United States Court of Appeals, District of Columbia Circuit
November 3, 2016
Petitions for Review of a Final Regulation Promulgated by the
United States Environmental Protection Agency
C. Marwell and Thomas Sayre Llewellyn argued the causes for
Industry Petitioners. With them on the briefs were Stacy R.
Linden, Matthew A. Haynie, Aaron J. Wallisch, Laura E.
Boorman, Kevin A. Gaynor, John P. Elwood, Roger R. Martella,
Jr., Joel Visser, Linda E. Kelly, Quentin Riegel, and Leslie
A. Hulse. Wayne D'Angelo, Harry M. Ng, and Michael R. See
Kenneth M. Kastner was on the brief for amici curiae Eastman
Chemical Company and Solvay USA Inc. in support of Industry
S. Pew argued the cause for Environmental Petitioners. With
him on the briefs was Khushi K. Desai.
R. Dertke, Attorney, U.S. Department of Justice, argued the
cause for respondents. With him on the brief were John C.
Cruden, Assistant Attorney General, Douglas M. Bushey,
Attorney, U.S. Department of Justice, and Alan Carpien,
Attorney, U.S. Environmental Protection Agency.
J. Patterson, Jr. argued the cause for Industry
Intervenor-Respondents. With him on the brief were Eric L.
Klein, Aaron J. Wallisch, Laura E. Boorman, John L.
Wittenborn, Wayne D'Angelo, Kevin A. Gaynor, John P.
Elwood, Jeremy C. Marwell, Leslie A. Hulse, Linda E. Kelly,
Quentin Riegel, Roger R. Martella, Jr., Joel Visser, James W.
Conrad, Jr., Thomas Sayre Llewellyn, Stacy R. Linden, and
Matthew A. Haynie. Douglas H. Green entered an appearance.
R. Case, James S. Pew, Khushi K. Desai, and Vincent Atriano
were on the joint brief for respondent-intervenors and
movant-intervenor Gulf Chemical and Metallurgical Corp.
Before: Tatel and Kavanaugh, Circuit Judges, and Williams,
Senior Circuit Judge.
case arises from the Environmental Protection Agency's
latest effort to define the term "solid waste"
under the Resource Conservation and Recovery Act. In 2015,
EPA promulgated a final rule governing when certain hazardous
materials qualify as "discarded" and hence are
subject to the agency's regulatory authority.
Environmental and Industry Petitioners have each petitioned
for review of that rule, arguing that numerous aspects of it
are unlawful and arbitrary and capricious. For the reasons
explained, we grant the Industry petition for review with
respect to Factor 4 of the legitimacy test and to the
Verified Recycler Exclusion and we dismiss the Environmental
petition for review.
Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. §§ 6901-6992k, empowers EPA to manage solid
and hazardous waste. The statute defines solid waste as
"garbage, refuse, sludge . . . and other discarded
material." 42 U.S.C. § 6903(27). Hazardous waste is
a subset of solid waste that may pose a substantial threat to
human health or the environment when improperly managed.
§ 6903(5)(B). If a material qualifies as hazardous
waste, it is subject to regulation under RCRA Subtitle C,
§§ 6921-6939g, which imposes comprehensive
reporting and operating requirements. Material that is not
solid waste, and therefore not hazardous waste, is exempt
from Subtitle C.
to its RCRA authority, EPA has promulgated a rule defining
solid waste as "discarded material" not otherwise
excluded from the agency's regulations. 40 C.F.R. §
261.2(a)(1). A separate regulation lists materials that fall
outside the definition of solid waste. § 261.4. Central
to the issues before us, EPA considers certain materials that
are destined for recycling to be discarded and hence solid
waste subject to RCRA regulation. Definition of Solid
Waste, 80 Fed. Reg. 1, 694, 1, 738/3 (Jan. 13, 2015)
(the "Final Rule").
purposes, the relevant history begins in 2007, when EPA
proposed a rule deregulating many hazardous secondary
materials. See American Petroleum Institute v. EPA,
683 F.3d 382, 385 (D.C. Cir. 2012) ("API
II"). Secondary materials are substances generated
as the remainder of industrial processes; they include spent
materials, byproducts, and sludges. See 40 C.F.R. §
260.10. EPA's proposed rule-which became a final rule in
October 2008- excluded hazardous secondary materials from the
definition of solid waste in two circumstances: first, if the
company that generated the materials controlled the recycling
of those materials; and second, if the generator transferred
the materials to an off-site recycler it had audited to
ensure compliance with proper recycling practices.
Revisions to the Definition of Solid Waste, 73 Fed.
Reg. 64, 668, 64, 669/3-70/1-2 (Oct. 30, 2008) (the
"2008 Rule"). These two exemptions were
known, respectively, as the "Generator-Controlled
Exclusion" and the "Transfer-Based Exclusion."
Id. at 64, 670/1, 64, 675/2 (capitalization
added). To qualify for either, secondary materials
had to be recycled "legitimately, " a term EPA
defined by reference to certain "legitimacy
factors." Id. at 64, 675/2-3. EPA adopted this
legitimacy requirement to distinguish "true"
recycling from "sham" recycling in which companies
claim to reuse materials they in fact discard. Id.
at 64, 700/2.
organizations challenged the 2008 Rule. One, the
American Petroleum Institute, argued that the rule unlawfully
regulated materials called spent petroleum refinery
catalysts, which are byproducts of the oil refining process.
API II, 683 F.3d at 387. Another group, the Sierra
Club, asserted that the rule "was not sufficiently
protective of human health and the environment, " in
violation of RCRA. Id. at 389. A third entity, Gulf
Chemical and Metallurgical Corporation ("Gulf"),
moved to intervene to defend the rule's treatment of
this court heard oral argument, EPA entered a settlement
agreement with the Sierra Club. Id. Pursuant to that
agreement, the Sierra Club withdrew its petition, and EPA
agreed to propose a new solid waste rule. Id. As
promised, EPA published a notice of proposed rulemaking in
July 2011. Definition of Solid Waste, 76 Fed. Reg.
44, 094 (July 22, 2011) (the "Proposed
Rule"). A year later, we held that API's
challenge to the 2008 rule was unripe given the forthcoming
final rule. API II, 683 F.3d at 384. We deferred any
action on Gulf's motion to intervene, which is dealt with
in a separate order published today.
promulgated the Final Rule on solid waste-the one
before us now-in January 2015. 80 Fed. Reg. at 1, 694/1. The
2015 Final Rule differs from the 2008 Rule
in several ways, four of which are relevant here. First, the
Final Rule revises the definition of
"legitimate" recycling and expands the scope of the
legitimacy factors to cover all recycling. Id. at 1,
719/3-20/1. Second, it establishes that spent catalysts-which
were ineligible for exclusions under the 2008
Rule-could qualify for the exemptions in the 2015
regulation. Id. at 1, 738/1. Third, the rule defers
a decision on whether to add conditions to 32 previously
promulgated exclusions from the definition of solid waste,
which EPA calls the "pre-2008" exclusions.
Id. at 1, 741/2. Fourth and finally, the rule
replaces the transfer-based exclusion with the "Verified
Recycler Exclusion, " a new standard governing when
transferred materials qualify as solid waste. Id. at
1, 695/2. We provide additional detail on each of these
provisions later in this opinion.
organizations petitioned for review of the 2015 rule. Their
petitions, which are consolidated in this case, challenge the
regulation on multiple fronts. Industry Petitioners argue
that both the legitimacy test and the Verified Recycler
Exclusion exceed EPA's RCRA authority. Industry
Petitioners also challenge EPA's treatment of two
specific materials: spent catalysts and off-specification
commercial chemical products. Environmental Petitioners argue
that the Verified Recycler Exclusion is too permissive and
that EPA should have added containment and notification
conditions to the 32 pre-2008 exclusions. We consider these
challenges in turn.
Petitioners first attack EPA's new legitimacy test.
Before EPA can regulate a hazardous secondary material as
hazardous waste, it must determine that the material has been
"discarded" under 42 U.S.C. § 6903(27). Items
recycled through "immediate reuse in" an
"industry's ongoing production process, " are
not discarded within the meaning of that section and are
outside EPA's hazardous waste regulations. See
American Mining Congress v. EPA, 824 F.2d 1177,
1183-85 (D.C. Cir. 1987) ("AMC"); see also
Ass'n of Battery Recyclers, Inc. v.
EPA, 208 F.3d 1047, 1052-53 (D.C. Cir. 2000) (explaining
that "immediate" in AMC means
"direct, " not instantaneous). But because
EPA's waste disposal regulations are acknowledged to be
very costly to meet, "there is an incentive for some
handlers to claim they are recycling when, in fact, they are
conducting . . . disposal." Final Rule, 80 Fed.
Reg. at 1, 719/3. To prevent such evasion, EPA polices the
line "between 'legitimate' (i.e., true)
recycling and 'sham' (i.e., fake)
recycling." Id. at 1, 720/1.
recently, EPA's policy on sham recycling existed chiefly
in uncodified guidance, notably a memo issued in 1989 by
Sylvia K. Lowrance, Director, EPA Office of Solid Waste (Apr.
26, 1989) (the "Lowrance Memo"). The memo
discussed over a dozen factors for evaluating recycling, all
aimed at determining "whether the secondary material is
'commoditylike, '" i.e., is it being handled
like a valuable industrial input or like a worthless
industrial byproduct. See id. at 2 & attachment.
Final Rule updates and codifies this effort to draw
the distinction between legitimate and sham recycling. It
requires that all recycling of hazardous secondary materials
meet a legitimacy test set forth in 40 C.F.R. §
260.43(a) or else be labeled "sham" and subjected
to full RCRA regulation. 40 C.F.R. § 261.2(g). Like the
Lowrance Memo, the rule is rooted in the assumption
that legitimate recycling should involve some
"recognizable benefit, " Final Rule, 80
Fed. Reg. at 1, 722/1, independent of merely "avoid[ing]
the requirements of" RCRA regulation, id. at 1,
satisfy the legitimacy test for recycling of a particular
material, firms must prevail on all of four factors, §
260.43(a)(1)-(4), which are in addition to whatever elements
a specific exclusion might require, see Final Rule,
80 Fed. Reg. at 1, 720/2. First, the hazardous secondary
material must "provide a useful contribution to the
recycling process." § 260.43(a)(1). Second,
"[t]he recycling process must produce a valuable product
or intermediate." § 260.43(a)(2). Third, the
persons controlling the secondary material must "manage
the hazardous secondary material as a valuable
commodity." § 260.43(a)(3). Fourth, "[t]he
product of the recycling process must be comparable to a
legitimate product or intermediate." §
260.43(a)(4). Factors 1 and 3 address the process, Factors 2
and 4 the product.
Petitioners do not attack EPA's authority to formulate
and apply a legitimacy test, nor do they fault EPA's
premise that legitimate recycling involves
"valuable" materials being used for a
"recognizable benefit." Final Rule, 80
Fed. Reg. at 1, 697/3, 1, 722/1. At that level of generality,
EPA's policy seems to be a reasonable method for
identifying materials that are "part of the waste
disposal problem" and thus subject to EPA's RCRA
authority over discarded materials. Safe Food &
Fertilizer v. EPA, 350 F.3d 1263, 1268 (D.C. Cir. 2003).
Industry Petitioners instead attack EPA's planned means
to implement that policy. They complain that mandating
Factors 3 and 4 across all recycling results in EPA's
"unlawfully regulat[ing] non-discarded materials."
Industry Pet'rs' Br. 16 (capitalization omitted).
begin with Factor 3, which requires secondary materials to be
handled as "valuable commodit[ies]." 40 C.F.R.
§ 260.43(a)(3). Where there is an analogous raw
material, the firm can meet this standard by handling the
secondary material "in an equally protective
manner." Id. If there is no raw analogue for
comparison, EPA requires that the secondary material be
"contained." Id. "Contained"
means "held in a unit (including a land-based unit . .
.) that meets" multiple enumerated criteria, including
that the unit be "labeled or otherwise ha[ve] a system
(such as a log) to immediately identify the hazardous
secondary materials" therein. 40 C.F.R. § 260.10
(entry for "Contained").
"[L]and-based unit[s], " id., encompass,
at least for some materials such as scrap metal, simply lying
on the ground, see Final Rule, 80 Fed. Reg. at 1,
721/3, 1, 736/2.
previously claimed that any "interdiction in time"
during a secondary material's trajectory from initial
output to recycling, e.g., for storage, could be considered
discard and thus trip the material into EPA's RCRA
authority. Battery Recyclers, 208 F.3d at 1052
(internal quotation marks omitted). We rejected that rule.
"To say that when something is saved it is thrown away
is an extraordinary distortion of the English language."
Id. at 1053. Industry Petitioners read that holding
to bar EPA from ever regulating how recycled materials are
contained. Their reading goes too far. EPA can impose a
containment requirement so long as it is such that an
inference of "sham" or illegitimacy would logically
flow from a firm's non-compliance. And given EPA's
explanation that a material may be "contained" if
it is simply piled on the ground, Final Rule, 80
Fed. Reg. at 1, 721/3, 1, 736/2, and meets specific
requirements that petitioners do not challenge as
unreasonable (with one exception, the "labelling"
requirement discussed below), the standard does not on its
face appear to ask for anything beyond what could be expected
of firms engaged in legitimate recycling.
Petitioners express concern about having to label or log
unwieldy molten metals and acidic sludges to satisfy
EPA's insistence on material being "contained."
But EPA offers an alternative to labelling in the
conventional sense- provision of "a system (such as a
log) to immediately identify the hazardous secondary
materials in the unit." § 260.10. Thus, in
substance, the requirement is not precisely one of labeling
or logging, but only of assuring that it somehow be possible
for the material to be "immediately
identif[iable]." Id. While doubtless EPA's
language could be interpreted unreasonably, we cannot see
that the requirement itself is unreasonable.
4 presents more difficulty. EPA explains this factor as an
effort to prevent recyclers from loading products with
hazardous secondary materials that "provide no
recognizable benefit to the product, " Final
Rule, 80 Fed. Reg. at 1, 722/1, and are simply
"along for the ride, " id. at 1, 726/2.
Although EPA does not require a material's
"hazardous component[s]" themselves to provide a
"useful contribution" to the product, see
id. at 1, 723/3 (discussing Factor 1), the agency is
concerned that a purported recycler might "incorporate
hazardous constituents into the final product when they were
not needed to make that product effective as a way to avoid
proper disposal of that material, which would be sham
recycling, " id. at 1, 726/1-2.
factor sets up two tracks, 40 C.F.R. §
260.43(a)(4)(i)-(ii), one covering products for which there
is an analogue of undoubted legitimacy, the other addressing
products with no such analogue. EPA refers to these together
as the "technical provisions." Final Rule,
80 Fed. Reg. at 1, 729/1. But as EPA recognizes that the
criteria set forth under these two tracks don't draw a
satisfactory line between genuine and sham, it also offers a
rather complicated exception-aimed at preventing products
from being labelled a sham when they in fact pose no
"significant human health or environmental risk."
§ 260.43(a)(4)(iii). But Factor 4's complex
provisions fall short of the aim. As we shall see, Factor 4
imposes tasks tangential to disposal vel non (and
thus tangential to EPA's authority), even when EPA has
offered little reason to doubt a product's legitimacy.
second track is the more reasonable of the two. When there is
no analogue, the recycled product will pass if it was created
by looping secondary materials back "to the original
process . . . from which they were generated" or if it
meets "widely recognized commodity standards and
specifications." § 260.43(a)(4)(ii)(A)-(B). Those
standards or specifications need not address the hazardous
aspects of the product. Final Rule, 80 Fed. Reg. at
1, 728/2-3. And EPA has explained that compliance with
"customer specifications" may suffice for
"specialty" products. Id. at 1, 728/1.
Although that gloss on "specifications" appears
only in EPA's discussion of the with- analogue track, the
Final Rule offers little indication that the same
word in the no-analogue track is meant to read differently on
this matter. Compare id. at 1, 727/3-28/1
(with-analogue), with id. at 1, 728/2-3
(no-analogue). Putting all this together, if a recycled
product, lacking an analogue, fails to satisfy customer
specifications, falls short of relevant commodity standards,
and is not derived from a closed-loop type process, EPA
treats it as discarded (subject to the ultimate exception).
These tests focus largely on the utility of the recycling in
question, a reasonable inquiry when deciding legitimacy. See
id. at 1, 728/3 (commodity standards and
specifications criteria mean that "market forces [will]
dictate" legitimacy); id. at 1, 729/1
("looping" criterion appropriate because this type
of recycling "conserves the use of raw materials"
without adding new hazards).
other track in Factor 4's technical provisions, applying
where the recycled product has an analogue, is more
explicitly tuned to the "along for the ride"
metaphor. It requires that the recycled product exhibit no
hazardous "characteristic" that is absent from the
product's analogue. 40 C.F.R. § 260.43(a)(4)(i)(A);
see also Final Rule, 80 Fed. Reg. at 1, 727/1
("The characteristics are ignitability, corrosivity,
reactivity, and toxicity."). This criterion-fenced in as
it is by the definitions of those characteristics, see 40
C.F.R. §§ 261.21-.24-also seems reasonable: one
would expect analogous products to have similar attributes.
But the track goes on from there. Even if the recycled
product and its analogue share the same hazardous
characteristics, the amount or "levels" of
hazardous constituents in the product must be
"comparable to or lower than" its analogue's.
§ 260.43(a)(4)(i)(B). If the product fails that test, it
can still be legitimate if it "meet[s] widely-recognized
commodity standards and specifications." Id.
Unlike in the no-analogue track, here the commodity standards
and specifications must "specifically address 
hazardous constituents." Id. Otherwise EPA will
regard the product as discarded (subject to the ultimate
left EPA some leeway in applying the idea that genuine
recyclers cannot include hazardous material just "along
for the ride" in their products. Thus in American
Petroleum Institute v. EPA, 216 F.3d 50 (D.C. Cir. 2000)
("API I"), we rejected a challenge under
"Chevron step one" to a rule that treated
"recovered oil" as discarded if it included
"extra materials . . . that provide no benefit
to the industrial process." Id. at 58-59
(emphasis added). But we hinted that such a rule should
reasonably avoid "incidentally regulat[ing] oil
containing chemicals [whose presence in the recycled oil was]
not caused by sham recycling (and therefore not
discarded)." See id. at 59.
by that perhaps opaque standard, EPA's "along for
the ride" metaphor suffers at least one of the usual
dangers of metaphors-imprecision. The record contains
examples of hazardous secondary materials that are
beneficially recycled into valuable products (recognized as
such by EPA), even though those products contain hazardous
constituents that do not, in themselves, contribute to the
value of the final product. See, e.g., Final Rule,
80 Fed. Reg. at 1, 721/1-2 (zinc-containing secondary
materials), 1, 729/3 (lead-containing secondary materials).
In those cases, even if EPA could technically say that some
small excess of hazardous constituents has been left in the
final product, the mere fact of their presence would not
constitute a reasonable basis for dubbing the product or the
process a sham. After all, it can be costly to extract tiny
amounts of hazardous constituents- potentially on the order
of "parts per million, " see id. at 1,
727/2-3-from secondary materials destined for recycling, and
no statute has given EPA authority to compel firms to engage
in such extraction where failing to do so imposes no health
or environmental risk. To rule otherwise would be to
disregard the statute's stated "objective" of
"encouraging . . . properly conducted recycling."
42 U.S.C. § 6902(a)(6).
made this very point in Safe Food to defend its
exclusion for recycled zinc fertilizers even though those
fertilizers could have "considerably higher"
contaminant levels than the corresponding "virgin
commercial fertilizer." 350 F.3d at 1269. After
reviewing EPA's data on the threat posed by the
additional contaminants, we agreed that the excesses of the
contaminant levels that EPA allowed (as consistent with
legitimate recycling) over those in virgin fertilizer samples
"lose their significance when put in proper perspective-
namely, a perspective based on health and environmental
risks." Id. at 1270.
perspective is allowed by the "comparable to or lower
than" standard for products with analogues. That
standard sets the bar at the contaminant level of the
analogue without regard to whether any incremental
contaminants are significant in terms of health and
environmental risks. This problem is reduced, but not
eliminated, by firms' option to meet
"widely-recognized commodity standards and
specifications, " 40 C.F.R. §
specifications" if the product is made-to-order,
Final Rule, 80 Fed. Reg. at 1, 728/1. Many products
might fail this alternative, not because they represent sham
recycling, but because the relevant commodity standards or
specifications don't address the hazardous constituent
levels of concern to EPA. Industry Petitioners contend, and
EPA does not contradict, that such standards usually refer to
minimum levels of desired elements rather than
maximum levels of specific impurities. Doubtless
this track will ensnare some sham recycling, but it does so
with a test that is not a "reasonable tool for
distinguishing products from wastes." See Safe
Food, 350 F.3d at 1269.
having recognized some of the shortcomings in these
provisions, created an exception purporting to account for
them. See Final Rule, 80 Fed. Reg. at 1, 729/1. A
recycler may avoid the sham label if it "prepare[s]
documentation showing why the recycling is, in fact, still
legitimate" and notifies regulators. 40 C.F.R. §
260.43(a)(4)(iii). The legitimacy "can be shown" by
"lack of exposure from toxics in the product, lack of
the bioavailability of toxins in the product, or other
relevant considerations which show that the recycled product
does not contain levels of hazardous constituents that pose a
significant human health or environmental risk."
explaining this exception, EPA has indicated that the
question is whether the recycled product will be used
beneficially in a manner that reasonably protects against the
risks its residual hazardous constituents present. See
Final Rule, 80 Fed. Reg. at 1, 729/1-3. Absence of
these circumstances would indicate that the true purpose of
the recycling is disposal. Hence, EPA explained in the
rulemaking that "lead contaminated foundry sand"
would be sham recycled when packaged as "children's
play sand" but that the same material can be
legitimately recycled for "mold making in a
facility's sand loop." Final Rule, 80 Fed.
Reg. at 1, 729/2-3. The sand is (in a sense) equally
hazardous in both cases, but the latter use is legitimate
"because . . . there is little chance of the hazardous
constituents being released into the environment or causing
damage to human health"; "there is lead throughout
the foundry's process" (i.e., the sand isn't
introducing new hazards); and "there is a clear value to
reusing the sand" in that industry. Id. at 1,
729/3. Recyclers can also meet this exception by analyzing
the "increased risk" of their product relative to
its analogues, if any. Id. We read this as saying,
in light of EPA's brief, that a recycler can show its
product is legitimate by documenting that any incremental
risk it presents is not "significant" to health and
the environment. See Respondent Br. 42-43 (citing Safe
Food, 350 F.3d at 1269-71).
to Industry Petitioners' claims, the general criteria
embodied in the Factor 4 exception seem permissible, indeed
consistent with our ruling in Safe Food. Industry
Petitioners also argue that the exception affords EPA
unlimited discretion to find discard. The language of Factor
4 and its exception is rather open-ended, so judicial review
of EPA's subsequent interpretations would normally be
highly deferential, Auer v. Robbins, 519 U.S. 452,
461-62 (1997), potentially leaving petitioners at the mercy
of a different reading in the future. But we note that Factor
4's exception is tuned specifically to "significant
human health or environmental risk[s]." 40 C.F.R. §
260.43(a)(4)(iii). And EPA has simultaneously provided an
explanation of how to apply the exception along with an
example of how a specific material might pass or fail it.
Final Rule, 80 Fed. Reg. at 1, 729/2-3 (foundry
sand). These aspects of the rulemaking sufficiently ...