” says Don Lewon, president of Utah Metal Works Inc. (Salt Lake City). “But people not acquainted with the industry think it’s the obvious thing to do when it comes to preventing criminal activity.”
Given that this year began with most scrap markets fairly tranquil, tag-and-hold laws are expected to stay in the background. As history has shown, however, that doesn’t mean the issue won’t rise again, so all recyclers continue to keep their antennae up for potential warning signals. As Jerry Simms, transportation manager for Atlas Metal & Iron Corp. (Denver), states, “We sympathize with the criminal justice enforcement, but any unduly burdensome regulation that affects us and how we do business is something we would argue against.”
Definitions, Goals, and Money
This year will also find many recyclers continuing to grapple with state issues related to solid waste vs. scrap, mandated recycling and/or waste reduction goals, and recycling-related financial incentives and tax breaks.
The Problem With Numbers. In Florida and Georgia, for example, “existing legislation has expired and there will be proposals going everywhere from increasing recycling goals to abolishing them all together,” Levetan points out. “Solid waste is where the issue can get crazy, but in all states in the Southeastern Chapter, scrap is not considered solid waste.”
While scrap’s distinction from solid waste may be clear in southern states, that’s not the case across the country and, as a result, many states are reporting dubiously based recycling rates that include recyclables culled from the solid waste sector and—erroneously—the traditional scrap stream. In such cases, the onus falls on many scrap processors to record the quantity and origin of material that passes through their doors.
“State governments needed a reporting mechanism and, unfortunately, scrap recyclers tended to get caught up in that mechanism,” says Horne. “Processors are just an easy target for getting the numbers, but it doesn’t give states an accurate recycling picture because these items have always been recycled.” The EPA is trying to develop guidelines to standardize recycling reporting, though it fails to realize “there is probably a more accurate mechanism for counting—and that doesn’t include scrap recyclers,” he notes.
A Level Recycling Field. In an effort to encourage recycling, many states continue to offer financial assistance and tax breaks to municipalities and recycling companies. The problem is that these incentives can sometimes work to the advantage of startup operations and the detriment of existing recyclers. For example, Pennsylvania scrap processors are asking the state to require counties to carry out more in-depth analyses as to the private sector’s ability to handle a recycling job before being given a grant to purchase recycling equipment. As it stands, a $2-per-ton fee assessed by landfills goes toward state grants, which are in turn given to counties for recycling and waste disposal activities.
A clause was added years ago specifying that any municipality looking to purchase recycling equipment must first advertise and research the private sector’s capacity to fill the void. Still, says Allan, “There’s no state law banning a municipality from going into competition with existing recyclers, so we’ve asked that such a ban be put into legislation: If the municipality uses the equipment for any use other than its original intent, it must return the grant to the state.” The Pennsylvania legislature has been receptive to this concept, as well as to the request that a scrap industry representative be contacted whenever anyone applies for a grant, he says.
In other states, the same need exists to ensure that tax breaks and incentives benefit both new market entrants and existing recyclers. But it’s not always easy getting state agencies to recognize this fact. “You’d be surprised how difficult it is,” Levetan says. “Their thrust is bringing in new business and they often don’t stop to consider that new industry might be competition to an existing one.”
* * *
These and other recycling-related issues could claim a place on the legislative agendas of many localities and states in 1997. With legislators just beginning to return to their chambers for this year’s session, however, it’s still too early to tell exactly what previous issues will be revived and what new challenges will arise.
As a result, veteran industry lobbyists and executives advise all recyclers to keep a watchful eye on their local and state governing bodies—and get involved when issues dictate. “You can’t afford not to be involved,” says Lewon. “Local bills that initially look benign can come up and be passed. Then suddenly they’re implemented and you’re wishing to heck you’d paid more attention to them earlier.” •
Though federal issues often dominate the scrap industry's legislative agenda, it's equally essential to keep abreast of recycling-related issues on the local and state levels. This primer looks at what could be important and where it could be relevant in 1997.