Environmental Protection

Looking Ahead

Top Issues in Waste Management in 2004

Despite changes in administration and economic and geo-political uncertainties, there continue to be developments in the U.S. Environmental Protection Agency's (EPA) programs affecting waste management.1 This article examines several of those developments.

EPA Proposes to Broaden Exemption for Recycled Materials
On October 28, 2003, EPA proposed new regulations that would amend the definition of "solid waste" under Subtitle C of the Resource Conservation and Recovery Act (RCRA). EPA described its proposed rulemaking as follows: "EPA is today proposing that any material which is generated and reclaimed in a continuous process within the same industry (as defined in today's proposal) is not 'discarded' for purposes of Subtitle C, provided that the recycling process is 'legitimate.'"2 In the preamble to the rulemaking, EPA notes that it estimates that approximately 70 percent of the materials potentially affected by the proposed rulemaking will come from the following industries: "inorganic chemicals, plastic materials and resins, pharmaceutical preparations, cyclic crudes and intermediates, industrial organic chemicals, secondary smelting of nonferrous metals, plating and polishing, and printed circuit boards."3 As is often the case, the defined terms in the proposed rulemaking are essential to understanding its scope and impact.

EPA is proposing and seeking comments on two options to define the phrase "continuous process within the same industry." Under the first option, "hazardous secondary materials would have to be generated and reclaimed within a single industry in order to qualify for the exclusion."4 Reclamation may take place in several steps and/or at several different facilities, so long as each step takes place in the same industry generating the material.4 Under the second option proposed by EPA, "hazardous secondary materials that are generated and claimed in a continuous process within the same industry would not be eligible for the exclusion if the reclamation takes place at a facility that also recycles regulated hazardous wastes generated in a different industry."5

EPA is proposing to use the North American Industry Classification System (NAICS) to define industries for purposes of the rule.6 If there are multi-industry sites, EPA states that it will "look to whether NAICS classifications of the specific establishments generating and reclaiming the secondary material are the same."7 Although not covered by the proposed rule, EPA is requesting comments on situations where two different industries are located on the same site and "where hazardous secondary materials are generated in one industry and could be reclaimed in a different, on-site industry."7

In further explaining how to define "continuous process" for purposes of the proposed rule, EPA discusses the use of brokers and independent transporters. EPA comments that it regards "the use of brokers as a significant discontinuity in the use of secondary material," but requests comment on this issue.8 Conversely, EPA notes that it would allow independent transporters to move materials from one facility to another, so long as each facility is within the same industry.8 EPA also states that the "continuous process" inquiry requires some limitation on the time between when a material is generated and when it is reclaimed and reused.8 EPA proposes to use its regulations governing "speculative accumulation" to determine if a process is continuous.9 Specifically, "for the purpose of this proposal, the person accumulating the material must show that during a calendar year (beginning January 1) the amount of material that is recycled, or transferred to a different site for recycling, must equal at least 75 percent by weight or volume of the amount of that material at the beginning of the period."10

In the proposed rulemaking, EPA also is offering criteria to clarify what constitutes "legitimate" recycling. Specifically, EPA is proposing four general criteria for use in "determining whether recycling of hazardous secondary materials is legitimate."11 According to EPA, codifying these principles in regulatory form is the agency's first attempt to codify "broadly applicable principles for making recycling legitimacy determinations."11 Although EPA's proposal is limited to materials that are "generated and reclaimed within the same industry," EPA is seeking comment on "a broader regulatory conditional exclusion from RCRA regulation for all materials that are legitimately recycled by reclamation, whether the recycling is done within the generating industry, or between industries."12 Therefore, it remains to be seen to what extent the final rulemaking will broaden exclusions from the definition of solid waste.

'All Appropriate Inquiry'
The Small Business Liability Relief and Brownfields Revitalization Act (the "Brownfields Amendments") will again play a major role in waste issues in 2004. The Brownfields Amendments provide liability protection for certain classes of property owners (bona fide prospective purchasers, innocent landowners and contiguous property owners)13, if the property owners comply with specific provisions, including conducting "all appropriate inquiry" into present and past uses of the property and the potential presence of contamination on the property. The Brownfields Amendments require EPA to develop regulations establishing standards and practices for how to conduct an "all appropriate inquiry" by January 2004.

The "all appropriate inquiry" regulations are being developed under the negotiated rulemaking process. "Negotiated rulemaking is a process which brings together representatives of various interest groups and a federal agency to negotiate the text of the proposed rule."14 The Brownfields Amendments clarify the requirements necessary to establish an innocent landowner defense and also provide liability limitations for those qualifying as "bona fide prospective purchasers" (BFPP) and "contiguous property owners." 15 Until EPA promulgates a final rule, there are two different interim standards for conducting "all appropriate inquiry." The date of purchase of the property determines which standard applies.

Windfall Liens
On July 16, 2003, EPA and the U.S. Department of Justice (DOJ) issued interim guidance on the "windfall lien" provision of the Brownfields Amendments, codified in Section 107(r) of the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as CERCLA or Superfund).16 The guidance discusses how "EPA and DOJ will generally exercise their enforcement discretion in the context of the new CERCLA Section 107(r) windfall lien provision."17 Section 107(r) of CERCLA provides that BFPPs are not liable as owner/operators for CERCLA response costs,18 but the property they acquire may be subject to a windfall lien where an EPA response action has increased the fair market value of the property.19 A windfall lien is generally capped at the amount of unrecovered response costs, not to exceed the increase in the fair market value caused by the EPA's response action.19

EPA notes that the decision to perfect a windfall lien is separate from its intent to seek to recover costs from liable parties under CERCLA.20 EPA identifies several situations in which EPA generally will not seek to perfect a windfall lien:

  • Where the "bona fide prospective purchaser acquires the property at fair market value after cleanup;"
  • Where EPA has already resolved the liability of an "owner" who is liable under CERCLA Section 107(a)(1) and that resolution considered the full value of the property with a completed cleanup, including any potential windfall resulting from the cleanup activity;
  • Where EPA only spends money from brownfield grants and loans, or where EPA's only costs are related to preliminary site assessments or investigations when EPA does not intend to undertake removal or remedial actions at the site;
  • Where a BFPP acquires and uses the property for residential purposes and where neither the seller nor the purchaser are governmental or commercial entities, or where the property is acquired for creation or preservation of a public park or a similar purpose;
  • "Where there is a substantial likelihood that EPA will recover all of its cleanup costs from liable parties;" and
  • Where an enforcement discretion policy will apply to the BFPP.21

When EPA does seek to perfect a windfall lien "EPA will generally seek only the increase in fair market value attributable to a response action that occurs after a bona fide prospective purchaser acquires the property at fair market value." 22 EPA notes that by identifying in the guidance situations in which it generally will not pursue a windfall lien, it hopes to help address windfall lien liability concerns. EPA adds, however, there may be situations where comfort/status letters may be appropriate.23

New Guidance on Completion of Corrective Action at RCRA Facilities<
On February 25, 2003, EPA published Final Guidance on Completion of Corrective Action Activities at RCRA Facilities.24 EPA notes that there are numerous reasons to recognize completion of corrective action. "Official recognition that corrective action activities are complete can, among other things, promote transfer of ownership of the property and, in some cases, can help return previously used commercial and industrial properties, such as 'brownfields,' to productive use."25 The guidance describes two types of completion determinations -- "Corrective Action Complete without Controls" and "Corrective Action Complete with Controls" -- and when each type of completion determination is appropriate. The first category applies where no further corrective action or institutional controls are necessary, while the second category recognizes that no further action is necessary beyond monitoring and/or institutional controls. In explaining the meaning of a corrective action determination, EPA states:

The Agency continues to believe that it is important to distinguish between situations where significant progress has been made toward final cleanup, and situations where corrective action is actually complete. The Agency believes that a "completion" determination signals to all parties involved that corrective action activities are no longer necessary (though controls to ensure the remedy remains protective may be necessary), and thus are preferably reserved for situations where there is no further cleanup activity to conduct -- regardless of how long it might take to achieve site-specific media cleanup objectives. The Agency is concerned that making "completion" determinations at facilities that have not yet achieved final cleanup goals would jeopardize the integrity of that distinction, potentially be misleading and minimize the accomplishment of facilities that truly have completed corrective action. 26, 27

In the preamble to the guidance, EPA emphasizes that Corrective Action Complete with Controls is a form of completion, and not merely a stepping stone toward Corrective Action Complete without Controls."28 The EPA guidance also "discusses completion determinations for less than an entire facility."29

When it proposed guidance in 2002, EPA offered the following criteria to mark completion of corrective action: "For both types, all of the following have been satisfied: (1) A full set of corrective measures is defined; (2) the facility has completed construction and installation of all required remedial actions; (3) site-specific media cleanup objectives, which were selected based on current and reasonably expected future land use, and maximum beneficial groundwater use, have been met." 30 In response to public comments, in the final guidance, EPA removed references to "maximum beneficial use of groundwater," in part because the draft guidance only discussed cleanup standards for groundwater, and not other media.31 EPA explained "The Agency did not intend the guidance to address the issue of cleanup standards for the various media addressed through corrective action, and saw no reason to single out groundwater for discussion." 31 EPA has created a panel to revisit its groundwater policies. 32

References

1. The author would like to thank Brandon Van Balen, Esq., for his assistance in preparing this article.

2. See 68 Federal Register 61,558, 61,563 (Oct. 28, 2003)

3. Id. at 61560-61561

4. Id. at 61,565

5. Id. at 61,566

6. Id. at 61,567

7. Id. at 61,573

8. Id. at 61,575

9. Id. 61,575-76

10. Id. at 61,576

11. Id. at 61,582

12. Id. at 61,588

13. These terms are defined in the Comprehensive Emergency Response, Compensation and Liability Act (CERCLA).

14. See "Negotiated Rulemaking Committee on All Appropriate Inquiry," available at www.epa.gov/swerosps/bf/index.html

15. See EPA All Appropriate Inquiry Fact Sheet, available at www.epa.gov/swerosps/bf/aai/aaifs.htm

16. See Interim Enforcement Discretion Policy Concerning "Windfall Liens" Under Section 107(r) of CERCLA (July 16, 2003).

17. Id. at 1

18. EPA notes that this guidance only applies where the BFPP criteria are satisfied. Id. at 2, n.2. Where an entity does not qualify as a BFPP, it may face full CERCLA liability. Id.

19. Id. at 2

20. Id. at 4

21. Id. at 5-7

22. Id. at 8
23. Id. at 12-13

24. See 68 Federal Register 8,757 (Feb. 25, 2003)

25. Id. at 8,760

26. Id. at 8,758

27. In the preamble, EPA notes that it intends to investigate "how it might formally and publicly recognize an earlier milestone in the corrective action process, analogous to Superfund's 'construction complete.'" Id. (note omitted).

28. Id. at 8,758-59

29. Id. at 8,760

30. Id. at 8757

31. Id. at 8,758

32. See "EPA Creates Panel to Assess RCRA Groundwater Cleanup Standards," Inside EPA Superfund Report, p. 14 (June 9, 2003).

This article originally appeared in the 01/01/2004 issue of Environmental Protection.

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