[Federal Register Volume 73, Number 211 (Thursday, October 30, 2008)]
[Rules and Regulations]
[Pages 64668-64788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24399]



[[Page 64667]]

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Part II





Environmental Protection Agency





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40 CFR Parts 260, 261, and 270



Revisions to the Definition of Solid Waste; Final Rule

Federal Register / Vol. 73, No. 211 / Thursday, October 30, 2008 / 
Rules and Regulations

[[Page 64668]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 260, 261, and 270

[EPA-HQ-RCRA-2002-0031; FRL-8728-9]
RIN 2050-AG31


Revisions to the Definition of Solid Waste

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is publishing a 
final rule that revises the definition of solid waste to exclude 
certain hazardous secondary materials from regulation under Subtitle C 
of the Resource Conservation and Recovery Act (RCRA). The purpose of 
this final rule is to encourage safe, environmentally sound recycling 
and resource conservation and to respond to several court decisions 
concerning the definition of solid waste.

DATES: This final rule is effective on December 29, 2008.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-RCRA-2002-0031. All documents in the docket are listed on 
the http://www.regulations.gov Web site. Although listed in the index, 
some information is not publicly available, e.g., Confidential Business 
Information (CBI) or other information whose disclosure is restricted 
by statute. Certain other material, such as copyrighted material, is 
not placed on the Internet and will be publicly available only in hard 
copy form. Publicly available docket materials are available either 
electronically in http://www.regulations.gov or in hard copy at the 
OSWER Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., 
Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 
p.m., Monday through Friday, excluding legal holidays. The telephone 
number for the Public Reading Room is (202) 566-1744, and the telephone 
number for the OSWER Docket is 202-566-0270.

FOR FURTHER INFORMATION CONTACT: For more detailed information on 
specific aspects of this rulemaking, contact Marilyn Goode, Office of 
Solid Waste, Hazardous Waste Identification Division, MC 5304P, 
Environmental Protection Agency, 1200 Pennsylvania Ave., NW., 
Washington, DC 20460, (703) 308-8800 (<a href="/cdn-cgi/l/email-protection#a2c5cdcdc6c78ccfc3d0cbcedbcce2c7d2c38cc5cdd4"><span class="__cf_email__" data-cfemail="ff9890909b9ad1929e8d96938691bf9a8f9ed1989089">[email protected]</span></a>) or Tracy 
Atagi, Office of Solid Waste, Hazardous Waste Identification Division, 
MC 5304P, Environmental Protection Agency, 1200 Pennsylvania Ave., NW., 
Washington, DC 20460, at (703) 308-8672 (<a href="/cdn-cgi/l/email-protection#4021342127296e3432212339002530216e272f36"><span class="__cf_email__" data-cfemail="2e4f5a4f4947005a5c4f4d576e4b5e4f00494158">[email protected]</span></a>).

SUPPLEMENTARY INFORMATION:

A. Does This Action Apply to Me?

    Entities potentially affected by today's action include 
approximately 5,600 facilities in 280 industries in 21 economic sectors 
that generate or recycle hazardous secondary materials that are 
currently regulated as RCRA Subtitle C hazardous wastes (e.g., 
secondary materials, such as industrial co-products, by-products, 
residues, and unreacted feedstocks). Approximately 60% of these 
affected facilities are classified in NAICS code economic sectors 31, 
32, and 33 (manufacturing). The remaining economic sectors, which have 
more than ten affected industries each, are in NAICS codes 48 
(transportation), 42 (wholesale trade), and 56 (administrative support, 
waste management and remediation). About 1.5 million tons per year of 
hazardous secondary materials generated and handled by these entities 
may be affected, of which the most common types are metal-bearing 
hazardous secondary materials (e.g., sludges and spent catalysts) for 
commodity metals recovery and organic chemical liquid hazardous 
secondary materials for recovery as solvents. Today's action is 
expected to result in regulatory and materials recovery cost savings to 
these industries of approximately $95 million per year. Taking into 
account impact estimation uncertainty factors, today's action could 
result in cost savings ranging from $19 million to $333 million per 
year to these industries in any future year. More detailed information 
on the potentially affected entities, industries, and industrial 
materials, as well as the economic impacts of this rule (with impact 
uncertainty factors), is presented in section XXI.A of this preamble 
and in the ``Regulatory Impact Analysis'' available in the docket for 
this final rule.

B. Why Is EPA Taking This Action?

    There are two primary purposes of this action. One purpose is to 
respond to a series of seven decisions by the U.S. Court of Appeals for 
the DC Circuit (1987 to 2000), which, taken together, have provided EPA 
with additional direction regarding the proper formulation of the RCRA 
regulatory definition of solid wastes for purposes of Subtitle C. A 
second purpose is to clarify the RCRA concept of ``legitimate 
recycling,'' which is a key component of EPA's approach to recycling 
hazardous secondary materials.
    This action is not intended to bring new wastes into the RCRA 
hazardous waste regulatory system and it does not do so. By removing 
unnecessary controls over certain hazardous secondary materials, and by 
providing more explicit and consistent factors for determining the 
legitimacy of recycling practices, EPA expects that today's action will 
encourage and expand the safe, beneficial recycling of additional 
hazardous secondary materials. Today's action is consistent with EPA's 
longstanding policy of encouraging the recovery, recycling, and reuse 
of valuable resources as an alternative to disposal (i.e., landfilling 
and incineration), while at the same time maintaining protection of 
human health and the environment. It also is consistent with the 
resource conservation goal of the Congress in enacting the RCRA statute 
(as evidenced by the statute's name), and with EPA's vision of how the 
RCRA program could evolve over the long term to promote economic 
sustainability and more efficient use of resources. EPA's long-term 
vision of the future of the RCRA waste management program is discussed 
in the document ``Beyond RCRA: Prospects for Waste and Materials 
Management in the Year 2020,'' which is available on EPA's Web site at: 
http://www.epa.gov/epaoswer/osw/vision.htm.

Preamble Outline

I. Statutory Authority
II. Which Revisions to the Regulations Is EPA Finalizing?
III. What Is the History of These Rules?
IV. How Do the Provisions in the Final Rule Compare to Those 
Proposed on March 26, 2007?
V. How Does the Concept of Discard Relate to the Final Rule?
VI. When Will the Final Rule Become Effective?
VII. Exclusion for Hazardous Secondary Materials That are 
Legitimately Reclaimed Under the Control of the Generator
VIII. Exclusion for Hazardous Secondary Materials That are 
Transferred for the Purpose of Legitimate Reclamation
IX. Legitimacy
X. Non-Waste Determination Process
XI. Effect on Other Exclusions
XII. Effect on Permitted and Interim Status Facilities
XIII. Effect on CERCLA
XIV. Effect on Imports and Exports
XV. General Comments on the Proposed Revisions to the Definition of 
Solid Waste
XVI. Major Comments on the Exclusion for Hazardous Secondary 
Materials Legitimately Reclaimed Under the Control of the Generator
XVII. Major Comments on the Exclusion for Hazardous Secondary 
Materials Transferred for the Purpose of Legitimate Reclamation

[[Page 64669]]

XVIII. Major Comments on Legitimacy
XIX. Major Comments on the Non-Waste Determination Process
XX. How Will These Regulatory Changes Be Administered and Enforced 
in the States?
XXI. Administrative Requirements for This Rulemaking

I. Statutory Authority

    These regulations are promulgated under the authority of sections 
2002, 3001, 3002, 3003, 3004, 3007, 3010, and 3017 of the Solid Waste 
Disposal Act of 1970, as amended by the Resource Conservation and 
Recovery Act of 1976 (RCRA), as amended by the Hazardous and Solid 
Waste Amendments of 1984 (HSWA), 42 U.S.C. 6912, 6921, 6922, 6923, 
6924, 6927, 6930, and 6938. These statutes, combined, are commonly 
referred to as ``RCRA.''

II. Which Revisions to the Regulations Is EPA Finalizing?

    In today's rule, EPA is revising the definition of solid waste to 
exclude from regulation under Subtitle C of RCRA (42 U.S.C. 6921 
through 6939(e)) certain hazardous secondary materials which are being 
reclaimed. We have defined hazardous secondary materials as those which 
would be classified as hazardous wastes if discarded. We are also 
promulgating regulatory factors for determining when recycling is 
legitimate. The Agency first proposed changes reflecting the court 
decisions on the definition of solid waste rules on October 28, 2003 
(68 FR 61558). We then published a supplemental proposal on March 26, 
2007 (72 FR 14172).
    Today's preamble is organized as follows: This section of the 
preamble (Section II) describes the three principal regulatory 
revisions that are finalized in this rule: (1) An exclusion for certain 
hazardous secondary materials legitimately reclaimed under the control 
of the generator within the United States or its territories; (2) a 
conditional exclusion for hazardous secondary materials that are 
transferred for the purpose of legitimate reclamation; and (3) a case-
by-case non-waste determination procedure. Section II also discusses 
EPA's treatment of legitimacy in the final rule. Section III describes 
the history of these revisions, including relevant court cases and the 
original proposal (October 28, 2003, 68 FR 61558). Section III also 
describes the Agency's independent analyses of successful recycling 
practices, environmental problems associated with recycling of 
hazardous secondary materials, and potential effects of market forces 
on the management of such materials, and provides an overview of the 
March 26, 2007, supplemental proposal (72 FR 14172). Section IV 
explains the ways in which the March 2007 supplemental proposal differs 
from today's rule. Section V discusses how this rule is related to the 
concept of ``discard,'' and section VI indicates the effective date of 
the rule. Sections VII-X contain detailed descriptions of all 
regulatory provisions promulgated today. Sections XI-XIV describe the 
effect of this rule on other exclusions, permitted and interim status 
facilities, Superfund, and imports/exports. Sections XV-XIX contain a 
discussion of all major public comments received on the March 26, 2007, 
supplemental proposal, along with the Agency's responses to these 
comments. Section XX describes how this rule will be administered and 
enforced in the states, and section XXI describes the administrative 
requirements for this rulemaking.
    Below is a summary of the principal regulatory revisions 
promulgated today.

A. Exclusion for Hazardous Secondary Materials That Are Legitimately 
Reclaimed Under the Control of the Generator in Non-Land-Based Units

    This provision--40 CFR 261.2(a)(2)(ii)--would exclude certain 
hazardous secondary materials (i.e., listed sludges, listed by-
products, and spent materials) that are generated and legitimately 
reclaimed within the United States or its territories under the control 
of the generator, when such materials are handled only in non-land-
based units (e.g., tanks, containers, or containment buildings). This 
provision applies to hazardous secondary materials that are not spent 
lead-acid batteries or listed wastes K171 or K172, or otherwise subject 
to the specific management conditions under 40 CFR 261.4(a). Under this 
provision, the hazardous secondary materials must be contained in such 
units and are subject to the speculative accumulation requirements of 
40 CFR 261.1(c)(8), as well as the provisions for legitimate recycling 
at 40 CFR 260.43. In addition, under 40 CFR 260.42, the generator (and 
the reclaimer, if the generator and reclaimer are located at different 
facilities) must send a notification prior to operating under the 
exclusion and by March 1 of each even numbered year thereafter to the 
EPA Regional Administrator or, in an authorized state, to the state 
director.
    Hazardous secondary materials would be considered ``under the 
control of the generator'' under the following circumstances:
    (1) They are generated and then reclaimed at the generating 
facility; or
    (2) They are generated and reclaimed at different facilities, if 
the generator certifies that the hazardous secondary materials are sent 
either to a facility controlled by the generator or to a facility under 
common control with the generator, and that either the generator or the 
reclaimer has acknowledged responsibility for the safe management of 
the hazardous secondary materials; or
    (3) They are generated and reclaimed pursuant to a written 
agreement between a tolling contractor and toll manufacturer, if the 
tolling contractor certifies that it has entered into a tolling 
contract with a toll manufacturer and that the tolling contractor 
retains ownership of, and responsibility for, the hazardous secondary 
materials generated during the course of the manufacture, including any 
releases of hazardous secondary materials that occur during the 
manufacturing process.
    This exclusion does not include the recycling of hazardous 
secondary materials that are inherently waste-like under 40 CFR 
261.2(d), hazardous secondary materials that are used in a manner 
constituting disposal or used to produce products that are applied to 
or placed on the land (40 CFR 261.2(c)(1)), or hazardous secondary 
materials burned to recover energy or used to produce a fuel or 
otherwise contained in fuels (40 CFR 261.2(c)(2)).

B. Exclusion for Hazardous Secondary Materials That Are Legitimately 
Reclaimed Under the Control of the Generator in Land-Based Units

    This provision--40 CFR 261.4(a)(23)--contains requirements that are 
identical to those that apply to hazardous secondary materials 
generated and legitimately reclaimed under the control of the generator 
within the United States or its territories and are handled in non-
land-based units in 40 CFR 261.2(a)(2)(ii), described above. Land-based 
units are defined in 40 CFR 260.10 as an area where hazardous secondary 
materials are placed in or on the land before recycling, but this 
definition does not include land-based production units. Examples of 
land-based units are surface impoundments and piles. This provision 
applies to hazardous secondary materials that are not spent lead-acid 
batteries or listed wastes K171 or K172, or otherwise subject to the 
specific management conditions under 40 CFR 261.4(a).

C. Exclusion for Hazardous Secondary Materials That Are Transferred for 
the Purpose of Legitimate Reclamation

    This conditional exclusion--40 CFR 261.4(a)(24), hereinafter 
referred to as

[[Page 64670]]

the ``transfer-based exclusion''--applies to hazardous secondary 
materials (i.e., spent materials, listed sludges, and listed by-
products) that are generated and subsequently transferred to a 
different person or company for the purpose of reclamation. As long as 
the conditions and restrictions to the exclusion are satisfied, the 
hazardous secondary materials would not be subject to Subtitle C 
regulation.
    Hazardous secondary material generators, reclaimers, and 
intermediate facilities (i.e., other facilities storing hazardous 
secondary materials for more than 10 days) must all submit a 
notification prior to operating under the exclusion and by March 1 of 
each even numbered year thereafter to the EPA Regional Administrator 
or, in an authorized state, to the state director (see 40 CFR 260.42). 
In addition, hazardous secondary materials managed at such facilities 
may not be speculatively accumulated as defined in Sec.  262.1(c)(8) 
(see 40 CFR 261.4(a)(24)(i)) and must be legitimately recycled as 
specified in Sec.  260.43 (see 40 CFR 261.4(a)(24)(iv)).
    Conditions applicable to generators of hazardous secondary 
materials are found at 40 CFR 261.4(a)(24)(v) and include containment 
of such materials, reasonable efforts to ensure that the intermediate 
facility or reclaimer intends to manage or recycle the hazardous 
secondary material properly and legitimately, and retention of records 
of off-site shipments for three years. Conditions applicable to 
intermediate facilities and reclaimers of hazardous secondary materials 
are found at 40 CFR 261.4(a)(24)(vi) and include containment of such 
materials, transmittal of confirmations of receipt to generators, 
maintenance of records for hazardous secondary materials received and 
sent off-site, financial assurance, and (for reclaimers) proper 
management of residuals. In addition, if any of the hazardous secondary 
materials excluded under 40 CFR 261.4(a)(24) are generated and then 
exported to another country for reclamation, the exporter must notify 
and obtain consent from the receiving country, and file an annual 
report. This requirement is codified in 40 CFR 261.4(a)(25).
    Like the previously discussed exclusion for hazardous secondary 
materials reclaimed under the control of the generator, this exclusion 
would not apply to hazardous secondary materials that are inherently 
waste-like under 40 CFR 261.2(d), hazardous secondary materials that 
are used in a manner constituting disposal or used to produce products 
that are applied to or placed on the land (40 CFR 261.2(c)(1)), or 
hazardous secondary materials burned to recover energy or used to 
produce a fuel or are otherwise contained in fuels (40 CFR 
261.2(c)(2)).

D. Codification of Legitimacy

    Under the RCRA Subtitle C definition of solid waste, certain 
hazardous secondary materials, if recycled, are not solid wastes and, 
therefore, are not subject to RCRA's ``cradle to grave'' management 
system. The basic idea behind this principle is that recycling of these 
materials often closely resembles industrial manufacturing rather than 
waste management. However, due to economic incentives for managing 
hazardous secondary materials outside the RCRA regulatory system, there 
is a potential for some handlers to claim that they are recycling the 
hazardous secondary materials when, in fact, they are conducting waste 
treatment and/or disposal. To guard against this, EPA has long 
articulated the need to distinguish between ``legitimate'' (i.e., true) 
recycling and ``sham'' recycling, beginning with the preamble to the 
1985 regulations that discussed the definition of solid waste (50 FR 
638, January 4, 1985) and continuing through today's final rule.
    In the October 28, 2003, proposed rule (68 FR 61581-61588) on the 
definition of solid waste, we proposed codifying four criteria (called 
``factors'' in today's rule) to determine when recycling of hazardous 
secondary materials is legitimate. In the March 26, 2007, supplemental 
proposal in section XI of the preamble (72 FR 14197), we refined our 
original proposal in response to public comments. In today's final 
rule, we are codifying the factors to be used in determining whether 
recycling under the provisions finalized in this rule is legitimate, 
applying the structure basically as proposed in March 2007 (proposed at 
40 CFR 261.2(g)). The legitimacy provision is finalized in 40 CFR 
260.43.

E. Non-Waste Determinations

    Today's rule establishes a non-waste determination process that 
provides persons with an administrative process for receiving a formal 
determination that their hazardous secondary materials are not 
discarded and, therefore, not solid wastes when legitimately reclaimed. 
This process is voluntary and is available in addition to the two self-
implementing exclusions included in today's rule. There are two types 
of non-waste determinations: (1) A determination for hazardous 
secondary materials reclaimed in a continuous industrial process; and 
(2) a determination for hazardous secondary materials indistinguishable 
in all relevant aspects from a product or intermediate.
    For hazardous secondary materials reclaimed in a continuous 
industrial process, the non-waste determination will be based on the 
following four criteria: (1) The extent that the management of the 
hazardous secondary material is part of the continuous primary 
production process; (2) whether the capacity of the production process 
would use the hazardous secondary material in a reasonable time frame; 
(3) whether the hazardous constituents in the hazardous secondary 
material are reclaimed rather than discarded to the air, water, or land 
at significantly higher levels from either a statistical or from a 
health and environmental risk perspective than would otherwise be 
released by the production process; and (4) other relevant factors that 
demonstrate the hazardous secondary material is not discarded.
    For hazardous secondary materials which are indistinguishable in 
all relevant aspects from a product or intermediate, the non-waste 
determination will be based on the following five criteria: (1) Whether 
market participants treat the hazardous secondary material as a product 
or intermediate rather than a waste; (2) whether the chemical and 
physical identity of the hazardous secondary material is comparable to 
commercial products or intermediates; (3) whether the capacity of the 
market would use the hazardous secondary material in a reasonable time 
frame; (4) whether the hazardous constituents in the hazardous 
secondary material are reclaimed rather than discarded to the air, 
water, or land at significantly higher levels from either a statistical 
or from a health and environmental risk perspective than would 
otherwise be released by the production process; and (5) other relevant 
factors that demonstrate the hazardous secondary material is not 
discarded.
    The process for the non-waste determination is the same as that for 
the solid waste variances found in 40 CFR 260.30.

III. What Is the History of These Rules?

A. Background

    RCRA gives EPA the authority to regulate hazardous wastes (see, 
e.g., RCRA sections 3001-3004). The original statutory designation of 
the subtitle for the hazardous waste program was Subtitle C and the 
national hazardous waste program is referred to as the RCRA Subtitle C 
program. Subtitle C is codified at 42 U.S.C. 6921 through

[[Page 64671]]

6939e. ``Subtitle C'' regulations are found at 40 CFR Parts 260 through 
279. ``Hazardous wastes'' are the subset of solid wastes that present 
threats to human health and the environment (see RCRA section 1004(5)). 
EPA also may address solid and hazardous wastes under its endangerment 
authorities in section 7003. (Similar authorities are available for 
citizen suits under section 7002.)
    Materials that are not solid wastes are not subject to regulation 
as hazardous wastes under RCRA Subtitle C. Thus, the definition of 
``solid waste'' plays a key role in defining the scope of EPA's 
authorities under Subtitle C of RCRA. The statute defines ``solid 
waste'' as ``* * * any garbage, refuse, sludge from a waste treatment 
plant, water supply treatment plant, or air pollution control facility 
and other discarded material * * * resulting from industrial, 
commercial, mining, and agricultural operations, and from community 
activities * * *'' (RCRA Section 1004 (27) (emphasis added)).
    Since 1980, EPA has interpreted ``solid waste'' under its Subtitle 
C regulations to encompass both materials that are destined for final, 
permanent treatment and placement in disposal units, as well as certain 
materials that are destined for recycling (45 FR 33090-95, May 19, 
1980; 50 FR 604-656, Jan. 4, 1985 (see in particular pages 616-618)). 
EPA has offered three arguments in support of this approach:
    <bullet> The statute and the legislative history suggest that 
Congress expected EPA to regulate as solid and hazardous wastes certain 
materials that are destined for recycling (see 45 FR 33091, citing 
numerous sections of the statute and U.S. Brewers' Association v. EPA, 
600 F. 2d 974 (DC Cir. 1979); 48 FR 14502-04, April 3, 1983; and 50 FR 
616-618).
    <bullet> Hazardous secondary materials stored or transported prior 
to recycling have the potential to present the same types of threats to 
human health and the environment as hazardous wastes stored or 
transported prior to disposal. In fact, EPA found that recycling 
operations have accounted for a number of significant damage incidents. 
For example, hazardous secondary materials destined for recycling were 
involved in one-third of the first 60 filings under RCRA's imminent and 
substantial endangerment authority, and in 20 of the initial sites 
listed under the Comprehensive Environmental Response, Compensation and 
Liability Act (CERCLA) (48 FR 14474, April 4, 1983). Congress also 
cited some damage cases which involve recycling (H.R. Rep. 94-1491, 
94th Cong., 2d Sess., at 17, 18, 22). More recent data (i.e., 
information on damage incidents occurring after 1982) included in the 
rulemaking docket for today's final rule corroborate the fact that 
recycling operations can result in significant damage incidents.
    <bullet> Excluding all hazardous secondary materials destined for 
recycling would allow materials to move in and out of the hazardous 
waste management system depending on what any person handling the 
hazardous secondary material intended to do with them. This seems 
inconsistent with the mandate to track hazardous wastes and control 
them from ``cradle to grave.''
    Hence, EPA has interpreted the statute to confer jurisdiction over 
at least certain hazardous secondary materials destined for recycling. 
The Agency has therefore developed in part 261 of 40 CFR a definition 
of ``solid waste'' for Subtitle C regulatory purposes. (Note: This 
definition is narrower than the definition of ``solid waste'' for RCRA 
endangerment and information-gathering authorities. (See 40 CFR 
261.1(b)). Also Connecticut Coastal Fishermen's Association v. 
Remington Arms Co., 989 F.2d 1305, 1315 (2d Cir. 1993) holds that EPA's 
use of a narrower and more specific definition of solid waste for 
Subtitle C purposes is a reasonable interpretation of the statute. See 
also Military Toxics Project v. EPA, 146 F.3d 948 (DC Cir. 1998).)
    EPA has always asserted that hazardous secondary materials are not 
excluded from its jurisdiction simply because someone claims that they 
will be recycled. EPA has consistently considered hazardous secondary 
materials destined for ``sham recycling'' to be discarded and, hence, 
to be solid wastes for Subtitle C purposes (see 45 FR 33093, May 19, 
1980; 50 FR 638-39, Jan. 4, 1985). The U.S. Court of Appeals for the DC 
Circuit has agreed that materials undergoing sham recycling are 
discarded and, consequently, are solid wastes under RCRA (see American 
Petroleum Institute v. EPA, 216 F.3d 50, 58-59 (DC Cir. 2000)).

B. A Series of DC Circuit Court Decisions on the Definition of Solid 
Waste

    Trade associations representing mining and oil refining interests 
challenged EPA's 1985 regulatory definition of solid waste. In 1987, 
the DC Circuit held that EPA exceeded its authority ``in seeking to 
bring materials that are not discarded or otherwise disposed of within 
the compass of `waste' '' (American Mining Congress v. EPA (``AMC I''), 
824 F.2d 1177, 1178 (DC Cir. 1987)).
    The Court held that certain of the materials EPA was seeking to 
regulate were not ``discarded materials'' under RCRA section 1004(27). 
The Court also held that Congress used the term ``discarded'' in its 
ordinary sense, to mean ``disposed of'' or ``abandoned'' (824 F.2d at 
1188-89). The Court further held that the term ``discarded materials'' 
could not include materials ``* * * destined for beneficial reuse or 
recycling in a continuous process by the generating industry itself 
(because they) are not yet part of the waste disposal problem'' (824 
F.2d at 1190). The Court held that Congress had directly spoken to this 
issue, so that EPA's definition was not entitled to deference under 
Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984) (824 F.2d at 1183, 
1189-90, 1193).
    At the same time, the Court did not hold that recycled materials 
could not be discarded. The Court mentioned at least two examples of 
recycled materials that EPA properly considered within its statutory 
jurisdiction, noting that used oil can be considered a solid waste (824 
F.3d at 1187 (fn 14)). Also, the Court suggested that materials 
disposed of and recycled as part of a waste management program are 
within EPA's jurisdiction (824 F. 2d at 1179).
    Subsequent decisions by the DC Circuit also indicate that some 
materials destined for recycling are ``discarded'' and therefore within 
EPA's jurisdiction. In particular, the Court held that emission control 
dust from steelmaking operations listed as hazardous waste ``K061'' is 
a solid waste, even when sent to a metals reclamation facility, at 
least where that is the treatment method required under EPA's land 
disposal restrictions program (American Petroleum Institute v. EPA 
(``API I''), 906 F.2d 729 (DC Cir. 1990)). In addition, the Court held 
that it is reasonable for EPA to consider as discarded (and solid 
wastes) listed wastes managed in units that are in part wastewater 
treatment units, especially where it is not clear that the industry 
actually reuses the materials (AMC II, 907 F. 2d 1179 (DC Cir. 1990)).
    It also is worth noting that two other Circuits also have held that 
EPA has authority over at least some materials destined for reclamation 
rather than final discard. The U.S. Court of Appeals for the 11th 
Circuit found that ``[i]t is unnecessary to read into the term 
`discarded' a congressional intent that the waste in question must 
finally and forever be discarded'' (U.S. v. ILCO, 996 F.2d 1126, 1132 
(11th Cir. 1993) (finding that used lead batteries sent to

[[Page 64672]]

a reclaimer have been ``discarded once'' by the entity that sent the 
battery to the reclaimer)). In addition, the Fourth Circuit found that 
slag held on the ground untouched for six months before sale for use as 
road bed could be a solid waste (Owen Electric Steel Co. v. EPA, 37 
F.3d 146, 150 (4th Cir. 1994)).
    In 1998, EPA promulgated a rule in which EPA claimed Subtitle C 
jurisdiction over hazardous secondary materials recycled by reclamation 
within the mineral processing industry, the ``LDR Phase IV rule'' (63 
FR 28556, May 26, 1998). In that rule, EPA promulgated a conditional 
exclusion for all types of mineral processing hazardous secondary 
materials destined for reclamation. EPA imposed a condition prohibiting 
land-based storage prior to reclamation because it considered hazardous 
secondary materials from the mineral processing industry that were 
stored on the land to be part of the waste disposal problem (63 FR 
28581). The conditional exclusion decreased regulation over spent 
materials stored prior to reclamation, but increased regulation over 
by-products and sludges that exhibit a hazardous characteristic, and 
that are stored prior to reclamation. EPA noted that the statute does 
not authorize it to regulate ``materials that are destined for 
immediate reuse in another phase of the industry's ongoing production 
process.'' EPA, however, took the position that materials that are 
removed from a production process for storage are not ``immediately 
reused,'' and therefore are ``discarded'' (63 FR 28580).
    The mining industry challenged the rule, and the DC Circuit vacated 
the provisions that expanded jurisdiction over characteristic by-
products and sludges destined for reclamation (Association of Battery 
Recyclers v. EPA (``ABR''), 208 F.3d 1047 (DC Cir. 2000)). The Court 
held that it had already resolved the issue presented in ABR in its 
opinion in AMC I, where it found that ``* * * Congress unambiguously 
expressed its intent that `solid waste' (and therefore EPA's regulatory 
authority) be limited to materials that are `discarded' by virtue of 
being disposed of, abandoned, or thrown away'' (208 F.2d at 1051). It 
repeated that materials reused within an ongoing industrial process are 
neither disposed of nor abandoned (208 F.3d at 1051-52). It explained 
that the intervening API I and AMC II decisions had not narrowed the 
holding in AMC I (208 F.3d at 1054-1056).
    Notably, the Court did not hold that storage before reclamation 
automatically makes materials ``discarded.'' Rather, it held that ``* * 
* at least some of the secondary material EPA seeks to regulate as 
solid waste (in the mineral processing rule) is destined for reuse as 
part of a continuous industrial process and thus is not abandoned or 
thrown away'' (208 F.3d at 1056).
    In its most recent opinion dealing with the definition of solid 
waste, Safe Food and Fertilizer v. EPA (``Safe Food''), 350 F.3d 1263 
(DC Cir. 2003), the Court upheld an EPA rule that excludes from the 
definition of solid waste hazardous secondary materials used to make 
zinc fertilizers, and the fertilizers themselves, so long as the 
recycled materials meet certain handling, storage and reporting 
conditions and the resulting fertilizers have concentration levels for 
lead, arsenic, mercury, cadmium, chromium, and dioxins that fall below 
specified thresholds (Final Rule, ``Zinc Fertilizers Made From Recycled 
Hazardous Secondary Materials'' (``Fertilizer Rule''), 67 FR 48393, 
July 24, 2002). EPA determined that if these conditions are met, the 
hazardous secondary materials used to make the fertilizer have not been 
discarded. The conditions apply to a number of recycled materials not 
produced in the fertilizer production industry, including certain zinc-
bearing hazardous secondary materials, such as brass foundry dusts.
    EPA's reasoning was that market participants, consistent with the 
EPA-required conditions in the rule, would treat the exempted materials 
more like valuable products than like negatively-valued wastes and, 
thus, would manage them in ways inconsistent with discard. In addition, 
the fertilizers derived from these recycled feedstocks are chemically 
indistinguishable from analogous commercial products made from raw 
materials (350 F.3d at 1269). The Court upheld the rule based on EPA's 
explanation that market participants manage materials in ways 
inconsistent with discard, and the fact that the levels of contaminants 
in the recycled fertilizers were ``identical'' to the fertilizers made 
with virgin raw materials. The Court held that this interpretation of 
``discard'' was reasonable and consistent with the statutory purpose. 
The Court noted that the identity principle was defensible because the 
differences in health and environmental risks between the two types of 
fertilizers are so slight as to be substantively meaningless.
    However, the Court specifically stated that it ``need not consider 
whether a material could be classified as a non-discard exclusively on 
the basis of the market-participation theory'' (350 F.3d at 1269). The 
Court only determined that the combination of market participants' 
treatment of the materials, EPA required management standards, and the 
``identity principle'' are a reasonable set of tools to establish that 
the recycled hazardous secondary materials and fertilizers are not 
discarded.

C. October 2003 Proposal To Revise the Definition of Solid Waste

    Prompted by concerns articulated in various Court opinions decided 
up to that point, in October 2003, EPA proposed a rule that material 
generated and reclaimed in a continuous process within the same 
industry is not discarded for purposes of Subtitle C, provided the 
recycling process is legitimate (68 FR 61558, October 28, 2003). ``Same 
industry'' was defined as industries sharing the same 4-digit North 
American Industry Classification System (NAICS) code.
    In the same notice, EPA also solicited comment on several different 
alternatives to the proposed exclusion. The first alternative was 
whether to exclude from the definition of solid waste those hazardous 
secondary materials that are generated and reclaimed in a continuous 
process on-site (as defined in 40 CFR 260.10), even if different 
industries were involved. This exclusion would be based on the premise 
that materials recycled on-site in a continuous process are unlikely to 
be discarded because they would be closely managed and monitored by a 
single entity that is intimately familiar with both the generation and 
reclamation of the hazardous secondary material. In addition, no off-
site transport of the hazardous secondary material (with its attendant 
risks) would occur, and there would be few questions about potential 
liability in the event of mismanagement or mishap.
    The second alternative was an exclusion for certain situations 
within the chemical manufacturing industry that might present unique 
recycling situations. Specifically, within the chemical manufacturing 
industry, the first manufacturer contracts out production of certain 
chemicals to another manufacturer (referred to as batch or tolling 
operations). The second manufacturer may generate hazardous secondary 
materials that could be returned to the first chemical manufacturer for 
reclamation.
    The third alternative would have provided a broader conditional 
exclusion from the RCRA hazardous waste regulations for essentially all 
hazardous secondary materials that are legitimately recycled by 
reclamation. The purpose of this broader exclusion

[[Page 64673]]

would have been to encourage reclamation by lowering costs of 
recycling, while still protecting human health and the environment. The 
Agency suggested that additional requirements or conditions might be 
appropriate to protect human health and the environment for this 
broader exclusion, compared to the same-industry exclusion that we 
proposed. Examples of such additional conditions could include 
recordkeeping and reporting requirements, along with safeguards on 
storage or handling.
    In response to the October 2003 proposal, a number of commenters 
criticized the Agency specifically for not having conducted a study of 
the potential impacts of the proposed regulatory changes. These 
commenters expressed the general concern that deregulating hazardous 
secondary materials that are reclaimed in the manner proposed could 
result in mismanagement of these materials and, thus, could create new 
cases of environmental damage that would require remedial action under 
federal or state authorities. Some of the commenters further cited a 
number of examples of environmental damage that were attributed to 
hazardous secondary material recycling, including a number of sites 
listed on the Superfund National Priorities List (NPL).
    However, other commenters to the October 2003 proposal expressed 
the view that the great majority of these cases of recycling-related 
environmental problems occurred before RCRA, CERCLA, or other 
environmental programs were established in the early 1980s. These 
commenters further argued that these environmental programs--most 
notably, RCRA's hazardous waste regulations and the liability 
provisions of CERCLA--have created strong incentives for proper 
management of recyclable hazardous secondary materials and recycling 
residuals. Several commenters further noted that, because of these 
developments, industrial recycling practices have changed substantially 
since the early 1980s and present day generators and recyclers are much 
better environmental stewards than in the pre-RCRA/CERCLA era. Thus, 
they argued, cases of ``historical'' recycling-related environmental 
damage are not particularly relevant or instructive with regard to 
modifying the current RCRA hazardous waste regulations for hazardous 
secondary materials recycling.

D. Recycling Studies

    In light of these comments on the October 2003 proposal, and in 
deliberating on how to proceed with this rulemaking effort, the Agency 
decided that additional information on hazardous secondary material 
recycling would benefit the regulatory decision-making process, and 
would provide stakeholders with a clearer picture of the hazardous 
secondary material recycling industry in this country. Accordingly, the 
Agency examined three basic issues that we believed were of particular 
importance to informing this rulemaking effort:
    <bullet> How do responsible generators and recyclers of hazardous 
secondary materials ensure that recycling is done in an environmentally 
safe manner?
    <bullet> To what extent have hazardous secondary material recycling 
practices resulted in environmental problems in recent years, and why?
    <bullet> Are there certain economic forces or incentives specific 
to hazardous secondary material recycling that can explain why 
environmental problems can sometimes originate from such recycling 
activities?
    Reports documenting these studies have been available for comment 
in the docket for this rulemaking, under the following titles:
    <bullet> An Assessment of Good Current Practices for Recycling of 
Hazardous Secondary Materials (EPA-HQ-RCRA-2002-0031-0354 ) 
(``successful recycling study'').
    <bullet> An Assessment of Environmental Problems Associated With 
Recycling of Hazardous Secondary Materials (EPA-HQ-RCRA-2002-0031-0355) 
(``environmental problems study'').
    <bullet> A Study of Potential Effects of Market Forces on the 
Management of Hazardous Secondary Materials Intended for Recycling 
(EPA-HQ-RCRA-2002-0031-0358) (``market forces study'').

The results of these three studies have informed and supported EPA's 
decision making in today's final rule.
    The successful recycling study has provided information to the 
Agency that has helped us determine what types of controls would be 
appropriate for hazardous secondary materials sent for reclamation to 
determine that they are handled as commodities rather than wastes. EPA 
found that responsible recycling practices used by generators and 
recyclers to manage hazardous secondary materials fall into two general 
categories. The first category includes the audit activities and 
inquiries performed by a generator of a hazardous secondary material to 
determine whether the entity to which it is sending such material is 
equipped to responsibly manage it without the risk of releases or other 
environmental damage. These recycling and waste audits of other 
companies' facilities form a backbone of many of the transactions in 
the hazardous secondary materials market. The second category of 
responsible recycling practices consists of the control practices that 
ensure responsible management of any given shipment of hazardous 
secondary material, such as the contracts under which the transaction 
takes place and the tracking systems in place that can inform a 
generator that its hazardous secondary material has been properly 
managed.
    As discussed later in today's preamble, these findings helped 
inform EPA's decision to require that a hazardous secondary material 
generator conduct reasonable efforts to ensure its materials are 
properly and legitimately recycled, and to require certain 
recordkeeping requirements.
    The goal of the environmental problems study was to identify and 
characterize environmental problems that have been attributed to some 
types of hazardous secondary material recycling activity that are 
relevant for the purpose of this rulemaking effort. To address 
commenters' concerns that historic damages are irrelevant to current 
practices, EPA only included cases where damages occurred after 1982 
(post-RCRA and -CERCLA implementation). The study identifies 208 cases 
in which environmental damages of some kind occurred from some type of 
recycling activity and that otherwise fit the scope of the study. The 
Agency believes that the occurrence of certain types of environmental 
problems associated with current recycling practices shows that discard 
has occurred. In particular, instances where materials were abandoned 
(e.g., in warehouses) and which required removal overseen by a 
government agency and expenditure of public funds clearly demonstrate 
that the hazardous secondary material was discarded. Of the 208 damage 
cases, 69 cases (33%) involve abandoned materials. The relatively high 
incidence of abandoned materials likely reflects the fact that 
bankruptcies or other types of business failures were associated with 
138 (66%) of the cases.
    In addition, the pattern of environmental damages that resulted 
from the mismanagement of recyclable materials (including contamination 
of soils, groundwater, surface water and air) is a strong indication 
that the hazardous secondary materials were generally not managed as 
valuable commodities and were discarded. Of the 208 damage cases, 81 
cases (40%) primarily resulted from the

[[Page 64674]]

mismanagement of recyclable hazardous secondary materials. 
Mismanagement of recycling residuals was the primary cause in 71 cases 
(34%). Often, in the case of mismanagement of recycling residues, 
reclamation processes generated residuals in which the toxic components 
of the recycled materials were separated from the non-toxic components, 
and these portions of the hazardous secondary material were then 
mismanaged and discarded. Examples of this include a number of drum 
reconditioning facilities, where large numbers of used drums were 
cleaned out to remove small amounts of remaining product such as 
solvent, and these wastes were then improperly stored or disposed.
    As discussed later in today's preamble, these findings helped 
inform EPA's decision to require that the hazardous secondary material 
be contained in the unit and managed in a manner that is at least as 
protective as an analogous raw material (where there is an analogous 
material), that the recycling residuals be properly managed, and that 
the reclamation facility and any intermediate facilities have financial 
assurance. In addition, the relatively small proportion of cases of 
damages from on-site recycling (13 of the 208 cases (6%)) lends support 
for EPA's decision to include fewer limitations on the exclusion for 
hazardous secondary materials recycled under the control of the 
generator.
    The market forces study uses accepted economic theory to describe 
how various market incentives can influence a firm's decision-making 
process when the recycling of hazardous secondary materials is 
involved. This study helps explain some of the possible fundamental 
economic drivers of both the successful and unsuccessful recycling 
practices, which, in turn, helped the Agency to design the exclusions 
being finalized today.
    As pointed out by some commenters to the October 2003 proposed 
rule, the economic forces shaping the behavior of firms that recycle 
hazardous secondary materials are often different from those at play in 
manufacturing processes using virgin materials. The market forces study 
uses economic theory to provide information on how certain 
characteristics can influence three different recycling models to 
encourage or discourage an optimal outcome. The three recycling models 
examined are: (1) Commercial recycling, where the primary business of 
the firms is recycling hazardous secondary materials that are accepted 
for recycling from off-site industrial sources (which usually pay a 
fee); (2) industrial intra-company recycling, where firms generate 
hazardous secondary materials as by-products of their main production 
processes and recycle the hazardous secondary materials for sale or for 
their own reuse in production; and (3) industrial inter-company 
recycling, where firms whose primary business is not recycling, but 
either use or recycle hazardous secondary materials obtained from other 
firms, with the objective of reducing the cost of their production 
inputs. The report looks at how the outcome from each model is 
potentially affected by three market characteristics: (1) Value of the 
recycled product, (2) price stability of recycling output or inputs, 
and (3) net worth of the firm.
    While an individual firm's decision-making process is based on many 
factors and attempting to extrapolate a firm's likely behavior from a 
few factors could be an over-simplification, when used in conjunction 
with other pieces of information, the economic theory can be quite 
illuminating. For example, according to the market forces study, the 
industrial intra- and inter-company recyclers have more flexibility in 
adjusting to unstable recycling markets (e.g., during price 
fluctuations, these companies can more easily switch from recycling to 
disposal or from recycled inputs to virgin inputs). Therefore, they 
would be expected to be less likely to have environmental problems from 
over-accumulated materials. On the other hand, certain specific types 
of commercial recycling, where the product has low value, the prices 
are unstable, and/or the firm has a low net worth, could be more 
susceptible to environmental problems from the over-accumulation of 
hazardous secondary materials, especially when compared to recycling by 
a well-capitalized firm that yields a product with high value. In both 
cases, these predicted outcomes appear to be supported by the results 
of the environmental problems study, which show the majority of 
problems occur at off-site commercial recyclers.
    However, as shown by the successful recycling study, generators who 
might otherwise bear a large liability from poorly managed recycling at 
other companies have addressed this issue by carefully examining the 
recyclers to which they send their hazardous secondary materials to 
ensure that they are technically and financially capable of performing 
the recycling. In addition, we have seen that successful recyclers 
(both commercial and industrial) have often taken advantage of 
mechanisms, such as long-term contracts to help stabilize price 
fluctuations, allowing recyclers to plan their operations better.
    Further discussion of the recycling studies, including the 
methodology and limitations of the studies, can be found in the March 
2007 supplemental proposal (72 FR 14178-83), and the studies themselves 
can be found in the docket for today's rulemaking.

E. March 2007 Supplemental Proposal To Revise the Definition of Solid 
Waste

    To provide public notice on the recycling studies discussed above, 
in March 2007, EPA published a supplemental proposal (72 FR 14172, 
March 26, 2007). In addition, based on the comments received on the 
October 2003 proposal, EPA also decided to restructure our approach to 
revising the definition of solid waste to more directly consider 
whether particular materials are not considered ``discarded'' and thus 
are not solid and hazardous wastes subject to regulation under Subtitle 
C of RCRA. We agreed with the many commenters on the October 2003 
proposal who said that whether materials are recycled within the same 
NAICS code is not an appropriate indication of whether they are 
discarded. NAICS designations are designed to be consistent only with 
product lines, so that the effect of our October 2003 proposal would be 
that hazardous secondary materials generated and reclaimed under the 
control of the generator would not be excluded, even though the 
generator has not abandoned the material and has every opportunity and 
incentive to maintain oversight of, and responsibility for, the 
material that is reclaimed (see ABR, 208 F.2d at 1051 (noting that 
discard has not taken place where the producer saves and reuses 
secondary materials)).
    Instead, in March 2007, EPA proposed two exclusions for hazardous 
secondary materials recycled under the control of the generator (one 
exclusion would apply to hazardous secondary materials managed in non-
land-based units, whereas the other exclusion would apply to hazardous 
secondary materials managed in land-based units) and an additional 
exclusion for hazardous secondary materials transferred to another 
party for reclamation.
    For the exclusions for hazardous secondary materials reclaimed 
under the control of the generator, EPA described three circumstances 
under which we believe that discard does not take place and where the 
potential for environmental releases is low to non-existent. The three 
situations involve legitimate recycling of hazardous secondary 
materials that are generated and reclaimed at the generating facility, 
at a different facility within the same

[[Page 64675]]

company, or through a tolling arrangement. Under all three 
circumstances, the hazardous secondary materials must be generated and 
reclaimed within the United States or its territories. Because the 
hazardous secondary material generator in these situations still finds 
value in the hazardous secondary materials, has retained control over 
them, and intends to use them, EPA proposed to exclude these materials 
from being a solid waste and, thus, from regulation under Subtitle C of 
RCRA if the recycling is legitimate and if the hazardous secondary 
materials are not speculatively accumulated.
    In those cases, however, where generators of hazardous secondary 
materials do not reclaim the materials themselves, it often may be a 
sound business decision to ship the hazardous secondary materials to a 
commercial facility or another manufacturer for reclamation in order to 
avoid the costs of disposing of the material. In such situations, the 
generator has relinquished control of the hazardous secondary materials 
and the entity receiving such materials may not have the same 
incentives to manage the hazardous secondary materials as a useful 
product, especially if they are paid a fee for managing the hazardous 
secondary materials.
    Accordingly, for the exclusion for hazardous secondary materials 
transferred to another party for reclamation, the Agency proposed 
conditions that, when met, would indicate that these hazardous 
secondary materials are not discarded. One of the conditions would 
require the generator to make reasonable efforts to determine that its 
hazardous secondary materials will be properly and legitimately 
recycled (thus demonstrating the hazardous secondary material is not 
being discarded). Another condition would require the reclamation 
facility to have adequate financial assurance (thus demonstrating that 
the hazardous secondary material will not be abandoned). In addition, 
EPA proposed that both the generator and reclaimer would need to 
maintain shipping records (to demonstrate that the hazardous secondary 
material was sent for reclamation and was received by the reclaimer), 
and the reclaimer would be subject to additional storage and residual 
management standards (to address the instances of discard observed at 
off-site reclamation facilities in the damage cases).
    In addition, in March 2007, EPA's supplemental proposal included a 
case-by-case petition process to allow applicants to demonstrate that 
their hazardous secondary materials are not discarded and therefore are 
not solid wastes.
    Finally, in EPA's March 2007 supplemental proposal, EPA proposed a 
definition of legitimate recycling that restructured the legitimacy 
factors originally proposed in October 2003. The proposed legitimacy 
factors would be used to determine whether the recycling of hazardous 
secondary materials is legitimate.

IV. How Do the Provisions in the Final Rule Compare to Those Proposed 
on March 26, 2007?

    EPA is finalizing the exclusions largely as proposed in March 2007, 
with some revisions and clarifications. The following is a brief 
overview of the revisions to the proposal, with references to 
additional preamble discussions for more detail.
    For the exclusion for hazardous secondary materials that are 
legitimately reclaimed under the control of the generator, we are 
clarifying the scope of the exclusion, including addressing issues with 
defining ``on-site,'' ``same company,'' and ``tolling arrangement.'' We 
have also added additional data elements to the notification 
requirement, clarified that the hazardous secondary materials must be 
contained when managed in non-land-based units, as well as in land-
based units, because hazardous secondary materials that are released to 
the environment and not immediately recovered are discarded, and added 
a reference to the new legitimacy provision in Sec.  260.43. We have 
also revised the definition of land-based unit to be ``an area where 
hazardous secondary materials are placed in or on the land before 
recycling,'' while also clarifying that the definition does not include 
production units. For further discussion of the generator-controlled 
exclusion, see section VII of this preamble.
    For the exclusion for hazardous secondary materials that are 
transferred for the purpose of reclamation, we are clarifying that 
hazardous secondary materials held at a transfer facility for less than 
10 days will be considered to be in transport. We are also allowing the 
use of intermediate facilities that store hazardous secondary materials 
for more than 10 days, provided the facilities comply with the same 
conditions applicable to reclamation facilities. In addition, the 
hazardous secondary material generator must select the reclamation 
facility (or facilities) that can be used and must perform reasonable 
efforts on both the intermediate facility and reclamation facility (or 
facilities), and the intermediate facility must send the hazardous 
secondary material to the reclamation facility that the generator 
selected. For the reasonable efforts condition, we have included 
specific questions in the regulatory language, and are requiring both 
documentation and certification. We are also clarifying how the 
financial assurance condition applies to reclamation and intermediate 
facilities excluded under the transfer-based exclusion, including 
tailored regulatory language for financial assurance specific to these 
types of facilities. We have also added a reference to the new 
legitimacy provision in Sec.  260.43. For further discussion, see 
section VIII of this preamble.
    Regarding legitimacy, we are adding legitimacy as a condition of 
the exclusions and the non-waste determinations in this rule, but are 
not finalizing the language proposed in Sec.  261.2(g) for all 
recycling. The new legitimacy provision can be found at Sec.  260.43. 
For further discussion, see section IX of this preamble.
    Finally, for the non-waste determination process, we have limited 
the categories for non-waste determinations to materials reclaimed in a 
continuous industrial process and materials indistinguishable from 
products and we have revised the criteria to make them more consistent 
across the two categories of non-waste determinations. Furthermore, we 
are not finalizing the non-waste determination for materials reclaimed 
under the control of the generator via a tolling arrangement or similar 
contractual arrangement. For further discussion, see sections X and XIX 
of this preamble.

V. How Does the Concept of Discard Relate to the Final Rule?

    In the March 2007 supplemental proposal, EPA explained how the 
concept of ``discard'' is the central organizing idea behind the 
revisions to the definition of solid waste being finalized today (72 FR 
14178). Basing the revisions on ``discard'' reflects the fundamental 
logic of the RCRA statute. As stated in RCRA Section 1004(27), ``solid 
waste'' is defined as ``* * * any garbage, refuse, sludge from a waste 
treatment plant, or air pollution control facility and other discarded 
material * * * resulting from industrial, commercial, mining and 
agricultural activities. * * *'' Therefore, in the context of this 
final rule, a key issue is the circumstances under which a hazardous 
secondary material that is recycled by reclamation is or is not 
discarded.

[[Page 64676]]

    The March 2007 supplemental proposal represented a shift from the 
approach taken in the October 2003 proposal, which proposed to exclude 
from the definition of solid waste any hazardous secondary material 
generated and reclaimed in a continuous process within the same 
industry, provided the reclamation was legitimate. ``Same industry'' 
was defined as industries sharing the same 4-digit NAICS code. The 
basis for that proposed exclusion was the holding in American Mining 
Congress v. EPA (``AMC I''), 824 F.2d 1177 (DC Cir. 1987) that 
materials destined for beneficial reuse in a continuous process by the 
generating industry are not discarded (68 FR 61563, 61564-61567).
    Commenters critical of the October 2003 proposal argued, among 
other things, that EPA failed to present a reasoned analysis of the 
indicia of discard (72 FR 14184-14185). In evaluating these comments, 
EPA determined that the effect of our October 2003 proposal would be 
that some hazardous secondary materials generated and reclaimed under 
the control of the generator would not be excluded, even though the 
generator had not abandoned the material and had every opportunity and 
incentive to maintain oversight of, and responsibility for, the 
hazardous secondary material being reclaimed. Under these 
circumstances, we determined in March 2007 that discard has generally 
not occurred (72 FR 14185). Therefore, in the March 2007 supplemental 
proposal, EPA decided to examine the concept of discard, which is the 
driving principle behind the court's holdings on the definition of 
solid waste, rather than trying to fit materials into specific fact 
patterns addressed by the court (see 72 FR 14175).
    EPA continues to believe that the concept of discard is the most 
important organizing principle governing the determinations we have 
made in today's final rule. In the series of decisions discussed above 
relating to the RCRA definition of solid waste, the Court of Appeals 
for the DC Circuit has consistently cited a plain language definition 
of discard, as meaning ``disposing, abandoning or throwing away.'' 
Today's final rule is consistent with that definition. Below is a 
discussion of each provision of the final rule with an explanation of 
how it relates to discard. Further discussion of the concept of discard 
and its relationship to specific provisions and ways of implementing 
this rule is found in sections V.A through V.D, below.
    The Agency also incorporates in this preamble to the final rule all 
determinations in the March 2007 supplemental proposal, except to the 
extent they are inconsistent with the determinations in this preamble, 
regarding the conditions for the solid waste exclusions. In addition, 
EPA notes that it did not reopen the specific details of the 
speculative accumulation regulation regarding the time periods under 
which materials are to be recycled, since these periods have been part 
of the Agency's regulations for many years and are familiar to persons 
who are affected by the regulations.

A. Discard and the Generator-Controlled Exclusions

    In the March 2007 supplemental proposal, EPA determined that if the 
generator maintains control over the recycled hazardous secondary 
material, the material is legitimately recycled under the standards 
established in the proposal, and the material is not speculatively 
accumulated within the meaning of EPA's regulations, then the hazardous 
secondary material is not discarded. This is because the hazardous 
secondary material is being treated as a valuable commodity rather than 
as a waste. By maintaining control over, and potential liability for, 
the recycling process, the generator ensures that the hazardous 
secondary materials are not discarded (see ABR 208 F.3d 1051 (``Rather 
than throwing these materials [destined for recycling] away, the 
producer saves them; rather than abandoning them, the producer reuses 
them.'')) (72 FR 14178).
    EPA continues to believe that when a generator legitimately 
recycles hazardous secondary material under its control, the generator 
has not abandoned the material and has every opportunity and incentive 
to maintain oversight of, and responsibility for, the hazardous 
secondary material that is reclaimed.
    In determining when recycling occurs ``under the control'' of the 
generator, EPA looked at three scenarios: Recycling performed on-site, 
recycling performed within the same company, and recycling performed 
under certain specific tolling arrangements.
    In the March 2007 supplemental proposal, EPA noted that, of the 208 
recycling cases that caused environmental damage, only 13 
(approximately 6%) occurred as a result of on-site recycling. We also 
agreed with commenters on the October 2003 proposal who asserted that 
``generators who recycle materials on-site (even if the reclamation 
takes place in a different NAICS code) are likely to be familiar with 
the material and more likely to maintain responsibility for the 
materials'' (72 FR 14185).
    EPA also determined that this rationale applies to legitimate 
reclamation taking place within the same company. In the case of same-
company recycling, both the generating facility and the reclamation 
facility (if they are different) would be familiar with the hazardous 
secondary materials and the company would be ultimately liable for any 
mismanagement of the hazardous secondary materials. Under these 
circumstances, the incentive to avoid such mismanagement would be so 
strong that mismanagement also would be unlikely.
    In the case of certain tolling operations, EPA determined in the 
March 2007 supplemental proposal that a certain specific type of 
tolling arrangement provides equivalent assurance that recycling is 
performed ``under the control of the generator'' and does not 
constitute discard. Under this type of arrangement, one company (the 
tolling contractor) contracts with a second company (the toll 
manufacturer) to produce a specialty chemical from specified unused 
materials identified in the tolling contract. The toll manufacturer 
produces the chemical and the production process generates a hazardous 
secondary material (such as a spent solvent) which is routinely 
reclaimed at the tolling contractor's facility. The typical toll 
manufacturing contract contains detailed specifications about the 
product to be manufactured, including management of any hazardous 
secondary materials that are produced and returned to the tolling 
contractor for reclamation. Under this scenario, the hazardous 
secondary material continues to be managed as a valuable product, so 
discard has not occurred. Moreover, because the contract specifies that 
the tolling contractor retains ownership of, and responsibility for, 
the hazardous secondary materials, there is a strong incentive to avoid 
any mismanagement or release. In essence, the tolling contractor has 
outsourced a step in its manufacturing process, but continues to take 
responsibility and maintain control of the process as a whole, 
including both the unused materials going into the process and the 
product and hazardous secondary materials resulting from the process.
    For all three of these generator-controlled exclusions--reclamation 
performed on-site, within the same company, and via certain tolling 
arrangements--EPA continues to find that the facility owner still finds 
value in the hazardous secondary materials, has retained control over 
them, and intends to reclaim them. Therefore, EPA

[[Page 64677]]

is finalizing an exclusion for these materials, with certain 
restrictions discussed below.
    In the March 2007 supplemental proposal, EPA also noted that 
management in a land-based unit does not automatically indicate a 
hazardous secondary material is being discarded. As long as the 
hazardous secondary material is contained and is destined for recycling 
under the control of the generator, it would still meet the terms of 
the exclusion. However, if the hazardous secondary material is not 
managed as a valuable product and, as a result, a significant release 
to the environment from the unit occurs and is not immediately 
recovered, the hazardous secondary material in the land-based unit 
would be considered discarded (72 FR 14186). Thus, EPA proposed that 
the hazardous secondary material must be contained in the land-based 
unit in order for the exclusion to be applicable.
    However, in making this finding that hazardous secondary materials 
managed in a land-based unit must be contained in order to retain the 
exclusion, EPA did not intend to imply that hazardous secondary 
materials managed in non-land-based units do not need to be contained. 
Hazardous secondary materials released to the environment are not 
destined for recycling and are clearly discarded whether they 
originated from a land-based unit or not. Because non-land-based units 
do not involve direct contact with the land, in the March 2007 
supplemental proposal, EPA did not include an explicit ``contained'' 
restriction for these units. However, as commenters noted, it is still 
possible for non-land-based units to leak or otherwise release 
significant amounts of hazardous secondary materials to the 
environment, even if they are not in direct contact with the land, 
resulting in those materials being discarded. Thus, for today's final 
rule, EPA is requiring that hazardous secondary materials must be 
contained (whether it is managed in land-based units or non-land-based 
units) in order to identify the hazardous secondary materials that are 
not being discarded and, therefore, are not solid wastes.
    Another restriction on the generator-controlled exclusions is the 
prohibition against speculative accumulation. As noted in the March 
2007 supplemental proposal, restrictions on speculative accumulation 
(40 CFR 261.1(c)(8)) have been an important element of the RCRA 
hazardous waste recycling regulations since they were promulgated on 
January 4, 1985. Historically, hazardous secondary materials excluded 
from the definition of solid waste generally become wastes when they 
are speculatively accumulated, because, at that point, they are 
considered to be unlikely to be recycled and therefore discarded. 
According to this regulatory provision, a hazardous secondary material 
is accumulated speculatively if the person accumulating it cannot show 
that the material is potentially recyclable; further, the person 
accumulating the hazardous secondary material must show that during a 
calendar year (beginning January 1) the amount of such material that is 
recycled, or transferred to a different site for recycling, must equal 
at least 75% by weight or volume of the amount of that material at the 
beginning of the period. As noted in the March 2007 supplemental 
proposal, this provision already applies to hazardous secondary 
materials that are not otherwise considered to be wastes when recycled, 
such as materials used as ingredients or commercial product 
substitutes, materials that are recycled in a closed-loop production 
process, or unlisted sludges and by-products being reclaimed (72 FR 
14188). Given that a significant portion of the damage cases stemmed 
from over-accumulation of hazardous secondary materials, EPA continues 
to believe that a restriction on speculative accumulation is needed to 
determine that the hazardous secondary material is being recycled and 
is not discarded.
    In addition, as with all recycling exclusions under RCRA, the 
excluded hazardous secondary materials must be recycled legitimately. 
As discussed in section IX of this preamble, EPA has long articulated 
the need to distinguish between ``legitimate'' (i.e., true) recycling 
and ``sham'' recycling, beginning with the preamble to the 1985 
regulations that established the definition of solid waste (50 FR 638, 
January 4, 1985) and continuing with the October 2003 proposed 
codification of criteria for identifying legitimate recycling. Because 
there can be a significant economic incentive to manage hazardous 
secondary materials outside the RCRA regulatory system, there is a 
potential for some handlers to claim that they are recycling, when, in 
fact, they are conducting waste treatment and/or disposal in the guise 
of recycling. While the legitimacy construct applies to both excluded 
recycling and the recycling of regulated hazardous wastes, hazardous 
secondary materials that are not legitimately recycled (i.e., that are 
being treated and/or disposed in the guise of recycling) are discarded 
materials and, therefore, are solid wastes.
    A final restriction on the generator-controlled exclusion from the 
definition of solid waste is that the hazardous secondary material must 
be generated and recycled within the United States.\1\ Because 
hazardous secondary materials that are exported for recycling passes 
out of the regulatory control of the federal government, making it 
difficult to determine if these activities are ``under the control of 
the generator'' and because, as noted in the March 2007 supplemental 
proposal, we do not have sufficient information about most recycling 
activities outside of the United States to decide whether discard is 
likely or unlikely (72 FR 14187), EPA continues to find that this 
restriction is needed to properly define when the hazardous secondary 
material is not being discarded.
---------------------------------------------------------------------------

    \1\ As discussed in section VII.C., persons taking advantage of 
the generator-controlled option must also notify the regulatory 
authority. This notification requirement is needed to enable 
credible evaluation of the status of hazardous secondary materials 
under RCRA and to ensure the terms of the exclusions are being met 
by generators and reclaimers. These types of notification 
requirements in this rule are being promulgated under the authority 
of RCRA section 3007.
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B. Discard and the Transfer-Based Exclusion

    As EPA noted in the March 2007 supplemental proposal, in cases 
where generators of hazardous secondary materials do not reclaim the 
materials themselves, it often may be a sound business decision to ship 
the hazardous secondary materials to be reclaimed to a commercial 
facility or another manufacturer in order to avoid the costs of 
disposing of the material.
    In such situations, EPA determined that the generator has 
relinquished control of the hazardous secondary materials and the 
entity receiving such materials may not have the same incentives to 
manage them as a useful product (72 FR 14178). This is evidenced by the 
results of the environmental problems study, found in the docket of 
today's final rule. Of the 208 damage cases EPA identified for the 
March 2007 supplemental proposal, 195 (about 94%) were from off-site 
third-party recyclers, with clear instances of discard resulting in 
risk to human health and the environment, including cases of large-
scale soil and ground water contamination with remediation costs in 
some instances in the tens of millions of dollars.
    In addition, the market forces study in the docket for today's 
rulemaking supports the conclusion that the pattern of discard at off-
site, third party reclaimers is a result of inherent differences 
between commercial

[[Page 64678]]

recycling and normal manufacturing. As opposed to manufacturing, where 
the cost of raw materials or intermediates (or inputs) is greater than 
zero and revenue is generated primarily from the sale of the output, 
hazardous secondary materials recycling can involve generating revenue 
primarily from receipt of the hazardous secondary materials (72 FR 
14182). Recyclers of hazardous secondary materials in this situation 
may thus respond differently from traditional manufacturers to economic 
forces and incentives, accumulating more inputs (hazardous secondary 
materials) than can be processed (reclaimed). In addition, commercial 
recyclers appear to have less flexibility than in-house recyclers 
(e.g., during price fluctuations, in-house recyclers can more easily 
switch from recycling to disposal or from recycled inputs to virgin 
inputs, which commercial recyclers cannot) (72 FR 14183).
    After reviewing public comments on the recycling studies (see 
section XV.D. of today's preamble), EPA continues to believe that 
conditions are needed under the transfer-based exclusion for the Agency 
to determine that these hazardous secondary materials are not 
discarded.\2\
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    \2\ These are conditions beyond the prohibition on speculative 
accumulation, the requirement that the hazardous secondary material 
be contained, and the requirement that the materials be legitimately 
recycled, as described in section VII.C., which would also apply to 
the transfer-based exclusion. The transfer-based exclusion also 
includes a notification requirement, which is needed to enable 
credible evaluation of the status of hazardous secondary materials 
under section 3007 of RCRA and to ensure the terms of the exclusions 
are being met by generators, intermediate facilities, and 
reclaimers.
---------------------------------------------------------------------------

    One key condition that reflects the basic premise underlying the 
exclusion is the condition that the hazardous secondary material 
generator perform and document reasonable efforts to ensure that its 
hazardous secondary material will be properly and legitimately 
recycled. As EPA explained in the March 2007 supplemental proposal, in 
order to demonstrate that hazardous secondary materials will not be 
discarded, generators who transfer their hazardous secondary materials 
to a third party must have a reasonable understanding of who will be 
reclaiming the materials and how they will be managed and reclaimed and 
a reasonable assurance that the recycling practice is safe and 
legitimate (72 FR 14194). In order for a generator to determine whether 
its hazardous secondary materials are not solid wastes because they are 
not discarded, the generator must make a reasonable effort to ensure 
that the reclaimer intends to legitimately recycle the material and not 
discard it, and that the reclaimer (and any intermediate facility) will 
properly manage the material.
    EPA continues to find that the reasonable efforts condition is 
critical in determining when hazardous secondary materials sent to 
another party for reclamation are not discarded. According to the 
successful recycling study found in the docket for today's rulemaking, 
generators of hazardous secondary materials frequently perform audit 
activities and inquiries to determine whether the entity to which they 
are sending hazardous secondary materials is equipped to responsibly 
and legitimately reclaim and manage those materials without the risk of 
releases or other environmental damage. These recycling and waste 
audits of other companies' facilities form a backbone of many of the 
transactions in the hazardous secondary materials markets. As noted in 
the March 2007 supplemental proposal, EPA's successful recycling study 
quotes one large recycling and disposal vendor as stating that of its 
new customers, 60% of the large customers and 30-50% of the smaller 
customers now perform audits on them (72 FR 14191). Thus, although 
these practices are not universal, they do indicate that there are 
currently many generators who recognize the risk of third-party 
recyclers discarding their hazardous secondary materials and who take 
responsibility to ensure that this discard does not occur. By codifying 
the reasonable efforts condition of the transfer-based exclusion, EPA 
believes that hazardous secondary materials generated by companies who 
take this type of responsibility are not being discarded.
    EPA has developed a reasonable efforts condition that is objective 
and is based on the types of information that are typically gathered in 
environmental audits currently performed by generators. However, one 
piece of information that is not included under the reasonable efforts 
provision being finalized today is the financial health of the 
reclamation facility. While EPA agrees with comments received that 
state that evaluating the financial health of a company can be a useful 
exercise, and encourages companies to do so, it is not an activity that 
lends itself to an objective standard that would be workable in a solid 
waste identification regulation.
    However, the financial health of a reclamation facility can still 
be a crucial consideration in determining whether discard is taking 
place. According to the successful recycling study, an examination of a 
company's finances is an important part of many environmental audits. 
In addition, the environmental problems study showed that bankruptcies 
or other types of business failures were associated with 138 (66%) of 
the damage cases, and the market forces study identified a low net 
worth of a firm as a strong indication of a sub-optimal outcome of 
recycling.
    To address the issue of the correlation of financial health with 
the absence of discard, EPA proposed in the March 2007 supplemental 
proposal to require that reclamation facilities obtain financial 
assurance. The financial assurance requirements are designed to help 
EPA determine that the hazardous secondary material generator is not 
discarding the hazardous secondary material by sending it to a 
reclamation facility that is financially unsound.
    In addition, by obtaining financial assurance, the owner/operator 
of the reclamation facility (or intermediate facility) is making a 
direct demonstration that it will not abandon the hazardous secondary 
material. Discard through abandonment was a major cause of damages 
identified in the environmental problems study. Of the 208 damage 
cases, 69 (33%) cases involved abandoned materials. By obtaining 
financial assurance, a reclaimer (or intermediate facility) is 
demonstrating that even if events beyond its control make its 
operations uneconomical, the hazardous secondary material will not be 
abandoned.
    Another major cause of damages identified in the environmental 
problems study was mismanagement of recyclable materials, constituting 
the primary cause of damage in 81 (40%) of the 208 cases. Accordingly, 
in the March 2007 supplemental proposal, EPA proposed a condition for 
reclaimers that they must manage the hazardous secondary materials in 
at least as protective a manner as they would an analogous raw 
material, and in such a way that the hazardous secondary materials 
would not be released into the environment (72 FR 14195). After 
reviewing the comments, EPA continues to find that such a condition is 
needed for the Agency to determine that the hazardous secondary 
materials are not discarded.
    The third major source of damages identified in the environmental 
problems study was mismanagement of residuals generated from the 
reclamation activity, constituting the primary cause of damage in 71 
(34%) of the 208 cases. As discussed in the March 2007 supplemental 
proposal, EPA found that in many cases, the

[[Page 64679]]

residuals were comprised of the most hazardous components of the 
hazardous secondary materials (e.g., polychlorinated biphenyls (PCBs) 
from transformers) and were simply disposed of in on-site landfills or 
piles, with little regard for the environmental consequences of such 
mismanagement or possible CERCLA liabilities associated with cleanup of 
these releases. Therefore, EPA proposed that ``any residuals that are 
generated from reclamation processes will be properly managed. If any 
residuals exhibit a hazardous characteristic according to subpart C of 
40 CFR part 261, or themselves are listed hazardous wastes, they are 
hazardous wastes (if discarded) and must be managed according to the 
applicable requirements of 40 CFR parts 260 through 272'' (72 FR 
17195). EPA continues to find that this condition is important to 
clarify the regulatory status of these waste materials, and to 
emphasize in explicit terms that the residuals generated from 
reclamation operations must be managed properly (i.e., consistent with 
federal and state requirements).
    Finally, other provisions of the transfer-based exclusion help 
ensure that the hazardous secondary material is properly transferred to 
the reclamation facility for recycling. Only the hazardous secondary 
material generator, transporter, intermediate facility and reclaimer 
can handle the material. (Note that, as with hazardous waste, a 
hazardous secondary material can be held up to 10 days at a transfer 
facility and still be considered as being in transport.) The hazardous 
secondary material generators, intermediate, and reclamation facilities 
claiming the exclusion must keep records of the hazardous secondary 
material shipments, and reclamation and intermediate facilities must 
send confirmations of receipt back to the hazardous secondary material 
generator. Thus, all parties responsible for the excluded hazardous 
secondary materials will be able to demonstrate that the materials were 
in fact sent for reclamation and arrived at the intended facility and 
were not discarded in transit. For hazardous secondary material 
generators who are exporting to other countries for reclamation, notice 
and consent must be obtained, thus facilitating oversight of the 
hazardous secondary material when sent beyond the borders of the United 
States, helping to ensure that it is recycled rather than discarded.

C. Discard and Non-Waste Determinations

    In addition to the exclusions discussed above, the Agency is also 
finalizing a process for obtaining a case-specific non-waste 
determination for certain hazardous secondary materials that are 
recycled. This process allows a petitioner to receive a formal 
determination from EPA (or the state, if the state is authorized for 
this provision) that its hazardous secondary material is not discarded 
and therefore is not a solid waste. The procedure allows EPA or the 
authorized state to take into account the particular fact pattern of 
the reclamation operation to determine that the hazardous secondary 
material in question is not a solid waste.
    The determination is available to applicants who demonstrate (1) 
that their hazardous secondary materials are reclaimed in a continuous 
industrial process, or (2) that the materials are indistinguishable in 
all relevant aspects from a product or intermediate.
    As discussed earlier, court decisions have made it clear that 
hazardous secondary materials reclaimed in a continuous industrial 
process are not discarded and, therefore, are not solid waste. As 
discussed in the March 2007 supplemental proposal, EPA believes that 
the generator-controlled exclusion also excludes from the definition of 
solid waste hazardous secondary materials recycled in a continuous 
industrial process (72 FR 14202). In effect, hazardous secondary 
materials reclaimed in a continuous process are a subset of the 
hazardous secondary materials reclaimed under the control of the 
generator that are excluded under today's rule.
    However, EPA also recognized in the March 2007 supplemental 
proposal that production processes can vary widely from industry to 
industry. Thus, in some cases, EPA may need to evaluate case-specific 
fact patterns to determine whether an individual hazardous secondary 
material is reclaimed in a continuous industrial process, and therefore 
not a solid waste.\3\ EPA continues to believe that this is best done 
through a case-by-case procedure and is, therefore, finalizing the non-
waste determination process today.
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    \3\ See, for example the ABR decision, where the Court 
acknowledged that the term ``discard'' could be ``ambiguous as 
applied to some situations, but not as applied to others,'' and 
particularly cited the difficulty in examining the details of the 
many processes in the mineral processing industry (208 F.3d at 
1056). While the court overturned EPA's regulations for casting too 
wide a net over continuous industrial processes, it acknowledged 
that there are a large number of processes, some of which may be 
continuous and some of which may not. Determining what is a 
continuous process in the mineral processing industry, according to 
the Court, would require examination of the details of the processes 
and does not lend itself, well, to broad abstraction. Specifically, 
the Court stated,
    ``Some mineral processing secondary materials covered under the 
Phase IV Rule may not proceed directly to an ongoing recycling 
process and may be analogous to the sludge in AMC II. The parties 
have presented this aspect of the case in broad abstraction, 
providing little detail about the many processes throughout the 
industry that generate residual material of the sort EPA is 
attempting to regulate under RCRA, * * *'' 208 F.3d at 1056.
    In the case of today's final rule, which applies across 
industries, there are far larger and more diverse processes. While 
EPA believes it is establishing a reasonable set of principles, they 
must still be applied to the details of the industrial processes in 
question.

    In addition to ruling that hazardous secondary materials recycled 
within a continuous industrial process are not discarded and therefore 
not solid waste, the courts have also said that hazardous secondary 
materials destined for recycling in another industry are not 
automatically discarded. In the Safe Food decision, the Court stated, 
``[n]obody questions that virgin * * * feedstocks are products rather 
than wastes. Once one accepts that premise, it seems eminently 
reasonable to treat [recycled] materials that are indistinguishable in 
the relevant respects as products as well'' (350 F.3d at 1269). In Safe 
Food, the court accepted EPA's determination that the ``relevant 
respects'' were that ``market participants treat the * * * materials 
more like valuable products rather than like negatively-valued wastes 
managing them in ways inconsistent with discard, and that the 
fertilizers derived from these recycled feedstocks are chemically 
indistinguishable from analogous commercial products made from virgin 
materials.'' Id. As a result, EPA recognized in the March 2007 
supplemental proposal, and continues to believe today, that there may 
be some instances that would benefit from a non-waste determination (72 
FR 14203). Thus, we are also finalizing the non-waste determination 
process for hazardous secondary materials indistinguishable in all 
relevant aspects from a product or intermediate.

VI. When Will the Final Rules Become Effective?

    This final rule is effective on December 29, 2008. Section 3010(b) 
of RCRA allows EPA to promulgate a rule with a period for the effective 
date shorter than six months where the Administrator finds that the 
regulated community does not need additional time to come into 
compliance with the rule. This rule does not impose any requirements on 
the regulated

[[Page 64680]]

community; rather, the rule provides flexibility in the regulations 
with which the regulatory community is required to comply. The Agency 
finds that the regulatory community does not need six months to come 
into compliance.

VII. Exclusion for Hazardous Secondary Materials That Are Legitimately 
Reclaimed Under the Control of the Generator

A. What Is the Purpose of This Exclusion?

    Sections 261.2(a)(2)(ii) and 261.4(a)(23), being finalized today, 
excludes from the definition of solid waste those hazardous secondary 
materials which remain under the control of the generator when 
legitimately reclaimed. By maintaining control over, and potential 
liability for, the hazardous secondary materials and the reclamation 
process, the generator ensures that such materials have not been 
discarded. When reclaimed under the control of the generator, the 
hazardous secondary materials are being treated as a valuable commodity 
rather than a waste. However, if such hazardous secondary materials are 
released into the environment and are not recovered immediately, they 
have been discarded and the generator is subject to all applicable 
federal and state regulations, as well as applicable cleanup 
authorities.

B. Scope and Applicability

    EPA is today excluding from the definition of solid waste those 
hazardous secondary materials that are legitimately reclaimed under the 
control of the generator, provided they are not speculatively 
accumulated and they are reclaimed within the United States or its 
territories. In addition, the generator must submit a notification of 
the exclusion to EPA or the authorized state and the hazardous 
secondary material must be contained in the units in which it is 
stored. The provision excluding hazardous secondary materials that are 
under the control of the generator and that are managed in land-based 
units is found at 40 CFR 261.4(a)(23), while the provision excluding 
such materials that are managed in non-land-based units is found at 40 
CFR 261.2(a)(2)(ii). A land-based unit is defined in 40 CFR 260.10 as 
an area where hazardous secondary materials are placed in or on the 
land before recycling, but this definition does not include land-based 
production units. Examples of land-based units include surface 
impoundments and piles.
    The definition of ``hazardous secondary material generated and 
reclaimed under the control of the generator'' is finalized in 40 CFR 
260.10 and consists of three parts. The first part applies to hazardous 
secondary materials generated and legitimately reclaimed at the 
generating facility. For purposes of this exclusion, ``generating 
facility'' means all contiguous property owned, leased, or otherwise 
controlled by the hazardous secondary material generator, and 
``hazardous secondary material generator'' means any person whose act 
or process produces hazardous secondary materials at the generating 
facility. A facility that collects hazardous secondary materials from 
other persons (for example, when mercury-containing equipment is 
collected through a special collection program) is not the hazardous 
secondary material generator of those materials.
    Under this definition, if a generator contracts with a different 
company to reclaim hazardous secondary materials at the generator's 
facility, either temporarily or permanently, the materials would be 
considered under the control of the generator. However, generators 
sometimes contract with a second company to collect hazardous secondary 
materials at the generating facility and the materials are subsequently 
reclaimed at the facility of the second company. In that situation, the 
hazardous secondary materials would no longer be considered ``under the 
control of the generator'' and would instead be managed under the 
exclusion for materials transferred for reclamation.
    The second part of the definition applies to hazardous secondary 
materials generated and legitimately reclaimed at different facilities 
if the reclaiming facility is controlled by the generator or if a 
person as defined in Sec.  260.10 controls both the generator and the 
reclaimer. For purposes of this exclusion, ``control'' means the power 
to direct the policies of the facility, whether by the ownership of 
stock, voting rights, or otherwise, except that contractors who operate 
facilities on behalf of a different person as defined in Sec.  260.10 
shall not be deemed to ``control'' such facilities. Thus, when a 
contractor operates two facilities, each of which is owned by a 
different company, hazardous secondary materials generated at the first 
facility and reclaimed at the second facility are not considered 
``under the control of the generator'' and must use the exclusion for 
such materials that are transferred for reclamation.
    Under the definition promulgated in today's final rule, the 
generating facility must provide one of two certifications: (1) That 
the generating facility will send the indicated hazardous secondary 
materials to the reclaiming facility, which is controlled by the 
generating facility, and that either the generating facility or the 
reclaiming facility has acknowledged full responsibility for the safe 
management of such hazardous secondary materials; or (2) that the 
generating facility will send the hazardous secondary materials to the 
reclaiming facility, that both facilities are under common control, and 
that either the generating facility or the reclaiming facility has 
acknowledged full responsibility for the safe management of such 
hazardous secondary materials. This certification should be made by an 
official familiar with the corporate structure of both the generating 
and the reclaiming facilities. The certification should be retained at 
the site of the generating facility.
    The third part of the definition applies to hazardous secondary 
materials that are generated pursuant to a written contract between a 
tolling contractor and a toll manufacturer and legitimately reclaimed 
by the tolling contractor. For purposes of this exclusion, a tolling 
contractor is a person who arranges for the production of a product or 
intermediate made from specified unused materials through a written 
contract with a toll manufacturer. The toll manufacturer is the person 
who produces a product or intermediate made from specified unused 
materials pursuant to a written contract with a tolling contractor. 
Under today's final rule, the tolling contractor must certify that it 
has a written contract with the toll manufacturer to manufacture a 
product or intermediate made from specified unused materials, and that 
the tolling contractor will reclaim the hazardous secondary materials 
generated during the manufacture of the product or intermediate. The 
tolling contractor must also certify that it retains ownership of, and 
liability for, the hazardous secondary materials that are generated 
during the course of the manufacture, including any releases of 
hazardous secondary materials that occur during the manufacturing 
process at the toll manufacturer's facility. This certification should 
be made by an official familiar with the terms of the written contract 
and should be retained at the site of the tolling contractor.

C. Restrictions and Requirements

    Hazardous secondary materials must be contained. The regulations at 
40 CFR 261.2(a)(2)(ii) and 40 CFR 261.4(a)(23) apply to hazardous 
secondary materials that are generated and legitimately reclaimed under 
the control of the generator in the United States or its

[[Page 64681]]

territories. Under these provisions, the hazardous secondary materials 
must be contained, whether they are stored in land-based units or non-
land-based units. Generally, such material is ``contained'' if it is 
placed in a unit that controls the movement of the hazardous secondary 
material out of the unit and into the environment. These restrictions 
support EPA's determination that materials managed in this manner are 
not discarded.
    In the event of a release from a unit to the environment, the 
hazardous secondary materials that remain in the unit may or may not 
meet the terms of the exclusion. They would be considered solid wastes 
if they are not managed as a valuable raw material, intermediate, or 
product, and as a result, a ``significant'' release of hazardous 
secondary materials from the unit to the environment were to take place 
and the materials were not immediately recovered. If such a significant 
release were to occur, the hazardous secondary materials remaining in 
the unit would be considered solid and hazardous wastes and the unit 
would be subject to the appropriate hazardous waste regulations. For 
example, an acidic hazardous secondary material undergoing reclamation 
could be stored in a tank that experienced a failure. A facility might 
fail to monitor the structural integrity of the tank, as most product 
tanks are monitored, or the tank might not be constructed to contain 
acidic hazardous secondary materials, causing a significant release of 
such materials into the environment that is not immediately recovered. 
The unit itself would consequently be considered a hazardous waste 
management unit because the hazardous secondary materials were not 
being managed as a valuable raw material, intermediate, or product, as 
evidenced by the failure to monitor it for structural integrity, 
resulting in the release. Thus, the unit and any remaining waste would 
be subject to Subtitle C controls because the hazardous secondary 
materials in the unit have been discarded. In addition, any of the 
released materials that were not immediately recovered would also be 
considered discarded and, if hazardous, subject to appropriate federal 
or state regulations and applicable authorities. Thus, to be excluded 
from the definition of solid waste, the facility has an obligation to 
manage the material as it would any raw material, intermediate or 
product because of its value. This includes, for example, operating and 
maintaining storage units in the same manner as product units. In the 
above example, whether by mismanagement of the hazardous secondary 
materials or by storing acidic materials in a tank not constructed to 
handle them or because of the failure to monitor the structural 
integrity of the unit, the result is that the unit would come under 
Subtitle C regulation.
    Conversely, a tank or a surface impoundment in good condition may 
experience small releases resulting from normal operations of the 
facility. Sometimes a material may escape from primary containment and 
may be captured by secondary containment or some other mechanism that 
would prevent the material from being released to the environment or 
would allow immediate recovery of the material. In that case, the unit 
would retain its exclusion from RCRA hazardous waste regulation and the 
hazardous secondary materials in the unit would still be excluded from 
the definition of solid waste, even though any such materials that had 
been released would be considered discarded if not immediately 
recovered and would be subject to appropriate regulation. One specific 
example of ``contained'' hazardous secondary materials would be furnace 
bricks collected from production units and stored on the ground in 
walled bins before being used as feedstocks in the metals production 
process. If there were very small releases from the walled bins due to 
precipitation runoff, such releases would not cause the storage bins to 
be subject to Subtitle C controls.
    It should be noted that a ``significant'' release is not 
necessarily large in volume. Such a release could include an 
unaddressed small release to the environment from a unit that, if 
allowed to continue over time, could cause significant damage. Any one 
release may not be significant in terms of volume. However, if the 
cause of such a release remains unaddressed over time and hazardous 
secondary materials are managed in such a way that the release is 
likely to continue, the materials in the unit would not be contained. 
For example, a rusting tank or containers that are deteriorating may 
have a slow leak that, if unaddressed, could, over time, cause a 
significant environmental impact. Similarly, a surface impoundment with 
a slow, unaddressed leak to groundwater could result, over time, in 
significant damage. Another example would be a large pile of lead-
contaminated finely ground dust without any provisions to prevent wind 
dispersal of the dust. Such releases, if unaddressed over time and 
likely to continue, would mean that the hazardous secondary materials 
remaining in the unit were not being managed as a valuable raw 
material, intermediate, or product and that the materials had been 
discarded. As a result, the hazardous secondary materials in the unit 
would be hazardous wastes and these units would be subject to the RCRA 
hazardous waste regulations.
    Speculative accumulation. In addition to the containment provision, 
hazardous secondary materials that are generated and legitimately 
reclaimed under the control of the generator are subject to the 
speculative accumulation provisions of 40 CFR 261.1(c)(8). If these 
materials are speculatively accumulated, they are considered discarded. 
EPA did not propose changes to the speculative accumulation provisions 
in its March 26, 2007 proposal.
    Legitimate Recycling. Under this exclusion, hazardous secondary 
materials under the control of the generator must be legitimately 
reclaimed, as specified under 40 CFR 260.43. Legitimate recycling must 
involve a hazardous secondary material that provides a useful 
contribution to the recycling process or product and the recycling 
process must produce a valuable product or intermediate. In addition, 
as part of a legitimacy determination, persons must consider whether 
the hazardous secondary material is managed as a valuable product and 
must consider the levels of toxics in the product of the recycling 
process as compared to analogous products made from virgin materials. 
The details of the legitimacy provision are discussed in section IX of 
this preamble.
    Notification. Under today's rule, hazardous secondary material 
generators, tolling contractors, toll manufacturers, and reclaimers 
(where the generator and reclaimer are part of the same company, but 
located at different facilities) managing hazardous secondary materials 
reclaimed under the control of the generator are required to submit a 
notification prior to operating under this exclusion and by March 1 of 
each even numbered year thereafter to the EPA Regional Administrator 
using EPA Form 8700-12. In states authorized by EPA to administer the 
RCRA Subtitle C hazardous waste program, notifications may be sent to 
the state Director. The notice must include:
    <bullet> The name, address and EPA ID number (if applicable) of the 
facility;
    <bullet> The name and telephone number of a contact person;
    <bullet> The NAICS code of the facility;
    <bullet> The exclusion under which the hazardous secondary 
materials will be managed (e.g., 40 CFR 261.2(a)(2(ii)

[[Page 64682]]

and/or 40 CFR 261.4(a)(23) for hazardous secondary materials managed in 
a land-based unit);
    <bullet> When the facility expects to begin managing the hazardous 
secondary materials in accordance with the exclusion;
    <bullet> A list of hazardous secondary materials that will be 
managed according to the exclusion (reported as the EPA hazardous waste 
numbers that would apply if the hazardous secondary materials were 
managed as hazardous waste);
    <bullet> For each hazardous secondary material, whether the 
material, or any portion thereof, will be managed in a land-based unit;
    <bullet> The quantity of each hazardous secondary material to be 
managed annually; and
    <bullet> The certification (included in EPA Form 8700-12) signed 
and dated by an authorized representative of the facility.
    Generators and reclaimers are required to notify on a per facility 
basis. In other words, facilities managing hazardous secondary 
materials will need to submit a notification form in accordance with 
the exclusion. One notification cannot cover two or more facilities. 
Furthermore, each facility need only use one notification form to list 
all of the hazardous secondary materials to be managed under the 
exclusion (i.e., facilities need not file separate notifications for 
each hazardous secondary material).
    We are also requiring facilities that stop managing hazardous 
secondary materials in accordance with the exclusion to notify the 
Regional Administrator within 30 days using the same EPA Form 8700-12. 
Notification in this instance serves two objectives: (1) It allows 
states to follow up with the facility to verify that the hazardous 
secondary material has not been discarded; and (2) it maintains the 
usability of the database to enable states to monitor compliance and, 
for today's transfer-based exclusion, to assist generators with 
performing reasonable efforts on potential reclaimers. We consider a 
facility to have `stopped' managing hazardous secondary materials when 
a facility no longer generates, manages and/or reclaims hazardous 
secondary materials under the exclusion and does not expect to manage 
any amount of hazardous secondary material under the exclusion for at 
least one year. This includes if the facility chooses to manage the 
hazardous secondary materials as hazardous waste or the facility 
chooses to temporarily suspend management of hazardous secondary 
materials and does not expect to manage any amount of hazardous 
secondary materials for at least one year. For example, a facility that 
has previously notified it is managing hazardous secondary materials 
under the exclusion, but then subsequently chooses to stop managing all 
hazardous secondary materials for a period of at least one year, must 
notify the Regional Administrator. However, if this same facility only 
stopped managing one type of hazardous secondary material (but 
continued to manage another type of hazardous secondary material under 
the exclusion) it would not need to notify, and could just update its 
list of hazardous secondary materials during the next periodic re-
notification submitted every two years. Additionally, if a reclaimer or 
intermediate facility managing hazardous secondary materials under the 
transfer-based exclusion requests release of financial assurance under 
40 CFR 261.143(h), it is clear the facility has `stopped' managing 
hazardous secondary materials, and, therefore, must notify the Regional 
Administrator (for additional clarification, notification does not 
`trigger' the process for releasing financial assurance; instead, a 
facility wishing to be released from financial assurance obligations 
must notify it has `stopped' managing hazardous secondary materials). 
Of course, a facility could certainly choose to begin managing 
hazardous secondary materials again and would simply have to submit a 
notification in compliance with 40 CFR 260.42.
    We note that the requirement to provide this notification is not a 
condition of the exclusion. Thus, failure to comply with the 
requirement constitutes a violation of RCRA, but does not affect the 
excluded status of the hazardous secondary materials.
    We believe our authority to request such information is inherent in 
our authority to determine whether a material is discarded, and we 
consider this to be the minimum information needed to enable credible 
evaluation of the status of hazardous secondary materials under section 
3007 of RCRA and to ensure that the terms of the exclusions are being 
met by generators and reclaimers. EPA further believes that RCRA 
section 3007 allows us to gather information about any material when we 
have reason to believe that it may be a solid waste and possibly a 
hazardous waste within the meaning of RCRA section 1004(5). Section 
2002 also gives EPA authority to issue regulations necessary to carry 
out the purposes of RCRA.
    We also note that after EPA promulgates regulations listing a 
material as a hazardous waste or identifying it by its characteristics, 
section 3010 of RCRA requires generators of such materials to submit a 
notification to EPA within 90 days. Since the changes finalized today 
could substantially affect the universe of facilities in the Subtitle C 
system, we believe the notifications are appropriate.
    The intent of this notification requirement is to provide basic 
information to the regulatory agencies about who will be managing 
hazardous secondary materials under the exclusion. The specific 
information included in today's notification requirement will enable 
regulatory agencies to monitor compliance adequately and to ensure 
hazardous secondary materials are managed according to the exclusion 
and not discarded. For example, in the notification, EPA requires 
facilities to include the quantity of hazardous secondary materials 
that will be managed according to the exclusion and whether certain 
types of hazardous secondary materials will be managed in land-based 
units. This information can be used to assist RCRA inspectors in 
determining which facilities may warrant greater oversight and provides 
a basis for setting enforcement priorities. Furthermore, requiring 
facilities to notify when they have stopped managing hazardous 
secondary materials allows states to follow-up and ensure that 
hazardous secondary materials were not discarded. Notification 
information is collected in EPA's RCRAInfo database, which is the 
national repository of all RCRA Subtitle C site identification 
information, whether collected by a state authority or EPA. EPA 
provides public access to this information through EPA's public Web 
site at http://www.epa.gov/enviro/html/rcris/ (or other successor Web 
site).
    This notification requirement is the same as the notification 
requirement for today's transfer-based exclusion found in section 
VIII.C. of today's preamble. Sending to an intermediate facility. We 
note that under this exclusion, hazardous secondary materials may not 
be sent to an intermediate facility as defined in 40 CFR 260.10 (i.e., 
a facility, other than a generator or reclaimer, that stores hazardous 
secondary materials for more than 10 days). If hazardous secondary 
materials are sent to intermediate facilities, they would not meet the 
definition of hazardous secondary materials reclaimed under the control 
of the generator, and they are subject to the conditions of the 
transfer-based exclusion, discussed below.

[[Page 64683]]

D. Terminating the Exclusion

    Units managing excluded hazardous secondary materials are not 
subject to the closure regulations in 40 CFR parts 264 and 265 subpart 
G. However, when the use of these units is ultimately discontinued, all 
owners and operators must manage any remaining hazardous secondary 
materials that are not reclaimed and remove or decontaminate all 
hazardous residues and contaminated containment system components, 
equipment structures, and soils. These hazardous secondary materials 
and residues, if no longer intended for reclamation, would also no 
longer be eligible for the exclusion (which only applies to materials 
that will be reclaimed). Failure to remove these materials within a 
reasonable time frame after operations cease could cause the facility 
to become subject to the full Subtitle C requirements if the Agency 
determines that recycling is no longer feasible. While this final rule 
does not set a specific time frame for these activities, the Agency 
believes that they typically should be completed within the time frames 
established for analogous activities. For example, the requirements for 
product tanks under 40 CFR 261.4(c) allow 90 days for removal of 
hazardous material after the unit ceases to be operated for 
manufacturing. This time frame should serve as a guideline for 
regulators in determining on a case-by-case basis whether owners and 
operators have completed these activities within a reasonable time 
frame. In any event, these hazardous secondary materials remain subject 
to the speculative accumulation restrictions in 40 CFR 261.1(a)(8), 
which includes both a time limitation and a requirement that the 
facility be able to show there is a feasible means of recycling the 
hazardous secondary material.

E. Enforcement

    Under today's rule, hazardous secondary materials generated and 
legitimately reclaimed within the United States under the control of 
the generator are excluded from RCRA Subtitle C regulation, but are 
subject to certain restrictions, principally speculative accumulation, 
legitimate recycling, and containment. Persons that handle these 
hazardous secondary materials are responsible for maintaining the 
exclusion by ensuring that these restrictions are met. If the hazardous 
secondary materials are not managed pursuant to these restrictions, 
they are not excluded. They would then be considered solid and 
hazardous wastes if they were listed or they exhibited a hazardous 
waste characteristic for Subtitle C purposes from their point of 
generation. Persons operating under the exclusion are also required to 
notify EPA or the authorized state.
    Persons taking advantage of today's exclusion that fail to meet the 
requirements may be subject to an enforcement action. EPA could choose 
to bring an enforcement action under RCRA section 3008(a) for 
violations of the hazardous waste requirements occurring from the time 
the hazardous secondary materials are generated through the time they 
are ultimately disposed of or reclaimed. The Agency affirms in this 
preamble that Sec.  261.2(f) applies to claims that hazardous secondary 
materials are not solid waste because they are being legitimately 
recycled. Respondents in enforcement cases should be prepared to 
demonstrate that they meet the terms of the exclusion or exemption, 
which includes demonstrating that the recycling is legitimate. 
Appropriate documentation must be provided to the enforcing agency to 
demonstrate that the material is not a solid waste or is exempt from 
regulation. In addition, the recycler of the hazardous secondary 
materials should be prepared to show they have the necessary equipment 
to perform the recycling operation. Furthermore, any release of the 
hazardous secondary materials to the environment that is not 
immediately cleaned up would be considered discarded and, thus, the 
hazardous secondary materials that were released would be a solid waste 
and potentially subject to the RCRA hazardous waste regulations.
    The Agency believes that this approach provides hazardous secondary 
material generators with an incentive to handle or (in the case of 
tolling) to ensure that their contractors handle the hazardous 
secondary materials pursuant to the requirements. It also encourages 
each hazardous secondary material generator to take appropriate steps 
to ensure that such materials are properly handled and legitimately 
reclaimed by others in the management chain. If there is a release of 
the hazardous secondary materials into the environment, they are 
considered discarded and subject to all applicable hazardous waste 
regulations and cleanup authorities.

VIII. Exclusion for Hazardous Secondary Materials That Are Transferred 
for the Purpose of Legitimate Reclamation

    Today, EPA is also finalizing an exclusion from the definition of 
solid waste for hazardous secondary materials that are generated and 
subsequently transferred to another company or person for the purpose 
of reclamation (i.e., ``transfer-based exclusion''), provided that 
certain conditions are met. Reclamation that conforms to these 
conditions would not involve discard, and therefore the hazardous 
secondary materials would not be regulated as solid waste. As with all 
recycling-related exclusions and exemptions, such excluded hazardous 
secondary materials would also need to be recycled legitimately. For 
further discussion on how the transfer-based exclusion relates to the 
concept of discard, see section V.B. of this preamble.
    The conditions that must be met for this exclusion are based on our 
analysis of how successful third-party recycling currently operates 
(and, conversely, how unsuccessful third-party recycling practices can 
result in recyclable hazardous secondary materials being discarded), 
and are supported by the information contained in the rulemaking 
record, including the recycling studies found in the public docket for 
today's rulemaking and discussed previously in section III.D. of 
today's preamble and in the preamble to the March 2007 supplemental 
proposal at 72 FR 14178-14183. For example, the successful recycling 
study indicates that many responsible generators examine the recycler's 
technical capabilities, business viability, environmental track record, 
and other relevant questions before sending hazardous secondary 
materials for recycling. Currently, these recycler audits, which can be 
thought of as a form of environmental ``due diligence,'' are in essence 
a precaution to minimize the prospect of incurring CERCLA liability in 
the event that the recycling, or lack thereof, results in the release 
of material to the environment. The fact that these companies are 
willing to incur the expense of auditing recyclers as a business 
practice is of itself a marketplace affirmation that sending hazardous 
secondary materials to other companies for recycling involves some 
degree of risk. Although these risks may be small when the recycler is 
a well-established, successful enterprise with a good record of 
environmental stewardship, it also is apparent that not all recyclers 
fit this profile, as evidenced in the study of environmental problems 
associated with hazardous secondary materials recycling. Thus, we 
believe that there is sufficient basis for the Agency to place certain 
conditions on this exclusion for the generator to determine that the 
hazardous secondary material is not discarded, particularly since we 
expect that this rulemaking could encourage

[[Page 64684]]

some companies that are currently not involved with hazardous secondary 
materials recycling to enter the business.

A. What Is the Purpose of This Exclusion?

    In finalizing this conditional exclusion, EPA's objectives are to 
encourage the reclamation of hazardous secondary materials and reduce 
unnecessary regulatory compliance costs to industry, while still 
maintaining protection of human health and the environment. After 
considering the entire rulemaking record, including comments submitted 
by the public, we continue to believe that this exclusion is a 
workable, common-sense approach to meeting these objectives; is well 
supported by the record for this rulemaking, including the recycling 
studies that EPA has conducted; and, in important ways, reflects 
current good industry practices that are used by responsible generators 
for recycling hazardous secondary materials.

B. Scope and Applicability

    The conditional exclusion for the transfer-based approach applies 
to hazardous secondary materials that are currently regulated as 
hazardous wastes because their recycling involves reclamation--
specifically, spent materials, listed sludges, and listed by-products. 
It would not be available for hazardous secondary materials that are 
regulated as hazardous wastes for other reasons, such as ``inherently 
waste-like materials,'' materials that are ``used in a manner 
constituting disposal,'' or ``materials burned for energy recovery.'' 
The conditional exclusion also does not apply to materials that are 
currently excluded from the definition of solid waste according to 
other, existing provisions of 40 CFR part 261. For example, the 
exclusion for broken cathode ray tubes requires them to be transported 
in closed containers per 40 CFR 261.4(a)(22). Today's exclusion does 
not supersede or otherwise affect these other exclusions, and such 
hazardous secondary materials will need to be managed in accordance 
with those existing exclusions. For a discussion of how this exclusion 
relates to particular existing exclusions and additional details 
involving these exclusions, see section XI of today's preamble.
    This exclusion is available to hazardous secondary material 
generators, transporters, intermediate facilities, or reclaimers. In 
the March 2007 supplemental proposal, EPA proposed that the hazardous 
secondary material must be transferred directly from the generator to 
the reclaimer and not be handled by anyone else other than a 
transporter. Thus, as proposed, a generator that wished to maintain the 
excluded status of its hazardous secondary materials would not be able 
to ship those materials to a middleman, such as a broker. We said that 
we believed that a generator who ships materials to a middleman, such 
as a broker typically does not know who will ultimately manage and 
reclaim them, or how they will be reclaimed (72 FR 14189). However, we 
requested comment on allowing middlemen to participate in the 
exclusion.
    Comments on the proposal disputed the assumption that the generator 
does not know the final destination when shipping to an intermediate 
facility, saying, that in certain cases, the generator works with an 
intermediate facility to choose the reclamation facility and the final 
destination is arranged by contract before the hazardous secondary 
materials are shipped. Commenters also asserted that such arrangements 
allow for consolidation of shipments, making recycling economical for 
small businesses who generate hazardous secondary materials.
    EPA agrees with the comments that some types of intermediate 
facilities could participate in the exclusion, while still allowing the 
hazardous secondary material generator to perform reasonable efforts to 
ensure that the hazardous secondary material is properly and 
legitimately recycled. Thus, in the final rule, EPA has determined that 
intermediate facilities will be allowed under the transfer-based 
exclusion. However, to limit the exclusion to those intermediate 
facilities where discard will not occur, if the hazardous secondary 
material will be passing through an intermediate facility, the 
hazardous secondary material generator must make contractual 
arrangements with the intermediate facility to ensure that the 
hazardous secondary material is sent on to the reclamation facility or 
facilities identified by the generator and must perform reasonable 
efforts on the intermediate facility, as well as on the reclamation 
facility. Also, the intermediate facility must send the hazardous 
secondary material to the reclaimer(s) designated by the generator.
    In addition, the intermediate facility must meet the same 
conditions as the reclamation facility for the same reasons the 
reclamation facility must meet them. Section VIII.C.4. below discusses 
additional details as to why these conditions need to apply to the 
reclamation facilities and this reasoning applies equally to 
intermediate facilities involved in the process. Of the 208 damage 
cases in the environmental problems study, 45 (22%) cases were from 
intermediate facilities. Therefore, EPA believes the record for 
requiring the conditions for the reclamation facility also supports 
promulgation of the same conditions for intermediate facilities.
    In addition, in the March 2007 supplemental proposal, the Agency 
recognized that, in some cases, recycling of an excluded hazardous 
secondary material may involve more than one reclamation step. For 
example, a recyclable hazardous secondary material, such as an 
electroplating secondary material, might have a relatively high 
moisture content and a somewhat variable chemical composition. Such 
materials might need to be dried and blended to a suitable, consistent 
specification before they are amenable to a ``final'' reclamation 
process (e.g., metals smelting). In this example, the two different 
reclamation processes might be conducted by different companies and/or 
at different facilities. The Agency continues to see no reason to 
discourage this kind of recycling. The transfer-based exclusion 
finalized today is available for hazardous secondary materials that are 
recycled by means of one or more reclamation processes, including when 
they occur at more than one reclamation facility.
    The conditions for generators and reclaimers under the terms of 
this exclusion would apply in the same way, regardless of how many 
reclamation steps were involved with recycling of an excluded material. 
For example, if the excluded hazardous secondary material was reclaimed 
by more than one facility or company, the generator of such material 
would need to make reasonable efforts to examine each facility or 
company involved in the reclamation process to ensure that the 
hazardous secondary materials would be properly and legitimately 
recycled. We believe that this is a consistent application of the idea 
of requiring ``reasonable efforts'' as a condition of this exclusion. 
Where recycling of a hazardous secondary material involves more than 
one reclamation step at more than one facility, generators should be 
well informed as to how the materials will be reclaimed, and by whom, 
throughout the recycling process. Additionally, each reclaimer 
(including `partial reclaimers') managing hazardous secondary materials 
must meet all the reclaimer conditions listed under 40 CFR 
261.4(a)(24), as well as the recordkeeping requirements.

[[Page 64685]]

C. Conditions and Requirements

1. Provisions Applicable to the Hazardous Secondary Materials 
Generator, the Reclamation Facility, and Any Intermediate Facility
    Prohibition on speculative accumulation. As a condition of the 
transfer-based exclusion, hazardous secondary materials cannot be 
speculatively accumulated (40 CFR 261.1(c)(8)) at the hazardous 
secondary material generator, reclamation facility, or intermediate 
facility. Restrictions on speculative accumulation have been an 
important element of the RCRA hazardous waste recycling regulations 
since they were promulgated on January 4, 1985. According to this 
regulatory provision, hazardous secondary materials are accumulated 
speculatively if the person accumulating them cannot show that the 
material is potentially recyclable; further, the person accumulating 
the hazardous secondary material must show that during a calendar year 
(beginning January 1) the amount of such material that is recycled or 
transferred to a different site for recycling is at least 75% by weight 
or volume of the amount of the hazardous secondary material present at 
the beginning of the period. It is also the same prohibition that is 
being promulgated today for the generator-controlled exclusions.
    Legitimate recycling. Under the transfer-based exclusion, hazardous 
secondary materials must be legitimately reclaimed, as specified under 
40 CFR 260.43. Legitimate recycling must involve a hazardous secondary 
material that provides a useful contribution to the recycling process 
or product and the recycling process must produce a valuable product or 
intermediate. In addition, as part of a legitimacy determination, 
persons must consider whether the hazardous secondary material is 
managed as a valuable product and must consider the levels of toxics in 
the product of the recycling process as compared to analogous products 
made from virgin materials. The details of the legitimacy provision are 
discussed in section IX of this preamble.
    Notification. Under today's transfer-based exclusion, hazardous 
secondary material generators, reclaimers, and intermediate facilities 
are required to send a notification prior to operating under this 
exclusion and by March 1 of each even numbered year thereafter to the 
EPA Regional Administrator using EPA Form 8700-12. In states authorized 
by EPA to administer the RCRA Subtitle C hazardous waste program, 
notifications may be sent to the state Director. The notice must 
include:
    <bullet> The name, address, and EPA ID number (if applicable) of 
the facility;
    <bullet> The name and telephone number of a contact person;
    <bullet> The NAICS code of the facility;
    <bullet> The exclusion under which the hazardous secondary 
materials will be managed (e.g., whether the hazardous secondary 
materials are managed under the transfer-based exclusion in 40 CFR 
261.4(a)(24) and/or under the exclusion for hazardous secondary 
materials exported for reclamation in 40 CFR 261.4(a)(25));
    <bullet> For reclaimers and intermediate facilities managing 
hazardous secondary materials, whether the reclaimer or intermediate 
facility has financial assurance for the management of such hazardous 
secondary materials (not applicable for hazardous secondary material 
generators);
    <bullet> When the facility expects to begin managing the hazardous 
secondary materials in accordance with the exclusion;
    <bullet> A list of hazardous secondary materials that will be 
managed according to the exclusion (reported as the EPA hazardous waste 
numbers that would apply if the hazardous secondary materials were 
managed as hazardous waste);
    <bullet> For each hazardous secondary material, whether the 
material, or any portion thereof, will be managed in a land-based unit;
    <bullet> The quantity of each hazardous secondary material to be 
managed annually; and
    <bullet> The certification (included in EPA Form 8700-12) signed 
and dated by an authorized representative of the facility.
    If a facility has submitted a notification, but then subsequently 
stops managing hazardous secondary materials in accordance with the 
exclusion, the facility must re-notify the Regional Administrator 
within 30 days using the same EPA Form 8700-12. We consider a facility 
to have `stopped' managing hazardous secondary materials when a 
facility no longer generates, manages and/or reclaims hazardous 
secondary materials under the exclusion and does not expect to manage 
any amount of hazardous secondary material under the exclusion for at 
least one year. Of course, a facility could certainly choose to begin 
managing hazardous secondary materials again and would simply have to 
submit a notification in compliance with 40 CFR 260.42.
    The requirement to provide this notification is not a condition of 
the exclusion. Thus, failure to comply with the requirement constitutes 
a violation of RCRA, but does not affect the excluded status of the 
hazardous secondary materials.
    This notification requirement is the same as the notification 
requirement for the generator-controlled exclusion. For further 
discussion on the notification, including examples of when a facility 
must re-notify that it has stopped managing hazardous secondary 
materials, see section VII.C. of today's preamble.
    Hazardous secondary materials must be contained. Another condition 
of the transfer-based exclusion applicable to hazardous secondary 
material generators, reclamation facilities, and intermediate 
facilities is that the hazardous secondary materials must be contained 
in their management units. Hazardous secondary materials released to 
the environment from any unit are discarded and would be subject to the 
hazardous waste regulations, unless they are immediately cleaned up. 
Hazardous secondary materials remaining in a unit that experiences a 
release may also be considered discarded in certain cases. This is the 
same as the restriction that is being promulgated for the generator-
controlled exclusions. For further discussion on the containment 
provisions, including examples of how they might be applied in case-
specific situations, see section VII.C. of today's preamble.
2. Provisions Applicable to the Hazardous Secondary Material Generator
    Reasonable efforts. Today's final rule requires generators to make 
reasonable efforts to ensure that their hazardous secondary materials 
are properly and legitimately recycled before shipping or otherwise 
transferring them to a reclamation facility or any intermediate 
facility. As discussed previously, this condition effectively requires 
that generators perform a type of environmental ``due diligence'' on a 
reclaimer or any intermediate facility to ensure that those facilities 
intend to properly manage the hazardous secondary materials as 
commodities and legitimately recycle rather than discard them. We 
believe that this condition reflects the existing best practices of 
many responsible generators who audit and assess recyclers to maintain 
their commitment to sound environmental stewardship, minimize their 
potential regulatory and liability exposures, and make decisions about 
with whom they should do business.
    Our successful recycling study quotes one large recycling and 
disposal vendor

[[Page 64686]]

as stating that with respect to its new customers, 60% of its large 
customers and 30%-50% of its smaller customers now perform audits on 
them. Under current practices, such audits can involve a site visit to 
the recycling facility and an examination of the company's finances, 
technical capability, environmental compliance record, and housekeeping 
practices. (Note: Audits that are currently conducted may or may not 
cover all of these areas.) Through the codification of this condition, 
we want to reinforce this best practice among all generators who use 
the transfer-based exclusion to send hazardous secondary materials to 
reclamation and intermediate facilities. We believe that this condition 
is critical for generators who currently may not evaluate reclaimers 
and intermediate facilities because this condition provides these 
generators with a framework for making reasonable efforts to ensure 
their hazardous secondary materials are properly managed and reclaimed, 
and not discarded.
    Currently, under 40 CFR part 262, a generator must make a hazardous 
waste determination and, thus, already has an obligation to determine 
whether the waste is subject to regulation as a hazardous waste. EPA 
believes that to make a parallel determination under 40 CFR 
261.4(a)(24) that hazardous secondary materials are not solid wastes 
because they are destined for reclamation and are not discarded, the 
generator must meet the reasonable efforts condition. A reasonable 
efforts inquiry by the hazardous secondary material generator ensures 
that the reclaimer intends to recycle the hazardous secondary material 
legitimately pursuant to 40 CFR 260.43 and not discard it, and that the 
reclaimer or any intermediate facility will manage the hazardous 
secondary materials in compliance with 40 CFR 261.4(a)(24)(vi).
    The reasonable efforts condition for generators applies when 
hazardous secondary materials are transferred to intermediate 
facilities (as defined in 40 CFR 260.10) and reclamation facilities 
operating without a RCRA Part B permit or under the interim status 
standards that extend to management of the hazardous secondary 
materials in question. If the permit or interim status standards 
address the units being used to manage the hazardous secondary 
materials, we do not require generators to conduct reasonable efforts 
because we believe that a Part B permit or the interim status standards 
provide some assurance to generators that the facility has a measure of 
financial stability and that the hazardous secondary materials will be 
well managed. RCRA permitted or interim status facilities where the 
permit or interim status standards extend to the management of the 
hazardous secondary materials being reclaimed are already subject to 
stringent design and operating standards, must demonstrate financial 
assurance, and are subject to the corrective action requirements in the 
event of environmental problems. Not requiring reasonable efforts for 
generators that transfer hazardous secondary materials to these RCRA 
permitted or interim status recycling or intermediate facilities would 
likely be of particular benefit to relatively smaller volume generators 
who may not have the resources required to satisfy this condition.
    Of course, if a permitted facility later modifies its permit terms 
in a way that the permit no longer extends to the management of the 
hazardous secondary materials, the generator would need to perform 
reasonable efforts in accordance with this exclusion. EPA recommends 
that any hazardous secondary material generator transferring hazardous 
secondary materials to a permitted facility request that it get placed 
on the facility mailing list, so they can then receive notice of 
changes to the permit status of the reclaimer or intermediate facility 
(see 40 CFR 270.42 and 40 CFR 124.10).
    In contrast, if the permit or interim status standards do not 
extend to the hazardous secondary materials being reclaimed, the same 
level of assurance is not guaranteed. Therefore, if a reclamation or 
intermediate facility only has a RCRA permit or complies with the 
interim status standards for another on-site operation unrelated to the 
hazardous secondary materials of interest to the generator, then the 
hazardous secondary material generator is required to make a reasonable 
efforts inquiry of the facility as if it were a non-permitted facility.
    EPA believes that a generator should be allowed to use any credible 
evidence available in making reasonable efforts, including information 
gathered by the generator, provided by the reclaimer or intermediate 
facility, and/or provided by a third party, in lieu of personally 
performing an assessment. For example, the hazardous secondary material 
generator might hire an independent auditor to review the operations, 
produce audit reports as a consortium of generators, or rely on an 
assessment of a recycler or intermediate facility by a parent 
corporation or trade association that is used by several generating 
facilities. In fact, EPA believes that many reputable third-party 
auditors, parent companies, and trade associations already assemble the 
types of information based on credible evidence that would be needed 
for a generator to satisfy the reasonable efforts condition. EPA would 
encourage this type of pooling of information to reduce the burden on 
generators and to take advantage of specialized technical expertise.
    EPA is also finalizing in the regulatory text a series of 
questions, which together represent a minimum standard for reasonable 
efforts, to provide generators and overseeing agencies with regulatory 
certainty regarding fulfillment of the condition. We believe that these 
questions are objective and must be answered affirmatively. Hazardous 
secondary material generators wishing to take advantage of the 
exclusion must be able to answer all questions affirmatively to 
determine that their hazardous secondary materials are or will be 
properly and legitimately recycled and will not be discarded. The 
reasonable efforts questions are straight-forward by design and will 
allow generators to use a common sense approach in answering the 
questions and satisfy the condition. These questions can be found at 40 
CFR 261.4(a)(24)(v)(B) and are discussed below.
    Of course, a generator could choose to seek additional information 
or ask additional questions to determine that its hazardous secondary 
materials will not be discarded due to concerns about CERCLA liability. 
One example of additional information that many responsible generators 
currently seek from recyclers, but that EPA is not including in today's 
final rule, is information about a reclamation facility's financial 
health. Based on EPA's successful recycling study and comments on the 
proposed rule, we know that responsible generators often inquire about 
a reclamation facility's financial health. These inquiries can include 
reviews of liability insurance coverage, company annual reports, 
bankruptcy filings, investments in capital improvements, markets for 
recycled products, and business reports, such as Dun & Bradstreet 
reports. EPA believes that evaluating the financial health of a company 
can benefit a generator's reasonable efforts inquiry of a reclamation 
or intermediate facility and encourages generators to do so, although 
we acknowledge that it is not an activity that lends itself to an 
objective standard that would be appropriate for regulation. Instead, 
EPA is requiring that, under the transfer-based exclusion and 
reasonable efforts condition, reclamation and intermediate

[[Page 64687]]

facilities have financial assurance and generators affirm that 
facilities have notified the appropriate authorities that the financial 
assurance condition is satisfied.
    EPA intends that if a hazardous secondary material generator has 
met the reasonable efforts condition prior to transferring hazardous 
secondary materials to the reclamation or intermediate facility, then 
the reclaimer or intermediate facility, not the generator, would be 
liable under RCRA if the materials were discarded (i.e., not properly 
and legitimately recycled). However, if the generator does not meet the 
reasonable efforts condition, then the generator is ineligible for the 
transfer-based exclusion and would be potentially liable in the event 
its hazardous secondary materials were discarded by a reclamation or 
intermediate facility. (See section VIII.E. for more information.) EPA 
acknowledges that meeting this condition will not affect CERCLA 
liability. (See section XIII for more information on CERCLA liability.)
    The following five questions represent a minimum standard for 
satisfying the reasonable efforts condition:
    (1) Does the available information indicate that the reclamation 
process is legitimate pursuant to Sec.  260.43? In answering this 
question, the hazardous secondary material generator can rely on its 
existing knowledge of the physical and chemical properties of the 
hazardous secondary material, as well as information from other sources 
(e.g., the reclamation facility, audit reports, etc.) about the 
reclamation process. (By responding to this question, the hazardous 
secondary material generator has also satisfied its requirement in 
Sec.  260.43(a) to be able to demonstrate that the recycling is 
legitimate.)
    (2) Does the publicly available information indicate that the 
reclamation facility and any intermediate facility that is used by the 
hazardous secondary material generator have notified the appropriate 
authorities of hazardous secondary materials reclamation activities 
pursuant to 40 CFR 260.42 and have they notified the appropriate 
authorities that the financial assurance condition is satisfied per 40 
CFR 261.4(a)(24)(vi)(F)? In answering these questions, the hazardous 
secondary material generator can rely on the available information 
documenting the reclamation facility's and any intermediate facility's 
compliance with the notification requirements per Sec.  260.42, 
including the requirement in Sec.  260.42(a)(5) to notify EPA whether 
the reclaimer or intermediate facility has financial assurance.
    (3) Does publicly available information indicate that the 
reclamation facility or any intermediate facility that is used by the 
hazardous secondary material generator has not had any formal 
enforcement actions taken against the facility in the previous three 
years for violations of the RCRA hazardous waste regulations and has 
not been classified a significant noncomplier with RCRA Subtitle C? In 
answering this question, the hazardous secondary material generator can 
rely on the publicly available information from EPA or the state. If 
the reclamation facility or any intermediate facility that is used by 
the hazardous secondary material generator has had a formal enforcement 
action taken against the facility in the previous three years for 
violations of the RCRA hazardous waste regulations and has been 
classified as a significant non-complier with RCRA Subtitle C, does the 
hazardous secondary material generator have credible evidence that the 
facilities will manage the hazardous secondary materials properly? In 
answering this question, the hazardous secondary material generator can 
obtain additional information from EPA, the state, or the facility 
itself that the facility has addressed the violations, taken remedial 
steps to address the violations and prevent future violations, or that 
the violations are not relevant to the proper management of the 
hazardous secondary materials.
    (4) Does the available information indicate that the reclamation 
facility and any intermediate facility that is used by the hazardous 
secondary material generator have the equipment and trained personnel 
to safely recycle the hazardous secondary material? In answering this 
question, the generator may rely on a description by the reclamation 
facility or by an independent third party of the equipment and trained 
personnel to be used to recycle the generator's hazardous secondary 
material.
    (5) If residuals are generated from the reclamation of the excluded 
hazardous secondary materials, does the reclamation facility have the 
permits required (if any) to manage the residuals? If not, does the 
reclamation facility have a contract with an appropriately permitted 
facility to dispose of the residuals? If not, does the hazardous 
secondary material generator have credible evidence that the residuals 
will be managed in a manner that is protective of human health and the 
environment? In answering these questions, the hazardous secondary 
material generator can rely on publicly available information from EPA 
or the state, or information provided by the facility itself.
    Question (1) focuses on whether the reclamation facility receiving 
hazardous secondary materials from a generator legitimately recycles 
such materials. EPA believes that any generator ``regulated under Sec.  
260.34 or claiming to be excluded from the hazardous waste regulations 
under Sec.  261.2(a)(2)(ii), Sec.  261.4(a)(23), (24), or (25) because 
they are engaged in recycling, must be able to demonstrate that the 
recycling is legitimate'' (40 CFR 260.43). Determining whether a 
recycling operation is legitimate is a fundamental basis for 
establishing that a generator's hazardous secondary materials will not 
be discarded after being transferred to a reclamation facility.
    Since reclaimers must also be able to demonstrate that the 
recycling is legitimate under 40 CFR 260.43, EPA believes that 
generators can work with the owner or operator of the reclamation 
facility to verify that they have made a determination that the 
recycling is legitimate, which would answer question (1) for the 
purposes of satisfying the condition. We would expect that a reclaimer 
would be willing and able to adequately explain to the hazardous 
secondary material generator how the recycling activity satisfies the 
legitimacy requirements pursuant to 40 CFR 260.43, such that we would 
not expect that a generator would have to examine in detail the 
legitimacy factors. Of course, in order to answer question (1), a 
generator may also rely on its existing knowledge of the physical and 
chemical properties of the hazardous secondary material. Based on our 
discussions with the generating industry, we would expect that a 
hazardous secondary material generator that produces and manages a 
material that is more like an ingredient (i.e., a hazardous secondary 
material to be recycled) than a waste to be discarded would have a good 
understanding of the material's valuable components and useful 
contribution to a process. Since the generator manages the process that 
generates the hazardous secondary material, it would be knowledgeable 
about the makeup of the material and the value and usefulness of its 
components.
    However, if questions or concerns remain regarding the legitimacy 
of the recycling activity, a generator could request additional 
information on how the definition of legitimacy is met. (See section IX 
of this rulemaking preamble for a discussion of determining 
legitimacy.)
    Question (2) concentrates on whether the recycler or intermediate 
facility (to

[[Page 64688]]

the extent that the hazardous secondary material generator uses an 
intermediate facility) has met the following obligations under the 
exclusion before accepting hazardous secondary materials: Notification 
of the appropriate regulatory authorities that it plans to reclaim (or, 
in the case of the intermediate facility, properly store the hazardous 
secondary material) excluded hazardous secondary materials, and 
notification of the appropriate regulatory authorities that the 
facility has the necessary financial assurance to cover the costs of 
managing any hazardous secondary materials that remain if the facility 
closes. If a facility was found to have failed to meet the notification 
requirement and condition to have financial assurance, then it also 
would have failed to show a good faith effort towards demonstrating 
that it intends to recycle the hazardous secondary materials (or, in 
the case of the intermediate facility, properly store the hazardous 
secondary material) and not discard them.
    For the purposes of reasonable efforts, generators will be able to 
determine that a facility has satisfied both the notification 
requirement and financial assurance condition if the reclamation or 
intermediate facility has submitted a notification. The notification 
form will include a section indicating the facility has satisfied the 
financial assurance condition. Generators may access the notification 
information, including the facility's notification that it has 
financial assurance, through EPA's public Web site at http://www.epa.gov/enviro/html/rcris/ or other successor Web sites.
    Question (3) focuses on the compliance history of the recycler or 
the intermediate facility (to the extent that the hazardous secondary 
material generator uses an intermediate facility). Although 
consideration of compliance data is an imperfect tool for determining 
whether a recycler would properly manage the hazardous secondary 
materials, we believe that publicly available compliance data are a 
reasonable starting point for evaluating a facility's environmental 
performance. Facility-specific enforcement data on compliance status, 
ongoing enforcement actions by both EPA and states, and specific case 
information for formal enforcement actions are readily available on 
EPA's public Web site at http://www.epa.gov/echo. ``Formal 
enforcement'' is a written document that mandates compliance and/or 
initiates a civil or administrative process, with or without appeal 
rights before a trier of fact that results in an enforceable agreement 
or order and an appropriate sanction. For EPA, formal enforcement 
action is a referral to the U.S. Department of Justice for the 
commencement of a civil action in the appropriate U.S. District Court, 
or the filing of an administrative complaint, or the issuance of an 
order, requiring compliance and a sanction. For states, formal 
enforcement action is a referral to the state's Attorney General for 
the commencement of a civil or administrative action in the appropriate 
forum, or the filing of an administrative complaint, or the issuance of 
an order, requiring compliance and a sanction. ``Significant non-
complier'' is a defined term in EPA's Hazardous Waste Civil Enforcement 
Response Policy and means the violators have caused actual exposure or 
a substantial likelihood of exposure to hazardous waste or hazardous 
waste constituents; are chronic or recalcitrant violators; or deviate 
substantially from the terms of a permit, order, agreement, or from the 
RCRA statutory or regulatory requirements. In evaluating whether there 
has been actual or likely exposure to hazardous waste or hazardous 
waste constituents, EPA and the states consider both the environmental 
and human health concerns, including the potential exposure of workers 
to hazardous waste or hazardous waste constituents. For both terms, see 
EPA's Hazardous Waste Civil Enforcement Response Policy (Dec. 2003) at 
http://www.epa.gov/compliance/resources/policies/civil/rcra/finalerp1203.pdf.
    We do not believe that evaluating this publicly available 
information, which a generator would likely already be familiar with 
based on its own regulated activities, is difficult for a generator, 
nor is interpreting the data and deriving conclusions about facilities, 
since the database specifically notes whether a facility is alleged to 
be a ``significant non-complier'' (i.e., identified as a ``SNC'' or in 
``significant non-compliance''). We also note that since many states 
already provide compliance information to EPA and the public through 
the EPA Web site, we do not believe that requiring hazardous secondary 
material generators to review such information would pose a significant 
new burden for state agencies.
    While a facility designated as a significant non-complier and the 
subject of a formal enforcement action does not mean that the facility 
would not reclaim the hazardous secondary materials properly, it does 
raise questions that we believe the hazardous secondary material 
generator should investigate. That is, if any formal enforcement 
actions were taken against the facility in the previous three years for 
such non-compliance and the facility was alleged to be a significant 
non-complier, we would expect that the reclaimer would adequately 
explain to the hazardous secondary material generator how it has 
resolved any issues or how the reclamation facility will properly 
manage the hazardous secondary materials to avoid future violations 
and/or enforcement actions. Additionally, if the generator obtains 
reasonable information that the enforcement matters are unrelated to 
the facility's commitment to manage the hazardous secondary materials 
properly or that the violation has been corrected and the facility is 
back in compliance, then that would satisfy this aspect of the 
reasonable efforts determination. The generator also may wish to make a 
similar investigation of facilities designated as significant non-
compliers by EPA or a state even if no formal enforcement action has 
been taken.
    Question (4) concentrates on the technical capability of the 
recycler or intermediate facility, the most basic requirement for 
ensuring proper and legitimate recycling of hazardous secondary 
materials. If a reclamation or intermediate facility was found to have 
no equipment or inadequate equipment for storing the hazardous 
secondary material or was found to have personnel who have not been 
trained for reclaiming the hazardous secondary materials, it raises 
serious questions as to whether the facility would properly manage such 
materials and avoid discarding them to the environment.
    In public comments on this question, which was included in the 
preamble to the proposed rule, commenters pointed out that a 
determination of what specific equipment and training would be 
appropriate to safely recycle hazardous secondary materials may be 
beyond the expertise of some generators. EPA agrees that, as drafted in 
the proposed rule, answering this question may require specialized 
knowledge and expertise. Accordingly, EPA is changing this question to 
allow the generator to rely on the reclamation facility to explain why 
its equipment and personnel are appropriate. Of course, the generator 
must have an objectively reasonable belief based on this information 
that the reclamation facility's equipment and trained personnel are 
adequate for safe recycling. Accordingly, if the equipment and 
personnel described by the reclamation facility would be, to an 
objective and reasonable person, clearly inadequate for safe recycling 
of the generator's hazardous secondary material, then the generator 
would not have met this condition. However, EPA

[[Page 64689]]

does not require or expect the generator to have specialized knowledge 
or expertise of the recycling process.
    Of course, generators of hazardous secondary materials also are 
already familiar with equipment and personnel needed to manage their 
hazardous secondary materials properly at their own site. Therefore, a 
generator may also choose to answer question (4) using its existing 
knowledge of the physical and chemical properties of the hazardous 
secondary materials, technologies involved with managing and recycling 
such materials, and applicable regulations or industry standards based 
on the generator's experience producing and managing such materials.
    Generators may also at their discretion use relevant third-party 
information sources to answer questions about a facility's equipment 
and personnel, including audit reports; information provided by 
industry or waste management associations related to the reclamation or 
intermediate facility; documents provided by the reclaimer or 
intermediate facility; and as noted in the successful recycling study, 
an evaluation by a qualified engineer.
    Question (5) focuses on another major cause of environmental 
problems from recycling hazardous secondary materials: The management 
of residuals. This question relates to discard through the concept that 
a generator or reclaimer may actually be discarding hazardous secondary 
materials through the release of residuals from the recycling process. 
While the product made from recycling may be a legitimate product, the 
whole recycling process could be considered a discard activity if 
hazardous constituents from the recycled hazardous secondary materials 
are released to the environment. Roughly one-third of the damage cases 
documented in EPA's environmental problems study were caused by 
mismanagement of the residuals from recycling. Because the residuals 
from recycling can contain the hazardous constituents that originated 
with the hazardous secondary materials, it is important that the 
hazardous secondary material generator understands how a reclamation 
facility will manage any residuals generated.
    Many generators of hazardous waste already understand and comply 
with the requirements for residuals management. Therefore, they may 
rely on their existing knowledge to answer question (5) and we do not 
anticipate that answering it will pose a significant challenge to them. 
We also anticipate that new generators will use the same resources that 
are publicly available to current hazardous secondary material 
generators for determining applicable regulatory requirements. In 
addition, a reclamation facility would likely assist the generator in 
understanding any requirements applicable to residuals management. For 
example, the reclamation facility could identify the types of residuals 
generated by the recycling process and explain to the generator how 
they are managed, whether any requirements apply, and how the 
requirements are met.
    To answer question (5), a generator should determine that the 
reclamation facility has practices in place to ensure that residuals 
are managed in a manner that is protective of human health and the 
environment and according to applicable federal or state standards. For 
example, residuals may or may not be regulated hazardous wastes. If a 
residual is a hazardous waste, generators could access information 
about a facility's permit for managing the material on EPA's public Web 
site at http://www.epa.gov/enviro/html/rcris (or successor Web sites) 
or through a state Web site if such information is made publicly 
available. If a residual is a non-hazardous waste, a generator could 
access permit information from state agencies or a state Web site if 
available. A reclamation facility may also send its residuals to a 
waste management facility, in which case, a generator could ask about 
contracts with appropriately permitted disposal facilities. If a 
reclamation facility does not have permits for managing residuals or 
disposal contracts with permitted facilities, then the generator should 
determine that a reclamation facility has a system in place for 
managing residuals in a manner that is protective of human health and 
the environment.
    Any inquiry into a reclamation facility's system for analyzing 
options for residuals management should acknowledge that various 
options do exist and that price fluctuations may be a determining 
factor for selecting an option.
    In today's final rule, EPA is requiring that hazardous secondary 
material generators make reasonable efforts every three years, at a 
minimum, in order to ensure that the generators adequately manage their 
risk and are attune to changes at reclamation and intermediate 
facilities with which they are partners. We believe that this schedule 
reflects an average time frame for re-evaluating facilities, based on 
public comments, although we acknowledge that shorter time frames could 
be appropriate for certain industries, as suggested by some commenters. 
By specifying periodic updates for reasonable efforts every three years 
at a minimum, EPA in no way intends to limit a generator to conducting 
evaluations only every three years. In fact, EPA expects that any 
generator who has concerns about a reclamation or intermediate 
facility, or who gains new knowledge of significant changes or 
extraordinary situations at such facilities, would conduct reasonable 
efforts regardless of the required schedule. For example, if a 
hazardous secondary material generator conducted reasonable efforts in 
the first year it took advantage of the exclusion, prior to 
transferring materials to an intermediate facility, and then again 
conducted reasonable efforts in the second year upon learning about a 
significant change at the intermediate facility (such as bankruptcy), 
the hazardous secondary material generator would be required to update 
reasonable efforts three years later during the generator's fifth year 
of taking advantage of the exclusion.
    EPA is requiring that generators maintain documentation showing 
that they satisfied the reasonable efforts condition under 40 CFR 
261.4(a)(24)(v)(B) prior to transferring the hazardous secondary 
materials to the intermediate facility or the reclamation facility. 
Such records could include copies of audit reports and/or other 
relevant information that was used as the basis for affirmatively 
responding to inquiries about a reclamation or intermediate facility. 
Specifying that hazardous secondary material generators document these 
questions helps EPA and authorized states determine whether the 
generator made reasonable efforts to ensure that the hazardous 
secondary materials were not discarded. Documenting reasonable efforts 
is also beneficial for generators because EPA intends that if a 
generator has met the reasonable efforts condition prior to 
transferring the hazardous secondary materials to the reclamation or 
intermediate facility, then the reclaimer or intermediate facility, not 
the generator, would be liable under RCRA if the materials were 
discarded (see section VIII.E. for more information).
    Generators are also required to certify for each reclamation and 
intermediate facility that reasonable efforts were made to ensure that 
hazardous secondary materials will be properly and legitimately 
recycled, and not discarded. This certification should be signed and 
dated by an authorized representative of the generating company prior 
to transferring the excluded hazardous secondary materials to a 
reclamation or intermediate facility under 40 CFR 261.4(a)(24). The

[[Page 64690]]

certification should also incorporate the certification language in 40 
CFR 261.4(a)(24)(v)(C)(2). EPA believes that requiring a certification 
creates a necessary level of oversight from an authorized 
representative, who can be any appointed company representative, and 
who must affirm that the condition is met and that hazardous secondary 
materials will not be discarded.
    Documentation and certification are both necessary requirements of 
the reasonable efforts condition. Documentation of questions (1)-(5) 
will support a hazardous secondary material generator's assertion that 
it affirmatively answered the questions and is in compliance with the 
regulations. It will also facilitate any review by regulatory 
authorities investigating whether the conditions of the transfer-based 
exclusion are satisfied and help delineate liability under RCRA if the 
materials were discarded. Having an authorized representative certify 
reasonable efforts is critical for guaranteeing accountability at the 
generator facility for meeting the condition and for ensuring that the 
act of making reasonable efforts is in fact genuine. The certification 
is also necessary in order to allow for the ``flexible'' documentation 
requirement that does not specify a particular format. Since individual 
generators may use any form of documentation, we believe it is critical 
for all generators to uniformly certify that the condition is 
satisfied. Furthermore, we find both reasonable efforts requirements 
(documentation and certification) to be appropriate based on our 
understanding that third-party auditors do not generally draw any 
conclusions based on their audits, but simply report the results to 
generators. While a generator may use any information for making 
reasonable efforts, the certification statement would affirm that a 
generator used information that is gathered and documented during the 
reasonable efforts inquiry, similar to how generators currently draw 
conclusions based on third-party audit documents.
    The requirement for documentation and certification of reasonable 
efforts is not unlike existing forms of RCRA documentation that 
incorporate certifications, such as the RCRA Site ID Form, RCRA 
financial assurance requirements, and the Uniform Hazardous Waste 
Manifest.
    Documentation of reasonable efforts and the certification statement 
must be maintained by the generator for a minimum of three years and it 
must be made available upon request by a regulatory authority within 72 
hours, or within a longer period of time as specified by the regulatory 
authority. Requiring documentation will help EPA and authorized states 
to determine that hazardous secondary material generators have made 
reasonable efforts to ensure that hazardous secondary materials were 
reclaimed and not discarded. We understand that many generators may 
maintain this kind of documentation and certification at their company 
headquarters or at another off-site facility; therefore, we are not 
requiring that they be maintained on-site. However, we do believe that 
generators, having satisfied the reasonable efforts condition and 
certified reasonable efforts prior to transferring the hazardous 
secondary materials, should be able to produce the documentation and 
certification readily. Moreover, we understand that since generators 
today conduct business in an age of near-instantaneous communication, 
retrieving documentation from company headquarters or another off-site 
facility should be relatively easy. EPA also notes that time frames for 
producing documentation are generally determined by regulatory 
authorities on a case-by-case basis and time frames are clearly 
outlined by authorities within RCRA section 3007 information request 
letters.
    Recordkeeping. In addition to documentation and certification of 
reasonable efforts (discussed above in section VIII.C.2.), EPA is 
requiring hazardous secondary material generators to maintain at the 
generating facility certain records that document off-site shipments 
(i.e., transfers) of hazardous secondary materials for a period of 
three years. Specifically, for each shipment of hazardous secondary 
material, the generator must maintain documentation of when the 
shipment occurred, who the transporter was, the name and address of the 
reclaimer(s) and, if applicable, each intermediate facility, and the 
type and quantity of the hazardous secondary materials in the shipment. 
This recordkeeping requirement may be fulfilled by ordinary business 
records, such as bills of lading.
    In addition, hazardous secondary material generators are required 
to maintain confirmations of receipt from each reclaimer and 
intermediate facility for all off-site shipments of hazardous secondary 
materials in order to verify that the hazardous secondary materials 
reached their intended destination and were not discarded. These 
receipts must be maintained at the generating facility for a period of 
three years. Specifically, the hazardous secondary material generator 
must maintain documentation of receipt that includes the name and 
address of the reclaimer or intermediate facility, the type and 
quantity of hazardous secondary materials received, and the date which 
the hazardous secondary materials were received. The Agency is not 
requiring a specific template or format for confirmations of receipt 
and anticipates that routine business records (e.g., financial records, 
bills of lading, copies of Department of Transportation (DOT) shipping 
papers, electronic confirmations of receipt) would contain the 
appropriate information sufficient for meeting this requirement.
    We recognize that, in some cases, reclamation of a hazardous 
secondary material may involve more than one reclamation step. In these 
cases, the recordkeeping conditions for generators and reclaimers under 
the terms of the exclusion applies for each reclaimer and intermediate 
facility, regardless of how many reclamation steps were involved. For 
example, if a hazardous secondary material generator transferred 
hazardous secondary materials to one reclaimer for partial reclamation 
and then arranged for the partially-reclaimed material to be 
subsequently transferred to another reclaimer for `final' reclamation, 
the generator must maintain confirmations of receipt from each 
reclaimer involved in the reclamation process.
    The Agency believes that the recordkeeping requirements in today's 
rule comprise the minimum information needed to enable effective 
oversight to ensure the hazardous secondary materials were transferred 
for reclamation and were not discarded.
3. Provisions Applicable to the Transportation of Hazardous Secondary 
Materials
    Hazardous secondary materials may be stored for up to 10 days at a 
transfer facility and still be considered in transit. The 10-day 
storage standard for defining transfer facilities is the same as that 
used for hazardous waste transportation, and EPA has revised the 
definition of ``transfer facility'' at 40 CFR 260.10 to clarify that 
such facilities may store hazardous secondary materials, as well as 
hazardous waste. However, if the facility stores the hazardous 
secondary materials for more than 10 days, then it would be considered 
an intermediate facility and subject to the conditions in 40 CFR 
261.4(a)(24)(vi). While at the transfer facility, the hazardous 
secondary materials must continue to meet all applicable DOT standards. 
Hazardous secondary materials may be consolidated for shipping, but 
cannot be intermingled in a way that would constitute waste management.

[[Page 64691]]

4. Provisions Applicable to the Reclamation Facility and Any 
Intermediate Facilities
    Recordkeeping. Reclaimers and intermediate facilities who operate 
under the transfer-based exclusion must maintain certain records, 
similar to the records we are requiring for hazardous secondary 
material generators. Specifically, reclaimers and intermediate 
facilities must maintain at their facilities for a period of three 
years records of all shipments of hazardous secondary materials that 
were received at the facility and, if applicable, of all shipments of 
hazardous secondary materials sent off-site from the facility. For 
hazardous secondary materials received at the reclamation and 
intermediate facility, such records must document the name and address 
of the hazardous secondary material generator, the type and quantity of 
hazardous secondary materials received at the facility, any 
intermediate facilities that managed the hazardous secondary materials, 
the name of the transporter that brought the hazardous secondary 
materials to the facility, and the date such materials were received at 
the facility.
    For hazardous secondary materials that, after being received by the 
reclaimer or intermediate facility, are subsequently transferred off-
site for further reclamation, reclaimers and intermediate facilities 
must document the name and address of the hazardous secondary material 
generator, when the shipment occurred, who the transporter was, the 
name and address of the (subsequent) reclaimer and, if applicable, each 
(subsequent) intermediate facility, and the type and quantity of 
hazardous secondary materials in the shipment. This recordkeeping 
requirement may be fulfilled by ordinary business records, such as 
bills of lading.
    Reclaimers and intermediate facilities must also send confirmations 
of receipt to the hazardous secondary material generator for all off-
site shipments of hazardous secondary materials received at the 
facility in order to verify for the hazardous secondary material 
generator that their materials reached the intended destination and 
were not discarded. Specifically, the reclaimer (or each reclaimer, 
when more than one reclamation step is required) and, if applicable, 
each intermediate facility, must send documentation of receipt to the 
hazardous secondary material generator that includes the name and 
address of the reclaimer or intermediate facility, the type and 
quantity of the hazardous secondary materials received and the date 
which the hazardous secondary materials were received. The Agency is 
not requiring a specific template or format for confirmations of 
receipt and anticipates that routine business records (e.g., financial 
records, bills of lading, copies of DOT shipping papers, electronic 
confirmations of receipt) would contain the appropriate information 
sufficient for meeting this requirement.
    In addition, reclaimers and intermediate facilities must also meet 
the recordkeeping requirements under financial assurance discussed 
below in this section.
    Storage of Recyclable Hazardous Secondary Materials. In addition to 
the condition that the hazardous secondary materials must be contained 
(40 CFR 261.4(a)(24)(v)(A)), reclamation facilities and intermediate 
facilities must also manage the hazardous secondary materials in a 
manner that is at least as protective as that employed for the 
analogous raw material, where there is an analogous raw material. An 
``analogous raw material'' is a material for which a hazardous 
secondary material substitutes and which serves the same function and 
has similar physical and chemical properties as the hazardous secondary 
material. A raw material that has significantly different physical or 
chemical properties would not be considered analogous even if it serves 
the same function. For example, a metal-bearing ore might serve the 
same function as a metal-bearing air pollution control dust, but 
because the physical properties of the dust would make it more 
susceptible to wind dispersal, the two would not be considered 
analogous. Similarly, hazardous secondary materials with high levels of 
toxic volatile chemicals would not be considered analogous to a raw 
material that does not have these volatile chemicals or that has only 
minimal levels of volatile chemicals.
    Storage conditions for reclamation facilities and intermediate 
facilities that operate under today's exclusion will show that the 
materials are not discarded, but instead are treated as commodities 
which the handler considers valuable and would be used and not be lost 
to the environment. The great majority of damage cases documented in 
the environmental problems study occurred at commercial reclamation and 
intermediate storage facilities, and mismanagement of hazardous 
secondary materials was found to be a cause of environmental problems 
in 40% of the incidents. Accordingly, EPA believes that this condition 
for storage is necessary and appropriate for reclamation facilities and 
intermediate facilities that take advantage of this exclusion to show 
that storage of these materials is not just another way of disposing of 
them. In addition, it will establish an expectation for the owner/
operators of such facilities that they must manage hazardous secondary 
materials in at least as protective a manner as they would an analogous 
raw material, and in such a way that materials would not be released 
into the environment.
    Management of recycling residuals. Another condition of the 
transfer-based exclusion is that any residuals that are generated from 
the reclamation processes must be managed in a manner that is 
protective of human health and the environment. If any residuals 
exhibit a hazardous characteristic according to subpart C of 40 CFR 
part 261, or themselves are listed hazardous wastes, they are hazardous 
wastes (if discarded) and must be managed according to the applicable 
requirements of 40 CFR parts 260 through 273.
    The purpose of this condition is to clarify the regulatory status 
of these waste materials and to emphasize in explicit terms that 
residuals that are generated from the reclamation of hazardous 
secondary materials must be managed properly so that the reclamation 
operation does not become another way of avoiding waste management and 
simply becomes another way of discarding unwanted material. The study 
of recent (i.e., post-CERCLA and post-RCRA) recycling-related 
environmental problems revealed that mismanagement of residuals was the 
cause of such problems in one-third of the incidents that were 
documented. Some common examples of these mismanaged residuals were 
acids and casings from the processing of lead-acid batteries, solvents 
and other liquids generated from cleaning drums at drum reconditioning 
facilities, and PCBs and other oils generated from disassembled 
transformers. In many of these damage incidents, the residuals were 
simply disposed of on-site with little regard for the environmental 
consequences of such mismanagement or possible CERCLA liabilities 
associated with cleanup of these releases. By making proper management 
of the recycling residuals a condition of the exclusion, EPA ensures 
that the reclamation operation is not just another way of discarding 
hazardous constituents. This has the added benefit of ensuring that the 
reclamation operation does not pose a significant risk to human health 
and the environment.

[[Page 64692]]

    EPA notes that the ``derived from'' rule articulated in 40 CFR 
261.3(c)(2) does not apply to residuals from the reclamation of 
hazardous secondary materials excluded under today's rule. These 
residuals are a new point of generation for the purposes of applying 
the hazardous waste determination requirements of 40 CFR 262.11. If the 
residuals exhibit a hazardous characteristic, or they themselves are a 
listed hazardous waste, they would be considered hazardous wastes 
(unless otherwise exempted) and would have to be managed accordingly. 
If they did not exhibit a hazardous characteristic, or were not 
themselves a listed hazardous waste, they would need to be managed in 
accordance with applicable state or federal requirements for non-
hazardous wastes.
Financial Assurance
    For the transfer-based exclusion, EPA proposed in its March 2007 
supplemental proposal that reclamation facilities comply with the 40 
CFR part 265 subpart H financial assurance requirements as a condition 
of the exclusion. As discussed in section V.B of this preamble, by 
obtaining financial assurance, the reclamation or intermediate facility 
is making a direct demonstration that it will not abandon the hazardous 
secondary materials, it will properly decontaminate equipment, and it 
will clean up any unacceptable releases, even if events beyond its 
control make its operations uneconomical. Moreover, financial assurance 
also addresses the issue of the correlation of the financial health of 
a reclamation or intermediate facility with the absence of discard. In 
essence, financial assurance will help demonstrate that the reclamation 
or intermediate facility owner/operators who would operate under the 
terms of this exclusion are financially sound and will not discard the 
hazardous secondary materials.
    An implementation issue for the financial assurance condition stems 
from the fact that the 40 CFR part 265 subpart H financial assurance 
requirements directly reference and rely on the provisions of the 40 
CFR part 265 subpart G closure requirements. For example, in 40 CFR 
part 265 subpart H, a facility owner uses the ``closure plan'' in 40 
CFR part 265 subpart G to calculate closure cost estimates, which then 
set the amount of financial assurance required under subpart H. 
Similarly, the financial assurance requirements remain in place until 
EPA has reviewed the closure plan, and the facility has closed 
according to the plan. At that point, EPA releases the financial 
assurance instruments. Commenters expressed some confusion on this 
issue and requested that EPA clarify that the provisions of subpart G 
which are required to implement financial assurance be made explicit.
    Thus, in today's final rule, for the convenience of the regulated 
community, EPA has detailed the applicable requirements in a separate 
regulation, subpart H of 40 CFR part 261, using terminology appropriate 
for excluded facilities, that specifically identifies the processes by 
which a facility determines the amount of financial assurance required 
and by which it secures release of financial assurance when it no 
longer wishes to operate under the transfer-based exclusion. The 
financial assurance requirements detailed in 40 CFR part 261 subpart H 
incorporate those aspects of the hazardous waste closure and financial 
assurance regulations as they apply to the financial assurance 
condition for excluded hazardous secondary material reclamation and 
intermediate facilities. However, since these facilities are not 
regulated hazardous waste facilities, new subpart H does not include a 
stand-alone closure requirement, although some aspects of the closure 
process (described below) are included as being necessary for the 
implementation of the financial assurance condition.
    Substantively, these requirements generally mirror the interim 
status standards in 40 CFR part 265 for hazardous waste treatment, 
storage and disposal facilities (TSDFs), but have been tailored for 
hazardous secondary material reclamation and intermediate facilities. 
The provision in the new subpart H in 40 CFR part 261 are linked to 
equivalent provisions under 40 CFR part 265, which, as we noted in the 
March 2007 supplemental proposal, ``outline how owners and operators 
should determine cost estimates, explain the acceptable mechanisms for 
providing financial assurance, and set the minimum amounts of liability 
coverage required'' (see 72 FR 14196).
    In addition to the closure requirements, 40 CFR part 265 subpart H 
includes requirements for post-closure care. Post-closure care (e.g., 
groundwater monitoring, maintenance of waste containment systems) only 
applies to land disposal units, where hazardous waste remains in the 
unit or other contamination is present after Subtitle C closure. 
However, the conditional exclusion being promulgated today only applies 
to hazardous secondary materials intended for reclamation. In no cases 
should the storage of these materials be designed or managed with the 
intent of leaving these hazardous secondary materials in place. Unlike 
the need for closure, which could occur at a reclamation or 
intermediate facility which meets all the conditions of the exclusion, 
but then becomes subject to forces beyond its control (such as a sudden 
downturn in the market for its recycled product), the need for post-
closure care would only apply to a facility that does not meet the 
condition that the hazardous secondary materials are contained in the 
unit. Thus, the Agency has determined that the issue of post-closure 
care is most appropriately dealt with by enforcement of the condition 
that the hazardous secondary materials must be contained. If, during 
the life of the unit, there is a significant release that indicates 
that the hazardous secondary materials are discarded, and thus are 
wastes, then such waste is subject to the RCRA Subtitle C requirements, 
including the post-closure care requirements. See discussion of the 
condition that the hazardous secondary materials must be ``contained'' 
found in section VII.C.
Cost Estimate
    Under subpart H of 40 CFR part 261, as it is under subpart H of 40 
CFR part 265 for hazardous waste treatment storage and disposal 
facilities, the first step in obtaining financial assurance is to 
develop a detailed written estimate on the amount of financial 
assurance required. The cost estimate determines the amount of 
financial assurance that will be available to the state or EPA for a 
third party to close a facility if the owner or operator fails to do 
so. The requirements for a cost estimate in 40 CFR 261.142 generally 
tracks the procedures in 265.142 with changes to accommodate the 
absence of a closure plan. Because hazardous secondary materials that 
lose the exclusion may have to be disposed of as a hazardous waste and 
the facility may have to be closed as a hazardous waste facility in 
accordance with the requirements of 40 CFR part 265, the owner or 
operator must have a detailed written estimate in current dollars of 
performing this work. The detailed cost estimate should include all 
necessary information which will allow the state or EPA to assess 
whether the assumptions underlying the estimate are consistent with 
what could be required to close the facility. For example, do the 
estimates for disposal, including transportation charges, reflect the 
distance to available disposal facilities? What level of personal 
protective equipment is needed to protect workers? Is there sufficient 
sampling of equipment to determine that it has been decontaminated? 
Where

[[Page 64693]]

there is uncertainty about the scope of the work, is there a reasonable 
contingency factor included? While not required by this rule for 
developing a cost estimate, some owners or operators may find that 
developing a plan similar to the requirements in 40 CFR 265.112 would 
be beneficial for assessing the potential costs of closing the 
facility. (Note, however, that the cost estimate must reflect the costs 
of closure under the Subtitle C hazardous waste requirements, and any 
remaining hazardous secondary material must be managed as a hazardous 
waste, and therefore the procedures used as the basis of the cost 
estimate may differ from the actual procedures a compliant facility 
will carry out when it completes operations and exits from the 
exclusion.) The owner or operator can be required to provide the 
documentation of the cost estimate upon request.
    The cost estimating requirements in 40 CFR 265.142 and 40 CFR 
261.142 are designed so that if a state or EPA must close a facility 
because of an owner or operator's failure, there will be adequate funds 
to do so. The requirements for the cost estimate are therefore based 
upon the point when the extent and manner of the facility's operation 
would make these activities the most expensive.
    The cost estimate must, at minimum, be based on the costs of hiring 
a third party or parties to conduct these activities. The cost estimate 
may not include any salvage value for the hazardous secondary materials 
as hazardous waste or non-hazardous waste and the owner or operator may 
not incorporate a zero cost for such materials that might have economic 
value.
    The financial assurance provisions are intended, in part, to 
demonstrate that the owner and operator is not discarding the hazardous 
secondary materials. As noted earlier, 69 of the 208 incidents of 
environmental damage identified in EPA's environmental problems study 
involve abandonment of the hazardous secondary materials as the primary 
cause of damage. These cost estimate provisions, found in 40 CFR 
261.142(a) are equivalent to those required to estimate financial 
assurance under 40 CFR 265.142(a).
    In addition, the financial assurance cost estimate must be revised 
and additional financial assurance must be obtained to adjust annually 
for inflation or in the event that changes in the reclaimer's or 
intermediate facility's operations or unexpected events result in an 
increase in the cost of managing any hazardous secondary materials that 
are not reclaimed and the cost of removing or decontaminating all 
hazardous residues. These cost estimate provisions, found in 40 CFR 
261.142(b) and 40 CFR 261.142(c) are equivalent to those required under 
40 CFR 265.142(b) and 40 CFR 265.142(c), and incorporates language from 
40 CFR 265.112(c)(2) requiring the owner or operator to amend the 
estimates at least 60 days prior to a planned change in facility design 
or operation or no later than 60 days after an unexpected event has 
occurred that affects cost estimates. The financial assurance cost 
estimate must be documented and this documentation maintained at the 
facility. This information must be furnished upon request, and made 
available at all reasonable times for inspection. The requirement in 40 
CFR 261.142(d) to maintain documentation at the facility is from the 
requirement in 40 CFR 265.142(d) and 40 CFR 265.73(b)(7), and the 
responsibility to make it available upon request, which will allow 
Agency representatives to review the cost estimate, is from 40 CFR 
265.74(a) which covers information required in 40 CFR 265.73.
Interaction of the Cost Estimate and the Financial Assurance 
Instruments
    As with the interim status regulations in 40 CFR part 265 subpart 
H, the interaction of the cost estimating requirements in 40 CFR 
261.142 and the instrument requirements in 40 CFR 261.143 result in 
adjustments in the amount of financial assurance as facility operations 
change. If changes in the reclaimer's or intermediate facility's 
operations result in a reduction in the cost estimate, the owner or 
operator may submit a new cost estimate. If the new cost estimate is 
less than the amount of financial assurance provided, the amount of the 
financial assurance instrument may be reduced to the amount of the new 
cost estimate following written approval by the Regional Administrator 
(see, for example, 40 CFR 261.143(b)(7)). For example, a facility with 
three units managing hazardous secondary materials that use a single 
surety bond could close one unit according to the plan in 40 CFR 
261.143(h). With a new cost estimate submitted by the facility that 
reflects the lower costs for the two remaining units, the Regional 
Administrator can approve a reduction in the value of the surety bond. 
On the other hand, a change in the facility's operating plan or design 
that increases the cost of closing necessitates a new cost estimate (40 
CFR 261.142(c)) and an increase in the amount of financial assurance 
(see, for example, 40 CFR 261.143(b)(7)).
Establishment of the Instrument, Plan for Removal of All Hazardous 
Secondary Material Residues, and Release From Financial Assurance
    Under 40 CFR 261.4(a)(24)(vi)(F), an owner or operator of a 
reclamation or intermediate facility must establish financial assurance 
as a condition of the exclusions under 40 CFR 261.4(a)(24) and 
261.4(a)(25). The same general types of instruments that are available 
for interim status facilities under 40 CFR part 265 subpart H are also 
available to owners or operators of reclamation or intermediate 
facilities. Owners or operators may use trust funds, payment surety 
bonds, letters of credit, insurance, or a financial test and corporate 
guarantee to demonstrate financial assurance.
    The regulations governing the financial assurance instruments that 
an owner or operator must provide to qualify for the exclusions have 
been modified to reflect that they apply to hazardous secondary 
materials and not hazardous wastes. The financial assurance instruments 
for the trust fund, surety bond, letter of credit, and corporate 
guarantee have been revised so that EPA can direct the financial 
assurance funds at the point the hazardous secondary material 
reclamation or intermediate facility no longer meets the exclusion and, 
therefore, is managing a hazardous waste. As long as a facility is 
operating under the transfer-based exclusion so that the hazardous 
secondary material is not being discarded, there would be no need to 
invoke the financial assurance instruments.
    The regulations allow the same flexibility as in 40 CFR part 265 
subpart H for using a combination of trust funds, surety bonds, letters 
of credit and insurance at a single facility (see 40 CFR 261.143(f)), 
and allow the use of a single mechanism for multiple facilities (see 40 
CFR 261.143(g)).
    The provisions for releasing the reclamation or intermediate 
facility from the financial assurance requirements, found in 40 CFR 
261.143(h), are functionally equivalent to those under 40 CFR 
265.143(h). ``Within 60 days after receiving certifications from the 
owner or operator and a qualified Professional Engineer that all 
hazardous secondary materials have been removed from the unit and the 
unit has been decontaminated in accordance with the approved plan per 
paragraph (i), the Regional Administrator will notify the owner or 
operator in writing that he is no longer required under Sec.  
261.4(a)(24)(vi)(F) to maintain financial assurance for that

[[Page 64694]]

unit, unless the Regional Administrator has reason to believe that that 
all hazardous secondary materials have not been removed from the unit 
or that the unit has not been decontaminated in accordance with the 
approved plan.''
    Under 40 CFR part 265 subpart H, the provisions for releasing 
financial assurance rely on receiving a certification that the unit was 
closed per the approved closure plan in 40 CFR 265.112. However, as 
noted earlier, under today's exclusion, units managing hazardous 
secondary materials are not subject to closure. Thus, the provision for 
releasing financial assurance for these units adapts language from the 
closure plan requirement found in 40 CFR 265.112 and from the 
certification requirement found in 40 CFR 265.115. Instead of a 
hazardous waste ``closure plan,'' the 40 CFR 261.143(i) provisions for 
releasing financial assurance require submission of a plan for removing 
hazardous secondary materials and decontaminating the unit at least 180 
days prior to the date that owner or operator expects to cease 
operating under the exclusion. The contents of the plan are detailed in 
40 CFR 261.153(i)(2) and have been tailored to reflect the fact that, 
although the hazardous secondary material management units are not 
subject to closure, when reclamation operations or storage operations 
(in the case of an intermediate facility) ceases, the hazardous 
secondary materials must be removed or the unit would become subject to 
the Subtitle C hazardous waste requirements (see section VIII.D). 
Briefly, the plan must include, at least, (a) a description of how all 
excluded hazardous secondary materials will be reclaimed or sent for 
reclamation and how all residues, contaminated containment systems 
(liners, etc), contaminated soils, subsoils, structures, and equipment 
will be removed or decontaminated as necessary to protect human health 
and the environment (for guidance, see the March 16, 1998, memorandum 
entitled ``Risk-Based Clean Closure,'' from Elizabeth Cotsworth, Acting 
Director, Office of Solid Waste, to RCRA Senior Policy Advisors. 
Available at http://www.epa.gov/correctiveaction/resource/guidance/risk/cclosfnl.pdf; (b) a description of the steps necessary to remove 
or decontaminate all hazardous secondary material residues and 
contaminated containment system components, equipment, structures, and 
soils including, but not limited to, procedures for cleaning equipment 
and removing contaminated soils, methods for sampling and testing 
surrounding soils, and criteria for determining the extent of 
decontamination necessary to protect human health and the environment; 
(c) a description of any other activities necessary to protect human 
health and the environment during this time frame, including, but not 
limited to, leachate collection, run-on and run-off control, etc.; and 
(d) a schedule for conducting the activities.
    This plan, which is essentially the subset of information required 
in a 40 CFR part 265 closure plan that would apply to excluded 
hazardous secondary material units, would still need to be reviewed by 
the Regional Administrator (or State Director, in authorized states) 
because that would ensure that EPA would agree that the hazardous 
secondary materials, or equipment contaminated with hazardous secondary 
materials, will not remain unregulated at the facility after it is no 
longer operating under an exclusion and no longer maintains financial 
assurance. As with the financial assurance release provision of 40 CFR 
part 264, the Regional Administrator will provide notice to the owner 
or operator and the public and an opportunity to submit written 
comments on the plan and request modifications to the plan. The 
Regional Administrator will approve, modify, or disapprove the plan 
within 90 days of its receipt.
    Once residuals (and any hazardous secondary materials) have been 
removed and the unit has been decontaminated according to the plan, the 
facility would send a certification to that effect from the owner or 
operator and a qualified Professional Engineer to the regulatory 
agency, and that agency would then authorize the release of the 
financial assurance for those specific units, unless there is reason to 
believe that the hazardous secondary materials and residues were not 
removed (in which case the regulatory authority would send a written 
explanation of this fact). Again, this process is similar to that 
required under 40 CFR 265.115, as referenced in 40 CFR part 265 subpart 
H.
Operation of the Instruments if the Exclusion Is No Longer Applicable
    As noted above, as long as a facility is operating under the 
transfer-based exclusion and the hazardous secondary material is not 
being discarded, there would be no need to invoke the financial 
assurance instruments. However, if the exclusion is no longer 
applicable, then the hazardous secondary material is a hazardous waste 
subject to the Subtitle C requirements and the Regional Administrator 
can invoke the instruments consistent with RCRA 3004(t) and related 
laws. Similarly, as in 40 CFR part 265, if an owner or operator fails 
to obtain an approved replacement instrument within 90 days after a 
notice of cancellation from a surety, issuer of a letter of credit, 
insurer, or guarantor, the Regional Administrator can invoke the 
instrument. The following descriptions of the instruments contain 
additional information on how the instruments operate under this rule.
Trust Funds
    If facilities choose to use a trust fund, they must fully fund the 
trust before they can rely on it for financial assurance. This is 
consistent with the proposal, which was based on the pay-in provisions 
under 40 CFR part 265. In part 265, the pay-in period for trust funds 
is limited to the remaining operating life of a facility or 20 years 
from the effective date of the 40 CFR part 265 regulations, which 
became effective in 1982. Thus, under the exclusion, the pay-in period, 
which would allow a trust to build over time, is not available. This 
means that facilities that are not financially strong enough to qualify 
for the financial test and that cannot obtain a guarantee, such as a 
surety bond or a letter of credit from a third party (potentially 
because the surety or bank is not confident that it will be repaid if 
the instrument is called upon) will need to fully fund the trust before 
qualifying for the exclusion.
    While the hazardous secondary materials retain the exclusion, EPA 
has no access to these funds. The trustee must meet the qualifications 
in 40 CFR 261.143(a)(1) and the wording of the trust agreement must be 
identical to the wording specified in Sec.  261.151(a)(1). The trust 
agreement must include a Schedule A that lists each facility, including 
the units with hazardous secondary materials, and the amounts of the 
current cost estimates, or portions thereof, for which financial 
assurance is demonstrated by the trust. Schedule A of the trust 
agreement must be updated within 60 days after a change in the amount 
of the current cost estimate covered by the agreement.
    Whenever the current cost estimate changes, the owner or operator 
must compare the new estimate with the trustee's most recent annual 
valuation of the trust fund. If the value of the fund is less than the 
amount of the new cost estimate, the owner or operator, within 60 days 
after the change in the cost estimate, must either (1) deposit an 
amount into the trust fund so that its value after this deposit at 
least equals the amount of the current cost estimate, or (2) obtain 
other financial assurance,

[[Page 64695]]

such as a letter of credit, to cover the difference.
    There are also circumstances when the owner or operator may request 
a release of funds from the trust fund. If the value of the trust fund 
is greater than the total amount of the current cost estimate, the 
owner or operator may submit a written request to the Regional 
Administrator for release of the amount in excess of the current cost 
estimate. This could occur as a result of the closing of a unit at the 
facility and the submission of a revised cost estimate. Alternatively, 
the earning of the trust fund could exceed the increase in the cost 
estimate due to inflation. Further, if an owner or operator substitutes 
other financial assurance as specified in the regulations for all or 
part of the trust fund, he may submit a written request to the Regional 
Administrator for release of the amount in excess of the current cost 
estimate covered by the trust fund.
    Within 60 days after receiving a request from the owner or operator 
for release of funds, the Regional Administrator will instruct the 
trustee to release to the owner or operator such funds that exceed the 
amount of the current cost estimate, as the Regional Administrator 
deems appropriate and specifies in writing. Alternatively, in the event 
that the owner or operator begins final closure of the unit under 
subpart G of 40 CFR part 264 or 265, an owner or operator may request 
reimbursements for partial or final closure expenditures by submitting 
itemized bills to the Regional Administrator.
    The Regional Administrator will agree to termination of the trust 
fund when the owner or operator substitutes alternate financial 
assurance, such as receiving approval for an insurance policy to 
replace the trust, or if the owner or operator demonstrates that he 
meets the requirements of the financial test. It should be noted that 
both surety bonds and letters of credit require a standby trust, as 
discussed below. The Regional Administrator will also agree to the 
termination of the trust fund when he releases the owner or operator 
from the requirements of this section in accordance with 40 CFR 
261.143(i).
    The preceding discussion explained the operation of the regulations 
during the exclusion. The regulations also address the situation where 
the hazardous secondary materials lose their exclusion. The 
requirements in 40 CFR 261.151(a) for the trust fund provide that if 
the hazardous secondary materials lose their exclusion, EPA becomes the 
beneficiary of the trust, consistent with RCRA section 3004(t) and 
federal law. The trust fund also receives the proceeds of a payment 
surety bond or letter of credit if the hazardous secondary materials 
lose the exclusion. The trustee shall make payments from the Fund as 
the EPA shall order or direct, in writing, to provide for the payment 
of the costs of the performance of closure activities required under 
subpart G of 40 CFR parts 264 or 265 for the facilities covered by the 
trust agreement. This provision allows funds from the trust to be used 
to close facilities as hazardous waste facilities.
    An owner or operator whose hazardous secondary materials have lost 
their exclusion, but subsequently meets the requirements for the 
exclusion, including establishing financial assurance in accordance 
with the provisions of 40 CFR 261.143, may request a reduction in the 
amount of the trust fund and the Regional Administrator may instruct 
the trustee to return funds to the owner or operator under Section 4 of 
the trust agreement in 40 CFR 261.151(a). For example, hazardous 
secondary materials could lose their exclusion and the Regional 
Administrator could draw upon a letter of credit being used to 
establish financial assurance and have it deposited into the trust 
fund. If the hazardous secondary materials regained their exclusion and 
the owner or operator substituted a new approved letter of credit, the 
Regional Administrator may direct the trustee to refund funds to the 
owner or operator.
Surety Bonds
    The surety bond operates similarly to the payment surety bond in 40 
CFR part 265, with some modifications to reflect the differences 
between a conditionally exempt hazardous secondary material and a 
hazardous waste. The surety bond must conform to the requirements of 40 
CFR 261.143(b) and the owner or operator must submit the bond to the 
Regional Administrator. The surety company issuing the bond must, at a 
minimum, be among those listed as acceptable sureties on federal bonds 
in Circular 570 of the U.S. Department of the Treasury. The wording of 
the surety bond must be identical to the wording specified in 40 CFR 
261.151(b).
    The owner or operator who uses a surety bond must also establish a 
standby trust fund and submit an originally signed duplicate of the 
trust agreement with the surety bond. Under the terms of the bond, all 
payments made thereunder will be deposited by the surety directly into 
the standby trust fund in accordance with instructions from the 
Regional Administrator. This standby trust fund must meet the 
requirements specified in Sec.  261.143(a), except that until the 
standby trust fund is funded pursuant to the requirements of this 
section, the following are not required by these regulations:
    (A) Payments into the trust fund as specified in Sec.  261.143(a);
    (B) Updating of Schedule A of the trust agreement (see Sec.  
261.151(a)) to show current cost estimates;
    (C) Annual valuations as required by the trust agreement; and
    (D) Notices of nonpayment as required by the trust agreement.
    The penal sum of the bond must be in an amount at least equal to 
the current cost estimate, except as provided in 40 CFR 261.143(f). The 
regulations at 40 CFR 261.143(f) allow the use of certain combinations 
of instruments so long as their sum is at least equal to the total cost 
estimates.
    Whenever the current cost estimate increases to an amount greater 
than the penal sum, the owner or operator, within 60 days after the 
increase, must either cause the penal sum to be increased to an amount 
at least equal to the current cost estimate and submit evidence of such 
increase to the Regional Administrator or obtain other financial 
assurance as specified in the regulations in 40 CFR 261.143 to cover 
the increase. Whenever the current cost estimate decreases, the penal 
sum may be reduced to the amount of the current cost estimate following 
written approval by the Regional Administrator. So long as the owner or 
operator meets the exclusion, the Regional Administrator will not 
access the bond.
    The Regional Administrator will agree to termination of the surety 
bond when the owner or operator substitutes alternate financial 
assurance, such as an approved insurance policy to replace the surety 
bond, or if the owner or operator demonstrates that he meets the 
requirements of the financial test. The Regional Administrator will 
also agree to the termination of the surety bond when he releases the 
owner or operator from the requirements of this section in accordance 
with 40 CFR 261.143(i). Under 40 CFR 261.151(b), the Principal may 
terminate this bond by sending written notice to the Surety(ies), 
provided, however, that no such notice shall become effective until the 
Surety(ies) receive(s) written authorization for termination of the 
bond by the EPA Regional Administrator(s) of the EPA Region(s) in which 
the bonded facility(ies) is (are) located.
    Under 40 CFR part 261, the surety becomes liable for funding the 
trust if the owner or operator has failed to fund the trust before the 
loss of the exclusion. The cancellation provisions for the

[[Page 64696]]

surety bond in 40 CFR part 261 operate similarly to the provisions in 
40 CFR part 265. If the surety has issued a notice of cancellation, and 
the owner or operator has not funded the trust or obtained approval by 
the Regional Administrator of a replacement instrument within 90 days, 
the surety becomes liable for payment into the trust fund. Under the 
hazardous waste rules, if the surety issues a notice of cancellation 
and the owner or operator does not fund the trust or obtain approved 
alternative financial assurance within 90 days, the Regional 
Administrator may access the funds.
    Reclamation and intermediate facilities, as under 40 CFR part 265, 
may not use a performance surety bond because there is no closure plan 
that has undergone review under the permitting process. The performance 
surety bond, which is allowed under the permitting standards in 40 CFR 
part 264 subpart H, requires the surety, in the event of a failure by 
the owner or operator to comply with the requirements of the closure 
requirements of 40 CFR part 264, to perform closure in accordance with 
the closure plan and permitting requirements or to deposit the penal 
sum of the bond into the standby trust. Closure plans for permitted 
facilities undergo detailed review as part of the permitting process, 
so it is appropriate to allow a surety to perform closure in this 
circumstance. However, like interim status facilities, reclamation and 
intermediate facilities do not have closure plans that undergo this 
type of review. ``During interim status, the closure and post-closure 
plans for a facility are generally not reviewed by the Regional 
Administrator until shortly before the time of closure. Upon such 
review, the Regional Administrator may find that major changes are 
needed in the plans. The Agency believes a performance bond is not 
appropriate when the actual required performance for the particular 
facility may not be specified in any detail during most of the term of 
the bond'' (47 FR 15040).
Letters of Credit
    The letter of credit requirements generally operate similarly to 
the requirements in 40 CFR part 265, except that they reflect the 
status of conditionally exempt hazardous secondary materials. An owner 
or operator may satisfy the requirements of 40 CFR 261.143 by obtaining 
an irrevocable standby letter of credit which conforms to the 
requirements of 40 CFR 261.143(c) and submitting the letter to the 
Regional Administrator. The issuing institution must be an entity which 
has the authority to issue letters of credit and whose letter-of-credit 
operations are regulated and examined by a federal or state agency.
    The wording of the letter of credit must be identical to the 
wording specified in Sec.  261.151(c). As with the surety bond, an 
owner or operator who uses a letter of credit must also establish a 
standby trust fund and submit to the Regional Administrator an 
originally signed duplicate of the trust agreement with the letter of 
credit. Under the terms of the letter of credit, all amounts paid 
pursuant to a draft by the Regional Administrator will be deposited by 
the issuing institution directly into the standby trust fund in 
accordance with instructions from the Regional Administrator. This 
standby trust fund must meet the requirements specified in Sec.  
261.143(a), except that until the standby trust fund is funded pursuant 
to the requirements of this section, the requirements, as noted above, 
that are not necessary for a surety bond are also not required for a 
letter of credit.
    The letter of credit must be issued in an amount at least equal to 
the current cost estimate, except as provided in 40 CFR 261.143(f). The 
regulations in 40 CFR 261.143(f) allow the use of certain combinations 
of instruments so long as their sum is at least equal to the total cost 
estimates.
    Whenever the current cost estimate increases to an amount greater 
than the amount of the letter of credit, the owner or operator, within 
60 days after the increase, must either cause the amount of the letter 
of credit to be increased so that it at least equals the current cost 
estimate and submit evidence of such increase to the Regional 
Administrator or obtain other financial assurance as specified in the 
regulations in 40 CFR 261.143 to cover the increase. Whenever the 
current cost estimate decreases, the amount of the letter of credit may 
be reduced to the amount of the current cost estimate following written 
approval by the Regional Administrator.
    The Regional Administrator will return the letter of credit to the 
issuing institution for termination when an owner or operator 
substitutes alternate financial assurance as specified in 40 CFR 
261.143, or when the Regional Administrator releases the owner or 
operator from the requirements of this section in accordance with Sec.  
261.143(i).
    So long as the owner or operator meets the exclusion and maintains 
financial assurance, the Regional Administrator will not access the 
letter of credit. Access to the letter of credit only occurs upon the 
loss of the exclusion. For the letter of credit, in the event that the 
hazardous secondary materials at the covered reclamation or 
intermediate facilities no longer meet the conditions of the exclusion, 
EPA may draw upon the letter of credit. If the owner or operator does 
not establish alternate financial assurance and obtain written approval 
of such alternate assurance from the Regional Administrator within 90 
days after a notice from the issuing institution that it has decided 
not to extend the letter of credit beyond the current expiration date, 
the Regional Administrator will draw on the letter of credit. When the 
Regional Administrator draws on the letter of credit, the proceeds are 
deposited into the standby trust fund, and the funds in the trust 
become available for the payment of the costs of closure in compliance 
with subpart G of 40 CFR parts 264 or 265.
Insurance
    Insurance operates similarly to the insurance instrument in 40 CFR 
part 265, with some modifications to reflect differences between 
conditionally exempt hazardous secondary materials and hazardous 
wastes. An owner or operator may satisfy the requirements of 40 CFR 
261.143 by obtaining insurance that conforms to the requirements of 40 
CFR 261.143(d) and submitting a certificate of such insurance to the 
Regional Administrator At a minimum, the insurer must be licensed to 
transact the business of insurance or be eligible to provide insurance 
as an excess or surplus lines insurer, in one or more states.
    The wording of the certificate of insurance must be identical to 
the wording specified in Sec.  261.151(d). As part of the certificate, 
the insurer warrants that the policy conforms in all respects with the 
requirements of 40 CFR 261.143(d), as applicable, and agrees that any 
provision of the policy inconsistent with 40 CFR 261.143(d) is hereby 
amended to eliminate such inconsistency. The insurer also agrees to 
furnish to the EPA Regional Administrator(s) a duplicate original of 
the policy listed above, including all its endorsements, whenever 
requested by the Regional Administrator.
    The insurance policy must be issued for a face amount at least 
equal to the current cost estimate, except as provided in Sec.  
261.143(f), which allows the use of certain combinations of instruments 
so long as their sum is at least equal to the total cost estimates.
    Whenever the current cost estimate increases to an amount greater 
than the face amount of the policy, the owner or operator, within 60 
days after the increase, must either cause the face amount to be 
increased to an amount at least equal to the current cost estimate

[[Page 64697]]

and submit evidence of such increase to the Regional Administrator or 
obtain other financial assurance as specified in 40 CFR 261.143 to 
cover the increase. Whenever the current cost estimate decreases, the 
face amount may be reduced to the amount of the current cost estimate 
following written approval by the Regional Administrator.
    In 40 CFR 261.143(d)(4), the insurance policy must guarantee that 
funds will be available to pay the cost of removal of all hazardous 
secondary materials from the unit, to pay the cost of decontamination 
of the unit, and to pay the costs of the performance of any activities 
required under subpart G of 40 CFR parts 264 or 265 for the facilities 
covered by this policy, if they become necessary. This provision, as 
that in 40 CFR part 265, allows the owner or operator to recover the 
costs of removing hazardous secondary materials and is similar to the 
provisions in Sec.  265.143(d) that allow the owner or operator of a 
facility to be reimbursed for the costs of closure. This provision also 
allows the Regional Administrator to allow reimbursement for the same 
activities that are allowed under the trust fund. The insurance 
provisions that allow for reimbursement for the cost of removal of 
hazardous secondary materials are broader than the provisions in 40 CFR 
261.151(a) for payment from the trust fund. This difference is due to 
the fact that the monies in the trust fund are returned to the owner or 
operator once the facility exits the exclusion, but there is no such 
provision for insurance; in order to make the insurance provisions 
functionally equivalent to their counterparts in 40 CFR part 265, the 
insurance provisions must cover the cost of removing the hazardous 
secondary materials when the unit exits the exclusion. However, the 
owner or operator may request reimbursements only if the remaining 
value of the policy is sufficient to cover the maximum costs for the 
facility.
    The Regional Administrator will give written consent to the owner 
or operator that he may terminate the insurance policy when the owner 
or operator substitutes alternate financial assurance as specified in 
Sec.  261.143, or the Regional Administrator releases the owner or 
operator from the requirements of this section in accordance with Sec.  
261.143(i).
    Under 40 CFR 261.143(d)(8), cancellation, termination, or failure 
to renew may not occur and the policy will remain in full force and 
effect in the event that on or before the date of expiration, the 
conditional exclusion terminates or is revoked. This is analogous to 
the provisions for surety bonds and letters of credit that ensure that 
payments under those instruments will occur if the conditionally 
excluded hazardous secondary materials lose the exclusion.
    Under the insurance provisions of Sec.  265.143, failure of the 
owner or operator to pay the premiums of a policy without the 
substitution of an alternative mechanism constitutes a significant 
violation of the regulations. EPA was faced with a decision of how to 
implement that provision here. Since the exclusion relies upon 
compliance with the conditions, failure to pay the premium is 
significant and may result in loss of the exclusion. Similarly, loss of 
the exclusion will preclude the cancellation or termination of the 
policy. Under the circumstances, EPA recognizes that insurers may 
carefully screen applicants to ensure that they will meet the 
requirements of the exclusion and establish premiums, possibly with a 
substantial portion up front or collateralized, that reduce the 
insurer's risk of non-payment.
    In 40 CFR 265.143(d)(1), there is a provision allowing an owner or 
operator of a treatment, storage, and disposal facility an additional 
90 days from the effective date of the regulations to provide a 
certificate of insurance. The effective date of the interim status 
regulations was in 1982, and therefore this provision is no longer 
applicable and today's rule does not allow this additional 90 days. In 
keeping with the proposal to use requirements in subpart H of 40 CFR 
part 265, the additional 90-day period has been deleted from these 
regulations.
Financial Test
    EPA had solicited comment on whether to use the financial assurance 
provisions in the standardized permit rule rather than those in 40 CFR 
part 265, but commenters generally did not support the standardized 
permit rule alternative. Therefore, certain provisions that are 
available under the standardized permit rule will not be available to 
reclamation and intermediate facilities, with one exception. The 
financial test provision referenced by subpart H of 40 part CFR 265 
includes an obsolete requirement that the Certified Public Accountant's 
report state that ``[i]n connection with that procedure, no matters 
came to his attention which caused him to believe that the specified 
data should be adjusted.'' This is referred to by the auditing 
profession as a ``negative assurance.'' However, the American Institute 
of Certified Public Accountants, Inc.'s (AICPA's) Statement on Auditing 
Standards no longer permits independent auditors to express negative 
assurance. Thus, to ensure that today's final rule conforms with 
current professional auditing standards, EPA is using the language from 
the standardized permit rule for this aspect of the financial test.\4\
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    \4\ For current EPA guidance for companies using the financial 
test in 40 CFR part 264 or 265, please see the February 27, 1997 
Memorandum from Elizabeth Cotsworth to Senior RCRA Policy Advisors 
entitled ``Obsolete Language in the Financial Test for Subtitle C 
Treatment Storage and Disposal Facilities,'' at http://
yosemite.epa.gov/osw/rcra.nsf/ea6e50dc6214725285256bf00063269d/
C68C99D730932BE28525670F006C2B4A/$file/14066.pdf.
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    As noted in the March 2007 supplemental proposal, the Agency 
currently has underway a review of the subpart H financial assurance 
regulations, which will address this issue among others in the broader 
context of 40 CFR parts 264 and 265. As part of any rulemaking that 
addresses the results of that review, EPA will include any necessary 
changes to the financial assurance condition being finalized today.
    In today's regulation, the letter from the chief financial officer 
(see Sec.  261.151(e) or (f)) contains a requirement to account for 
obligations assured through a financial test or corporate guarantee for 
facilities handling conditionally excluded hazardous secondary 
materials. This addition is necessary because the chief financial 
officer's letter required in the 40 CFR part 265 regulations does not 
anticipate these obligations.
    The financial test and the letter from the chief financial officer 
use accounting terms, such as current assets, current liabilities, and 
liabilities. Under 40 CFR 261.141, which defines the terms used in this 
subpart, these and other accounting terms follow their definition in 40 
CFR 265.141(f). As noted in 40 CFR 265.141(f), ``The definitions are 
intended to assist in the understanding of these regulations and are 
not intended to limit the meanings of terms in a way that conflicts 
with generally accepted accounting practices.'' This is an important 
provision of the financial assurance regulations because it allows the 
terms used in the test to reflect evolving definitions. For example, if 
the accounting standards covering retiree obligations change, this 
provision ensures that the accounting in the financial test submission 
to EPA reflects the new standards. Companies may not use an obsolete 
definition of these terms.
    Like the 40 CFR part 265 regulations, this regulation includes a 
provision

[[Page 64698]]

allowing an owner or operator to obtain a corporate guarantee as a 
method of complying with the financial assurance requirements. The 
provisions governing who may extend a guarantee are the same as those 
in 40 CFR part 265. Since there is no requirement for an up-front 
closure plan, the text of the guarantee in 40 CFR part 261 differs 
somewhat from the language in 40 CFR part 265. In Sec.  261.151(g)(1), 
the guarantor ``guarantees that in the event of a determination by the 
Regional Administrator that the hazardous secondary materials at the 
owner or operator's facility covered by this guarantee do not meet the 
conditions of the exclusion under Sec.  261.4(a)(24), the guarantor 
will manage any hazardous secondary material in accordance with 
applicable regulations and close the facility in accordance with 
closure requirements found in parts 264 and 265 of this chapter or 
establish a trust fund as specified in Sec.  261.143(a) in the name of 
the owner or operator in the amount of the current cost estimate.''
Liability Requirements
    The liability coverage requirements for sudden and nonsudden 
accidental occurrences in subpart H of 40 CFR part 261 are essentially 
the same as those for TSDFs in 40 CFR 265.147, with revised terminology 
so that the regulatory language applies to hazardous secondary material 
reclamation and intermediate facilities. Sudden accidental coverage for 
bodily injury and property damage to third parties is required for all 
units, and nonsudden accidental coverage is required for land-based 
units. Land-based units are defined in 40 CFR 260.10 as an area where 
hazardous secondary materials are placed in or on the land before 
recycling and are functionally equivalent to the units required to have 
nonsudden accidental coverage under 40 CFR 265.147(b) (e.g., surface 
impoundments). In addition, the provisions for requesting a variance or 
adjusting the coverage are the same as 40 CFR 265.147(c) and (d) 
respectively, except the reference that ties these procedures to the 
Subtitle C permit modification procedures under 40 CFR 270.41(a)(5) and 
40 CFR 124.5 has been removed, because these provisions would not apply 
to excluded hazardous secondary material.
Other Financial Assurance Provisions
    Finally, the provisions for incapacity of owners or operators, 
guarantors, or financial institutions (40 CFR 261.148), use of state-
required mechanisms (40 CFR 261.149), and state assumption of 
responsibility (40 CFR 261.150) are essentially the same as their 
counterparts in 40 CFR part 265, with one exception. The state-required 
mechanism provisions have been expanded to indicate that states may 
allow facilities to use their existing Subtitle C financial assurance 
policies to address the financial assurance condition of 40 CFR 
261.4(a)(24)(vi)(F), provided they can ensure that the instruments 
actually cover the financial assurance cost estimate.
5. Provisions Applicable to Hazardous Secondary Materials That Are 
Exported and Imported
    Under today's final rule, generators who export hazardous secondary 
materials are required to notify the receiving country through EPA and 
obtain consent from that country before shipment of the hazardous 
secondary materials takes place (see 40 CFR 261.4(a)(25)). These notice 
and consent requirements provide notification to the receiving country 
so that it can ensure that the hazardous secondary materials are 
reclaimed rather than disposed of or abandoned. As an additional 
benefit, these requirements allow the receiving country the opportunity 
to consent or not consent based on its analysis of whether the 
reclamation facility can properly recycle the hazardous secondary 
materials and manage the process residuals in an environmentally sound 
manner within its borders. EPA believes that sections 2002, 3002, 3007, 
and 3017 of RCRA provide authority to impose this condition because 
such notice and consent help determine that the materials are not 
discarded.
    Specifically, hazardous secondary materials that are exported from 
the United States and its territories and recycled at a reclamation 
facility located in a foreign country are not solid wastes, provided 
the hazardous secondary material generator complies with the 
requirements of 40 CFR 261.4(a)(25), including notifying EPA of the 
proposed export and obtaining subsequent consent from the receiving 
country.
    Included by reference in 40 CFR 261.4(a)(25), the generator must 
comply with the requirements of 40 CFR 261.4(a)(24)(i)-(v), which 
comprise the hazardous secondary material generator requirements under 
the transfer-based exclusion, such as speculative accumulation and 
reasonable efforts. However, hazardous secondary material generators 
who export hazardous secondary materials for reclamation are not 
required to comply with 40 CFR 261.4(a)(24)(v)(B)(2) for foreign 
reclaimers and intermediate facilities because, as part of satisfying 
reasonable efforts, this question requires the generator to 
affirmatively answer if the reclaimer or intermediate facility has 
notified the appropriate authorities pursuant to Sec.  260.42 and if 
the reclaimer or intermediate facility has financial assurance as 
required under Sec.  261.4(a)(24)(vi)(F). Since foreign reclaimers and 
foreign intermediate facilities are not subject to U.S. regulations, 
they cannot comply with the notification and financial assurance 
requirements under today's rule (however, hazardous secondary material 
generators must affirmatively answer this question for domestic 
intermediate facilities).
    The provisions that we are finalizing today in 40 CFR 261.4(a)(25) 
require hazardous secondary material generators to notify EPA of an 
intended export 60 days before the initial shipment is intended to be 
shipped off-site. The notification may cover export activities 
extending over a 12-month or shorter period. The notification must 
include contact information for the hazardous secondary material 
generator, as well as for the reclaimer and intermediate facility, 
including any alternate reclaimer or alternate intermediate 
facilities.\5\ The notification must also include a description of the 
type(s) of hazardous secondary materials and the manner in which the 
hazardous secondary materials will be reclaimed, the frequency and rate 
at which they will be exported, the period of time over which they will 
be exported, the means of transport, the estimated total quantity of 
hazardous secondary materials to be exported, and information about 
transit countries through which such hazardous secondary materials will 
pass.
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    \5\ Hazardous secondary material generators may choose, in the 
notice of export, to designate alternate reclaimers or alternate 
intermediate facilities to which the hazardous secondary materials 
may be exported in the event that delivery to the primary reclaimer 
or intermediate facility cannot take place. Hazardous secondary 
material generators, of course, must comply with all conditions 
(e.g., reasonable efforts) for each alternate reclaimer and 
alternate intermediate facility as with a primary reclaimer and 
intermediate facility.
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    Notifications must be sent to EPA's Office of Enforcement and 
Compliance Assurance,\6\ which will then notify the receiving country 
and any transit countries. For purposes of 40 CFR 261.4(a)(25), the 
terms ``Acknowledgement of Consent,'' ``receiving country,'' and 
``transit country'' are used as defined in 40 CFR 262.51 with the 
exception that the terms in this section refer to hazardous

[[Page 64699]]

secondary materials, rather than hazardous waste.
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    \6\ The Office of Enforcement and Compliance Assurance (OECA) is 
the office within EPA that implements the notice and consent process 
for exports.
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    When the receiving country consents (or objects) to the receipt of 
the hazardous secondary materials, EPA will inform the hazardous 
secondary material generator, through an Acknowledgement of Consent, of 
the receiving country's response, as well as any response from any 
transit countries.
    For exports to Organization for Economic Cooperation and 
Development (OECD) Member countries, the receiving country may choose 
to respond to the notification with tacit, rather than written, 
consent. With respect to exports to such OECD Member countries, if no 
objection has been lodged by the receiving country or transit countries 
to a notification within 30 days after the date of issuance of the 
acknowledgement of receipt of notification by the competent authority 
of the receiving country, the U.S. understands that an export may 
commence at that time. In such cases, EPA will send an Acknowledgment 
of Consent to inform the hazardous secondary material generator that 
the receiving country and any relevant transit countries have not 
objected to the shipment, and are thus presumed to have consented 
tacitly. Tacit consent expires one calendar year after the close of the 
30-day period; re-notification and renewal of all consents is required 
for exports after that date. This tacit consent procedure for exports 
of hazardous secondary materials to OECD Member countries in this rule 
is similar to the tacit consent procedure for hazardous waste exports 
to OECD Member countries under 40 CFR part 262 subpart H. We note that 
Canada and Mexico, though they are OECD Member countries, typically 
require written consent for exports to their countries.
    The hazardous secondary material generator may proceed with the 
shipment of the hazardous secondary materials only after it has 
received an Acknowledgment of Consent from EPA indicating the receiving 
country's consent (actual or tacit). If the receiving country does not 
consent to the receipt of the hazardous secondary materials or 
withdraws a prior consent, EPA will notify the hazardous secondary 
material generator in writing. EPA also will notify the hazardous 
secondary material generator of any responses from transit countries. 
Hazardous secondary material generators must keep copies of any 
notifications and consents for a period of three years following 
receipt of the consent.
    Hazardous secondary material generators must also file with the 
Administrator, no later than March 1 of each year, a report containing 
its name, mailing and site address, and EPA ID number (if applicable); 
the calendar year covered by the report; the name and site address of 
each reclaimer and intermediate facility; and, for each hazardous 
secondary material exported, a description of the hazardous secondary 
material, the type of hazardous secondary material (reported as the EPA 
hazardous waste numbers that would apply if the hazardous secondary 
materials were managed as hazardous wastes), the DOT hazard class, the 
name and U.S. EPA ID number (where applicable) for each transporter 
used, the total amount of hazardous secondary material shipped and the 
number of shipments pursuant to each notification. Hazardous secondary 
material generators must also sign a certification statement (found 
under 40 CFR 261.4(a)(25)(xi)(E)). These procedures are similar to 
those required for exports of hazardous waste under 40 CFR part 262 
subpart E, except for the use of the hazardous waste manifest which is 
not required under today's exclusions.
    Imports of hazardous secondary materials are eligible for today's 
transfer-based exclusion, provided that the person who imports the 
hazardous secondary material fulfills all requirements and conditions 
(e.g., notification, reasonable efforts, recordkeeping) for a hazardous 
secondary material generator under 40 CFR 261.4(a)(24) of today's rule. 
Persons who import hazardous secondary materials are not eligible for 
today's generator-controlled exclusion since EPA would not be able to 
ensure the close management and monitoring of the hazardous secondary 
materials by a single entity in a foreign country.

D. Termination of the Exclusion

    As with the generator-controlled exclusion, units managing 
hazardous secondary materials excluded under the transfer-based 
exclusion are not subject to the closure regulations in 40 CFR parts 
264 and 265 subpart G. However, when the use of these units is 
ultimately discontinued, all owners and operators must manage any 
remaining hazardous secondary materials that are not reclaimed and 
remove or decontaminate all hazardous residues and contaminated 
containment system components, equipment structures, and soils. These 
hazardous secondary materials and residues, if no longer intended for 
reclamation, would also no longer be eligible for the exclusion (which 
only applies to hazardous secondary materials that will be reclaimed). 
Failure to remove these materials within a reasonable time frame after 
operations cease could cause the facility to become subject to the full 
Subtitle C requirements if the Agency determines that reclamation is no 
longer feasible. While this final rule does not set a specific time 
frame for these activities, the Agency believes that they typically 
should be completed within the time frames established for analogous 
activities. For example, the requirements for product tanks under 40 
CFR 261.4(c) allow 90 days for removal of hazardous material after the 
unit ceases to be operated for manufacturing. This time frame should 
serve as a guideline for regulators in determining, on a case-by-case 
basis, whether owners and operators have completed these activities 
within in a reasonable time frame. In any event, these hazardous 
secondary materials remain subject to the speculative accumulation 
restrictions in 40 CFR 261.4(a)(8), which includes both a time 
limitation of recycling 75% of the hazardous secondary material within 
a year and a requirement that the facility be able to show there is a 
feasible means of recycling the hazardous secondary material.
    In addition, as described in section VIII.C. above, in order to be 
released from the financial assurance condition, intermediate and 
reclamation facilities will need to submit for approval a plan for 
removing the hazardous secondary material and decontaminating the unit, 
and then, when the work is completed, submit a certification from a 
qualified Professional Engineer that all hazardous secondary materials 
have been removed from the unit and the unit has been decontaminated.

E. Enforcement

    Hazardous secondary materials transferred to a third party for the 
purpose of reclamation are excluded from RCRA Subtitle C regulation 
under certain conditions and restrictions. If a hazardous secondary 
material generator fails to meet any of the above-described conditions 
that are applicable to the generator, then the hazardous secondary 
materials would be considered discarded by the generator and would be 
subject to the RCRA Subtitle C requirements from the point at which 
such material was generated. In addition, if a reclaimer or an 
intermediate facility failed to meet any of the above-described 
conditions, then the hazardous secondary materials would be considered 
discarded by the reclaimer or intermediate facility and would be 
subject to the RCRA Subtitle C requirements from the point at which the 
reclaimer or intermediate facility

[[Page 64700]]

failed to meet a condition or restriction, thereby discarding the 
material.
    It should be noted that the failure of the reclaimer or 
intermediate facility to meet the conditions of the exclusion does not 
mean that the hazardous secondary material was considered waste when 
handled by the generator, as long as the generator can adequately 
demonstrate that it has met its obligations, including the obligation 
under 40 CFR 261.4(a)(24)(v)(B) to make reasonable efforts to ensure 
that the hazardous secondary material will be reclaimed legitimately 
and properly managed. A hazardous secondary material generator that met 
its reasonable efforts obligations could, in good faith, ship its 
excluded materials to a reclamation facility or intermediate facility 
where, due to circumstances beyond its control, they were released and 
caused environmental problems at that facility. In such situations, and 
where the generator's decision to ship to that reclaimer or 
intermediate facility is based on an objectively reasonable belief that 
the hazardous secondary materials would be reclaimed legitimately and 
otherwise managed in a manner consistent with this regulation, the 
generator would not have violated the terms of the exclusion.
    In addition, the Agency affirms in this preamble that Sec.  
261.2(f) applies to all claims that hazardous secondary materials are 
not solid waste because they are being legitimately recycled, including 
those that are not specifically addressed in this final rule. 
Respondents in enforcement cases should be prepared to demonstrate that 
they meet the terms of the exclusion or exemption, which includes 
demonstrating that the recycling is legitimate. Appropriate 
documentation must be provided to the enforcing agency to demonstrate 
that the material is not a solid waste or is exempt from regulation. In 
addition, the recycler of the hazardous secondary material should be 
prepared to show it has the necessary equipment to perform the 
recycling operation. Furthermore, any release of the hazardous 
secondary materials to the environment that is not immediately cleaned 
up would be considered discarded and, thus, the hazardous secondary 
material that was released would be a solid waste and potentially 
subject to the RCRA hazardous waste regulations.

IX. Legitimacy

    As part of this final rulemaking, EPA has decided to codify in 40 
CFR 260.43 the requirement that materials be legitimately recycled as a 
requirement for the exclusion for hazardous secondary materials that 
are legitimately reclaimed under the control of the generator (40 CFR 
261.2(a)(2)(ii) and 40 CFR 261.4(a)(23)) and as a condition of the 
exclusion for hazardous secondary materials that are transferred for 
the purpose of legitimate reclamation (40 CFR 261.4(a)(24) and 40 CFR 
261.4(a)(25)). EPA is also requiring that hazardous secondary materials 
must be legitimately recycled under the final non-waste determinations 
(40 CFR 260.34) for hazardous secondary materials that are (a) 
reclaimed in a continuous industrial process and (b) indistinguishable 
in all relevant aspects from a product or intermediate.
    In addition, in Section IX.B.3, EPA has included a discussion of 
how the current legitimacy policy continues to apply to existing 
exclusions and how the four factors being added to 40 CFR 260.43 are 
substantively the same as the current legitimacy policy.

A. Background of Legitimacy

    Under the RCRA Subtitle C definition of solid waste, many existing 
hazardous secondary materials are not solid wastes and, thus, not 
subject to RCRA's ``cradle to grave'' management system if they are 
recycled. The basic idea behind this construct is that recycling of 
such materials often closely resembles normal industrial manufacturing 
rather than waste management. However, since there can be a significant 
economic incentive to manage hazardous secondary materials outside the 
RCRA regulatory system, there is a potential for some handlers to claim 
that they are recycling, when, in fact, they are conducting waste 
treatment and/or disposal in the guise of recycling.\7\ To guard 
against this, EPA has long articulated the need to distinguish between 
``legitimate'' (i.e., true) recycling and ``sham'' (i.e., fake) 
recycling, beginning with the preamble to the 1985 regulations that 
established the definition of solid waste (50 FR 638, January 4, 1985).
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    \7\ As an example of sham recycling, in a recent case the owner 
of a facility in Mississippi was found to be illegally burying 
hazardous waste on his property, where it was leaching into the 
surrounding soil and groundwater, while he was telling regulators 
and customers that he was recycling it into a salable product 
(Department of Justice, ``Mississippi Hazardous Waste Operator 
Sentenced to 41 Months in Prison for Environmental Crimes,'' news 
release, February 7, 2008, http://www.epa.gov/compliance/resources/cases/criminal/highlights/2008/pridemore-02-07-08.pdf).
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    In the October 28, 2003, proposal at 68 FR 61581-61588, EPA 
discussed its position on the relevance of legitimacy to hazardous 
secondary materials recycling in general and to the redefinition of 
solid waste specifically. We proposed to codify in the RCRA hazardous 
waste regulations four general criteria to be used in determining 
whether recycling of hazardous secondary materials is legitimate. In 
the supplemental proposal of March 26, 2007, at 72 FR 14197-14201, we 
proposed two changes to the 2003 proposed legitimacy criteria and asked 
for public comment on those changes. The changes were (1) a 
restructuring of the proposed criteria, called ``factors'' in this 
proposal, to make two of them mandatory, while leaving the other two as 
factors to be considered, and (2) additional guidance on how the 
economics of the recycling activity should be considered in a 
legitimate recycling determination.
    The concept of legitimacy being finalized in today's rule as a 
restriction or a condition for the final exclusions and the non-waste 
determinations is not substantively different from the Agency's 
longstanding policy that has been expressed in our earlier preamble 
discussions and policy statements. The October 28, 2003, definition of 
solid waste proposal discussed the history of the guidance EPA has 
provided to the regulated community on the question of what it means to 
legitimately recycle. To summarize that discussion, the January 4, 
1985, preamble to the final rule that promulgated the original 
definition of solid waste regulations established EPA's concept of 
legitimacy and described several indicators of sham recycling. A 
similar discussion that addressed legitimacy as it pertains to burning 
hazardous secondary materials for energy recovery was presented in the 
preamble to the January 8, 1988, proposed amendments to the definition 
of solid waste (53 FR 522).
    On April 26, 1989, the Office of Solid Waste (OSW) issued a 
memorandum that consolidated preamble statements concerning legitimate 
recycling that had been articulated previously into a list of criteria 
to be considered in evaluating legitimacy [OSWER directive 
9441.1989(19)]. This memorandum, known to many as the ``Lowrance 
Memo,'' has been a primary source of guidance for the regulated 
community and for implementing agencies in distinguishing between 
legitimate and sham recycling for many years.
    The legitimacy provision applicable to these exclusions and non-
waste determinations is based on the October 2003 proposal and March 
2007 supplemental proposal and all relevant information available to 
EPA as contained in the rulemaking record. The basis for how the 
legitimacy requirement in 40 CFR 260.43 works

[[Page 64701]]

includes the reasoning in the October 2003 and March 2007 preambles to 
the proposal and supplemental proposal, respectively, and consideration 
of all significant public comments as discussed in section XVIII of 
this preamble, as well as in the response to comment document.
    Following the detailed discussion of the structure of the 40 CFR 
260.43 legitimacy factors and each individual factor in this preamble, 
EPA has included a discussion of how the current legitimacy policy 
continues to apply to existing exclusions and how the four factors 
being added to 40 CFR 260.43 compare to the questions in the Lowrance 
Memo and the discussions in the preambles identified above.

B. How To Determine When Recycling Is Legitimate

1. What Is the Purpose of Legitimacy?
    As discussed in the October 2003 proposal and the March 2007 
supplemental proposal to this rulemaking, the Agency has a long-
standing policy that all recycling of hazardous secondary materials 
must be legitimate, including both excluded recycling and the recycling 
of regulated hazardous wastes. The legitimacy provision in today's 
final exclusions and non-waste determinations is designed to 
distinguish between real recycling activities--legitimate recycling--
and ``sham'' recycling, an activity undertaken by an entity to avoid 
the requirements of managing a hazardous secondary material as a 
hazardous waste. Because of the economic advantages in managing 
hazardous secondary materials as recycled materials rather than as 
wastes, there is an incentive for some handlers to claim they are 
recycling when, in fact, they are conducting waste treatment and/or 
disposal.
2. Legitimacy Requirements
    In this action, EPA is finalizing requirements that reclamation 
being undertaken under the exclusions at Sec.  261.2(a)(2)(ii), Sec.  
261.4(a)(23), (24), and (25) and the non-waste determinations at Sec.  
260.30(d) and (e) be legitimate. These requirements can be found in the 
final regulatory text at Sec.  260.34(b), Sec.  261.2(a)(2)(ii), Sec.  
261.4(a)(23)(v), and Sec.  261.4(a)(24)(iv). Each of these provisions 
refers to Sec.  260.43, where the full requirements for determining the 
legitimacy of the reclamation operation can be found.
    The design of legitimacy in the final rule has two parts. The first 
is a requirement that hazardous secondary materials being recycled 
provide a useful contribution to the recycling process or to the 
product of the recycling process and a requirement that the product of 
the recycling process is valuable. These two legitimacy factors make up 
the core of legitimacy and, therefore, a process that does not conform 
to them cannot be a legitimate recycling process, but would be 
considered sham recycling.
    The second part of legitimacy is two factors that must be 
considered when a recycler is making a legitimacy determination. EPA 
believes that these two factors are important in determining 
legitimacy, but has not made them factors that must be met because the 
Agency knows that there will be some situations in which a legitimate 
recycling process does not conform to one or both of these two factors, 
yet the reclamation activity would still be considered legitimate. EPA 
does not believe that this will be a common occurrence, but in 
recognition that legitimate recycling may occur in these situations, 
EPA has made management of the hazardous secondary materials and the 
presence of hazardous constituents in the product of the recycling 
process to be factors that must be considered in the overall legitimacy 
determination, but not factors that must always be met.
    Structure of legitimacy provision. Under the first paragraph of 40 
CFR 260.43, hazardous secondary materials that are not legitimately 
recycled are discarded materials and, therefore, are solid wastes. This 
paragraph also states that anyone claiming an exclusion at Sec.  
261.2(a)(2)(ii), Sec.  261.4(a)(23), Sec.  261.4(a)(24), or Sec.  
261.4(a)(25) or using a non-waste determination at Sec.  260.30(d) or 
(e) must be able to demonstrate that its recycling activity is 
legitimate. The Agency has included the language ``In determining if 
their recycling is legitimate, persons must address the requirements of 
Sec.  260.43(b) and must consider the requirements of Sec.  260.43(c)'' 
to make it clear that the factors in paragraph (b) must be met, while 
the factors in paragraph (c) must be considered and evaluated in 
determining whether the recycling activity overall is legitimate.
    Although there is no specific recordkeeping requirement that goes 
with the ability to demonstrate legitimacy, EPA would expect that in 
the event of an inspection or an enforcement action by an implementing 
agency, the recycler would be able to show how it made the overall 
legitimacy determination per Sec.  261.2(f).\8\ In the event that the 
process does not conform to one of the two factors under Sec.  
260.43(c), the facility should be able to show that it considered that 
factor and why the recycling activity overall remains legitimate. For 
example, under existing exclusions from the definition of solid waste, 
reuse of lead contaminated foundry sands may or may not be legitimate, 
depending on the use. The use and reuse of foundry sands for mold 
making in a facility's sand loop under normal industry practices has 
been found to be legitimate because the sand is part of an industrial 
process where there is little chance of the hazardous constituents 
being released into the environment or causing damage to human health 
and the environment when it is kept inside, because there is lead 
throughout the foundry's process, and because there is a clear value to 
reusing the sand.\9\ However, in the case of lead contaminated foundry 
sand used as children's play sand, the same high levels of lead would 
disqualify this use from being considered legitimate recycling.\10\ the 
same result would be reached when applying Factor 4.
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    \8\ Under the transfer-based exclusion being finalized in 
today's rule, a reclaimer should also anticipate that a hazardous 
secondary material generator may inquire as to whether the 
reclamation process is legitimate (40 CFR 261.4(a)(24)(v)(B)(1)). 
Reasonable effort inquiries will vary by generator and may include a 
request for information or documentation of legitimacy.
    \9\ Letter. Elizabeth Cotsworth, Director Office of Solid Waste, 
to Amy Blankenbiller, American Foundry Society, March 28, 2001. 
http://yosemite.epa.gov/osw/rcra.nsf/
0c994248c239947e85256d090071175f/4C9A2EEE6E5F859B85256AC5004FC1C2/
$file/14534.pdf
    \10\ One of the profiles in the docket shows that from 1997-
1998, a horticultural nursery purchased approximately 375 tons of 
foundry sand that contained lead above the regulatory limits and 
that was then bagged and sold as play sand to approximately 40 
different retailers. (U.S. EPA, An Assessment of Environmental 
Problems Associated with Recycling of Hazardous Secondary Materials, 
Appendix 2).
---------------------------------------------------------------------------

    Factor 1--Useful Contribution. ``Legitimate recycling must involve 
a hazardous secondary material that provides a useful contribution to 
the recycling process or to a product of the recycling process * * * 
The hazardous secondary material provides a useful contribution if it 
(i) contributes valuable ingredients to a product or intermediate; or 
(ii) replaces a catalyst or carrier in the recycling process; or (iii) 
is the source of a valuable constituent recovered in the recycling 
process; or (iv) is recovered or regenerated by the recycling process; 
or (v) is used as an effective substitute for a commercial product'' 
(40 CFR 260.43(b)(1)).
    This factor, one of the two core legitimacy factors, expresses the 
principle that hazardous secondary materials should contribute value to 
the recycling process. This factor is an

[[Page 64702]]

essential element to legitimate recycling because real recycling is not 
occurring if the hazardous secondary materials being added or recovered 
do not add anything to the process. This factor is intended to prevent 
the practice of adding to or recovering hazardous secondary materials 
from a manufacturing operation simply as a means of disposing of them, 
or recovering only small amounts of a constituent, which EPA would 
consider sham recycling.
    In response to comments received on this factor asking for more 
clarification on what useful contribution means, the regulatory text 
includes an explanation of how useful contribution might be achieved in 
(i) through (v) of Sec.  260.43(b)(1). EPA stresses that the ways in 
which hazardous secondary materials can add value and be useful in a 
recycling process are (i) contributing valuable ingredients to a 
product or intermediate; (ii) replacing a catalyst or carrier in the 
recycling process; (iii) providing a valuable constituent to be 
recovered; (iv) being regenerated; or (v) being used as an effective 
substitute for a commercial product. The preamble to the October 2003 
proposed rule gave full descriptions of these five situations (68 FR 
61585), but the Agency has also included them in the regulatory text to 
clarify this factor for the regulated community.
    The Agency also wants to restate for clarification that for 
hazardous secondary materials to meet the useful contribution factor, 
not every constituent or component of the hazardous secondary material 
has to make a contribution to the recycling activity. For example, a 
legitimate recycling operation involving precious metals might not 
recover all of the components of the hazardous secondary material, but 
would recover precious metals with sufficient value to consider the 
recycling process legitimate. In addition, the recycling activity does 
not have to involve the hazardous component of the hazardous secondary 
materials if the value of the contribution of the non-hazardous 
component justifies the recycling activity. One example of this factor 
from an existing exemption is where hazardous secondary materials 
containing large amounts of zinc, a non-hazardous component, are 
recycled into zinc micronutrient fertilizers. In cases where the 
hazardous component is not being used or recycled, the Agency stresses 
that the recycler is responsible for the management of any hazardous 
residuals of the recycling process.
    In a situation where more than one hazardous secondary material is 
used in a single recycling process and the hazardous secondary 
materials are mixed or blended as a part of the process, each hazardous 
secondary material would need to satisfy the useful contribution 
factor. This requirement prevents situations where a worthless 
hazardous secondary material could be mixed with valuable and useful 
hazardous secondary materials in an attempt to disguise and dispose of 
it. In addition, a situation in which hazardous secondary materials 
that can be useful to a process are added to that process in much 
greater amounts than are needed to make the end-product or to otherwise 
provide its useful contribution would also be sham recycling.
    Another way the usefulness of the hazardous secondary material's 
contribution could be demonstrated is by looking at the efficiency of 
the material's use in the recycling process--that is, how much of the 
constituent in a hazardous secondary material is actually being used. 
As an example, if there is a constituent in the hazardous secondary 
material that could add value to the recycling process, but, due to 
process design, most of it is not being recovered but is being disposed 
of in the residuals, this would be a possible indicator of sham 
recycling. However, there are certainly recycling scenarios where a low 
recovery rate could still be legitimate. For example, under an existing 
exclusion, if the concentration in a metal-bearing hazardous secondary 
material is low (2%-4%) and a recycling process was able to recover a 
large percentage of the target metal, this factor could be met and the 
recycling may be legitimate (depending on the outcome of the analysis 
of the other legitimacy factors).
    One way to use the efficiency of the recycling process to evaluate 
legitimacy is to compare the process to typical industry recovery rates 
from raw materials to determine if the recycling process is reasonably 
efficient. This method should involve an examination of the overall 
process, not just a single step of the process. For example, if one 
step in the process recovers a small percentage of the constituent, but 
the overall process recovers a much larger percentage, the Agency would 
consider the overall efficiency of the recycling process in determining 
whether hazardous secondary materials are providing a useful 
contribution.
    There are various ways in which hazardous secondary materials can 
be useful to a recycling process and various ways are laid out in this 
discussion of how a facility might demonstrate conformity with this 
factor. In addition, we provided a number of different ways a material 
could contribute to the process in the regulatory text describing this 
factor. Any one of these would be sufficient to demonstrate that the 
hazardous secondary material provides a useful contribution. Overall, 
the Agency considers this factor to be a critical element in 
determining legitimacy and any recycling process that does not meet 
this factor cannot be considered legitimate recycling.
    Factor 2--Valuable Product or Intermediate. ``The recycling process 
must produce a valuable product or intermediate * * * The product or 
intermediate is valuable if it is (i) sold to a third party or (ii) 
used by the recycler or the generator as an effective substitute for a 
commercial product or as an ingredient or intermediate in an industrial 
process'' (40 CFR 260.43(b)(2)).
    This factor, one of the two core legitimacy factors, expresses the 
principle that the product or intermediate of the recycling process 
should be a material of value, either to a third party who buys it from 
the recycler, or to the generator or recycler itself, who can use it as 
a substitute for another material that it would otherwise have to buy 
or obtain for its industrial process. This factor is also an essential 
element of the concept of legitimate recycling because recycling cannot 
be occurring if the product or intermediate of the recycling process is 
not of use to anyone and, therefore, is not a real product. This factor 
is intended to prevent the practice of running a hazardous secondary 
material through an industrial process to make something just for the 
purpose of avoiding the costs of hazardous waste management, rather 
than for the purpose of using the product or intermediate of the 
recycling activity. Such a practice would be sham recycling.
    Most commenters on the proposed rule for this factor stated that 
this is a useful way of gauging whether recycling is actually taking 
place, but requested that the Agency clarify the meaning of the term 
valuable, as it is used in the regulatory text. EPA is repeating and 
clarifying today that for the purpose of this factor, a recyclable 
product may be considered ``valuable'' if it can be shown to have 
either economic value or a more intrinsic value to the end user. 
Evaluations of ``valuable'' for the purpose of this factor should be 
done on a case-by-case basis, but one way to demonstrate that the 
recycling process yields a valuable product would be the documented 
sale of a product of the recycling process to a third party. Such 
documentation could be in the form of

[[Page 64703]]

receipts or contracts and agreements that establish the terms of the 
sale or transaction. This transaction could include money changing 
hands or, in other circumstances, may involve trade or barter. A 
recycler that has not yet arranged for the sale of its product to a 
third party could establish value by demonstrating that it can replace 
another product or intermediate that is available in the marketplace. A 
product of the recycling process may be sold at a loss in some 
circumstances, but the recycler would have to be prepared to show how 
the product is clearly valuable to the purchaser.
    However, many recycling processes produce outputs that are not sold 
to another party, but are instead used by the generator or recycler. A 
product of the recycling process may be used as a feedstock in a 
manufacturing process, but have no established monetary value in the 
marketplace. Such recycled products or intermediates would be 
considered to have intrinsic value, though demonstrating intrinsic 
value may be less straightforward than demonstrating value for products 
that are sold in the marketplace. Demonstrations of intrinsic value 
could involve showing that the product of the recycling process or 
intermediate replaces an alternative product that would otherwise have 
to be purchased or could involve a showing that the product of the 
recycling process or intermediate meets specific product specifications 
or specific industry standards. Another approach could be to compare 
the product's or intermediate's physical and chemical properties or 
efficacy for certain uses with those of comparable products or 
intermediates made from raw materials.
    Some recycling processes may consist of multiple steps that may 
occur at separate facilities. In some cases, each processing step will 
yield a valuable product or intermediate, such as when a metal-bearing 
hazardous secondary material is processed to reclaim a precious metal 
and is then put through another process to reclaim a different mineral. 
When each step in the process yields a valuable product or intermediate 
that is salable or usable in that form, the recycling activity would 
conform to this factor.
    Like the other factors, this factor should be examined and 
evaluated on a case-by-case basis looking at the specific facts of a 
recycling activity. If, for instance, a recycling activity produces a 
product or intermediate that is used by the recycler itself, but does 
not serve any purpose and is just being used so that the product or 
intermediate appears valuable, that would be an indicator of sham 
recycling. An example of this would be a recycler that reclaims a 
hazardous secondary material and then uses that material to make blocks 
or building materials for which it has no market and then ``uses'' 
those building materials to make a warehouse in which it stores the 
remainder of the building materials that it is unable to sell.
    Factor 3--Managed as a Valuable Commodity. ``The generator and the 
recycler should manage the hazardous secondary material as a valuable 
commodity. Where there is an analogous raw material, the hazardous 
secondary material should be managed, at a minimum, in a manner 
consistent with the management of the raw material. Where there is no 
analogous raw material, the hazardous secondary material should be 
contained. Hazardous secondary materials that are released to the 
environment and are not recovered immediately are discarded'' (40 CFR 
260.43(c)(1)).
    The first of the additional factors that must be considered 
expresses the principle that hazardous secondary materials being 
recycled should be managed in the same manner as other valuable 
materials. This factor requires those making a legitimacy determination 
to look at how the hazardous secondary material is managed before it 
enters the recycling process. In EPA's view, a recycler will value 
hazardous secondary materials that provide an important contribution to 
its process or product and, therefore, will manage those hazardous 
secondary materials in a manner consistent with how it manages a 
valuable feedstock. If, on the other hand, the recycler does not manage 
the hazardous secondary materials as it would a valuable feedstock, 
that behavior may indicate that the hazardous secondary materials may 
not be recycled, but rather released into the environment and 
discarded.
    This factor may be particularly appropriate in the case where a 
recycler has been paid by a generator to take its materials as a result 
of the economic incentives in the hazardous secondary materials market. 
By looking at the management of the hazardous secondary material before 
it enters the recycler's process, the entity making the legitimacy 
determination can tell that a material being managed like an analogous 
raw material is, in fact, valued by the recycler. If the hazardous 
secondary material is not being managed like a valuable raw material 
because it is uncontrolled or is being released, that indicates that 
the fee the recycler obtains for taking the hazardous secondary 
material may be its only value to that recycler. If the fee received 
were the only value to the recycler, it would mean that discard was 
taking place.
    This factor addresses the management of hazardous secondary 
materials in two distinct situations. The first situation is when a 
hazardous secondary material is analogous to a raw material which it is 
replacing in the process. In this case, the hazardous secondary 
material should be managed prior to recycling similarly to the way the 
analogous raw materials are managed in the course of normal 
manufacturing. EPA expects that all parties handling hazardous 
secondary materials destined for recycling--generators, transporters, 
intermediate facilities and reclamation facilities--will handle them in 
generally the same manner in which they would handle the valuable raw 
materials they might otherwise be using in their process. ``Analogous 
raw material,'' as defined elsewhere in this preamble, is a raw 
material for which the hazardous secondary material substitutes and 
which serves the same function and has similar physical and chemical 
properties as the hazardous secondary material.
    The second situation the factor addresses is the case where there 
is no analogous raw material that the hazardous secondary material is 
replacing. This could be either because the process is designed around 
a particular hazardous secondary material--that is, the hazardous 
secondary material is not replacing anything--or it could be because of 
physical or chemical differences between the hazardous secondary 
material and the raw material that are too significant for them to be 
considered ``analogous.''
    Hazardous secondary materials that have significantly different 
physical or chemical properties when compared to the raw material would 
not be considered analogous even if they serve the same function 
because it may not be appropriate to manage them in the same way. In 
this situation, the hazardous secondary material would have to be 
contained for this factor to be met. A hazardous secondary material is 
``contained'' if it is placed in a unit that controls the movement of 
that material out of the unit. This requirement is consistent with the 
idea that normal manufacturing processes are designed to use valuable 
material inputs efficiently rather to than allow them to be released 
into the environment.
    For example, if a manufacturer has an ingredient that is a dry raw 
material managed in supersacks, the Agency would expect that a 
hazardous secondary material that is a similar dry

[[Page 64704]]

material also would be managed in supersacks or in a manner that would 
provide equivalent protection. If, on the other hand, the hazardous 
secondary material was instead managed in an outdoor pile without 
appropriate controls in place to address releases to the environment, 
it may indicate that it was not being handled as a valuable commodity. 
If, however, the manufacturer decided to replace the dry raw material 
in its process with a liquid having the same constituents, it would not 
be sufficient, nor would it make sense, for the liquid to be managed in 
supersacks. Instead, the liquid would have to be ``contained'' (for 
example in a tank or surface impoundment).
    An important part of this factor is the statement in the regulatory 
text clarifying that hazardous secondary materials that are released to 
the environment and not recovered immediately are discarded. Valuable 
products should not be allowed to escape into the environment through 
poor management and this factor clarifies that those hazardous 
secondary materials that do escape (and are not immediately recovered) 
are clearly discarded. Either a large release or ongoing releases of 
smaller amounts could indicate that, in general, the hazardous 
secondary material is not being managed as a valuable product, which 
could potentially lead to the recycling process being found not to be 
legitimate. Hazardous secondary materials that are immediately 
recovered before they disperse into the environment--air, soil, or 
water--and are reintroduced in the recycling process are not discarded. 
This determination must be made on a case-by-case basis, however.
    EPA has determined that it is appropriate that this factor is one 
of the two that must be considered rather than a factor that must be 
met because there are situations in which this factor is not met, but 
recycling appears to be legitimate. An example of this kind of 
situation is described in the March 2007 supplemental proposal (72 FR 
14199). In the example, a hazardous secondary material that is a 
powder-like material is shipped in a woven super sack and stored in an 
indoor containment area, whereas the analogous raw material is shipped 
and stored in drums. A strict reading of this factor may determine that 
the hazardous secondary material is not being managed in a manner 
consistent with the raw material even if the differences in management 
are not actually impacting the likelihood of a release. By designing 
the legitimacy factors so that this one has to be considered, but not 
necessarily met, the individual facts of situations like the one 
described here can be evaluated on a case-by-case basis to determine if 
they affect the legitimacy of the recycling activity.
    In summary, given the nature of the legitimacy factors and their 
need to apply to all the practices covered by the exclusions in this 
final rule, it is not appropriate or practicable for EPA to develop a 
specific management standard. In the absence of such a management 
standard, EPA is using this factor: materials must be managed as 
analogous raw materials or, if there are no analogous raw materials, 
the materials must be contained. EPA's intent with this factor is that 
hazardous secondary materials are managed in the same manner as 
materials that have been purchased or obtained at some cost, just as 
raw materials are. Just as it is good business practice to ensure that 
raw materials enter the manufacturing process rather than being spilled 
or released, we would expect hazardous secondary materials to be 
managed effectively and efficiently in order that their full value to 
the manufacturing process would be realized.
    Factor 4--Comparison of Toxics in the Product. ``The product of the 
recycling process does not (i) contain significant concentrations of 
any hazardous constituents found in Appendix VIII of part 261 that are 
not found in analogous products; or (ii) contain concentrations of any 
hazardous constituents found in Appendix VIII of part 261 at levels 
that are significantly elevated from those found in analogous products; 
or (iii) exhibit a hazardous characteristic (as defined in part 261 
subpart C) that analogous products do not exhibit'' (40 CFR 
260.43(c)(2)).
    The second of the additional factors that must be considered 
requires those making a legitimacy determination to look at the 
concentrations of the hazardous constituents found in the product made 
from hazardous secondary materials and compare them to the 
concentrations of hazardous constituents in analogous products. Any of 
the following three situations could be an indicator of sham recycling: 
a product that contains significant levels of hazardous constituents 
that are not found in the analogous products; a product with hazardous 
constituents that were in the analogous products, but contains them at 
significantly higher concentrations; or a product that exhibits a 
hazardous characteristic that analogous products do not exhibit. Any of 
these situations could indicate that sham recycling is occurring 
because in lieu of proper hazardous waste disposal, the recycler could 
have incorporated hazardous constituents into the final product when 
they are not needed to make that product effective in its purpose. This 
factor, therefore, is designed to determine when toxics that are 
``along for the ride'' are discarded in a final product and, therefore, 
the hazardous secondary material is not being legitimately recycled.
    To evaluate this factor, a recycler will ordinarily compare the 
product of the recycling process to an analogous product made of raw 
materials. For example, if a recycling process produced paint, the 
levels of hazardous constituents in the paint will be compared with the 
levels of the same constituents found in similar paint made from virgin 
raw materials.
    A recycler is also allowed to perform this evaluation by comparing 
the hazardous constituents in the hazardous secondary material 
feedstock with those in an analogous raw material feedstock. If the 
hazardous secondary material feedstock does not contain significantly 
higher concentrations of hazardous constituents than the raw material 
feedstock, then the end product of the recycling process would not 
contain excess hazardous constituents ``along for the ride'' either. 
EPA is clarifying here that this method of showing that the product 
does not have ``toxics along for the ride'' is acceptable. There may be 
cases in which it is easier to compare feedstocks than it is to compare 
products because the recycler knows that the hazardous secondary 
material is very similar in profile to the raw material. A comparison 
of feedstocks may also be easier in cases where the recycler creates an 
intermediate which is later processed again and may end up in two or 
more products, when there is no analogous product, or when production 
of the product of the recycling process has not yet begun.
    This factor identifies three ways to evaluate whether or not 
unacceptable amounts of hazardous constituents are passed through to 
the products of the recycling process. (As explained above, these 
methods also could be used to compare the hazardous secondary material 
feedstock to a raw material feedstock, if the recycler prefers.) The 
first method specifies that when analogous products made from raw 
materials do not contain hazardous constituents, the product of the 
recycling process should not contain significant amounts of hazardous 
constituents. For example, if paint made from reclaimed solvent 
contains significant amounts of cadmium, but the same type of paint 
made from virgin raw materials does not contain cadmium, it could 
indicate that the cadmium serves

[[Page 64705]]

no useful purpose and is being passed though the recycling process and 
discarded in the product.
    The second method addresses analogous products that do contain 
hazardous constituents and asks whether the concentrations of those 
hazardous constituents are significantly higher in the product of the 
recycling process than in the product made from raw materials. 
Concentrations of hazardous constituents in the product of the 
recycling process that are significantly higher than in the product 
made from virgin raw materials could again be an indicator of sham 
recycling. For example, if a lead-bearing hazardous secondary material 
was reclaimed and then that material was used as an ingredient in 
making ceramic tiles and the amount of lead in the tiles was 
significantly higher than the amount of lead found in similar tiles 
made from virgin raw materials, the recycler should look more closely 
at the factors to determine the overall legitimacy of the process.
    The third method under this factor is whether the product of the 
recycling process exhibits a hazardous characteristic that analogous 
products do not exhibit. Requiring an evaluation of hazardous 
characteristics ensures that products of the recycling process do not 
exhibit the characteristics of toxicity, ignitability, corrosivity, or 
reactivity when the analogous products do not. The Agency believes that 
most issues associated with ``toxics along for the ride'' will involve 
the presence of toxic constituents, which are addressed under the first 
two parts of the factor. That is, we believe that it is likely that 
there are few instances where hazardous secondary materials are used in 
the process and hazardous constituents are not present at significantly 
higher levels, but the product made from the hazardous secondary 
material nevertheless exhibits the hazardous characteristic of toxicity 
when the analogous product does not. It is possible, though, that the 
use of hazardous secondary materials as an ingredient could cause a 
product to exhibit a hazardous characteristic, such as corrosivity, 
that is not exhibited by analogous products.
    The Agency has determined that it is appropriate for this factor to 
be considered in legitimacy determinations under the final exclusions 
and in the non-waste determinations in this action, but thinks that 
there may be situations in which the factor is not met but the 
recycling would still be considered legitimate. An example of this kind 
of situation that has been addressed by the Agency under the current 
regulatory scheme would be in the use and reuse of foundry sands for 
mold making in a facility's sand loop. Because of repeated exposure to 
metals in a foundry's process, the sands used to make the molds may 
have significantly higher concentrations of hazardous constituents than 
virgin sand. However, because the sand is part of an industrial process 
where there is little chance of the hazardous constituents being 
released into the environment or causing damage to human health and the 
environment when it is kept inside, because there is lead throughout 
the foundry's process, and because there is a clear value to reusing 
the sand, this would be an example of a situation where this factor is 
not met, but it does not affect the legitimacy of the recycling 
process.
    In fact, EPA has concluded as a general matter that foundries 
engaged in the reuse of lead-containing foundry sands are recycling 
those sands legitimately and these sands would not be regulated under 
RCRA Subtitle C (under the circumstances described in EPA's March 2001 
memorandum on this subject).\11\ Thus, while the used sands in the sand 
loop arguably have toxics-along-for-the ride, EPA did not raise 
questions about the legitimacy of the recycling, given the overall 
nature of the operations. If the used foundry sand were being recycled 
into a different product, such as a material used on the ground or in 
children's play sand, the legitimacy determination would be very 
different and significant levels of metals would likely render the 
recycling illegitimate. The same conclusions would be reached applying 
the factors codified in 260.43.
---------------------------------------------------------------------------

    \11\ Letter. Elizabeth Cotsworth, Director Office of Solid 
Waste, to Amy Blankenbiller, American Foundry Society, March 28, 
2001. http://yosemite.epa.gov/osw/rcra.nsf/
0c994248c239947e85256d090071175f/4C9A2EEE6E5F859B85256AC5004FC1C2/
$file/14534.pdf
---------------------------------------------------------------------------

    Another example of recycling that may be legitimate although this 
factor has not been met could be when the material has concentrations 
of toxics that could be considered ``significantly higher'' than the 
analogous product, but meets industry specifications for the product 
that include specific specifications for the hazardous constituent of 
concern. Meeting accepted industry standards would be a strong 
indication that this material is being legitimately recycled. A third 
example could be in the mining and mineral processing industry. In many 
mineral processing operations, the very nature of an operation results 
in hazardous constituents concentrating in the product as it proceeds 
through the various steps of the process. In many cases, there is not 
an analogous product to compare the products of these processes so this 
factor may not be relevant because of the nature of the operations. As 
with the above example, if a facility considers a factor and decides 
that it is not applicable to its process, the Agency suggests that the 
facility evaluate the presence of hazardous constituents in its product 
and be prepared to demonstrate both that it considered this factor and 
the reasons it believes the factor is not relevant.
    As discussed in more detail in the comments section of this 
preamble (section XVIII) and in the response to comments document in 
the docket, commenters on this factor requested clarification 
concerning what EPA meant by the terms used in this factor. In response 
to some of these comments, EPA has made two clarifications in the 
regulatory text by (1) specifying that the hazardous constituents 
referred to in the regulation are those that are found in Appendix VIII 
to 40 CFR part 261 and (2) clarifying that the hazardous 
characteristics to which EPA is referring to are those in 40 CFR part 
261 subpart C.
    The Agency also received much comment on the term ``significant'' 
and what the Agency intended by this term. EPA has decided to keep the 
term in the final rule. The alternative to using ``significant'' or a 
similarly flexible term to determine when there may be hazardous 
constituents in the product made from recycled hazardous secondary 
materials that are not in the analogous products made from raw 
materials would be to set an absolute standard. In its discussion of 
legitimacy in the October 2003 proposed rule, EPA discussed possible 
``bright line'' or risk-based approaches as a way to set absolute lines 
to define ``significant'' based on either a numerical limit or a risk 
level (68 FR 61587-61588). EPA recognizes that the ``bright line'' or 
the risk-based approach may provide greater clarity and predictability 
to the regulated community, but that in both cases the Agency would 
have to establish a line for what is acceptable and the line may either 
be somewhat arbitrary or it may exclude recycling practices that, if 
carefully considered, should be considered legitimate. Based on the 
comments received on those approaches, we are convinced that they would 
not be workable.
    On the other hand, a case-by-case analysis of a recycling process 
can take into consideration the relevant principles and facts for that 
activity,

[[Page 64706]]

leading to a determination of significance based on the facts of the 
activity. Because this factor must apply to various different recycling 
activities, we believe the case-by-case approach is most appropriate.
    EPA, therefore, is finalizing its proposed option of using the term 
``significant'' in 40 CFR 260.43(c)(2)(i) and (ii). Evaluating the 
significance of levels of hazardous constituents in products of the 
recycling process may involve taking into consideration several 
variables, such as the type of product, how it is used and by whom, 
whether or not the elevated levels of hazardous constituents compromise 
the efficacy of the product, the availability of the hazardous 
constituents to the environment, and others. For example, if a 
hazardous secondary material has been reclaimed and made into a product 
that will be used by children, and that product contains hazardous 
constituents that are not in analogous products, that product will 
likely need to be closely scrutinized. On the other hand, low levels of 
a hazardous constituent in a product from that same reclamation 
operation that is used as an ingredient in an industrial process or for 
another industrial application may not be significant and must be 
evaluated in the context of the product's use.
    EPA provided several additional examples in implementing this 
factor in the October 2003 proposed rule which will be repeated here. 
If zinc galvanizing metal made from hazardous secondary materials that 
were reclaimed contains 500 parts per million (ppm) of lead, while the 
same zinc product made from raw materials typically contains 475 ppm, 
this difference in concentration would likely not be considered 
``significant'' in the evaluation of this factor. If, on the other 
hand, the lead levels in the zinc product made from reclaimed hazardous 
secondary materials were 1,000 ppm, it may indicate that the product 
was being used to illegally dispose of lead and that the activity is 
sham recycling, unless other factors would demonstrate otherwise.
    In another example, if a ``virgin'' solvent contains no detectable 
amounts of barium, while spent solvent that has been reclaimed contains 
a minimal amount of barium (e.g., 1 ppm), this difference might not be 
considered significant. If, however, the barium in the reclaimed 
solvent were at much higher levels (such as 50 ppm), it may indicate 
discard of the barium and sham recycling.
    Unfortunately, because of the variety of possible recycling 
scenarios under the exclusions and in the non-waste determinations 
covered by this final rule, we cannot provide examples for how this 
factor might work for all possible recycling situations. The Agency 
stresses that the determination of legitimacy for this factor should 
consider both the use and the users of the product in addition to the 
concentration of the hazardous constituents or the presence of a 
hazardous characteristic, as well as other relevant information. In 
addition, in some cases, the implementing agency may accept a risk 
argument from a recycler to show that the recycling activity meets this 
factor. If the recycler can show that despite elevated concentrations 
of hazardous constituents, such constituents pose little or no risk to 
human health or the environment, the implementing agency may consider 
that as evidence that the elevated concentrations are not significant. 
How consideration of economics applies to legitimacy. Consideration of 
economics has long been a part of the Agency's concept of legitimacy, 
as is evident in the Lowrance Memo and earlier preamble text (50 FR 
638, January 4, 1985 and 53 FR 522, January 8, 1988; see also American 
Petroleum Institute v. EPA (``API II''), 216 F.3d 50, 57-58 (DC Cir. 
2000)). This final rule does not codify specific regulatory language on 
economics as part of the legitimacy provision, but EPA offers further 
guidance and clarification on how economics may be considered in making 
legitimacy determinations, which is similar to the preamble discussion 
in the March 2007 supplemental proposal.
    Specifically, EPA believes that consideration of the economics of a 
recycling activity can be used to inform and help determine whether the 
recycling operation is legitimate. Positive economic factors would be a 
strong indication of legitimate recycling, whereas negative economic 
factors would be an indication that further evaluation of the recycling 
operation may be warranted in assessing the legitimacy factors.
    Considering the economics of a recycling activity can also inform 
whether the hazardous secondary material inputs provide a useful 
contribution and whether the product of recycling is of value. Economic 
information that may be useful could include (1) the amount paid or 
revenue generated by the recycler for recycling hazardous secondary 
materials; (2) the revenue generated from the sale of recycled 
products; (3) the future cost of processing existing inventories of 
hazardous secondary materials; and (4) other costs and revenues 
associated with the recycling operation. The economics of the recycling 
transaction may be more of an issue when hazardous secondary materials 
are sent to a third-party recycler, but even when the hazardous 
secondary materials are recycled under the control of the generator, 
the generator must still show that the hazardous secondary materials 
are, at a minimum, providing a useful contribution and producing a 
valuable product.
Useful Economic Information
    (1) The amount paid or revenue generated by the recycler for 
recycling hazardous secondary materials is one example of how economic 
information can help support a legitimacy determination. We have three 
primary illustrations to exemplify this. First, the basic economic 
flows can suggest whether the recycling operation will process inputs, 
including hazardous secondary materials, and produce products over a 
reasonable period of time, recognizing that there will be lean and slow 
times. A general accounting of the major costs, revenues, and economic 
flows for a recycling operation over a reasonable period of time can 
provide information for considering whether recycling is likely to 
continue at a reasonable rate, compared to the rate at which inputs are 
received, or whether it is likely that significant amounts of hazardous 
secondary materials would be accumulated and then abandoned when the 
facility closes. Any bona fide sources of revenues would be included in 
this consideration, such as payments by generators to recyclers for 
accepting hazardous secondary materials and subsidies supporting 
recycling. However, in order to have some level of confidence that 
beneficial products are or will be produced over a reasonable 
timeframe, we believe that at least some portion of the revenues should 
be from product sales (or savings due to avoided purchases of products 
if the hazardous secondary materials are used directly by the 
recycler). This is consistent with the factor requiring that the 
hazardous secondary material must be recycled to make a valuable 
product or intermediate.
    Two scenarios illustrate this first example: A recycling operation 
that generates revenues from the sale of recycled products that greatly 
exceed the costs of the operation is an indication of a process that 
turns the hazardous secondary materials into useful products, and is 
unlikely to over accumulate them. A very different example is an 
operation that has, relative to its revenues, large inventories of 
unsold product and large future liabilities in terms of stocks of

[[Page 64707]]

unprocessed hazardous secondary materials. This operation could 
potentially fail the ``useful contribution'' and ``produces a valuable 
product or intermediate'' legitimacy factors, and would draw closer 
attention to determine whether it is engaged in treatment and/or 
abandonment in the guise of recycling.
    Second, when the economics of a recycling operation that uses 
hazardous secondary materials to produce and sell final products are 
similar to a manufacturing operation using raw materials to produce and 
sell final products, we believe that such an operation is likely to be 
legitimate. For instance, if the recycler pays for hazardous secondary 
materials as a manufacturer would pay for raw materials, the recycler 
sells products from the recycling process as a manufacturer would sell 
products from manufacturing, and the revenues generated equal or exceed 
costs, then the hazardous secondary materials appear to be valuable 
(i.e., the recycler is willing to pay for them) and appear to make a 
useful contribution to a valuable recycled product.
    However, we also recognize that the economics of many legitimate 
recycling operations that utilize hazardous secondary materials differ 
from the economics of more traditional manufacturing operations. For 
example, many recyclers are paid by generators to accept hazardous 
secondary materials. Generators may be willing to pay recyclers because 
generators can save money if the recycling is less expensive than 
disposing of the hazardous secondary materials in landfills or 
incinerators. Also, some recyclers receive subsidies that may be 
designed to develop recycling infrastructure and markets or to achieve 
other benefits of recycling. For instance, the recycling of electronic 
materials can be legitimate even when the recycler is subsidized for 
processing the material.
    Third, any analysis of the economics of a recycling operation 
should recognize that a recycler may be able to charge generators and 
still be a legitimate recycling operation. Because these hazardous 
secondary materials are hazardous wastes if disposed of, typically the 
generators' other alternative management option already carries a cost 
that is based on the existing market for hazardous waste 
transportation, treatment, and disposal. Hence, unless there is strong 
competition in recycling markets or the hazardous secondary materials 
are extremely valuable, a recycler may be able to charge generators 
simply because alternative disposal options cost more.
    Recognizing that such a dynamic exists can assist those making 
legitimacy determinations in evaluating recycling operations. For 
example, if a recycler is charging generators fees (or receiving 
subsidies from elsewhere) for taking hazardous secondary materials and 
receives a far greater proportion of its revenue from acceptance of the 
fees than from the sale of its products, both the useful contribution 
and the valuable product factors may warrant further review, unless 
other information would indicate that such recycling is legitimate. 
Fees and subsidies may indicate that the economic situation allows the 
recycler to charge high fees, regardless of the contribution provided 
by the inputs, including hazardous secondary materials. In this 
situation, recyclers may also have an increased economic incentive to 
over-accumulate or overuse hazardous secondary materials or to manage 
them less carefully than one might manage more valuable inputs. 
Additionally, if there is little competition in the recycling market, 
and/or if acceptance fees seem to be set largely to compete with the 
relative costs of alternative disposal options rather than to reflect 
the quality or usefulness of the input to the recycling operation, this 
may also suggest a closer look at the useful contribution factor.
    (2) A comparison of revenue from sales of recycled products to 
payments by generators is another example of how economic information 
can help support an evaluation of ``valuable product.'' It is possible 
that product sales revenues could be dwarfed by the acceptance of fees 
because markets for particular products are highly competitive or 
because high alternative disposal costs allow for high acceptance fees. 
However, relatively low sales revenues could also require a review of 
other factors, such as whether product sales prices are lower than 
other comparable products, products are being stockpiled rather than 
sold, or very little product is being produced relative to the amount 
of inputs to the recycling operation. These indicators may suggest that 
the product of the recycling process is not valuable and, thus, sham 
recycling may be occurring.
    (3) A consideration of the future cost of processing or 
alternatively managing existing inventories of hazardous secondary 
material inputs is another example of how economic information can 
inform a legitimacy determination. When hazardous secondary materials 
make a significant useful contribution to the recycling process, a 
recycler will have an economic incentive to process the input materials 
relatively quickly and efficiently, rather than to maintain large 
inventories. While recyclers often need to acquire sufficient amounts 
of hazardous secondary materials to make it economically feasible to 
recycle them, there should be little economic incentive to over-
accumulate such materials that make a useful contribution. Overly large 
accumulations of input materials may indicate that the hazardous 
secondary materials are not providing a useful contribution or that the 
recycler is increasing its future costs of either processing or 
disposing of the material, and may be faced with an unsound recycling 
operation in the future. However, it is important to keep in mind that 
possible explanations for this may exist. For example, the recycler may 
have acquired a large stock of hazardous secondary materials because 
the price was unusually low or perhaps the hazardous secondary 
materials are generated episodically and the recycler has few 
opportunities to acquire them.
    (4) An analysis of costs and revenues specific to on-site recycling 
is an additional, albeit specific, example of economic information to 
consider. When recycling is conducted under the control of the 
generator, the recycler may not account formally for some of the costs 
and savings of the operation. Still, when deciding whether to undertake 
or continue the recycling operation or to utilize alternative outside 
recycling or disposal options, the on-site recycler (under the control 
of the generator) will evaluate the basic economic factors as a part of 
doing business. One such factor could be an accounting of the costs of 
virgin materials avoided by using hazardous secondary materials. 
Similarly, sales of recycled products under the control of the 
generator that are sold to an external market may support the valuable 
product criterion.
3. Legitimacy Policy for Other Exclusions and Exemptions
    EPA is codifying a legitimacy provision in this final rule as part 
of the final exclusions and non-waste determinations, but stresses that 
EPA retains its long-standing policy that all recycling of hazardous 
secondary materials must be legitimate. If a facility is engaged in 
sham recycling, this, by definition, is not real recycling and that 
material is being discarded. The legitimacy policy continues to apply 
to all hazardous secondary materials that are excluded or exempted from 
Subtitle C regulation because they are recycled and to recyclable 
hazardous wastes that remain subject to the hazardous waste 
regulations. This policy is well-

[[Page 64708]]

understood throughout the regulated community and among the state 
implementing agencies.
    EPA believes that the four legitimacy factors being codified in 40 
CFR 260.43 are substantively the same as the existing legitimacy 
policy. These factors are a simplification and clarification of the 
policy statements in the 1989 Lowrance Memo and in various Definition 
of Solid Waste Federal Register notices.
    Nonetheless, to avoid confusion among the regulated community and 
state and other implementing regulatory agencies about the status of 
recycling under the existing exclusions, the Agency has decided not to 
codify the legitimacy factors for existing exclusions and, thus, states 
and other implementing agencies will continue to apply the existing 
legitimacy policy to all recycling as they have in the past in order to 
ensure that recycling is real and not a sham. The legitimacy provisions 
of the final rule are codified only for the exclusions and non-waste 
determinations being promulgated today. In developing the codified 
legitimacy language, we did not intend to raise questions about the 
status of legitimacy determinations that underlie existing exclusions 
from the definition of solid waste, or about case-specific 
determinations that have been made by EPA or the states. Current 
exclusions and other prior solid waste determinations or variances, 
including determinations made in letters of interpretation and 
inspection reports, remain in effect.
    A number of commenters raised concerns with the application of the 
codified legitimacy factors to these existing waste-specific and 
industry-specific exclusions. In particular, as we noted in the October 
2003 proposal, EPA has examined in depth a number of waste-specific and 
industry-specific recycling activities and has promulgated specific 
regulatory exclusions or provisions that address the legitimacy of 
these practices in much more specific terms than the general factors 
being finalized as part of the exclusions and non-waste determination 
process today. One example is the regulation for zinc fertilizers made 
from recycled hazardous secondary materials. In the zinc fertilizer 
regulation, among the requirements established by EPA are specific 
numerical limits on five heavy metal contaminants and dioxins in the 
zinc fertilizer product exclusion at 40 CFR 261.4(a)(21). Other 
examples are shredded circuit boards excluded under 40 CFR 
261.4(a)(14), which must be free of mercury switches, mercury relays 
and nickel-cadmium and lithium batteries, and comparable fuels excluded 
under 40 CFR 261.4(a)(16), which must meet specific levels for 
hazardous constituents. The conditions developed for the recycling 
exclusions in Sec.  261.4(a) were found to be necessary under material-
specific rulemakings that determined when the particular hazardous 
secondary material in question is not a solid waste. When EPA 
originally made the decision that these materials are not solid waste, 
the Agency took into account the relevant factors about the hazardous 
secondary materials, including how the material was managed and what 
toxic chemicals were present. By limiting the codified legitimacy 
provision to the exclusions and non-waste determinations in today's 
final rule, EPA is avoiding any implication that we are revisiting 
these determinations.
    However, at the same time, these material-specific exclusions from 
the definition of solid waste do not negate the basic requirement that 
the hazardous secondary material must be ``legitimately'' recycled. 
Recycling that is not legitimate is not recycling at all, but rather 
``sham recycling''--discard in the guise of recycling.
    For example, under EPA's historic guidance, particularly questions 
(1) and (3) in OSWER Directive 9441.1989(19), the ``Lowrance Memo,'' a 
facility could not plausibly claim the zinc fertilizer product 
exclusion at 40 CFR 261.4(a)(21) for a hazardous secondary material 
that contained absolutely no or minimal levels of zinc, even if all the 
conditions of the zinc fertilizer exclusion were met. The exclusion was 
developed to encourage legitimate recycling of zinc-containing 
hazardous secondary materials, not to allow any hazardous waste to be 
discarded to purported fertilizer in the name of recycling when the 
hazardous secondary material provided no recognizable benefit to the 
product.
    Similarly, if a facility accepted zinc-containing hazardous waste, 
claiming to make zinc fertilizer, but failed to produce a product that 
was actually sold or was otherwise valuable, such a process would not 
be legitimate recycling (under question (4) of the Lowrance Memo in the 
historic legitimacy guidance), even if the management conditions or the 
constituent levels in the zinc fertilizer exclusion were met. The 
consequences of the latter example are illustrated in one of the damage 
cases in the environmental problems study. A facility whose primary 
business was mixing electric arc furnace dust (K061) with agricultural 
lime for sale as a micronutrient lost its customers and could not sell 
its product. However, the facility continued to accept EPA Hazardous 
Waste K061, and, in approximately seven months, the facility had 
accepted over 60,000 tons of this hazardous waste and stored it on the 
ground in piles up to 30 feet high, with no prospect of it being used 
to produce a product and, thus, legitimately recycled. While the 
initial recycling of the K061 hazardous waste was legitimate, when the 
facility failed to produce a product that was actually sold, the K061 
could no longer be considered legitimately recycled.
    In summary, all hazardous secondary materials recycling and 
hazardous waste recycling, whether such recycling remains under 
hazardous waste regulations or is excluded from the definition of solid 
waste, must be legitimate. This has been our long-standing policy and 
it is well understood throughout the regulated community and the 
implementing state regulatory agencies. In order to be clear that the 
legitimacy provision codified at 40 CFR 260.43 under today's final rule 
would not affect how the current legitimacy policy applies to recycling 
under existing exclusions, the legitimacy provision at 40 CFR 260.43 is 
explicitly designated as applying only to the exclusions and non-waste 
determinations being finalized in today's rule.
    EPA also maintains that the legitimacy provision being finalized as 
part of the exclusions and non-waste determinations is substantively 
the same as existing policy because we developed the legitimacy factors 
in 40 CFR 260.43 by closely examining the questions and sub-questions 
in the Lowrance Memo and in the Federal Register preambles and 
converting them into four more direct questions. The following 
explanations show how each of the four factors is derived from the 
Lowrance Memo and other existing policy statements.
Factor 1--The Hazardous Secondary Material Provides a Useful 
Contribution
Relevant Lowrance Memo Questions
(1) Is the secondary material similar to an analogous raw material or 
product?
    Is much more of the secondary material used as compared with the 
analogous raw material/product it replaces? Is only a nominal amount of 
it used?
    Is the secondary material as effective as the raw material or 
product is replaces?

[[Page 64709]]

(3) What is the value of the secondary material?
    Is it listed in industry news letters, trade journals, etc.?
    Does the secondary material have economic value comparable to the 
raw material that normally enters the process?
Discussion
    The factor addressing ``useful contribution'' has been distilled 
from and clarifies concepts in the Agency's existing policy for 
legitimate recycling. For example, the preamble to the January 4, 1985, 
recycling regulations noted that if a hazardous secondary material is 
``ineffective or only marginally effective for the claimed use, the 
activity is not recycling but surrogate disposal.'' Similarly, the 
January 8, 1988, proposed rule discussed ``how much energy or material 
value each waste contributes to the recycling purpose.''
    In the 1989 Lowrance Memo, the issue of effectiveness was addressed 
by the following questions: ``Is much more of the secondary material 
used as compared with the analogous raw material/product it 
replaces?''; ``Is only a nominal amount used?''; and ``Is the secondary 
material as effective as the raw material or product it replaces?'' The 
memo also addressed the value of the secondary material by asking, ``Is 
[the secondary material] listed in industry news letters, trade 
journals, etc.?'' and ``Does the secondary material have economic value 
comparable to the raw material that normally enters the process?''
    Factor 1 takes these broad concepts of effectiveness and value and 
turns them into the requirement that the hazardous secondary material 
in the process must provide a ``useful contribution'' to the recycling 
process, that is, it must actually be adding something to the process 
into which they are being put. The factor provides more specifics than 
the Memo or preamble by providing a list of ways that a hazardous 
secondary material could provide that useful contribution to the 
process. EPA requested comment on other ways in which a hazardous 
secondary material might provide a useful contribution, but did not 
receive any from commenters.
Factor 2--The Recycling Process Produces a Valuable Product or 
Intermediate
Relevant Lowrance Memo Questions
(4) Is there a guaranteed market for the end product?
    Is there a contract in place to purchase the ``product'' ostensibly 
produced from the hazardous secondary materials?
    If the type of recycling is reclamation, is the product used by the 
reclaimer? The generator? Is there a batch tolling agreement? (Note 
that since reclaimers are normally TSDFs, assuming they store before 
reclaiming, reclamation facilities present fewer possibilities of 
systemic abuse).
    Is the reclaimed product a recognized commodity?
    Are there industry-recognized quality specifications for the 
product?
Discussion
    Factor 2 distills several of the questions posed by the 1989 
legitimacy memo. The memo addressed the value of recycled products sold 
to third parties by posing the questions, ``Is there a guaranteed 
market for the end product?'' and ``Is there a contract in place to 
purchase the ``product'' ostensibly produced from the hazardous 
secondary materials?'' The memo addressed the value of recycled 
products used by the recycler or the generator as process ingredients 
by posing the questions, ``Is the product used by the (recycler)? The 
generator? Is there a batch tolling agreement?'' The ``usefulness'' of 
a recycled material was addressed by posing the questions, ``Is the 
(recycled) product a recognized commodity?'' and ``Are there industry-
recognized quality specifications for the product?''
    The language of the factors in the legitimacy provision in the 
final rule reflects these concepts in a concrete manner by, for 
example, making it clear that the indicator of legitimacy is that a 
recycling process results in a valuable product or intermediate and 
that the product or intermediate is valuable if it is ``(i) sold to a 
third party or (ii) used by the recycler or the generator as an 
effective substitute for a commercial product or as an ingredient or 
intermediate in an industrial process.''
    The Lowrance Memo posed additional questions aimed at 
distinguishing recycling operations that involve direct use or reuse of 
secondary materials from recycling operations that involve reclamation. 
These concepts, however, are not particularly relevant to 
distinguishing legitimate from sham recycling and are not generally 
used by implementing agencies in legitimacy analyses, so we therefore 
did not attempt to capture them in the codified regulatory text.
Factor 3--Managed as a Valuable Commodity
Relevant Lowrance Memo Questions
(5) Is the secondary material handled in a manner consistent with the 
raw material/product it replaces?
    Is the secondary material stored in a similar manner as the 
analogous raw material (i.e., to prevent loss?)
    Are adequate records regarding the recycling transactions kept?
    Do the companies involved have a history of mismanagement of 
hazardous wastes?
Discussion
    Although worded somewhat differently, this factor is essentially 
the same as the fifth question in the Lowrance Memo. Similarly, the 
1985 preamble asked whether recyclable hazardous secondary materials 
were ``handled in a manner consistent with their use as raw materials 
or commercial product substitutes.''
    In one respect, however, Factor 3 is less restrictive than the 
Lowrance Memo--the memo posed an additional question, ``Is the 
secondary material stored on the land?'' This could be read as implying 
that storage on the land is an indication of sham recycling. Of course, 
this question is just one of the more than two dozen questions from the 
Lowrance memo, that, when taken as a whole, help draw the distinction 
between legitimate recycling and sham recycling. Also, the Agency is 
aware of situations where storage of raw materials on the land is a 
normal part of the manufacturing process. Thus, Factor 3 does not 
identify land storage as a specific indicator of sham recycling.
Factor 4--The Product Does Not Contain Significant TARs
Relevant Lowrance Memo Questions
(1) Is the secondary material similar to an analogous raw material or 
product?
    Does it contain Appendix VIII constituents not found in the 
analogous raw material/product (or at higher levels)?
    Does it exhibit hazardous characteristics that the analogous raw 
material/product would not?
    Does it contain levels of recoverable material similar to the 
analogous raw material/product?
(6) Other Relevant Factors
    Are the toxic constituents actually necessary (or of sufficient 
use) to the product or are they just ``along for the ride''?

[[Page 64710]]

Discussion
    The Lowrance Memo and the definition of solid waste preamble 
statements from which it was developed have addressed the question of 
``toxics along for the ride'' in a slightly different way than the 
factor in the final rule. The Lowrance Memo, for example, allows for 
examination of toxic constituents in the hazardous secondary material 
destined for recycling and/or in the recycled product. As noted above, 
Factor 4 is intended to primarily address the question of ``toxics 
along for the ride'' in the products of recycling. We believe that the 
presence of toxic constituents in recyclable hazardous secondary 
materials is less relevant to assessing the legitimacy of recycling, 
primarily because much if not most recycling (as well as manufacturing) 
involves removing or destroying such harmful materials. As reflected in 
the factor, the central question is whether or not (and in what amount) 
hazardous constituents pass through the recycling process and become 
incorporated into the products of recycling. While some may argue that 
the approach of focusing on toxic constituents in recycled products may 
be somewhat less restrictive than the policy it would replace, we 
believe it is a better indicator of legitimate recycling. In cases 
where a recycler would prefer to compare the virgin feedstock to the 
hazardous secondary material going into the process, the rule makes it 
clear that this would be an adequate stand-in for the comparison 
described in the regulatory text.
Lowrance Memo Questions Not Covered in Factors
    A few of the questions from the Lowrance Memo are not covered by 
the factors in the regulatory text for the legitimacy provision in 
Sec.  260.43. The above discussions address why EPA believes this is 
appropriate. In the case of the role economics can play in a legitimacy 
determination, this preamble has discussed how it can inform an overall 
legitimacy determination, but there is no particular factor on 
economics.
Relevant Lowrance Memo Questions
(2) What degree of processing is required to produce a finished 
product?
    Can the secondary material be fed directly into the process (i.e., 
direct use) or is reclamation (or pretreatment) required?
    How much value does final reclamation add?
    Is the secondary material stored on the land? (a sub-question of 
(5) Is the secondary material handled in a manner consistent with the 
raw material/ product it replaces?)
(6) Other Relevant Factors
    What are the economics of the recycling process? Does most of the 
revenue come from charging generators for managing their wastes or from 
the sale of the product?
    For the reasons outlined above, EPA believes that the legitimacy 
factors in 260.43 are equivalent to the existing legitimacy policy that 
applies to all recycling.

X. Non-Waste Determination Process

A. What Is the Purpose of This Provision?

    The purpose of the non-waste determination process is to provide 
persons with an administrative procedure for receiving a formal 
determination that their hazardous secondary materials are not 
discarded and, therefore, are not solid wastes when recycled. This 
process is available in addition to the solid waste exclusions in 
today's rule. Once a non-waste determination has been granted, the 
hazardous secondary material is not subject to the limitations and 
conditions discussed elsewhere in today's rule (e.g., prohibition on 
speculative accumulation, storage standard, or, for the transfer-based 
exclusion, recordkeeping, reasonable efforts, financial assurance, and 
export notice and consent); however, the regulatory authority may 
specify that a hazardous secondary material meet certain conditions and 
limitations as part of the non-waste determination.
    The non-waste determination process is voluntary. Facilities may 
choose to continue to use the self-implementing portions of any 
applicable waste exclusions and, for the vast majority of cases, where 
the regulatory status of the hazardous secondary material is evident, 
self-implementation will still be the most appropriate approach. In 
addition, facilities may continue to contact EPA or the authorized 
state to ask for informal assistance in making these types of non-waste 
determinations. However, for cases where there is ambiguity about 
whether a hazardous secondary material is a solid waste, today's formal 
process can provide regulatory certainty for both the facility and the 
implementing agency.
    EPA is finalizing two types of non-waste determinations: \12\ (1) A 
determination for hazardous secondary materials reclaimed in a 
continuous industrial process; and (2) a determination for hazardous 
secondary materials indistinguishable in all relevant aspects from a 
product or intermediate. The process for applying for a non-waste 
determination is found at 40 CFR 260.34.
---------------------------------------------------------------------------

    \12\ In the March 2007 supplemental proposal, EPA also proposed 
(but is not finalizing) a third type of non-waste determination for 
hazardous secondary materials reclaimed under the control of the 
generator via a tolling arrangement or similar contractual 
arrangement. EPA, however, did not identify any comments that 
described specific types of contractual arrangements that would meet 
the proposed criteria for this non-waste determination. See section 
XIX for more information.
---------------------------------------------------------------------------

    The Agency confirms today's process for non-waste determinations is 
not intended to affect any existing exclusion under 40 CFR 261.4. The 
process is also not intended to affect any variance already granted 
under 40 CFR 260.30 or other EPA or authorized state determination. In 
other words, generators or reclaimers operating under an existing 
exclusion, variance, or other EPA, or authorized state, determination 
do not need to apply for a formal non-waste determination under today's 
rule. This process also does not affect the authority of EPA or an 
authorized state to revisit past determinations according to 
appropriate procedures, if they so choose.

B. Scope and Applicability

    Hazardous secondary materials presented for a non-waste 
determination must be legitimately recycled and, therefore, must meet 
the legitimacy factors under 40 CFR 260.43 of today's rule. For further 
discussion of legitimacy and the factors to be considered, see section 
IX of today's preamble.
    In addition, today's rule limits non-waste determinations to 
reclamation activities and does not apply to recycling of ``inherently 
waste-like'' materials (40 CFR 261.2(d)); recycling of materials that 
are ``used in a manner constituting disposal,'' or ``used to produce 
products that are applied to or placed on the land'' (40 CFR 
261.2(c)(1)); or for ``burning of materials for energy recovery'' or 
materials ``used to produce a fuel or otherwise contained in fuels'' 
(40 CFR 261.2(c)(2)). Today's rule does not affect how these recycling 
practices are regulated.

C. Types of Non-Waste Determinations

1. Non-Waste Determination for Hazardous Secondary Materials Reclaimed 
in a Continuous Industrial Process
    As discussed earlier in today's preamble, previous court decisions 
have indicated that hazardous secondary

[[Page 64711]]

materials that are reclaimed in a continuous industrial process are not 
discarded and, therefore, not a solid waste. EPA believes, in most 
instances, hazardous secondary materials reclaimed in a continuous 
process would be excluded under today's self-implementing exclusions. 
However, production processes can vary widely from industry to industry 
and it is possible that the regulatory status of certain materials may 
be unclear under a self-implementing exclusion (including those 
exclusions finalized today). Thus, to determine whether individual 
hazardous secondary materials are reclaimed in a continuous industrial 
process, and, therefore, not a solid waste, EPA has developed the non-
waste determination process to evaluate case-specific fact patterns.
    EPA is finalizing four criteria for making the non-waste 
determination for hazardous secondary materials reclaimed in a 
continuous industrial process. The first is the extent that the 
management of the hazardous secondary material is part of the 
continuous production process and is not waste treatment. At one end of 
the spectrum, if the hazardous secondary material is handled in a 
manner identical to virgin feedstock, then it would appear to be fully 
integrated into the production process. At the other end of the 
spectrum, hazardous secondary materials that are indisputably discarded 
prior to being reclaimed are not a part of the continuous primary 
production process, (``AMC II''), 907 F. 2d 1179 (DC Cir. 1990) (listed 
wastes managed in units that are part of wastewater treatment units are 
discarded materials (and solid wastes), especially where it is not 
clear that the industry actually reuses the materials). For cases that 
lie within the spectrum, persons applying for a non-waste determination 
need to provide sufficient information about the production process to 
demonstrate that the management of the hazardous secondary material is 
an integral part of the production process and is not waste treatment. 
It is important to note that this non-waste determination is not 
necessarily limited to cases under the control of the generator. For 
example, hazardous secondary materials that are hard piped from one 
facility to another facility that is under separate control would 
appear to be fully integrated into the production process and may 
therefore be eligible for this non-waste determination, provided the 
other criteria are met.
    The second criterion examined under this non-waste determination is 
the capacity of the production process to use the hazardous secondary 
material in a reasonable time frame and ensure that it will not be 
abandoned. This criterion can be satisfied by a consideration of past 
practices, market factors, the nature of the hazardous secondary 
material, or any contractual arrangements. Abandonment of stockpiled 
hazardous secondary materials is one way that discard can occur at 
recycling operations and is one of the major causes of environmental 
problems. As indicated in the recycling studies, 69 of the 208 
incidents of environmental damage involve abandonment of the hazardous 
secondary materials as the primary cause of damage. For today's self-
implementing exclusions for hazardous secondary materials, EPA is using 
speculative accumulation (as defined in 40 CFR 261.1(c)(8)) as the 
method for determining when a hazardous secondary material is discarded 
by abandonment. For the non-waste determination, a person does not need 
to demonstrate that the hazardous secondary material meets the 
speculative accumulation limits per 40 CFR 261.1(c)(8), but he must 
provide sufficient information about the hazardous secondary material 
and the process to demonstrate that the hazardous secondary material 
will in fact be reclaimed in a reasonable time frame and will not be 
abandoned. EPA is not explicitly defining ``reasonable time frame'' 
because such time frames could vary according to the hazardous 
secondary material and industry involved and, therefore, determining 
this time frame should be made on a case-specific basis. However, a 
person may still choose to use the speculative accumulation time frame 
as a default.
    The third criterion for this non-waste determination is whether the 
hazardous constituents in the hazardous secondary material are 
reclaimed rather than released to the air, land, or water at 
significantly higher concentrations from either a statistical or from a 
health and environmental risk perspective than would otherwise be 
released by the production process. To the extent that the hazardous 
constituents are an extension of the original hazardous secondary 
material, their release to the environment is an indicator of discard. 
The Agency recognizes that normal production processes may also result 
in a certain level of releases and, in evaluating this criteria, would 
not deny a non-waste determination if the increase in releases is not 
significantly different from either a statistical or risk perspective. 
However, when unacceptably high levels of the hazardous constituents in 
the hazardous secondary material are released to the environment rather 
than reclaimed, then that material (or at least the portion of the 
material that is of most concern) is not in fact being ``reclaimed in a 
continuous industrial process.''
    The fourth and final criterion for this non-waste determination 
includes any other relevant factors that demonstrate the hazardous 
secondary material is not discarded. This catch-all criterion is 
intended to allow the person to provide any case-specific information 
deemed important and relevant in making the case that the hazardous 
secondary material is not discarded and, therefore, not a solid waste.
2. Non-Waste Determination for Hazardous Secondary Materials 
Indistinguishable in All Relevant Aspects From a Product or 
Intermediate
    Although the courts have indicated that hazardous secondary 
materials recycled within a continuous industrial process are not 
discarded and, therefore, are not solid wastes, they have also said 
that hazardous secondary materials destined for recycling in another 
industry are not automatically discarded. However, there may be some 
situations where the regulatory status of a certain material is unclear 
under a self-implementing exclusion and thus may benefit from a non-
waste determination that evaluates case-specific fact patterns. EPA is 
finalizing five criteria for making a non-waste determination for 
hazardous secondary materials indistinguishable in all relevant aspects 
from a product or intermediate.
    The first criterion for this non-waste determination is 
consideration of likely markets for the hazardous secondary material 
(e.g., based on the current positive value of the hazardous secondary 
material, stability of demand, and any contractual arrangements). This 
evaluation of market participation is a key element for determining 
whether companies view these hazardous secondary materials like 
products rather than negatively-valued wastes. EPA's market forces 
study on how market incentives affect the management of hazardous 
secondary materials indicates that both high value and stable markets 
are strong incentives to refrain from over-accumulating hazardous 
secondary materials, thus maximizing the likelihood that the hazardous 
secondary materials will be reclaimed and not abandoned.
    The second criterion for this non-waste determination is the 
chemical and physical identity of the hazardous secondary material and 
whether it is comparable to commercial products or

[[Page 64712]]

intermediates. This ``identity principle'' is a second key factor that 
the Court in Safe Foods found useful in determining whether a material 
is indistinguishable from a product. It is important to note that the 
identity of a material can be comparable to a product without being 
identical. However, to qualify for a non-waste determination, any 
differences between the hazardous secondary material in question and 
commercial products or intermediates should not be significant from 
either a statistical or from a health and environmental risk 
perspective.
    The third criterion for making this non-waste determination is the 
capacity of the market to use the hazardous secondary material in a 
reasonable time frame and ensure that it will not be abandoned. 
Abandonment of stockpiled hazardous secondary materials is one way that 
discard can occur at recycling operations and is one of the major 
causes of environmental problems (a key finding from the recycling 
studies discussed earlier). For today's self-implementing exclusions 
for hazardous secondary materials, EPA is using speculative 
accumulation (as defined in 40 CFR 261.1(c)(8)) as the method for 
determining when a hazardous secondary material is discarded by 
abandonment. For the non-waste determination, a person does not need to 
demonstrate that the hazardous secondary material meets the speculative 
accumulation limits per 40 CFR 261.1(c)(8), but he must provide 
sufficient information about the hazardous secondary material and the 
market demand for it to demonstrate that the hazardous secondary 
material will in fact be reclaimed in a reasonable time frame and will 
not be abandoned. EPA is not explicitly defining ``reasonable time 
frame'' because such time frames could vary according to the hazardous 
secondary material and industry involved, and therefore determining 
this time frame should be made on a case-specific basis. However, a 
person may still choose to use the speculative accumulation time frame 
as a default.
    The fourth criterion for this non-waste determination is whether 
the hazardous constituents in the hazardous secondary materials are 
reclaimed rather than released to the air, land, or water at 
significantly higher concentrations from either a statistical or from a 
health and environmental risk perspective than would otherwise be 
released by the production process. The Agency believes that to the 
extent that the hazardous constituents are an extension of the original 
hazardous secondary material, their release to the environment is a 
possible indicator of discard. The Agency recognizes that normal 
production processes also result in a certain level of releases and, in 
evaluating this criteria, would not deny a non-waste determination if 
the increase in releases is not significant from either a statistical 
or a health and environmental risk perspective. However, when 
unacceptably high levels of the hazardous constituents in the hazardous 
secondary material are released to the environment rather than 
reclaimed, then that material (or at least the portion of the hazardous 
secondary material that is of most concern) is not being handled as a 
commercial product or intermediate.
    As with the non-waste determination for hazardous secondary 
materials reclaimed in a continuous industrial process, the fifth and 
final criterion for this non-waste determination includes any other 
relevant factors that demonstrate the hazardous secondary material is 
not discarded. This catch-all criterion is intended to allow the person 
to provide any case-specific information it deems important and 
relevant in making the case that its hazardous secondary material is 
not discarded.

D. Non-Waste Determination Process

    The process for the non-waste determination is the same as that for 
the solid waste variances found in 40 CFR 260.30. In order to obtain a 
non-waste determination, a facility that manages hazardous secondary 
materials that would otherwise be regulated under 40 CFR part 261 as 
either a solid waste or an excluded waste must apply to the 
Administrator or the authorized state per the procedures described in 
40 CFR 260.33, which EPA is amending today to apply to non-waste 
determinations. The application must address the relevant criteria 
discussed in detail above. The Administrator will evaluate the 
submission and issue a draft notice tentatively granting or denying the 
application. Notification of this tentative decision will be provided 
by newspaper advertisement or radio broadcast in the locality where the 
facility is located. The Administrator will accept comment on the 
tentative decision for 30 days, and may also hold a public hearing. The 
Administrator will issue a final decision after receipt of comments and 
after the hearing (if held). If the application is denied, the facility 
may still pursue a solid waste variance or exclusion (for example, one 
of the solid waste variances under 40 CFR 260.30 or solid waste 
exclusions under 40 CFR 261.4).
    After a formal non-waste determination has been granted, if a 
change occurs that affects how a hazardous secondary material meets the 
relevant criteria contained in 40 CFR 260.34, persons must re-apply to 
the Administrator for a formal determination that the hazardous 
secondary material continues to meet the relevant criteria and is not 
discarded and not a solid waste.
    As discussed in more detail in section XX of today's preamble, 
under section 3006 of RCRA, EPA would authorize states to administer 
the non-waste determinations as part of their base RCRA program. 
Because states are not required to implement federal requirements that 
are less stringent or narrower in scope than the current requirements, 
authorized states are not required to adopt the non-waste determination 
process. Ordinarily this provision could not go into effect in an 
authorized state until the state chooses to adopt it. However, because 
the non-waste determination process is a formalization of 
determinations that states may already perform, states that have not 
formally adopted this non-waste determination process may participate 
if the following conditions are met: (1) The state determines that the 
hazardous secondary material meets the criteria in either paragraph (b) 
or (c) of 40 CFR 260.34; (2) the state requests EPA to review its 
determination; and (3) EPA approves the state determination. In 
addition, of course, states may continue to make regulatory 
determinations under their authorized state regulations, as they do 
now.

E. Enforcement

    If a regulatory authority determines that a hazardous secondary 
material is not a solid waste through the non-waste determination 
process, the hazardous secondary material is not subject to the RCRA 
Subtitle C hazardous waste requirements. However, as part of this 
process, the applicant has an obligation to submit, to the best of his 
ability, complete and accurate information. If the information in the 
application is found to be incomplete or inaccurate and, as a result, 
the hazardous secondary material does not meet the criteria for a non-
waste determination, then the material may be subject to the RCRA 
Subtitle C requirements and EPA or the authorized state could choose to 
bring an enforcement action under RCRA section 3008(a). Moreover, if 
the person submitting the non-waste determination is found to have 
knowingly submitted false information, then he also may be subject to 
criminal penalties under RCRA section 3008(d).
    Once a non-waste determination has been granted, the applicant is 
obligated

[[Page 64713]]

to ensure the hazardous secondary material continues to meet the 
criteria of the non-waste determination, including any conditions 
specified therein by the regulatory authority. If a change occurs that 
affects how a hazardous secondary material meets the relevant criteria 
and (if applicable) any conditions as specified by the regulatory 
authority and the applicant fails to re-apply to the Administrator for 
a formal determination, the hazardous secondary material may be 
determined to be a solid and hazardous waste and subject to the RCRA 
Subtitle C hazardous waste requirements.

XI. Effect on Other Exclusions

    The final rule will not supersede any of the current exclusions or 
other prior solid waste determinations or variances, including 
determinations made in letters of interpretation and inspection 
reports. If a hazardous secondary material has been determined not to 
be a solid waste, for whatever reason, such a determination will remain 
in effect, unless the regulatory agency decides to revisit the 
regulatory determination under their current authority. In addition, if 
a hazardous secondary material has been excluded from hazardous waste 
regulations--for example, under the Bevill exclusion in 40 CFR 
261.4(b)(7)--the regulatory status of that material will not be 
affected by today's rule.
    In the October 2003 proposal, EPA proposed a number of specific 
``conforming changes'' to existing exclusions (68 FR 61578-61580). The 
purpose of these conforming changes was to simplify and clarify the 
regulations. EPA did not intend to make any substantive changes as to 
how currently excluded materials would need to be managed or regulated. 
However, comments to the proposed changes were overwhelming in favor of 
retaining the existing exclusions. These existing exclusions are 
familiar to both the states and the regulated community, and making 
wholesale adjustments, it appears, would have had unintended 
consequences in many cases.
    Thus, in the March 2007 supplemental proposal, we proposed to 
retain the existing exclusions exactly as written (72 FR 14205). In 
addition, recycling of such hazardous secondary materials at new 
facilities, or at existing facilities that are not currently operating 
under the terms of an existing exclusion, would also be subject to the 
existing applicable regulatory exclusions, rather than the proposed 
exclusions.
    We did request comment, however, on the option of allowing a 
regulated entity to choose which exclusion it is subject to in those 
cases where more than one exclusion could apply and, if so, whether 
that entity should be required to document the choice made. One state 
supported allowing a regulated entity to choose if that entity 
documents its choice and the few comments that were submitted by 
industry on this matter, generally, preferred to have the option to 
choose which exclusion they would be subject to. EPA has determined, 
however, that the conditions that were developed for the existing 
exclusions were found to be necessary under case-specific rulemakings 
that determined when the hazardous secondary material in question is 
not a solid waste. For example, broken cathode ray tubes must be 
transported in closed containers (40 CFR 261.4(a)(22)) and shredded 
circuit boards need to be free of mercury switches and relays (40 CFR 
261.4(a)(14)).
    Therefore, the final rule requires that hazardous secondary 
materials specifically subject to the existing exclusions must continue 
to meet the existing conditions or requirements in order to be excluded 
from the definition of solid waste. Moreover, industry and the states 
are familiar with these requirements and EPA believes that changing 
them would only lead to confusion in the regulated community. In 
addition, the current exclusions would apply to facilities not 
currently operating under terms of an existing exclusion. They would 
also be subject to the conditions for that exclusion if they decide to 
recycle the particular excluded wastes in the future.
    In the March 2007 supplemental proposal, we also requested comment 
on whether any specific regulatory exclusion would need revision in 
order to avoid confusion or contradictions. With a few exceptions, 
public comments did not discuss this issue in depth. Only three states 
commented on this issue. One supported the requirement that currently-
excluded facilities must stay under their specific exclusions and two 
requested clarifications on how such a requirement would be 
implemented. Industry, in a few cases, had specific comments on the 
provisions already in place.
    One commenter asked that EPA clarify that wood preserving waste be 
allowed to be reclaimed off-site under the new exclusion. This would be 
an expansion of the existing exclusion, which is limited to on-site 
reuse. Another comment was in regards to whether hazardous secondary 
materials currently regulated under the closed-loop exclusion would be 
eligible for the new exclusions that do not require closed-loop 
operations. The third comment, from both reclaimers of spent lead-acid 
batteries and spent lead-acid battery manufacturers requested that EPA 
clarify that spent lead-acid battery recycling continue to be regulated 
under 40 CFR 266.80 or as a universal waste at 40 CFR part 273. The 
mining industry requested that EPA clarify that the proposed exclusions 
would have ``no impact'' on 40 CFR 266.70 (precious metals exclusion) 
and 40 CFR 266.100(d) and (g) (conditional exclusions from boiler and 
industrial furnace (BIF) regulations for ``smelting, melting, and 
refining furnaces'' and precious metals recovery furnaces).

A. Solid Waste Exclusions Found in 40 CFR 261.4(a)

    Under today's final rule, if a hazardous secondary material is 
subject to material-specific management conditions under 40 CFR 
261.4(a) when reclaimed, such a material is not eligible for the final 
rule exclusions. For most of the exclusions in 40 CFR 261.4(a), this 
provision will have no practical effect because the current exclusion 
either (1) has no conditions, (2) has conditions that overlap with 
those of the final rule exclusions (i.e., no speculative accumulation, 
or land disposal),\13\ (3) does not involve reclamation, or (4) 
involves hazardous secondary materials burned for energy recovery or 
used in a manner constituting disposal. These include the exclusions in 
40 CFR 261.4(a)(1)-(7), 40 CFR 261.4(a)(10)-(13), 40 CFR 261.4(a)(15)-
(16), 40 CFR 261.4(a)(18), and 40 CFR 261.4(a)(20)-(21).
---------------------------------------------------------------------------

    \13\ ``Disposal'' is defined in 40 CFR 260.10 as ``the 
discharge, deposit, injection, dumping, spilling leaking or placing 
of any solid waste or hazardous waste into or on any land or water 
so that such solid waste or hazardous waste or any constituent 
thereof may enter the environment or be emitted into the air or 
discharged into any waters, including ground waters.'' Thus a 
hazardous secondary material that is land disposed would presumably 
not meet the ``contained'' standard.
---------------------------------------------------------------------------

    The exclusions in 40 CFR 261.4(a) that are for a specific material 
and include conditions that are more specific than those included for 
the exclusions being finalized today are those for (1) spent wood 
preserving solutions (40 CFR 261.4(a)(9)), (2) shredded circuit boards 
(40 CFR 261.4(a)(14)), (3) mineral processing spent materials (40 CFR 
261.4(a)(17)), (4) spent caustic solutions from petroleum refining 
liquid treating processes (40 CFR 261.4(a)(19)), and (5) cathode ray 
tubes (40 CFR 261.4(a)(22)). For each of these cases, EPA has made a 
material-specific determination of

[[Page 64714]]

when such a material is not discarded and therefore not a solid waste 
and such a determination is more appropriately applied to these 
materials than the general conditions of today's final rule. The 
conditions of the material-specific exclusion essentially help define 
when that material is legitimately recycled and not discarded.
    However, in the case of the spent wood preserving exclusion (40 CFR 
261.4(a)(9)), EPA agrees with the comments that this exclusion is 
limited to on-site recycling. Thus, if managed on-site, these materials 
would need to comply with the existing conditions to be eligible for an 
exclusion from the definition of solid waste. However, since the 
current exclusion does not apply to hazardous secondary materials sent 
off-site, and the substance of the exclusion (i.e., drip pad 
requirements) applies to a management method not applicable to off-site 
transfers, the new exclusion in today's rule would apply to hazardous 
secondary materials that are sent off-site for reclamation. Thus, if 
sent off-site for legitimate reclamation, these materials could be 
eligible for today's exclusion if the restrictions and/or the 
conditions are met.
    Finally, the closed-loop exclusion 40 CFR 261.4(a)(8) is not 
specific to a material, but rather identifies a recycling process. EPA 
agrees with comments stating that hazardous secondary materials 
recycled via the closed-loop exclusion at 40 CFR 261.4(a)(8) could be 
recycled under a different process and still be eligible for today's 
exclusions. The closed-loop exclusion is based on the premise that 
hazardous secondary materials reclaimed in a continuous process within 
an industry are not discarded and, therefore, are not solid wastes 
subject to EPA's RCRA jurisdiction (See AMC I.) In fact, closed loop 
recycling is a subset of materials reclaimed in a continuous industrial 
process, since materials may be reclaimed in a continuous process 
outside of a closed loop system. EPA did not make a finding that any 
particular hazardous secondary material must be reclaimed in a 
continuous process. The Agency only determined that closed-loop 
recycling, in general, should be excluded. Today's exclusions, however, 
allow any hazardous secondary materials to be excluded if reclamation 
meets the restrictions and/or conditions set forth in the rules. Thus, 
a facility currently engaged in closed-loop recycling could change 
their processes and still be excluded, as long as all applicable 
restrictions and/or conditions are met.
    In addition to the solid waste exclusions currently in 40 CFR 
261.4(a), EPA is planning to propose--in a separate rulemaking from 
today's final rule--to amend its hazardous waste regulations to 
conditionally exclude from the definition of solid waste spent 
hydrotreating and hydrorefining catalysts generated in the petroleum 
refining industry when these hazardous secondary materials are 
reclaimed (see entry in the Introduction to the Fall 2007 Regulatory 
Plan, 72 FR 69940, December 10, 2007). Spent hydrotreating and 
hydrorefining catalysts generated in the petroleum refining industry 
are routinely recycled by regenerating the catalyst so that it may be 
used again as a catalyst. When regeneration is no longer possible, 
these spent catalysts are either treated and disposed of as listed 
hazardous wastes or sent to RCRA-permitted reclamation facilities, 
where metals, such as vanadium, molybdenum, cobalt, and nickel are 
reclaimed from the spent catalysts.
    EPA originally added spent hydrotreating and hydrorefining 
catalysts (waste codes K171 and K172) to the list of RCRA hazardous 
wastes found in 40 CFR 261.31 on the basis of toxicity (i.e., these 
materials were shown to pose unacceptable risk to human health and the 
environment when mismanaged) (63 FR 42110, August 6, 1998). In 
addition, EPA based its decision to list these materials as hazardous 
due to the fact that these spent catalysts can at times exhibit 
pyrophoric or self-heating properties.
    It is largely because of these pyrophoric properties that EPA is 
considering a separate proposal to conditionally exempt these catalysts 
from hazardous waste regulation. This future proposal will allow the 
agency to consider and seek comment on specific conditions to address 
the pyrophoric properties of these hazardous secondary materials, 
particularly during transportation and storage prior to reclamation, in 
order for the Agency to determine that they are not being discarded. As 
a result of this separate effort, these spent catalysts will not be 
eligible for today's exclusions. Once EPA has proposed a conditional 
exclusion specifically for these spent catalysts, and after 
consideration of public comments, EPA will either finalize a 
conditional exclusion specific to these spent catalysts or may decide 
that the conditions being promulgated in today's final rule are fully 
adequate for the management of these spent catalysts when recycled, and 
therefore would remove the restriction preventing these spent catalysts 
from being eligible for today's exclusions.

B. Spent Lead-Acid Battery Recycling and Precious Metals Reclamation

    EPA also agrees that spent lead-acid battery recycling should 
continue to be regulated under 40 CFR 266.80 or 40 CFR part 273. This 
is because these regulations are actually hazardous waste regulations 
and are not solid waste exclusions. Continuing the regulation of spent 
lead-acid battery (SLAB) recycling as hazardous waste is necessary due 
to the unique nature of these batteries. Also, as noted by the 
commenters, the current battery recycling regulations are working well. 
More than 95% of SLABs are currently recycled and generators of SLABs 
are exempt from Superfund liability under the Superfund Recycling 
Equity Act (SREA), provided that they meet the requirements of the 
exemption, including the requirement to take ``reasonable care'' to 
determine that the accepting facility is in compliance with the 
substantive environmental regulations.
    Because SREA was based on the current SLAB hazardous waste 
regulations under RCRA, changing the regulation of SLABs could have 
unintended consequences. For example, the current regulations prohibit 
battery-breaking without a permit because such battery-breaking 
operations have been high-risk activities. In addition, as noted in the 
environmental problems study, 12% of our damage cases were from 
battery-breaking operations. Moreover, the high value of the lead 
plates and low entry cost for a battery-breaking facility provides a 
strong market incentive for facilities to recycle without investing in 
adequate management systems for the discarded battery acid and casings.
    In addition, because the RCRA-regulated ``generator'' of a SLAB is 
often the garage or junkyard that removed the battery from the 
automobile (rather than the original owner who discarded the battery), 
the generator-controlled exclusion could be read to apply to these 
operations. Therefore, the reasonable efforts and financial assurance 
conditions that are a part of the transfer-based exclusion would not 
apply, despite the fact that their activities would resemble waste 
management rather than production. Because, in these cases, the SLABs 
have effectively already been discarded by the original owners before 
they enter the RCRA hazardous waste regulatory system, EPA will 
continue to regulate SLABs as solid and hazardous waste under 40 CFR 
266.80 or 40 CFR part 273.
    EPA also agrees with comments that the exclusions should have no 
impact on 40 CFR 266.70 (precious metals

[[Page 64715]]

exclusion) and 40 CFR 266.100(d) and (g) (conditional exclusions from 
the boiler and industrial furnace (BIF) regulations for ``smelting, 
melting, and refining furnaces'' and precious metals recovery 
furnaces). Because these exclusions are exclusions from certain 
hazardous waste regulations, not solid waste exclusions, as a general 
matter, EPA believes that facilities should have a choice of whether 
they manage their materials as hazardous waste under these exclusions 
or seek an exclusion from the definition of solid waste through today's 
final rule.
    However, part of what 40 CFR 266.100(d) accomplishes is to define 
when an operation involving burning is solely a metals recovery 
operation rather than a burning for energy recovery or destruction 
operation, neither of which is eligible for today's exclusions. This 
distinction is an important one to make, and EPA did not intend to 
revise how such material recovery operations were identified, nor did 
EPA ask for comment on such a revision.
    Thus, for the purpose of defining the type of burning for metals 
recovery to be allowed under these exclusions, EPA will reference the 
requirements in 40 CFR part 266 subpart H that defines when a 
``smelting, melting, and refining'' furnace is solely engaged in metals 
recovery, but will not require the other conditions that are not 
related to distinguishing legitimate materials recovery from burning. 
Therefore, under today's final rule, hazardous secondary materials 
burned for metals recovery would still be required to meet the minimum 
metals and maximum toxic organic metals content specified in 40 CFR 
part 266 (as part of the definition of this activity), and would 
continue to be exempt from BIF permits, but they would not be subject 
to hazardous waste manifests and storage permits, as long as the 
conditions of the exclusions promulgated in today's rule are met.

C. Other Recycling Exclusions

    For other hazardous secondary materials currently eligible for 
management under other exclusions or alternative regulatory structures 
that do not include an exclusion from the definition of solid waste 
(such as the universal waste regulations in 40 CFR part 273), the 
facility would have the choice of either continuing to manage the 
hazardous secondary material as a hazardous waste under the existing 
regulations or under today's exclusions from the definition of solid 
waste.
    In addition, it should be noted that, for the purposes of Sec.  
261.2(a)(2)(ii) and Sec.  261.4(a)(2)(23), when a facility collects 
hazardous secondary materials from other persons (for example, when 
mercury-containing equipment is collected through a special collection 
program), it is not the hazardous secondary material generator. 
Therefore, a universal waste handler who collects hazardous secondary 
materials from other persons would not be eligible for the generator-
controlled exclusion, even if it would be considered a ``generator'' 
for purposes of the Universal Waste regulations.

XII. Effect on Permitted and Interim Status Facilities

A. Permitted Facilities

    Facilities that currently have RCRA permits or interim status and 
manage hazardous wastes that are excluded under today's final rule will 
be affected in a number of ways, depending on the situation at the 
facility. At some facilities, some of the hazardous waste management 
units will be converted solely to manage excluded hazardous secondary 
materials, and other units may continue to manage hazardous wastes. At 
other facilities, all of the hazardous waste management units will be 
converted to manage wastes excluded under today's final rule. In still 
other cases, individual units may manage both excluded materials and 
hazardous wastes. In all cases, the owner or operator of the facility 
must comply with the applicable conditions and limitations of the 
exclusion (including the containment of the hazardous secondary 
material in units operating under the exclusion, recycling 
legitimately, and the prohibition against speculative accumulation of 
excluded hazardous secondary materials) to maintain the exclusion.
    Permitted facilities that continue to manage hazardous wastes in 
addition to managing hazardous secondary materials excluded under this 
final rule must continue to maintain their Part B permits. Individual 
units may be converted solely to manage excluded hazardous secondary 
materials; however, the permit requirements applicable to the newly 
excluded units will remain in effect until they are removed from the 
permit. Owners and operators that seek to remove permit conditions 
applicable to units that are no longer hazardous waste management units 
must submit a permit modification request to the implementing agency. 
In the March 26, 2007, supplemental proposed rule, the Agency requested 
comment on requiring owners and operators seeking to modify their 
permits to remove units that are no longer regulated to follow the 
procedures of 40 CFR 270.42(a) for Class 1 permit modifications, with 
prior Agency approval. The Agency received few comments on this issue, 
and is proceeding in this final rule with the proposed approach. Thus, 
this final rule modifies 40 CFR 270.42 by adding an entry to Appendix 1 
that classifies permit modifications to remove units that are no longer 
regulated as a result of this rule as Class 1 with prior Agency 
approval.
    As was discussed in the preamble of the March 26, 2007, 
supplemental proposal, under the Class 1 with prior Agency approval 
approach, the owner or operator must submit notification of the permit 
modification to the implementing agency, along with documentation 
demonstrating that the operations at the unit meet the conditions of 
the exclusion and that the unit is used solely to manage excluded 
hazardous secondary materials. In addition, the owner or operator must 
comply with the requirements of 40 CFR 270.42(a)(ii) for public 
notification. Under Sec.  270.42(a)(ii), the permit modification will 
not become effective until the owner or operator receives written 
approval by the implementing agency. The implementing agency will 
approve the permit modification so long as the owner or operator has 
complied with the procedural requirements of Sec.  270.42(a) and has 
demonstrated that the operations meet the conditions of the exclusion, 
and that the unit does not manage non-excluded hazardous wastes.
    One commenter disagreed with the Agency's approach, and believed 
that the Class 2 permit modification procedures were necessary to 
provide the public an opportunity to comment on the removal of the unit 
from the permit. The Agency disagrees with this commenter. The 
regulations that govern permit modification classify modifications to 
the permit term, to allow for earlier permit termination, as Class 1 
with prior Agency approval. The Agency believes that removing permit 
conditions for units that are no longer regulated is, in effect, 
allowing earlier permit termination at those units. Thus, the Agency 
believes that Class 1 with prior Agency approval is the appropriate 
designation for these permit modifications.
    In the preamble of the March 26, 2007, supplemental proposal, the 
Agency discussed the issue of whether closure requirements at formerly 
regulated units would be triggered when this rule becomes effective and 
the hazardous secondary materials they are receiving is no longer 
hazardous waste. This issue was also discussed in the October 2003 
proposal, in which EPA

[[Page 64716]]

expressed the view that requiring closure of units in these situations 
would serve little environmental purpose, since after closure the unit 
would be immediately reopened and used to store the same (now excluded) 
hazardous secondary material (68 FR 61580-61581).
    In today's final rule, a permitted unit that is converted solely to 
manage excluded hazardous secondary materials will not be subject to 
the 40 CFR part 264 closure requirements, since, typically, it will be 
managing the same material, with the only difference being that the 
material is now excluded from regulation as a hazardous waste. However, 
we expect that any funds in the closure or post-closure financial 
assurance mechanisms will be converted to provide financial assurance 
under today's exclusion, assuming the facility is operating under the 
transfer-based exclusion. In addition, as described in sections VII.D. 
and VIII.D of this preamble, at the end of the operating life of these 
units, all owners and operators (i.e., of units operating under either 
exclusion promulgated in this final rule) must manage any hazardous 
secondary materials that are not recycled, and remove or decontaminate 
all hazardous residues and contaminated containment system components, 
equipment structures, and soils.
    A permitted facility that converts to manage only hazardous 
secondary materials excluded under this final rule, and is, therefore, 
no longer a hazardous waste management facility, will no longer be 
required to maintain a hazardous waste operating permit (although, as 
discussed below, may still be subject to corrective action).\14\ 
However, permits issued to these facilities remain in effect until they 
are terminated.
---------------------------------------------------------------------------

    \14\ Again, the owner/operator of the facility must comply with 
the applicable conditions and limitations of the exclusion 
(including the containment of the hazardous secondary material in 
the unit, legitimate recycling, and the prohibition against 
speculative accumulation) to maintain the exclusion.
---------------------------------------------------------------------------

    In the March 2007 supplemental proposal, the Agency also requested 
comment on requiring owners and operators seeking to terminate their 
operating permits (as opposed to just removing units from their permit) 
by modifying the permit term to follow the procedures of 40 CFR 
270.42(a) for Class 1 permit modifications, with prior Agency approval. 
The Agency received few comments on this issue, and is proceeding in 
this final rule with the proposed approach. Thus, this final rule 
modifies Sec.  270.42 by adding an entry to Appendix 1 that classifies 
permit modifications to terminate operating permits by modifying the 
permit term, at facilities at which all units are excluded as a result 
of this final rule, as Class 1 with prior Agency approval. Under this 
approach, owners and operators seeking to terminate their operating 
permits must submit a permit modification request to the overseeing 
agency following the procedures of Sec.  270.42(a) for Class 1 
modifications with prior Agency approval, as described above.\15\
---------------------------------------------------------------------------

    \15\ The commenter discussed above who disagreed with the 
Agency's approach for permit modifications to remove units that are 
no longer regulated, also believed that Class 2 permit modification 
procedures were necessary to provide the public an opportunity to 
comment on the owner or operator's request to terminate a permit by 
modifying the permit term. The Agency disagrees with this commenter. 
As was discussed above, the regulations governing permit 
modifications classify changes to the expiration date to allow 
earlier permit termination as Class 1 with prior Agency approval.
---------------------------------------------------------------------------

    To support a request for permit termination by modifying the permit 
term, the owner or operator must demonstrate that the operations meet 
the conditions of the exclusion, and that the facility does not manage 
non-excluded hazardous wastes.
    In addition, as was explained in the October 28, 2003, proposal 
(see 68 FR 61580) and again in the March 26, 2007, supplemental 
proposal (72 FR 14206), the obligation of 40 CFR 264.101 to address 
facility-wide corrective action at permitted facilities, is not 
affected by this final rule, and remains in effect.\16\ Therefore, an 
owner or operator of a facility that manages only hazardous secondary 
materials excluded under this final rule, who seeks to terminate the 
facility's permit by modifying the permit term, must demonstrate as 
part of the permit modification request that the corrective action 
obligations at the facility have been addressed or where corrective 
action obligations remain, that continuation of the permit is not 
necessary to assure that they will be addressed. The Agency's 
corrective action authority at such facilities is not affected by this 
rulemaking and the Agency thus retains its authority to address 
corrective action at such facilities using all authorities applicable 
prior to this rulemaking.
---------------------------------------------------------------------------

    \16\ Owners and operators of permitted and interim status 
facilities with corrective action obligations should refer to the 
Agency's February 25, 2003, guidance entitled ``Final Guidance on 
Completion of Corrective Action Activities at RCRA Facilities,'' 
(see 68 FR 8757) for a detailed discussion of corrective action 
completion.
---------------------------------------------------------------------------

    At some facilities, corrective action obligations will likely 
continue to be addressed through the corrective action provisions of 
the permit. In these cases, maintenance of the permit would ensure that 
facility-wide corrective action will be addressed. Thus, in these 
cases, the permit would not be terminated by modifying the permit term, 
but would be modified to remove the provisions that applied to the now-
excluded hazardous secondary material. The facility's permit would, 
thereafter, only address corrective action.
    In other cases, however, EPA or an authorized state may have 
available an alternative federal or state enforcement mechanism or 
other federal or state cleanup authority, through which it could choose 
to address the facility's cleanup obligations, rather than continue to 
pursue corrective action under a permit. In these cases, where the 
alternate authority would ensure that facility-wide corrective action 
will be addressed, maintenance of the permit would not be necessary.

B. Interim Status Facilities

    A facility that is operating under interim status will be affected 
by this final rule in much the same way as is a permitted facility and 
the issue of corrective action will be addressed in a similar manner. 
At an interim status facility that converts to managing only hazardous 
secondary materials that become excluded under this final rule, the 
part 265 interim status standards that applied to the hazardous waste 
management units at the facility, as well as the general facility 
standards in part 265, will no longer apply. At the same time, the 
Agency's authority to address corrective action at the facility is not 
affected by this final rule, and the owner or operator retains 
responsibility for unaddressed corrective action obligations at the 
facility.

C. Releases From Excluded Units at Interim Status or Permitted 
Facilities

    Commenters on the October 28, 2003, proposal stated that one of the 
main purposes of the RCRA Subtitle C closure requirements is to 
identify and remediate any releases originating from the units. In 
response, the Agency noted in the March 26, 2007, supplemental proposal 
that releases from these units are discarded solid wastes and, 
therefore, potentially hazardous wastes, and agreed with the 
commenter's concern that such releases should be addressed. The Agency 
suggested in that preamble that the specific Subtitle C closure 
requirements may not be the most appropriate means of addressing 
cleanup of releases from these units, if any have occurred. Rather, the 
Agency suggested that a better approach to address historical releases 
from these

[[Page 64717]]

units, as well as any future releases, would be as part of corrective 
action for all releases at the facility--an approach that the Agency 
believed would achieve the same environmental results and would provide 
the owner or operator the option of integrating the cleanup more 
closely into the broader facility response.
    Some commenters on the March 26, 2007, supplemental proposal 
objected to this approach of addressing releases from units that 
previously managed hazardous wastes and, as a result of today's rule, 
would subsequently only receive hazardous secondary materials excluded 
from Subtitle C control. These commenters requested that EPA expressly 
recognize that units storing or managing hazardous secondary materials 
excluded as a result of this rule would no longer be regulated as solid 
waste management units and are not subject to RCRA's corrective action 
requirements. EPA disagrees with this approach, as we have discussed 
previously in this section and as discussed below, and continues to 
believe that the best approach to addressing releases from 
conditionally excluded units is, generally, to address them as part of 
corrective action for all releases at the facility.
    The Agency discussed the issue of its corrective action authority 
to address non-SWMU-related releases at RCRA treatment, storage, or 
disposal facilities in the May 1, 1996, Advance Notice of Proposed 
rulemaking (see 61 FR 19442-3). There, the Agency stated, ``[g]iven the 
legislative history of RCRA section 3004(u), which emphasizes that RCRA 
facilities should be adequately cleaned up, in part, to prevent the 
creation of new Superfund sites, EPA believes that corrective action 
authorities can be used to address all unacceptable risks to human 
health and the environment from RCRA facilities. In the permitting 
context, remediation of non-SWMU related releases may be required under 
the ``omnibus'' authority * * * In other contexts, orders under RCRA 
sections 3008(h) or 7003 may require remedial action to address 
releases regardless of whether a SWMU is present.''
    The Agency envisions three scenarios that might apply to units from 
which releases have occurred. The first will arise in situations where 
an owner or operator fails to comply with the applicable conditions and 
limitations of the exclusion, and the unit consequently loses its 
exemption. In these situations, the unit itself will once again become 
a hazardous waste management unit, and the unit, as well as materials 
in the unit, will become subject to all requirements that were 
applicable prior to this final rule. Not only will corrective action 
authority be available at such a unit, but the closure requirements of 
40 CFR part 264 or 265 will once again apply at the unit as well, and 
releases from that unit may be addressed through either the corrective 
action or the closure process.
    The second scenario will arise in situations where releases occur 
at an excluded unit but, based on the site-specific factors, the Agency 
does not consider the release to be significant and, therefore, the 
release does not cause the unit to lose its exclusion. Failure on the 
part of the owner or operator to respond to such releases could be 
considered an act of illegal disposal. The Agency generally would 
address these situations by issuing an enforcement action under RCRA 
section 3008(a), or other applicable authorities, to compel cleanup 
actions and/or impose penalties. It should be noted that this approach 
is consistent with the approach taken by the Agency in a July 2002 
final rule, in which the Agency excluded hazardous secondary materials 
used to make zinc fertilizers from the definition of solid waste (see 
``Zinc Fertilizers Made from Recycled Hazardous Secondary Materials,'' 
67 FR 48400, July 24, 2002).
    The third scenario will arise in situations where releases from the 
unit, of either the now excluded hazardous secondary material and/or 
other hazardous or solid wastes previously managed in the unit, were 
not addressed prior to the unit obtaining its exclusion. At permitted 
and interim status facilities, the status of those releases is 
unaffected by this rulemaking, and the Agency retains its authority to 
address them under all authorities applicable to them prior to this 
final rule, including sections 3004(u) and (v), and section 3008(h).

D. Financial Assurance Obtained for Closure at Newly-Excluded Units

    The requirements in 40 CFR parts 264 and 265 subpart H, which 
applied at these units prior to their exclusion under this final rule, 
provide for the release of financial assurance upon certification by 
the facility owner or operator that closure has been completed in 
accordance with the approved closure plan, and after the Agency has 
verified that certification (see 40 CFR 264.143(i) and 265.143(h)).\17\
---------------------------------------------------------------------------

    \17\ Similar provisions at 40 CFR 264.145(i) and 265.145(h) 
provide for release of financial assurance for post-closure care.
---------------------------------------------------------------------------

    Under the approach discussed in section VII.D. and VIII.D. of this 
preamble, hazardous waste management units that convert to managing 
only hazardous secondary materials that are excluded under this final 
rule will no longer be subject to the 40 CFR part 264 or part 265 
closure requirements. Further, while reclaimers who receive hazardous 
secondary materials that have been excluded under the new 40 CFR 
261.4(a)(24) are required to meet financial assurance requirements,\18\ 
persons who recycle hazardous secondary materials under the exclusions 
for materials recycled under the control of the generator (Sec.  
261.2(a)(2)(ii) and Sec.  261.4(a)(23)) are not required to meet the 
financial assurance requirements.
---------------------------------------------------------------------------

    \18\ See section VIII.C.4 of this preamble for a complete 
discussion of financial assurance as a condition of the exclusion 
for this group of facilities.
---------------------------------------------------------------------------

    Under the requirements of 40 CFR parts 264 and 265 subpart G, 
owners and operators of units now eligible for the exclusion of Sec.  
261.2(a)(2)(ii) and Sec.  261.4(a)(23) would have been required to 
remove and decontaminate all contaminated structures, equipment, and 
soils (see Sec.  264.114 and Sec.  265.114). The financial assurance 
provided under 40 CFR parts 264 and part 265 subpart H was designed to 
assure that funds would be available for these activities. In the case 
of generator controlled units, where financial assurance is no longer 
required, previous releases from the unit, which would have been 
addressed during closure and for which financial assurance was obtained 
will, as a result of this rule, now be addressed through corrective 
action authority. The question raised by the Agency in the March 26, 
2007, supplemental proposal was whether funds obtained for closure 
should, therefore, be directed to corrective action activities at the 
unit.
    Commenters on the March 26, 2007, supplemental proposal generally 
agreed that funds obtained for closure at units excluded under Sec.  
261.2(a)(2)(ii) and Sec.  261.4(a)(23) (under the control of the 
generator) should be directed to address releases from the unit. The 
Agency agrees with these commenters, and encourages regulators to work 
with owners and operators that seek to modify their permits to remove 
conditions applicable to these units that will operate under the 
exclusion of Sec.  261.2(a)(2)(ii) and Sec.  261.4(a)(23), to verify 
that there are no unaddressed releases from the unit. In situations 
where corrective action is necessary at the unit, the Agency encourages 
regulators to work with owners and operators to assure that the 
releases from the unit are addressed promptly.

[[Page 64718]]

XIII. Effect on CERCLA

    A primary purpose of today's final rule is to encourage the safe, 
beneficial reclamation of hazardous secondary materials. In 1999, 
Congress enacted the Superfund Recycling Equity Act (SREA), explicitly 
defining those hazardous substance recycling activities that may be 
exempted from liability under the Comprehensive Environmental Response, 
Compensation and Liability Act (CERCLA) (CERCLA section 127). Today's 
final rule does not change the universe of recycling activities that 
could be exempted from CERCLA liability pursuant to CERCLA section 127. 
Today's final rule only changes the definition of solid waste for 
purposes of the RCRA Subtitle C requirements. The final rule also does 
not limit or otherwise affect EPA's ability to pursue potentially 
responsible persons under section 107 of CERCLA for releases or 
threatened releases of hazardous substances.

XIV. Effect on Imports and Exports

    The exclusion for hazardous secondary materials generated and 
reclaimed under the control of the generator is limited to recycling 
performed in the United States or its territories. However, the 
exclusion for hazardous secondary materials exported for reclamation 
and the non-waste determinations included in today's final rule do not 
place any geographic restrictions on movements of such hazardous 
secondary materials, provided they meet the conditions of the exclusion 
or, if stipulated, conditions of the non-waste determination. It is 
therefore possible that in some cases excluded hazardous secondary 
materials could be generated in the United States or its territories 
and subsequently exported for reclamation to a facility in a foreign 
country. It is also possible that hazardous secondary materials could 
be generated in a foreign country and imported for reclamation in the 
United States. Under today's exclusion for hazardous secondary 
materials exported for reclamation, hazardous secondary materials are 
only excluded from the definition of solid waste in the U.S. and, thus, 
may be considered solid and hazardous wastes in the foreign country 
under that country's laws and regulations. If this is the case, the 
U.S. facility that exports or imports hazardous secondary materials 
will also need to comply with any applicable laws and regulatory 
requirements of the foreign country. For further discussion, see 
section VIII.C.5. of today's preamble regarding specific export and 
import conditions for hazardous secondary materials excluded under 
today's rule.

XV. General Comments on the Proposed Revisions to the Definition of 
Solid Waste

    EPA received hundreds of comments on the October 2003 proposal and 
the March 2007 supplemental proposal, most of which were quite detailed 
and raised multiple issues. Below is an overview of some of the major 
comments on general aspects of the proposals and a summary of EPA's 
responses to those comments. For a complete discussion of all the 
comments and EPA's responses to those comments, please see Revisions to 
the Definition of Solid Waste Final Rule Response to Comment Document 
found in the docket for today's rulemaking.

A. EPA's Legal Authority To Determine Whether a Material Is a Solid 
Waste

Comments: Legal Authority
    EPA received many comments from environmental groups and the waste 
treatment and recycling industry regarding EPA's authority to define 
when recyclable hazardous secondary materials are solid wastes and how 
EPA used this authority in the proposed rulemaking. Some commenters 
argued that EPA has no authority under the RCRA statute to broadly 
exclude hazardous secondary materials from the definition of solid 
waste. These commenters asserted that Congress intended for hazardous 
secondary materials to be classified as solid wastes even when they are 
recycled. The commenters argued that the proposed exclusions are 
contrary to the plain statutory language of RCRA and that EPA may not 
lawfully exclude pollution control sludges and materials resulting from 
industrial, commercial, mining, and agricultural operations, according 
to accepted principles of statutory interpretation. Although the 
commenters acknowledged that EPA has promulgated such exclusions in the 
past, and that one such exclusion was recently upheld in court in Safe 
Food and Fertilizer v. EPA, they stated that they believed that the DC 
Circuit erred in Safe Food. The commenters argue that, in the 
fertilizer rule upheld in Safe Food, EPA considered impermissible 
factors (e.g., market participation, management practices, and chemical 
identity) in defining which materials are not discarded under RCRA, and 
that the Agency has done so again in the current rulemaking effort.
EPA's Response: Legal Authority
    EPA disagrees with comments that state that we have exceeded our 
authority by the exclusions being finalized today. While EPA clearly 
has the authority to regulate hazardous secondary materials that are 
reclaimed under Subtitle C of RCRA when discard is involved, the Agency 
also believes (and the courts have generally confirmed) that when 
hazardous secondary materials are reclaimed and such recycling 
operations do not involve discard, the hazardous secondary materials 
involved are not solid wastes under RCRA. EPA also has the authority to 
determine which types of recycling do not involve discard and, 
therefore, which types of hazardous secondary materials are not solid 
wastes. As EPA noted in the March 2007 supplemental proposal, ``[u]nder 
the RCRA Subtitle C definition of solid waste, many existing hazardous 
secondary materials are not solid wastes and, thus, not subject to 
RCRA's `cradle-to-grave' management system if they are recycled. The 
basic idea behind this construct is that recycling of such materials 
often closely resembles normal industrial manufacturing, rather than 
waste management'' (72 FR 14197). Existing exclusions, found in 40 CFR 
261.4(a), provide a long historical precedent for EPA's authority to 
exclude reclaimed materials from the definition of solid waste. EPA 
refers these commenters to the discussion of case law, above, and 
asserts that this rule follows valid precedent in the DC Circuit, 
including the court's opinion in Safe Food.

B. Adequacy of Conditions and Restrictions Used To Determine Whether a 
Material Is a Solid Waste

Comments: Adequacy of Conditions
    Other commenters did not dispute EPA's authority to exclude 
hazardous secondary materials from the definition of solid waste, but 
instead argued that before EPA can lawfully claim that excluded 
materials are not discarded, the Agency would need to strengthen the 
conditions to protect human health and the environment. For example, 
one commenter believed that all legitimacy criteria should be 
mandatory, that performance standards, such as secondary containment 
are needed for materials stored in tanks and containers, and that EPA 
should require engineered liner systems and monitoring for materials 
stored in land-based units.

[[Page 64719]]

EPA's Response: Adequacy of Conditions
    EPA disagrees that the restrictions we are requiring for the under 
the control of the generator exclusions or the conditions and 
restrictions we are requiring for the transfer-based exclusion are 
inadequate. Each of the restrictions and/or conditions is specifically 
linked to defining when the hazardous secondary materials are not 
discarded and to ensuring that the regulatory authority has the 
information needed to oversee the exclusion. Specifically, for 
hazardous secondary materials reclaimed under the control of the 
generator, the fact that the generator maintains control and liability 
for the hazardous secondary materials, either by managing them on-site, 
within the same company, or under a specific tolling contract, is 
itself an indication that the materials are not discarded. The 
prohibition on speculative accumulation (as defined in 261.1(c)(8)), 
addresses both the situation in which a large percentage of the 
hazardous secondary material is accumulated over the year without being 
recycled and the situation where there is no feasible means of 
recycling the hazardous secondary material, regardless of volume. 
Finally, the requirement that the hazardous secondary materials must be 
contained in the unit recognizes the reality that hazardous secondary 
materials that are released to the environment are discarded.
    For hazardous secondary materials transferred to another party for 
reclamation, the fact that the generator is required to make reasonable 
efforts to ensure that its hazardous secondary materials are properly 
and legitimately reclaimed demonstrates that the generator is not 
simply disposing of the material, but instead is taking responsibility 
that the hazardous secondary materials will be recycled. In addition, 
by maintaining a record of each shipment and a confirmation of receipt, 
the generator demonstrates that it continues to take responsibility for 
knowing the ultimate disposition of its hazardous secondary materials. 
Furthermore, by obtaining financial assurance, the reclamation facility 
demonstrates that it has also taken on the responsibility to ensure 
that the hazardous secondary materials will not be abandoned in the 
event that circumstances make it impossible for the facility to reclaim 
the hazardous secondary materials. For further discussion of how these 
and other restrictions and/or conditions of the exclusions are linked 
to defining when hazardous secondary materials are not discarded, see 
section V of this preamble, as well as sections VII-IX and sections 
XVI-XVIII. Support for the Agency's determination regarding which 
materials are not discarded is also found throughout the rulemaking 
record in this proceeding.
    EPA also disagrees that specifying further engineering conditions, 
such as secondary containment, liners, and leak detection systems, is 
needed to determine which hazardous secondary materials are not being 
discarded. The restrictions EPA has established and the conditions that 
EPA is finalizing today address a variety of hazardous secondary 
materials and reclamation operations that are linked to defining the 
act of discard, rather than specifying a particular technology that may 
not be appropriate in some cases.
    Furthermore, hazardous secondary materials excluded under today's 
rule may remain subject (or become subject) to requirements under other 
statutory programs. For example, hazardous secondary material 
generators, transporters, intermediate facilities and reclaimers may be 
subject to regulations developed under:
    <bullet> The Occupational Safety and Health Act of 1970, which 
requires hazard communication programs, labeling, material safety data 
sheets (MSDS) and employee information and training (29 CFR part 1910). 
The Occupational Safety and Health Administration (OSHA) regulations 
also require emergency response planning and training under their 
Emergency Response Program to Hazardous Substance Releases (29 CFR 
1910.120);
    <bullet> The Hazardous Materials Transportation Act of 1975 and the 
subsequent Hazardous Materials Transportation Uniform Safety Act of 
1990, which requires hazardous secondary materials meeting DOT's 
defining criteria for hazard classes and divisions to comply with 
hazard identification, shipping papers, labeling and placarding, 
incident reporting and security plans (49 CFR part 107 and parts 171-
180);
    <bullet> The Comprehensive Environmental Response, Compensation and 
Liability Act (CERCLA), Emergency Planning and Community Right-to-Know 
Act (EPCRA) and the Superfund Amendments and Reauthorization Act (SARA) 
of 1986 which, combined, require notification of hazardous substance 
releases above a reportable quantity, emergency planning and, if 
applicable, MSDS and inventory reporting (40 CFR 302.6, 40 CFR parts 
355 and 370). Hazardous secondary material generators and reclaimers 
meeting defined criteria are also subject to toxic chemical release 
reporting (i.e., Toxics Release Inventory (TRI) under EPCRA (40 CFR 
part 372)).
    While not exhaustive, this list provides examples of regulatory 
programs designed to protect human health and the environment developed 
under other statutory authorities alongside of RCRA. For more 
information on these regulatory programs, please see ``Memorandum: 
Requirements that other Regulatory Programs would place on Generators, 
Reclaimers and Transporters of Hazardous Secondary Materials'' located 
in the docket for this rulemaking.

C. EPA's Authority To Regulate Recycling

Comments: EPA's Authority
    EPA also received comments from the hazardous waste generating 
industry disputing EPA's authority to promulgate today's rule. Unlike 
the environmental groups' and waste treatment and recycling industry's 
comments, which argued that EPA has no authority to deregulate 
hazardous secondary materials recycling, many of the generator industry 
comments asserted that EPA has no authority to regulate such recycling, 
even to prohibit speculative accumulation or require that the hazardous 
secondary materials be contained.
    While most such commenters applauded EPA's decision in the March 
2007 supplemental proposal to explicitly link the proposed exclusions 
to the concept of defining when hazardous secondary materials are not 
discarded, many of these comments argued that EPA has over-reached its 
statutory authority by imposing restrictions or conditions that the 
commenters argued have no relationship to discard.
    Some commenters asserted that limiting the exclusions for hazardous 
secondary materials reclaimed under the control of the generator and 
imposing conditions on the exclusion for hazardous secondary materials 
transferred to a third party for reclamation, EPA has misread the 
intent of Congress. These comments cite previous court cases, noting 
the ``analysis of the statute reveals clear Congressional intent to 
extend EPA's authority only to materials that are truly discarded, 
disposed of, thrown away, or abandoned'' (AMC I, 824 F2d. at 1190). 
They go on to argue that materials being recycled do not fall into one 
of these enumerated activities.
    Specifically, many of the comments cite the ABR decision (which in 
turn cites earlier court decisions), where the

[[Page 64720]]

court noted that EPA's authority is ``limited to materials that are 
`discarded' by virtue of being disposed of, abandoned, or thrown away'' 
and that ``[s]econdary materials destined for recycling are obviously 
not of that sort. Rather than throwing them away, the producer saves 
them, rather than abandoning them, the producer reuses them'' (ABR 208 
F.3d at 1051). ``To say that when something is saved it is thrown away 
is an extraordinary distortion of the English language'' (Id. at 1053). 
The commenters assert that, by limiting the exclusion to hazardous 
secondary materials intended for recycling that are ``contained'' in 
the unit, EPA is illegally imposing conditions on a material that has 
not been discarded.
    Other comments take issue with EPA's decision to impose conditions 
for the transfer-based exclusion. These comments criticize EPA's 
rationale that, in part, bases the conditions on the fact that 
``subsequent activities are more likely to involve discard, given that 
the generator has relinquished control of the hazardous secondary 
material'' (72 FR 14178). One commenter specifically challenged the 
proposed financial assurance requirement, claiming that the condition 
does not define the absence of discard and would effectively impose a 
waste management requirement upon a non-waste.
EPA's Response: EPA's Authority
    EPA disagrees with the comments that Congress did not intend to 
give EPA the authority to regulate hazardous waste recycling. As EPA 
noted in both the October 2003 proposal and the March 2007 supplemental 
proposal, the RCRA statute and the legislative history suggest that 
Congress expected EPA to regulate as solid and hazardous wastes certain 
materials that are destined for recycling (see 45 FR 33091, citing 
numerous sections of the statute and U.S. Brewers' Association v. EPA, 
600 F. 2d 974 (DC Cir. 1979); 48 FR 14502-04, April 3, 1983; and 50 FR 
616-618). Moreover, the case law discussed above clearly shows 
instances where EPA properly regulated the recycling of solid and 
hazardous wastes.
    EPA also disagrees that requiring the hazardous secondary materials 
to be ``contained'' contradicts the court's finding in ABR that EPA 
does not have the authority to define when hazardous secondary 
materials are not discarded. By limiting the exclusion to hazardous 
secondary materials that are contained, EPA is defining ``discard'' for 
this material. While it is true that the court has said that materials 
recycled in a continuous process by the generating industry are not 
solid wastes, commenters have failed to demonstrate how hazardous 
secondary materials that are not contained meet that description. By 
``contained,'' EPA means not released to the environment. It is a self-
evident fact that hazardous secondary materials released to the 
environment (e.g., causing soil and groundwater contamination) are not 
``destined for recycling'' or ``recycled in a continuous process''; 
thus, they are part of the waste management problem. Moreover, as 
discussed above in section VII.C, to the extent that significant 
releases to the environment from a storage unit have occurred and 
remain unaddressed, it is reasonable to conclude that the material 
remaining in the unit is also actively being discarded. It is important 
to note that the hazardous secondary materials that remain in the unit 
are not solid wastes, unless the releases from the storage unit 
indicate that these materials are not being managed as valuable 
commodities and are, in fact, discarded. For examples of releases from 
a hazardous secondary materials storage unit that indicate that the 
hazardous secondary material in the unit is discarded and examples of 
releases that do not indicate discard, see section VII.C. of this 
preamble.
    EPA also disagrees with comments that, under the transfer-based 
exclusion, EPA cannot consider the fact that the generator has 
relinquished control of the hazardous secondary material (along with 
other factors that indicate discard) in determining what conditions are 
needed for this exclusion. EPA's authority to regulate such transfers 
is clear: as the Court noted in Safe Food, ``materials destined for 
future recycling by another industry may be considered `discarded'; the 
statutory definition does not preclude application of RCRA to such 
materials if they can reasonably be considered part of the waste 
disposal problem'' (350 F.3d at 1268).
    EPA's record for today's rulemaking demonstrates that third-party 
recycling of hazardous secondary materials has been and continues to be 
part of the waste disposal problem, and, without the conditions being 
finalized today, these hazardous secondary materials would be solid 
wastes. Of the 208 damage cases in EPA's study of environmental 
problems associated with post-RCRA, post CERCLA hazardous secondary 
materials recycling, 94% appeared to take place at commercial off-site 
facilities. Moreover, EPA's study of how market forces impact recycling 
demonstrates that these damages are consistent with our understanding 
of how the business model for commercial recycling can lead to sub-
optimal results. As opposed to manufacturing, where the cost of inputs, 
either raw materials or intermediates, is greater than zero and revenue 
is from the sale of the output, recycling conducted by commercial 
hazardous secondary materials recyclers involves generating revenue 
from receipt of the hazardous secondary materials, as well as from the 
sale of the output. Recyclers of hazardous secondary materials in this 
situation can have a short-term incentive to accept more hazardous 
secondary materials than they can economically or safely recycle, 
resulting in the hazardous secondary materials eventually being 
discarded.
    The financial assurance condition for the transfer-based exclusion 
being finalized today is directly linked to this situation. By 
obtaining financial assurance, the owner or operator of the reclamation 
facility is making a direct demonstration that it will not abandon the 
hazardous secondary material. Of the 208 damage cases, 69 (or 33%) were 
primarily caused by abandonment of the hazardous secondary material by 
the recycler. None of 69 facilities whose damages were primarily caused 
by abandonment had financial assurance.
    Under the transfer-based exclusion, financial assurance is the 
means by which the recycler demonstrates an investment in the future of 
the recycled materials; even if the market changes in such a way that 
the recycler can no longer process the hazardous secondary materials, 
by obtaining financial assurance, it has made certain that the 
hazardous secondary materials will not be abandoned and therefore not 
discarded. EPA therefore disagrees with the comment that the financial 
assurance condition is not related to discard of the material.
    Moreover, financial assurance also addresses the correlation of the 
financial health of a reclamation facility with the absence of discard 
of hazardous secondary materials. According to the successful recycling 
study, an examination of a company's finances is an important part of 
many of the environmental audits generators currently use to determine 
that their hazardous secondary materials will not be discarded. In 
addition, the environmental problems study showed that bankruptcies or 
other types of business failures were associated with 138 (66%) of the 
damage cases, and the market forces study identified a low net worth of 
a firm as a strong indication of a sub-optimal outcome of recycling 
(i.e., over-accumulation of hazardous secondary materials, resulting in 
releases to the environment and

[[Page 64721]]

abandonment of hazardous secondary materials).
    In the March 2007 supplemental proposal, EPA proposed to require 
that reclamation facilities obtain financial assurance to ensure that 
the reclamation facility owner/operators who would operate under the 
terms of this exclusion are financially sound (72 FR 14191), and many 
commenters supported this condition and EPA's rationale. EPA continues 
to believe that the findings in the recycling studies indicate a 
correlation between financial health of a reclaimer and the likelihood 
he will not discard the hazardous secondary materials.

D. Comments on Recycling Studies

1. Environmental Problems Study
    EPA completed An Assessment of Environmental Problems Associated 
with Recycling of Hazardous Secondary Materials in order to identify 
and characterize environmental problems attributed to hazardous 
secondary materials recycling activities and to provide the 
stakeholders with a clearer picture of the recycling industry in the 
United States.
    The environmental problems study (or study) was conducted in 
response to public comments received on the October 2003 proposal and 
to guide EPA's deliberations on how to proceed with the March 2007 
supplemental proposal. In the public comments to the October 2003 
proposal, a number of commenters expressed concern that deregulating 
hazardous secondary materials that are reclaimed in the manner 
described in that proposal could result in mismanagement of the 
hazardous secondary materials, and thus could create new cases of 
environmental damage requiring remedial action under federal or state 
authorities. Some of these commenters illustrated their concern by 
citing specific examples of environmental damage related to hazardous 
secondary materials recycling. A number of other commenters expressed 
the view that the great majority of the damage cases cited by 
commenters had occurred before RCRA, CERCLA, or other environmental 
regulatory programs were established in the early 1980s and, therefore, 
that the cases represent ``historical'' recycling-related environmental 
damage and are not particularly relevant or instructive for revising 
the RCRA Subtitle C definition of solid waste. These commenters further 
argued that the environmental programs--most notably RCRA's hazardous 
waste regulations and the liability provisions of CERCLA--have created 
strong incentives for the proper management of recyclable hazardous 
secondary materials and recycling residuals.
    In response to the March 2007 supplemental proposal and to the 
study, made public in the rulemaking docket in conjunction with that 
proposal, EPA received comments on the study from a variety of 
commenters. In general, the comments pertain to the scope and 
methodology of the study and how the study reflects on today's 
exclusions and restrictions and/or conditions of the exclusions.
Comments: Scope and Methodology
    With respect to the scope and methodology of the study, a few 
commenters agreed with excluding historical damage cases from the study 
and stated that recycling operations have in fact improved since RCRA 
was enacted. A few commenters provided several types of recycling-
related environmental problems familiar to state agencies and a few 
commenters suggested the review of several additional damage cases. A 
few commenters argued that inclusion of their facility in the study, or 
the inclusion of their industry representatives' facilities, was 
unfounded due to one or more of the following reasons: Hazardous 
secondary materials were exempt from RCRA when environmental problems 
occurred; environmental problems stem from historical or pre-RCRA 
activities; numerous facilities in the study shut down during the 1980s 
in response to the creation of regulatory disincentives; environmental 
problems were addressed pursuant to CERCLA; and problematic activities 
were clearly a result of non-compliance. Also, a commenter suggested 
that one damage case profiled in the study ``is not a good example of a 
contaminated site caused by recycling.'' In support of their comment, 
the commenter cited a Record of Decision (ROD) which stated that the 
site's former foundry operations, which existed pre-RCRA, caused soil 
and groundwater contamination.
    One commenter suggested EPA overlooked potential sources of 
information for the study, including television commentary, media 
reports, books, and other reports (specifically one state report), and 
one commenter suggested that EPA ``may have missed reviewing relevant 
files'' by not analyzing state and regional paper files. Another 
commenter expressed concern that the study was not peer reviewed.
EPA's Response: Scope and Methodology
    EPA acknowledged in the preamble to the March 2007 supplemental 
proposal that we did not search every possible information source for 
damage cases for the environmental problems study. For example, we did 
not systematically survey all state environmental agencies for relevant 
cases, nor did we search paper files in EPA Regional offices. We did 
solicit damage cases from regional representatives and we solicited 
additional cases through the public comment process. We recognize that 
there are likely to be additional cases that we did not identify. 
However, we have no reason to believe that additional cases would 
substantially change the overall picture. In fact, information 
submitted to EPA does not indicate that EPA has failed to find a 
representative sample of environmental damage caused by recycling 
activities.
    EPA maintains that historical recycling-related damage cases are 
much less relevant and instructive than cases which have occurred 
within the current regulatory and liability landscape, and several 
commenters shared our belief. We value state commenters' general 
discussion of environmental problems encountered at recycling 
operations and note that any facility taking advantage of today's 
exclusion will need to comply with all applicable protective 
restrictions and conditions.
    We also appreciate the suggestion of additional damage cases to 
review for the study. Based on our analysis of these cases, we have 
added one new damage case site to the study and updated two existing 
damage case profiles with more information about environmental problems 
(see Addendum: An Assessment of Environmental Problems Associated With 
Recycling of Hazardous Secondary Materials). We also determined that 
three damage cases identified in the public comments already are 
included in the 2007 study and additional information was not revealed 
to supplement the profiles; determined that one damage case identified 
in the public comments was previously reviewed and the damage was 
deemed unrelated to recycling and that no additional information was 
provided to change this conclusion; and determined that two sites 
identified in the public comments had damage unrelated to recycling. We 
concluded that the new damage cases and the supplemental information 
added to existing cases are consistent with the damage cases previously 
cited in the study; therefore, the additional facts do

[[Page 64722]]

not substantially change our understanding of the hazardous secondary 
materials recycling damage cases.
    EPA maintains that the damage cases captured in the environmental 
problems study fall within the study's scope and, as such, are relevant 
for guiding the development of today's rulemaking. As we discussed in 
the study, we are interested in whether damage may be more or less 
prevalent for hazardous secondary materials that are explicitly 
exempted or excluded from RCRA regulatory controls and we are less 
interested in historical or pre-RCRA cases (defined in the study as 
before 1982). We also indicated in the study that we are interested in 
``whether or not the recycler * * * went out of business'' and which 
``government program is responsible for overseeing the cleanup of the 
site,'' and clearly we are interested in acts of non-compliance that 
resulted in environmental damage. These points of interest, among 
others cited on pages 4-5 of the study, are informative for the purpose 
of this rulemaking and are within the scope of the study. Consequently, 
we disagree with industry and association commenters who argued that 
certain damage cases did not warrant inclusion in the Environmental 
Problems Study.
    We acknowledge that the particular damage case referenced by a 
commenter as ``not a good example'' for the study does in fact exhibit 
environmental damage which can be partially attributed to foundry 
operations pre-1982. However, as indicated in the damage case profile 
in Appendix II of the study, the damage case was included in the study 
due to the following factors, which do not include damage associated 
with pre-1982 operations: Abandonment of drums of spent catalyst, 
bankruptcy, and business closure. As a result, we maintain that this 
damage case is within the scope of the study.
    While we acknowledge that we did not review all possible sources of 
information for our study and generally relied on readily available 
material, we did in fact rely on media reports for information and we 
collaborated with regional representatives who are very knowledgeable 
about the damage cases and who assisted us in fact checking and 
suggesting damage cases. With respect to a commenter's suggestion that 
we review the ``Final Report of the Waste and Hazardous Materials 
Division, Fire & Explosions Task Force,'' produced by Michigan DEQ, we 
regret that the state has not yet made the report publicly available. 
However, we note that the scope of the draft Michigan study was not 
limited to hazardous secondary materials recycling operations, and 
shows that accidents can and do occur in all types of manufacturing 
facilities.
    Despite the fact that we did not conduct an exhaustive review of 
all possible sources of damage case information, we believe that the 
restrictions and conditions of today's exclusions are sufficient to 
ensure safe recycling activities. For facilities operating under the 
transfer-based exclusion, sudden accidental liability coverage for 
bodily injury and property damage to third parties is required for all 
units, and non-sudden accidental liability coverage is required for 
land-based units (see section VIII.C.4. for a more detailed discussion 
of liability coverage). We also note that facilities may be subject to 
other regulations that ensure facility safety, such as the OSHA 
requirements and state and local requirements (see ``Memorandum: 
Requirements that other Regulatory Programs Would Place on Generators, 
Reclaimers and Transporters of Hazardous Secondary Materials'' made 
available in the docket for today's final rulemaking). While EPA has 
not done a definitive study of other regulatory requirements, we are 
reasonably comfortable with the fact that the available information 
indicates oversight by other regulatory agencies would significantly 
mitigate potential damage from the non-discarded materials.
    With respect to the comment regarding peer review, we believe that 
while the study was not peer reviewed, the scope and methodology are 
sound, as evidenced by the small number of comments received on this 
issue. Additionally, peer review was not warranted by EPA peer-review 
standards because the study is not a scientific and/or technical work 
product. Rather, the study is an analysis of existing and publicly 
available information compiled to provide a representative view of 
hazardous secondary materials recycling.
Comments: Study's Relation to Today's Actions
    EPA received a number of comments alleging that the study does not 
support today's exclusions. Several commenters strongly believe that 
the study reflected that recycling hazardous secondary materials is a 
high risk activity and thus should remain fully regulated. A few 
commenters wrote that the study does not support the transfer-based 
exclusion and these commenters collectively predicted that the 
exclusion will create future damage cases. To bolster their feedback, 
one commenter stressed that the majority of all damage cases cited in 
the study are located off-site from the facilities that generated the 
hazardous secondary materials. Commenters also used the study's 
findings (namely damage type, damage cause, cost of cleanup) to support 
their opposition to the transfer-based exclusion. In particular, 
commenters stressed the financial impact to states and communities if 
additional environmental clean-ups were to result from facilities 
taking advantage of the exclusions.
    On the other hand, EPA also received responses from several 
commenters stating that the environmental problems study supports the 
proposed conditions of the transfer-based exclusion for reclaimers and 
generators. While several of these commenters opposed codification of 
the transfer-based exclusion, other commenters supported it as long as 
there were requirements to ensure protection of public health and the 
environment. For example, commenters responded that mismanagement of 
hazardous secondary materials, residuals, and recycled products or 
intermediates in the damage cases clearly represented a need to have 
requirements for protective management and storage, as well as a 
requirement for safe residuals management. Additionally, commenters 
believed in the importance of a financial assurance requirement to 
protect against the damage noted in the study related to bankruptcy and 
the abandonment of hazardous secondary materials and residuals. A 
commenter also responded that generators should assess whether the 
above protections exist at reclamation facilities in order to minimize 
their future liability. Additionally, in response to the study, EPA 
received one comment suggesting that each of the following safeguards 
be added to the exclusions: Tracking materials, restriction on land-
based storage, and 90-day storage provisions in 40 CFR part 262 for all 
generators, including those who recycle on-site.
EPA's Response: Study's Relation to Today's Actions
    While EPA agrees that the study reflects the risk and problems 
involved with recycling hazardous secondary materials, we disagree with 
those commenters who stated that the study does not support today's 
exclusions because of the perceived risk posed by the exclusions. 
Instead, we agree that the environmental problems highlighted in the 
study demonstrate the need to promulgate restrictions and conditions 
for the exclusions (e.g., requirements for

[[Page 64723]]

financial assurance, reasonable efforts, shipping documentation, 
hazardous secondary materials management, legitimate recycling, and 
speculative accumulation). EPA maintains that the restrictions and 
conditions finalized with today's exclusions, and discussed more in 
depth in sections VII.C. and VIII.C., will address the problems 
identified in the study and will limit the exclusions to materials that 
EPA has determined are not discarded. We also agree with those 
commenters who suggest that generators should assess whether 
reclamation facilities adequately manage hazardous secondary materials 
in order to mitigate the risk of future environmental problems. 
Consequently, we are finalizing the reasonable efforts condition for 
the transfer-based exclusion.
Comments: Restrictions on Mining and Mineral Processing
    A few commenters responded that the study does not support controls 
on land-based storage of hazardous secondary materials at mining and 
mineral processing facilities. They cited that only 1 of the 208 damage 
cases is associated with a primary mineral processing facility. Thus, 
the commenters argued that the small number of environmental problems 
stemming from recycling at mining and mineral processing facilities 
does not warrant the proposed regulatory oversight of the industry.
EPA's Response: Restrictions on Mining and Mineral Processing
    EPA acknowledges that the environmental problems study included one 
damage case from primary mineral processing and two damage cases from 
secondary mineral processing. We note that whether an industry has a 
single damage case represented in the study or numerous damage cases, 
all industries are treated equally within the final rulemaking for 
hazardous secondary materials generated, reclaimed, and managed in 
land-based units (40 CFR 261.4(a)(23)).
    Moreover, further review of publicly available data revealed four 
additional damage case profiles from primary and secondary mineral 
processing facilities, which corroborates EPA's view that the findings 
from the environmental problems study apply across industries, 
including the mining and mineral processing industries (see Addendum: 
An Assessment of Environmental Problems Associated with Recycling of 
Hazardous Secondary Materials to review new damage case profiles). Of 
the four additional damage cases, three are primary mineral processing 
facilities and one is a secondary mineral processing facility. Improper 
disposal of residuals and improper management of recyclables are the 
most frequently observed primary damage cause at such facilities. The 
primary environmental damage type resulting from the above activities 
are soil contamination, wildlife exposure, and groundwater and surface 
water contamination.
    We have concluded that the additional damage cases do not 
substantially change the overall picture of environmental problems 
caused by hazardous secondary materials recycling activities at 
facilities, including mining and mineral processing facilities. We also 
disagree with the commenters' assertion that restrictions on land-based 
storage units are not supported by the environmental problems study. 
Cumulative damage causes from the study support the restrictions 
imposed by 40 CFR 261.4(a)(23) and the identification of additional 
mining and mineral processing damage cases corroborates EPA's finding 
that no industry should be exempt from the restrictions and/or 
conditions due to the limited number of damage case profiles exhibited 
in the environmental problems study.
2. Good Recycling Practices Study
    EPA completed An Assessment of Good Current Practices for Recycling 
of Hazardous Secondary Materials to provide a more complete picture of 
the hazardous secondary materials recycling industry in the United 
States. The study examines what practices responsible generators and 
recyclers currently use to ensure that their hazardous secondary 
materials are recycled responsibly.
    One purpose of the study was to provide the Agency with another 
angle from which to view the hazardous secondary materials recycling 
industry. EPA has long heard from representatives of that industry that 
management of hazardous secondary materials has changed and improved 
since RCRA was implemented in the early 1980s. In addition, by 
indicating what controls responsible recyclers are using, the study was 
intended to help EPA determine which kinds of regulatory requirements 
would be most appropriate and effective as conditions of the 
exclusions.
    Some of the comments on the successful recycling study supported 
the conclusions in the study. Particularly, these commenters stated 
that audits are typical, that they usually cover the subjects described 
in the study, and that RCRA and CERCLA liability are drivers of 
responsible recycling behavior. Several other commenters suggested that 
other incentives affecting the behavior of recyclers include economic 
concerns, the RCRA hazardous waste regulations, and environmental and 
safety regulations under other statutes.
Comments: Scope of the Successful Recycling Study
    EPA received several critical comments in response to the study on 
responsible recycling behaviors. One comment that appeared more than 
once was that EPA's study focused too much on large companies and that 
many of the practices a large company undertakes with a full 
environmental staff would not be possible for a smaller company and, 
therefore, that the practices are not widespread among smaller 
companies.
EPA's Response: Scope of the Successful Recycling Study
    EPA agrees with the focus on larger companies in the study and 
discusses it in the methodology section of the report's introduction. 
Because many of the contacts for interviews for the report came out of 
the public comments on the October 2003 proposed rule, much of the 
information in the report came from companies large enough to have 
staff responsible for submitting public comments to federal proposed 
rulemakings. However, where possible and appropriate, the study does 
examine the options for small businesses, as well as what small 
businesses are doing that approximates the audit programs and other 
practices of larger companies. The Agency did find that many small 
companies are concerned with questions of liability in their hazardous 
secondary materials recycling and often either belong to auditing 
consortiums or already do smaller audits by mail and telephone if they 
cannot afford to set up visits to the recycling facilities to examine 
them in person.
Comments: Purpose of the Successful Recycling Study
    Another comment made by several commenters expressed a concern that 
circular logic was in place in the March 2007 supplemental proposal. 
The commenters stated that it was regulation under RCRA that led to the 
growth of the good practices being described and stated that EPA was 
using these practices as justification for taking away the very 
regulations that led to them.
EPA's Response: Purpose of the Successful Recycling Study
    The Agency believes that those making this comment misunderstood

[[Page 64724]]

the relationship between the successful recycling study and the March 
2007 supplemental proposal. The proposal did not state that this 
background material was a justification for why the Agency proposed the 
conditional exclusion for hazardous secondary materials not under the 
control of the generator. Rather, the Agency looked to the study to 
determine what the current responsible practices are and to use that 
information to inform decisions on what restrictions and/or conditions 
would be appropriate for the transfer-based exclusion. By promulgating 
restrictions and/or conditions that will lead to responsible management 
of hazardous secondary materials, the Agency intends to encourage 
hazardous secondary materials recycling, while protecting human health 
and the environment.
3. Market Forces Study
    EPA received very few comments on Potential Effects of Market 
Forces on the Management of Hazardous Secondary Materials Intended for 
Recycling. The purpose of this study is to use economic theory to 
describe how various market incentives can influence a firm's decision 
making process when the recycling of hazardous secondary materials is 
involved. Different economic incentives between the recycling of 
hazardous secondary materials and manufacturing can arise due to 
differences in these two business models. As opposed to manufacturing, 
where the cost of inputs of either raw materials or intermediates is 
greater than zero and revenue is generated primarily from the sale of 
the output, some models of hazardous secondary materials recycling 
involve generating revenue primarily from the receipt of the hazardous 
secondary materials. Recyclers of hazardous secondary materials in this 
situation may thus respond differently to economic forces and 
incentives from traditional manufacturers.
Comments and EPA's Response: Market Forces Study
    Most of the commenters agreed with the underlying premise of the 
study that market forces affect commercial recycling differently from 
how they affect manufacturing from virgin materials, thus creating a 
potential incentive for the over-accumulation of hazardous secondary 
materials in some circumstances. Thus, the study supports both the 
proposed conditions for the transfer-based exclusion and the ``useful 
contribution'' factor for the legitimacy criteria. EPA agrees with 
these comments.
    One commenter stated that as a result of the market forces study, 
EPA should also include a requirement that the generator evaluate the 
financial health of the recycler before shipping a hazardous secondary 
material to the recycler. While EPA agrees that evaluating the 
financial health of a company can be useful and informative, and 
encourages companies to do so, it is not an activity that lends itself 
to an objective standard that would be appropriate for regulation. 
Instead, EPA is requiring recyclers under the transfer-based exclusion 
to have financial assurance in order to determine that negative 
economic factors will not result in the hazardous secondary materials 
being abandoned.
    One commenter disagreed with the study's conclusion that intra- and 
inter-company recyclers have more flexibility in their waste management 
decisions than commercial recyclers do. The commenter noted that 
company politics and internal goals can make it difficult to switch 
from recycling to disposal, even if the market forces make it more 
economical, and that it may take two or more months to find a disposal 
contractor.
    While EPA generally agrees that there are more factors at work than 
those described in the study, we continue to believe that intra- and 
inter-company recycling have more flexibility in waste management 
decisions than a commercial recycler does. When a commercial recycler's 
entire income is from accepting hazardous secondary materials for 
recycling and selling recycled products, there is no economic 
alternative for it to stop recycling and continue to stay in business 
unless it can afford the cost of a hazardous waste management permit 
and the cost of becoming a hazardous waste disposal facility. This 
finding is supported by the results of the damage cases, the 
overwhelming majority of which were at commercial recycling facilities.

E. Use Constituting Disposal (UCD) and Burning for Energy (BFE)

Comments: UCD and BFE
    EPA received extensive comments on both the October 2003 proposal 
and the March 2007 supplemental proposal requesting that the scope of 
the proposed rules be expanded to include hazardous secondary materials 
used in a manner constituting disposal and hazardous secondary 
materials burned for energy recovery. Commenters argued that these 
operations do not involve discard, and that they can have many 
environmental benefits, including resource conservation and reduction 
in greenhouse gas emissions. In particular, commenters argued that 
hazardous waste that is indistinguishable from a commercial fuel should 
be not a solid waste. Other commenters supported keeping the exclusion 
focused on reclamation and not including use constituting disposal and 
burning for energy recovery. Commenters noted that these types of 
activities, in some cases, are akin to discard, that precedents exist 
for regulation of these hazardous secondary materials, and that 
recycling and reclamation are higher on the waste management hierarchy 
and more likely to conserve resources than burning for energy recovery.
EPA's Response: BFE and UCD
    EPA continues to maintain that comments on UCD and BFE are outside 
the scope of the solid waste exclusions in today's final rule, which 
are focused on reclamation. EPA agrees that hazardous secondary 
materials that are comparable to commercial fuels should not be solid 
wastes, and the Agency has already promulgated an exclusion for certain 
of these materials (40 CFR 261.4(a)(16)). However, as stated earlier, 
such materials are outside the scope of today's final exclusions and 
are best addressed under separate rulemaking efforts.

XVI. Major Comments on the Exclusion for Hazardous Secondary Materials 
Legitimately Reclaimed Under the Control of the Generator

A. Scope of the Exclusion

1. Exclusion for Materials Recycled On-Site
Comments: On-Site Exclusion
    In our March 2007 supplemental proposal, EPA proposed to exclude 
from the definition of solid waste hazardous secondary materials that 
are generated and legitimately reclaimed at the generating facility. 
EPA proposed to define ``generating facility'' in 40 CFR 260.10 as 
``all contiguous property owned by the generator'' (72 FR 14214). We 
noted that our proposed definition would include situations where a 
generator contracted with another company to reclaim hazardous 
secondary materials at the generator's facility, either temporarily or 
permanently. The Agency solicited comment on whether facilities under 
separate ownership, but located at the same site (e.g., industrial 
parks), should be included within this proposed exclusion. We also 
solicited comment on other definitions which might be compatible with 
the concept of generator control.

[[Page 64725]]

    Commenters who addressed this issue generally supported the 
proposed on-site exclusion. They agreed with EPA that hazardous 
secondary materials reclaimed by a generator at its facility are 
unlikely to be discarded because the materials will be managed and 
monitored by a single entity who is familiar with both the generation 
and recycling of the hazardous secondary materials. Several commenters 
also agreed with EPA that environmental risks were lessened if the 
hazardous secondary materials were not transported off-site, and that 
fewer liability questions would arise in the case of accidents or 
mismanagement.
    With respect to companies under separate ownership, but located at 
the same site, commenter reaction was more mixed. Some commenters said 
that this situation is not compatible with generator control. They 
argued that unrelated companies would not be as likely to have 
knowledge of each other's operations and hazardous secondary materials, 
and that additional controls were necessary, such as financial 
assurance for the reclaimer and reasonable efforts on the part of the 
generator (conditions that EPA had proposed for the transfer-based 
exclusion).
    Other commenters supported an exclusion for facilities under 
separate ownership, but located at the same site, (i.e., co-located 
facilities). These commenters said that such an exclusion would 
encourage recycling. These commenters mentioned a variety of scenarios 
which they argued should be eligible for the exclusion. Some commenters 
described integrated chemical manufacturing operations with co-located 
facilities that are owned by different entities because of corporate 
mergers and acquisitions. Another commenter noted that at some steel 
plants, spent pickle liquor is reclaimed on-site by a company that is 
different from the company operating the steel plant. Other commenters 
noted that coke and tar plants at iron and steel facilities are 
sometimes owned by electric utilities. A few commenters argued that 
facilities at airports should be eligible for the exclusion, and other 
commenters mentioned various cooperative recycling ventures within the 
automotive industry. Some operations mentioned by commenters appeared 
to be prospective rather than actual.
EPA's Response: On-Site Exclusion
    After evaluating these comments, EPA has decided to finalize this 
provision as proposed and to limit the exclusion to hazardous secondary 
materials that are generated and legitimately reclaimed by the 
hazardous secondary material generator at that generator's facility. We 
agree with the commenters that at least some of the situations they 
described are not necessarily incompatible with generator control. One 
of the situations--spent pickle liquor recycled on-site at a steel 
mill--is eligible for the generator-controlled exclusion if the 
generator has contracted with the company to reclaim the material at 
the generator's facility. However, the Agency does not have sufficient 
legal or factual information about other situations mentioned by the 
commenters to determine if there is a single entity who remains in 
control of the hazardous secondary material throughout the reclamation 
process.
    For this reason, EPA believes that such situations may be more 
appropriately addressed under the exclusion for hazardous secondary 
materials transferred for reclamation (40 CFR 261.4(a)(24)) or under 
the case-by-case non-waste determination procedures finalized today in 
Sec.  260.30.
    For the sake of clarity and in response to comments, we are also 
adding a definition of ``hazardous secondary material'' and ``hazardous 
secondary material generator'' to Sec.  260.10. ``Hazardous secondary 
material'' means a secondary material that, when discarded, would be 
identified as hazardous waste under part 261 of 40 CFR. ``Hazardous 
secondary material generator'' means any person whose act or process 
produces hazardous secondary material at the generating facility. A 
facility that collects hazardous secondary materials from other persons 
is not the hazardous secondary material generator. These definitions 
would apply to all of the exclusions promulgated today. We note that 
generators sometimes contract with a second company to collect 
hazardous secondary materials at the generating facility, after which 
the hazardous secondary materials are subsequently reclaimed at the 
facility of the second company. In that situation, the hazardous 
secondary materials would no longer be considered ``under the control 
of the generator'' because the materials are not reclaimed at the 
generating facility. The materials should instead be managed under the 
exclusion for materials transferred for reclamation.
    EPA agrees with certain comments that a facility that generates 
hazardous secondary materials may lease the property where it conducts 
operations, rather than own the property and that our proposed 
definition of ``generating facility'' would not cover such 
arrangements. EPA has therefore changed the definition of ``generating 
facility'' in 40 CFR 260.10 to read ``all contiguous property owned, 
leased, or otherwise controlled by the hazardous secondary material 
generator.'' We have also amended the existing definition of 
``facility'' in Sec.  260.10 to include a reference to management of 
hazardous secondary materials. Therefore, any references to 
``facilities'' or ``units'' of a facility in today's rule also refers 
to facilities or units managing hazardous secondary materials excluded 
under this rule.
2. Exclusion for Materials Recycled by the ``Same Company''
    In its March 2007 supplemental proposal, EPA proposed to exclude 
from the definition of solid waste hazardous secondary materials that 
were generated and reclaimed by the same ``person'' as defined in 40 
CFR 260.10, if the generator certified the following: ``on behalf of 
[insert company name], I certify that the indicated hazardous 
recyclable material will be sent to [insert company name], that the two 
companies are under the same ownership, and that the owner corporation 
[insert company name] has acknowledged full responsibility for the safe 
management of the hazardous secondary material'' (72 FR 14214). 
``Person,'' as defined in Sec.  260.10, means an individual, trust, 
firm, joint stock company, Federal Agency, corporation (including a 
government corporation), partnership, association, State, municipality, 
commission, political subdivision of a State, or any interstate body. 
EPA proposed the certification requirement because of existing 
complexities in corporate ownership and liability. The certification 
would clarify the responsibilities of the generator and reclaimer and 
would help regulatory authorities determine whether a facility was 
eligible for this exclusion. The Agency solicited comment on any other 
certification language that might accomplish the same end, and on other 
definitions of ``same-company'' (72 FR 14186).
Comments: Same-Company Exclusion
    Many commenters supported this exclusion and stated that hazardous 
secondary materials sent from one company's facility to another 
remained essentially under the control of the generating company. 
According to these commenters, if a generator sends materials to a 
reclaimer that is part of the same corporate structure, the generator 
is likely to be familiar with the recycling and materials management 
processes employed by the reclaimer. In addition, questions regarding 
liability

[[Page 64726]]

and responsibility for such hazardous secondary materials are likely to 
be clearer than is the case with facilities from unrelated companies.
    Other commenters stated that when hazardous secondary materials are 
generated and transported off-site for reclamation, additional controls 
were needed to avoid discard and protect human health and the 
environment even in the case of intra-company recycling. Some of these 
commenters preferred such reclamation to be regulated under the 
proposed conditional exclusion for hazardous secondary materials 
transferred for the purpose of reclamation. This measure would ensure 
that generators would have to perform reasonable efforts and that 
reclaimers would have to obtain financial assurance. Other commenters 
suggested additional notification and recordkeeping requirements for 
any hazardous secondary materials transported off-site.
EPA's Response: Same-Company Exclusion
    After evaluating these comments, the Agency has decided to retain 
``same-company'' recycling under the exclusion for hazardous secondary 
materials legitimately reclaimed under the control of the generator. We 
do not believe that facilities exchanging hazardous secondary materials 
within the same corporate structure should be subject to the 
requirements for our exclusion at Sec.  261.4(a)(24), as long as 
appropriate control of the recycling process is maintained. In 
particular, it is unnecessary for the generator to perform reasonable 
efforts on the reclaimer, because the generator is likely to be 
knowledgeable about the reclaimer's ability to recycle the hazardous 
secondary materials properly and legitimately. Similarly, if the 
generator and reclaimer are part of the same corporate structure and if 
common control is maintained over the policies of both facilities, 
there are strong incentives to ensure that the hazardous secondary 
materials are properly and legitimately reclaimed, thus making a 
financial assurance requirement for the reclaimer unnecessary.
    In response to commenters who suggested additional notification and 
recordkeeping requirements, we note that the Agency is revising our 
proposed requirements for notification and recordkeeping for all 
exclusions promulgated today. These revisions are discussed in sections 
VII.C. and VIII.C. of this preamble.
Comments: Certification of Same Company
    Some commenters argued that no certification should be necessary 
when hazardous secondary materials are sent between the same or related 
companies because generator knowledge of the materials and the 
potential CERCLA liability should suffice to ensure safe and legitimate 
recycling. Other commenters supported a certification provision, but 
suggested alternative language that they stated would be more 
compatible with generator control. Still other commenters disagreed 
with our proposed requirement for certifying that the generator and 
reclaimer of hazardous secondary materials were under the same 
ownership and that the owner corporation must acknowledge 
responsibility for the safe management of the hazardous secondary 
materials.
    According to these commenters, under existing corporate law, parent 
companies do not (and sometimes cannot) assume legal liability for 
their subsidiaries. EPA's proposed certification requirement regarding 
the owner company would therefore have little legal effect and could 
actually discourage same-company recycling. Some of these commenters 
suggested that either the generator or the reclaimer should acknowledge 
responsibility for properly managing the hazardous secondary material, 
not a third-party owner corporation.
    Other commenters said that the proposed requirement that the 
hazardous secondary materials be generated and reclaimed by the same 
``person'' under 40 CFR 260.10 was not appropriate because a 
corporation and its affiliates or subsidiaries are legally distinct and 
not the same ``person.'' Therefore, one commenter suggested that we 
refer to related ``facilities'' rather than ``companies.'' Some other 
commenters suggested that we focus on the concept of ``control'' rather 
than ``ownership.''
EPA's Response: Certification of Same Company
    After evaluating these comments, EPA does not agree with the 
commenters who argued that a certification requirement is not needed. 
We note that the purpose of the certification is not to directly ensure 
proper and legitimate recycling, but to clarify responsibility for the 
hazardous secondary materials and to demonstrate to regulatory 
officials that the hazardous secondary materials are not discarded and 
are within the terms of the generator-controlled exclusion. We are 
therefore retaining a certification requirement for this exclusion.
    However, the Agency has also decided that its proposed 
certification language should be revised to avoid confusion and to 
ensure more effective generator control. We have therefore revised our 
proposed regulatory definition for this exclusion to refer to 
``facilities'' rather than companies. Under the definition finalized 
today at 40 CFR 260.10, the reclaiming facility must be ``controlled'' 
by the generating facility or by a person (under Sec.  260.10) who 
controls both the generating facility and the reclaiming facility. 
``Control,'' for purposes of this exclusion, means ``the power to 
direct the policies of the facility, whether by the ownership of stock, 
voting rights, or otherwise, except that contractors who operate 
facilities on behalf of a different person shall not be deemed to 
``control'' such facilities'' (see Sec.  260.10). Our final 
certification language requires the generating facility to certify that 
it controls the reclaiming facility, or that the generating facility 
and the reclaiming facility are under common control. In addition, the 
generator must certify that either the generating facility or the 
reclaiming facility acknowledges full responsibility for the proper 
management of the hazardous secondary materials. To avoid confusion, we 
have also amended the definition of ``facility'' at 40 CFR 260.10 to 
include facilities which manage hazardous secondary materials. 
Therefore, any reference to ``facilities'' in this rule also includes 
facilities which manage materials excluded under the regulations 
promulgated today.
    EPA believes that this revised language more appropriately reflects 
the concept of ``generator control'' that underlies the exclusions at 
40 CFR 261.2(a)(2)(ii) and 261.4(a)(23). Requiring that a generating 
facility control the reclaiming facility, or that both be under common 
control, ensures that there is an ongoing relationship between the 
generator and reclaimer and that the two facilities are more likely to 
be familiar with each others' waste management practices, thereby 
minimizing the possibility of discard. If there is no such 
relationship, the two facilities should not be eligible for this 
exclusion and the use of the transfer-based exclusion would be more 
appropriate. In addition, requiring the hazardous secondary material 
generator to certify that either the generating facility or the 
reclaiming facility acknowledges responsibility for the safe management 
of hazardous secondary materials ensures that the responsibility rests 
with the party most capable of assuming such responsibility. This

[[Page 64727]]

certification should be made by an official familiar with the corporate 
structure of both the generating and the reclaiming facilities and 
should be retained at the site of the generating facility.
Comments and EPA's Response: Application to Government Agencies and 
Universities
    Some commenters requested that EPA clarify whether two government 
agencies (such as the Department of Defense and the Department of 
Energy) would be considered the same ``person'' under 40 CFR 260.10 if 
hazardous secondary materials are generated by one agency and reclaimed 
by another. In response, we note that for purposes of RCRA, the federal 
government is not a single ``person''; rather, each agency or 
department would be considered a separate ``person.'' We also note that 
under today's final rule, a federal agency that is a generating 
facility does not normally have the power to direct the policies of a 
different federal agency that is a reclaiming facility, nor is there a 
``person'' under Sec.  260.10 who directs the routine policies of both 
facilities. In certain situations, the two different federal agencies 
involved may wish to apply for a case-by-case non-waste determination 
under 40 CFR 260.30, as appropriate, or use the transfer-based 
exclusion.
    Other commenters requested that EPA clarify whether the same-
company exclusion extends to hazardous secondary materials that are 
generated and reclaimed at different facilities, when both facilities 
are owned by the same government agency or university, but operated by 
a contractor. In some of these situations, the same contractor operates 
both the generating facility and the recycling facility, but, in other 
situations, the generating facility and the reclaiming facility are 
operated by different contractors. In those situations where the 
generating facility and the reclaiming facility are both owned by the 
same government agency or university, the two facilities would be under 
common control because the agency or university in question has the 
power to direct the policies of both the generating facility and the 
reclaiming facility. Under this scenario, both facilities would 
therefore be eligible for the same-company exclusion, even if operated 
by different contractors. However, if the generating facility and the 
reclaiming facility were each owned by a separate government agency or 
university, they would not be eligible for this exclusion even if both 
facilities were operated by the same contractor, because the element of 
common control would be lacking. We have revised the certification 
language of 40 CFR 260.10 to reflect this approach. The parties 
involved may apply for a case-by-case non-waste determination under 40 
CFR 260.30, as appropriate, or use the transfer-based exclusion.
3. Types of Tolling Arrangements Eligible
    In its March 2007 supplemental proposal, the Agency proposed to 
exclude from the definition of solid waste certain hazardous secondary 
materials that are generated pursuant to a written contract between a 
tolling contractor and a toll manufacturer. Through the contract, the 
tolling contractor would arrange for the manufacture by the toll 
manufacturer of a product made from unused materials specified by the 
tolling contractor. To be eligible for the exclusion, the tolling 
contractor would have to retain ownership of and responsibility for the 
hazardous secondary materials that were generated during the course of 
the production of the product. EPA solicited comment on other types of 
contractual arrangements under which discard is unlikely to happen and 
which could appropriately be covered by the exclusion for generator-
controlled hazardous secondary materials. For example, one company 
could enter into a contractual arrangement for a second company to 
reclaim and reuse (or return for reuse) the first company's hazardous 
secondary materials. The first company could create a contractual 
instrument that exhibits the same degree of control over how the second 
company manages the hazardous secondary materials as is found in a 
tolling arrangement (72 FR 14186).
Comments: Tolling Arrangements
    Some commenters stated that tolling arrangements are incompatible 
with ``generator control'' and are best regulated under the proposed 
exclusion for materials that were transferred for legitimate 
reclamation. They argued that requirements such as reasonable efforts 
(by generators) and financial assurance (for reclaimers) were necessary 
to avoid discard in the case of off-site reclamation. Some of the 
commenters argued that the physical generator of the hazardous 
secondary material (in this case, the toll manufacturer) retains legal 
liability for the material. They stated that contracts which 
reallocated resources to address financial responsibility for 
mismanagement or mishap could contain loopholes that would allow 
tolling contractors to dispose of hazardous secondary materials or send 
them to a third party for reclamation.
    Other commenters, on the other hand, urged EPA to expand the 
tolling exclusion to other types of contractual arrangements. A few 
commenters said that the exclusion should be allowed for any contract 
between a generator and a reclaimer where the generator was willing to 
retain ownership of and/or responsibility for the hazardous secondary 
materials. Other commenters mentioned specific contractual situations 
in which they argued the hazardous secondary materials in question were 
clearly handled as a commodity and discard was therefore highly 
unlikely. One example given was a facility that reclaims metals from 
electric arc furnace dust and then sends the metals back to steel mills 
to be reused. Another example was a facility that takes spent copper 
etchant from manufacturers of printed wiring boards and uses the 
material to make new copper compounds. Still another example was a 
facility that collects used paint purge solvent from auto body paint 
operations, reclaims it, and sells regenerated solvent back to the auto 
body facility.
EPA's Response: Tolling Arrangements
    After considering these comments, the Agency has decided to retain 
the tolling exclusion, but not to broaden its scope. The exclusion will 
therefore be limited to situations where a tolling contractor contracts 
with a toll manufacturer to make a product from specified unused 
materials. We do not agree with those commenters who said that tolling 
contracts are not compatible with ``generator control.'' The typical 
tolling contract contains detailed specifications about the product to 
be manufactured, including the management of any hazardous secondary 
materials that are generated and returned to the tolling contractor for 
reclamation. In addition, the tolling contractor will enter into a 
tolling contract with such requirements only if it has decided that the 
economic benefit from such recycling is justified. For these reasons, 
we do not believe that tolling arrangements should be subject to the 
conditions applicable to the transfer-based exclusion.
    On the other hand, the Agency also does not agree with those 
commenters who urged that we should allow the generator-controlled 
exclusion for any hazardous secondary materials generated under a 
contract between a generator and a reclaimer. We believe that the 
exclusion should be limited to the types of tolling arrangements 
specified in 40 CFR 260.10. When hazardous secondary materials are

[[Page 64728]]

transferred off-site for reclamation, there is, in general, less 
likelihood of generator control, and, hence, more likelihood of 
discard, in the absence of conditions that ensure the hazardous 
secondary materials will be handled as valuable products. In these 
situations, additional requirements are needed for the Agency to 
determine that no discard has occurred. Conversely, in the specific 
situations included in the generator-controlled exclusion (on-site, 
same-company, and tolling reclamation), we believe that the generator 
is much more likely to be familiar with the reclaimer and to have 
powerful incentives to see that the hazardous secondary materials are 
reclaimed properly and legitimately. In these cases, the requirements 
that we have finalized today (notification, legitimate recycling, 
compliance with speculative accumulation limits, and containment) are 
sufficient for the Agency to determine that such hazardous secondary 
materials are not discarded. These requirements may not be sufficient 
in the case of unrelated generators and reclaimers who have a non-
tolling type of contract.
    To clarify the requirements for tolling contracts under today's 
rule, and to assist regulatory authorities in determining whether a 
facility is eligible for an exclusion under a tolling contract, EPA has 
also added a certification requirement to the definition of hazardous 
secondary material generated and reclaimed under the control of the 
generator in Sec.  260.10 of the final rule. This provision would 
require the tolling contractor to certify that it has a written 
contract with the toll manufacturer to manufacture a product or 
intermediate which is made from unused materials specified by the 
tolling contractor, and that the tolling contractor will reclaim the 
hazardous secondary materials generated during the course of this 
manufacture. The tolling contractor must also certify that it retains 
ownership of, and responsibility for, the hazardous secondary materials 
that are generated during the course of the manufacture, including any 
releases of hazardous secondary materials that occur during the 
manufacturing process. This certification should be made by an official 
familiar with the terms of the written contract and should be retained 
at the site of the tolling contractor.
    In response to those commenters who described specific types of 
contractual arrangements that should be eligible for the generator-
controlled exclusion, we note that facilities operating under such 
arrangements may apply for a non-waste determination under Sec.  
260.30, as appropriate. In some cases, commenters did not include 
enough detail about the contracts to enable the Agency to draft 
appropriate regulatory language. In other cases, the arrangement 
suggested was industry-specific and the conditions or requirements 
suggested by the commenters were not appropriate for an exclusion 
covering many different types of facilities. We believe that such 
arrangements are best evaluated on a case-by-case basis by the 
regulatory authority, possibly under 40 CFR 260.30, to determine their 
eligibility for exclusion.
Comments: Terms Used in Tolling Exclusion
    One commenter suggested that we replace the term ``batch 
manufacturer'' with ``toll manufacturer.'' This commenter stated that 
``batch manufacturer'' was too broad and generally referred to a 
facility which engages in a distinct, short production campaign, not 
necessarily tied to a two-party contractual agreement. ``Toll 
manufacturer,'' this commenter stated, is a subset of batch 
manufacturers and generally refers to a party which undertakes 
manufacturing pursuant to a contract with a tolling contractor, such as 
the arrangement we proposed. This commenter also requested that EPA 
clarify that the ``product'' required to be produced under a tolling 
contract can include intermediates, as well as final products, and that 
materials used in toll manufacturing were sometimes specialty chemicals 
or intermediates that could not be described as ``raw materials,'' as 
would be required under our proposal. They suggested that we use the 
term ``specified materials'' instead.
EPA's Response: Terms Used in Tolling Exclusion
    The Agency agrees that the suggested term ``toll manufacturer'' is 
more accurate and has revised the definition in Sec.  260.10 
accordingly. EPA also agrees that a product produced under a tolling 
contract can be an intermediate or a final product and has revised the 
definition in Sec.  260.10 to refer to ``production of a product or 
intermediate.'' Finally, the Agency agrees that the term ``raw 
materials'' may not be accurate, but prefers to use the term ``unused 
materials'' instead of ``specified materials,'' because we believe that 
term encompasses specialty chemicals and intermediates without also 
including spent or secondary materials, which are not included in our 
definition of toll manufacturing.

B. Restrictions on Exclusions for Hazardous Secondary Materials Managed 
Under the Control of the Generator in Land-Based Units and Non-Land-
Based Units

    In its March 2007 supplemental proposal, the Agency proposed in 40 
CFR 261.4(a)(23)(i) that hazardous secondary materials generated and 
legitimately reclaimed under the control of the generator must be 
contained if they were stored in land-based units (72 FR 14216). EPA 
proposed to use the existing definition of land-based units and defined 
a land-based unit in 40 CFR 260.10 as a landfill, surface impoundment, 
waste pile, injection well, land treatment facility, salt dome 
formation, salt bed formation, or underground mine or cave. EPA did not 
propose a containment limitation for such materials if they were stored 
in non-land-based units.
    EPA did not propose a regulatory definition of ``contained,'' nor 
did we propose specific performance or storage standards. We stated 
that whether hazardous secondary materials are contained would be 
decided on a case-by-case basis, and that such materials are generally 
contained if they are placed in a unit that controls the movement of 
the hazardous secondary materials out of the unit. We solicited comment 
on whether additional requirements might be necessary to demonstrate 
absence of discard when hazardous secondary materials were recycled 
under the control of the generator. In particular, we asked whether 
additional requirements for storage would be appropriate, such as 
performance-based standards designed to address releases to the 
environment. We also indicated that if commenters believed such 
requirements were appropriate, they should specify the technical 
rationale for each requirement suggested and why the requirement is 
necessary if the hazardous secondary material remains under the control 
of the generator.
Comments and EPA's Response: Definition of ``Land-Based Unit''
    EPA received several comments expressing confusion over our 
proposed definition of ``land-based unit.'' We proposed land-based unit 
to mean ``a landfill, surface impoundment, waste pile, injection well, 
land treatment facility, salt dome formation, salt bed formation, or 
underground mine or cave.'' Commenters noted that including 
``landfills'' and ``injection wells'' was not necessary for the 
proposed exclusion, since these management units are clearly 
inappropriate for

[[Page 64729]]

hazardous secondary materials intended for recycling. Furthermore, 
commenters also noted that Subtitle C defines these terms waste-
centrically (i.e., as a unit that handles ``waste'' in one way or 
another). This could create confusion because a hazardous secondary 
material would not, by definition, be ``managed'' (or ``stored'') in 
one of these ``waste'' units. EPA agrees with these comments, and in 
the final rule has defined ``land-based unit'' as an area where 
hazardous secondary materials are placed in or on the land before 
recycling. However, as discussed below, the Agency has clarified that 
land-based units that are production units are not included in the 
definition.
Comments and EPA's Response: Mineral Processing Industry
    Some commenters asserted that the Agency has no jurisdiction over 
land-based production units in the mineral processing industry. As 
previously stated, EPA agrees that the Agency does not regulate the 
production process. (See 63 FR 28580). Accordingly, EPA has clarified 
the definition of ``land-based unit'' to clarify that production units 
are not included in that definition. However, these commenters also 
asserted that EPA cannot legally require containment for these units. 
To the extent that these comments are intended to mean that EPA cannot 
regulate material that has been released into the environment, these 
comments are addressed in section XV.C. of this preamble, and also in 
the response to comments document in the record for this rulemaking.
Comments: Standards for Units (Both Land-Based and Non-Land-Based)
    Other commenters, however, were opposed to allowing any land-based 
storage, at least without a RCRA Part B permit or strict requirements, 
such as secondary containment, leak detection measures, regular 
inspections, monitoring, or financial assurance. Most of these 
commenters did not appear to distinguish between land-based units under 
the generator-controlled exclusion and those under the exclusion for 
hazardous secondary materials transferred for reclamation; presumably, 
they wanted the same conditions for both.
    Regarding non-land-based units such as tanks, containers, or 
containment buildings, some commenters agreed with EPA's approach, but 
other commenters preferred minimum storage standards for these units. 
Some commenters wanted Subtitle C standards to apply. Other commenters 
believed that the RCRA hazardous waste requirements were not necessary, 
but suggested other standards, such as requiring tanks to be in good 
condition, to be compatible with the stored material, to have secondary 
containment, or to be subject to routine inspections.
EPA's Response: Standards for Units (Land-Based and Non-Land-Based)
    After evaluating these comments, the Agency has decided not to add 
performance standards or other requirements for managing hazardous 
secondary materials excluded under any of the exclusions promulgated 
today (Sec. Sec.  261.2(a)(2)(ii), 261.4(a)(23), or 261.4(a)(24)). Such 
detailed measures are unnecessary for hazardous secondary materials 
that are handled as valuable products that are destined for recycling. 
Under today's rule, regulatory authorities can determine whether such 
materials in a unit are contained by considering all such site-specific 
circumstances. For example, local conditions can greatly affect whether 
hazardous secondary materials managed in a surface impoundment are 
likely to leak and cause damage, and, therefore, whether the unit could 
be considered contained. Similarly, facilities may employ such measures 
as liners, leak detection measures, inventory control and tracking, 
control of releases, or monitoring and inspections. Any or all of these 
practices may be used to determine whether the hazardous secondary 
materials are contained in the unit.
    EPA also believes that detailed standards are not necessary to 
determine that valuable materials destined for recycling are not 
discarded when managed in non-land-based units. As with land-based 
units, the regulatory authorities can identify hazardous secondary 
materials that have been released from the unit and determine that the 
released material is discarded. To clarify this approach and to 
facilitate its implementation, however, EPA has revised its regulatory 
language to require that hazardous secondary materials that are 
generated and reclaimed under the control of the generator and managed 
in non-land-based units must also be contained (Sec.  261.4(a)(23)(i)).
Comments and EPA's Response: State Regulatory Program-Compliant Units
    A few commenters indicated that hazardous secondary materials 
managed in units complying with state regulatory programs to address 
releases should be considered contained. Because of the variety of such 
programs, and because the Agency has not conducted an in-depth 
evaluation of such state requirements, we are not adding a definition 
of ``contained'' that would incorporate this suggested element. 
However, regulatory authorities may consider compliance with such 
requirements as one of the factors in determining whether the hazardous 
secondary materials are contained in the units.
Comments: Releases
    In the March 2007 supplemental proposal, the Agency stated that 
hazardous secondary materials that remain contained in these units 
would still meet the terms of the exclusion even if a release occurred, 
unless the hazardous secondary materials are not managed as a valuable 
product, and, as a result, a significant release from the unit takes 
place. If such a significant release occurred, the hazardous secondary 
material remaining in the unit may be considered a solid and hazardous 
waste. Some commenters noted that a series of small releases from a 
unit could occur over time, causing cumulative environmental harm even 
though no single release was significant in terms of volume. These 
commenters said that such a series of releases should generally lead to 
the conclusion that the hazardous secondary material remaining in the 
unit was a waste.
EPA's Response: Releases
    EPA agrees with the comment concerning small releases from a unit 
over time. Thus, a ``significant'' release is not necessarily large in 
volume, but would include an unaddressed small release from a unit 
that, if allowed to continue over time, could cause significant damage. 
Any one release may not be significant in terms of volume. However, if 
the cause of such a release remains unaddressed over time and hazardous 
secondary materials are managed in such a way that the release is 
likely to continue, the hazardous secondary materials in the unit would 
not be contained. For example, a rusting tank or containers that are 
deteriorating may have a slow leak that, if unaddressed, could, over 
time, cause a significant environmental impact. Similarly, a surface 
impoundment with a slow, unaddressed leak to groundwater could, over 
time, result in significant damage. Another example would be a large 
pile of lead-contaminated finely ground material without any provisions 
to prevent wind dispersal of the particles. Such releases, if 
unaddressed over time and likely to continue, would mean that the 
hazardous secondary materials remaining in the unit were not being

[[Page 64730]]

managed as a valuable raw material, intermediate, or product and that 
the materials had been discarded. As a result, the hazardous secondary 
materials in the unit would be hazardous wastes and these units would 
be subject to the RCRA hazardous waste regulations.

XVII. Major Comments on the Exclusion for Hazardous Secondary Materials 
Transferred for the Purpose of Legitimate Reclamation

A. Status of Facilities Other Than the Generator or Reclaimer 
(``Intermediate Facilities'')

Comments: Intermediate Facilities
    In its March 2007 supplemental proposal, EPA requested comment on 
its proposal that under the proposed exclusion for hazardous secondary 
materials transferred for reclamation, such materials would have to be 
transferred directly from the generator to the reclaimer and not be 
handled by anyone other than a transporter.
    EPA received many comments on this provision. Some commenters 
supported the provision as proposed because they were concerned that if 
hazardous secondary materials were transferred to a ``middleman,'' the 
generator would not have a reasonable understanding of who would 
reclaim the hazardous secondary materials and how they would be managed 
and reclaimed. If the generator was unable to ascertain whether the 
hazardous secondary materials in question could be properly and 
legitimately recycled, the materials should be considered discarded.
    Other commenters objected to this proposed limitation. They argued 
that many persons who generate smaller quantities of hazardous 
secondary materials need help in consolidating shipments to make 
reclamation economically feasible. Some of these commenters also argued 
that intermediate facilities provided valuable assistance to generators 
by helping them properly transport, package, and store material, and by 
helping them find responsible reclaimers. These commenters believed 
that EPA's proposed limitation could discourage reclamation by persons 
who generate smaller quantities of such hazardous secondary materials.
    Most of the commenters who suggested that intermediate facilities 
be eligible for the exclusion also suggested conditions for these 
facilities. These conditions included requiring the generator to select 
the reclaimer, requiring the generator to perform reasonable efforts on 
the intermediate facility, as well as the reclaimer, and requirements 
for notification and recordkeeping. A few commenters argued that 
intermediate facilities should be required to have a RCRA Part B permit 
or interim status.
EPA's Response: Intermediate Facilities
    After evaluating these comments, the Agency has decided that 
intermediate facilities storing hazardous secondary materials should be 
eligible for the exclusion at 40 CFR 261.4(a)(24) under certain 
conditions. We believe that such facilities make it easier for 
generators that generate smaller quantities of hazardous secondary 
materials to send these materials for reclamation and that storage at 
such facilities under the conditions designed to address discard is 
completely consistent with handling the hazardous secondary materials 
as valuable commodities. To this end, we have added a new definition of 
``intermediate facility'' to 40 CFR 260.10. We note that this rule does 
not address ``brokers'' because that term is commonly understood to 
mean a person who helps arrange for the transfer of hazardous waste or 
hazardous secondary material, but does not take possession of the 
material or manage it in any way. Brokers that never take possession of 
hazardous secondary materials would not have been affected under the 
supplemental proposal, nor are they affected by today's rule.
    Under today's rule, an intermediate facility is a facility that 
stores hazardous secondary materials for more than 10 days, other than 
a generator or reclaimer of such materials. If an intermediate facility 
treats the hazardous secondary materials or commingles it with other 
hazardous secondary materials or with hazardous waste, it would not be 
eligible as an ``intermediate facility'' as defined in Sec.  260.10 
under today's regulation. Under 40 CFR 260.42, intermediate facilities 
must submit the same notification required of generators and reclaimers 
of hazardous secondary materials transferred for reclamation. In 
addition, under Sec.  261.4(a)(24)(v) of today's rule, generators must 
also perform appropriate reasonable efforts on the intermediate 
facility, as well as the reclamation facility, and generators are 
responsible for the ultimate selection of the reclamation facility. 
These requirements will ensure that the intermediate facility is 
handling the hazardous secondary materials as a commodity.
    Today's rule also requires intermediate facilities to comply with 
the applicable requirements for reclaimers of hazardous secondary 
materials under 40 CFR 261.4(a)(24)(vi), including recordkeeping, 
storage of excluded materials, financial assurance, and speculative 
accumulation. The Agency believes that these conditions are fully 
sufficient to ensure that hazardous secondary materials stored at 
intermediate facilities are handled as valuable products and not 
discarded. Therefore, we do not agree with those commenters who 
suggested that intermediate facilities should be required to operate 
under Part B permits or interim status.
    The Agency notes that in some cases, the intermediate facility 
performs the physical measures associated with generator reasonable 
efforts to ensure that the reclaimer will properly and legitimately 
recycle the hazardous secondary materials. These measures may include 
facility inspections and preparation of audits. In those cases, the 
generator must carefully review such measures to ensure that any 
information provided is credible.
    Under today's rule (see 40 CFR 261.4(a)(24)(ii)), if hazardous 
secondary materials are stored for 10 days or less at a transfer 
facility, the transit is not subject to the requirements applicable to 
intermediate facilities under the transfer-based exclusion. Instead, it 
must only be packaged in accordance with applicable DOT requirements. 
The Agency considers hazardous secondary materials stored by transfer 
facilities for short periods of time to be in transit, similar to 
hazardous waste stored by similar facilities for the same time period. 
They are therefore not discarded. We have revised the existing 
definition of ``transfer facility'' at 40 CFR 260.10 to clarify that 
such facilities may store hazardous secondary materials, as well as 
hazardous waste. The generator need not perform reasonable efforts on 
such facilities, nor must such facilities comply with the requirements 
applicable to reclaimers of hazardous secondary materials under 40 CFR 
261.4(a)(24)(vi). In addition, hazardous secondary materials at 
transfer facilities may be repackaged from one container to another 
(e.g., the materials may be consolidated from smaller to larger 
containers) or transferred to different vehicles for shipment (see 45 
FR 86966, December 31, 1980). However, different hazardous secondary 
materials may not be mixed together. In addition, if there is a release 
of the hazardous secondary materials at the transfer facility that is 
not cleaned up immediately, such materials become solid waste, and, if 
they exhibit a hazardous characteristic or are specifically listed by 
EPA, a hazardous waste as well. Depending on the nature of the release, 
the hazardous secondary materials remaining in the unit could

[[Page 64731]]

also become a solid and hazardous waste subject to Subtitle C 
regulation (for a discussion of when such units are considered 
``contained,'' see section XVI of this preamble).

B. Reasonable Efforts Condition

    EPA received many comments on the condition proposed in the March 
2007 supplemental proposal that generators ``make reasonable efforts to 
ensure that the reclaimer intends to legitimately recycle the material 
and not discard it * * * and that the reclaimer will manage the 
material in a manner that is protective of human health and the 
environment.'' This condition was proposed to be fulfilled by hazardous 
secondary material generators sending hazardous secondary materials to 
any reclamation facility not operating under a RCRA Part B permit or 
interim status standards, and the condition would have to be satisfied 
prior to transferring the hazardous secondary materials to the 
reclamation facility (72 FR 14190-14194). Below is a summary of six 
major issues raised in the comments and EPA's responses. For more 
detailed comment responses, please see Revisions to the Definition of 
Solid Waste Response to Comments Document.
Comments: An Objective Standard for Reasonable Efforts
    As proposed, the codified reasonable efforts provision for 
generators was a general standard, rather than a more specific standard 
with clearly stated requirements. EPA requested comment on establishing 
a more objective standard for making reasonable efforts, such as 
requiring generators to answer the questions discussed in the preamble. 
EPA acknowledged that creating an objective standard could provide 
generators and overseeing agencies with more regulatory certainty and 
requested comment on codifying the six questions outlined in the 
preamble.
    EPA received many comments in support of an objective standard for 
satisfying the reasonable efforts condition. Commenters suggested that 
a minimum standard was needed to determine whether a generator 
fulfilled the condition and as a way of determining what is 
``reasonable.'' Many of these commenters also believed that a standard 
that generators must meet was necessary to delineate liability for 
hazardous secondary materials that are transferred from a generator to 
a reclamation facility. In contrast, several commenters suggested that 
formalizing a minimum standard which all generators must meet is 
inappropriate since recycling is inherently case-specific.
    On the issue of whether to codify a reasonable efforts standard, 
which several commenters addressed separately from the development of a 
standard, EPA received many comments both in support of and against 
codification. A large number of commenters addressed this issue by 
commenting on the six questions EPA discussed in the preamble. Those in 
favor of codification believed that establishing a minimum, objective 
standard was important in order to provide regulatory certainty for 
generators regarding what is ``reasonable'' and for overseeing agencies 
needing to make consistent determinations that the condition is 
satisfied. Industry commenters responding in support of codification 
believed the six questions resemble existing audit questions, and would 
therefore be straightforward to answer and satisfy. Recyclers and waste 
management commenters believed that small quantity generators would 
benefit from having a clear standard and also that the standard would 
make additional clarifying guidance unnecessary in the future. Some 
commenters conditionally supported codification contingent upon 
severance of RCRA liability for generators that meet the minimum 
condition. These commenters supported EPA's proposal to create what 
they termed as a ``safe harbor'' for generators that, having met the 
reasonable efforts condition, would be shielded from any future RCRA 
liability caused by environmental damage at a reclamation facility.
    On the other hand, several commenters (mostly from the generating 
industry) opposed codifying a standard. They believed a standard would 
be unnecessary since generators that already audit recyclers have 
existing criteria for making reasonable efforts. Some of these 
commenters also stressed a need to maintain flexibility in their 
activities and to avoid additional burdensome requirements. One state 
commenter requested that EPA allow generators to establish their own 
standard for reasonable efforts so that generators will weigh their own 
level of risk and ultimately be responsible for their decisions. This 
commenter also believed that one standard is impractical for both ``a 
large industrial generator of a highly toxic hazardous secondary 
material'' and ``a small generator of a barely ignitable hazardous 
secondary material.''
    Of the commenters that responded to the March 2007 supplemental 
proposal to codify a standard for reasonable efforts, many also 
provided comments on the six questions in the preamble. In general, 
commenters were divided between supporting and opposing codification of 
all six questions, but responses were generally favorable when 
commenters discussed the value of individual questions within a 
reasonable efforts inquiry. One exception to this is with respect to 
proposed question (B) (``Does the reclamation facility have the 
equipment and trained personnel to properly recycle the hazardous 
secondary material?''), which several commenters believed to be 
difficult for a hazardous secondary material generator to answer with 
existing knowledge. A few commenters also noted that questions (D) and 
(E), the two proposed questions pertaining to legitimacy within the 
preamble discussion of reasonable efforts, did not represent the 
legitimacy ``factors to be considered'' that were proposed in the March 
2007 supplemental proposal at 40 CFR 261.2(g). These commenters 
suggested that a reasonable efforts inquiry should include all criteria 
and factors in the proposed legitimate recycling requirement. A few 
commenters also suggested including an additional question about the 
financial health of a reclaimer.
EPA's Response: An Objective Standard for Reasonable Efforts
    After evaluating these comments, EPA agrees that an objective 
minimum standard is appropriate and necessary for hazardous secondary 
material generators to determine that they have fulfilled the 
reasonable efforts condition. We believe that without such a standard, 
both generators and the regulatory agencies would experience difficulty 
in determining whether the condition is met. However, in defining the 
standard, it would in no way limit a generator's ability to tailor and 
enhance its reasonable efforts inquiry to evaluate a particular 
industry or recycler.
    We also agree with the commenters who stated that the six questions 
from the preamble to the March 2007 supplemental proposal, with two 
modifications noted below, serve as a minimum objective standard. 
Therefore, we are codifying them, with certain modifications. We 
strongly believe that any generator who takes advantage of today's 
transfer-based exclusion must be able to answer all reasonable efforts 
questions affirmatively for each reclamation facility (and intermediate 
facility, if such hazardous secondary materials are sent to such a 
facility) in order to demonstrate that its hazardous

[[Page 64732]]

secondary materials will be properly and legitimately recycled and not 
discarded. In EPA's view, a generator who is unable to satisfy the 
reasonable efforts condition has not demonstrated that its hazardous 
secondary materials are not discarded when recycled. The hazardous 
secondary materials would thus be ineligible for today's transfer-based 
exclusion.
    With respect to question (4) (``Does the available information 
indicate that the reclamation facility and any intermediate facility 
that is used by the hazardous secondary material generator have the 
equipment and trained personnel to safely recycle the hazardous 
secondary material?''), we believe that its inclusion within reasonable 
efforts is appropriate and necessary since the question informs a 
generator's inquiry as to whether its hazardous secondary materials 
will be properly and legitimately recycled. If a reclamation facility 
were found to have inadequate equipment or untrained personnel, it 
would raise serious questions as to whether the facility would be 
engaged in proper recycling or discard. Without exploring this 
question, we believe that a generator cannot ascertain that a 
reclamation facility will properly and legitimately recycle its 
hazardous secondary materials. However, we also agree that, as drafted 
in the proposed rule, answering this question may require specialized 
knowledge and expertise. Accordingly, EPA is changing this question to 
allow the generator to rely on the reclamation facility to explain why 
its equipment and personnel are appropriate. Of course, the generator 
must have an objectively reasonable belief that the reclamation 
facility's equipment and trained personnel are adequate for safe 
recycling. Accordingly, if the equipment and personnel described by the 
reclamation facility would be, to an objective reasonable person, 
clearly inadequate for safe recycling of the generator's hazardous 
secondary material, then the generator would not have met this 
condition. However, EPA does not require nor expect the generator to 
have specialized knowledge or expertise of the recycling process. We 
also discuss in more detail how a generator can answer this question in 
section VIII.C.2. of this preamble.
    As noted previously, we are codifying the questions with two 
modifications. The first modification to the questions is language that 
accommodates the inclusion of intermediate facilities within the 
transfer-based exclusion. As discussed in section VIII.C. of this 
preamble, if a generator sends hazardous secondary materials to an 
intermediate facility where they are stored for longer than 10 days 
prior to being transferred to a reclamation facility, the generator 
will need to perform reasonable efforts for both the intermediate 
facility and reclamation facility.
    The second modification is to the questions pertaining to 
legitimate recycling activities. EPA acknowledges that one source of 
confusion for commenters regarding the relationship between the 
reasonable efforts condition and the legitimate recycling requirement 
may have been the two questions pertaining to legitimacy (proposed 
questions (D) and (E)) within the reasonable efforts preamble 
discussion and the proposed legitimacy requirement at 40 CFR 261.2(g). 
Questions (D) and (E) and the proposed regulatory language for 
legitimacy did not share the exact same wording, although both concepts 
were intended to be consistent. Furthermore, we understand the concern 
commenters raised that questions (D) and (E) did not represent the 
legitimacy ``factors to be considered'' that were proposed within 40 
CFR 261.2(g). As a result, we have restructured the reasonable efforts 
questions pertaining to legitimacy to read as a single question that 
ensures that a reclamation facility receiving hazardous secondary 
materials intends to legitimately recycle the hazardous secondary 
materials. Because of changes to the legitimacy provision in this final 
rule as compared to the March 2007 supplemental proposal, this question 
now refers to the legitimacy requirement in Sec.  260.43 of today's 
final rule.
Comments: Liability Related to Reasonable Efforts
    EPA proposed the reasonable efforts condition as a way for 
hazardous secondary material generators to demonstrate that they met 
their regulatory obligation to ensure that their hazardous secondary 
materials, when transferred to a reclamation facility, would not be 
discarded. Based on our assessment of good recycling practices and the 
comments received, we believe that the reasonable efforts condition 
reflects current industry best practices of auditing or assessing 
reclamation facilities prior to entering into business relations; this 
is done to minimize potential regulatory and liability exposures and to 
demonstrate a commitment to environmental stewardship.
    We received many comments related to liability and the reasonable 
efforts condition. Many commenters stated that making reasonable 
efforts to evaluate a reclaimer is a good method for limiting future 
liability and that many generators already employ some form of the 
practice. These commenters largely supported the provision. Other 
commenters expressed concern that the reasonable efforts condition is 
an unnecessary requirement since existing incentives, such as economic 
motivations and CERCLA liability, would cause a generator to perform 
evaluations of reclaimers without being mandated as a condition of the 
exclusion.
    Additionally, EPA received comments about whether satisfying the 
reasonable efforts condition would sever a generator's regulatory 
liability if, after being sent to a reclamation facility, its hazardous 
secondary materials were discarded or involved in environmental damage. 
Several commenters (namely from industry) asked that EPA clarify that 
upon conducting a reasonable efforts evaluation of a reclamation 
facility, a generator would not be liable for a reclaimer's subsequent 
environmental violations or if a reclaimer's actions caused or 
contributed to some environmental harm or damage. Many of these 
commenters supported the codification of a reasonable efforts standard, 
provided that liability would be severed upon meeting the condition. 
Conversely, several commenters stated that generator liability should 
be maintained into the future regardless of satisfying the condition. 
In general, these commenters were concerned that hazardous secondary 
material generators could subvert RCRA liability by conducting 
incomplete and superficial evaluations of reclaimers, and that future 
environmental damage would result at reclamation facilities. A few of 
these commenters suggested that EPA clarify that a hazardous secondary 
material generator would be held liable for violating the condition of 
the exclusion into the future if it was shown that the generator did 
not conduct a thorough assessment of the reclaimer.
EPA's Response: Liability Related to Reasonable Efforts
    EPA disagrees that the reasonable efforts condition is unnecessary 
in light of economic forces or CERCLA liability, which may motivate 
some generators to evaluate recyclers. We proposed the reasonable 
efforts condition as a way for hazardous secondary material generators 
to demonstrate that they are not discarding the hazardous secondary 
materials when sending them to a third party for reclamation. The 
language of the condition is intended to capture within the regulatory 
text how

[[Page 64733]]

responsible generators currently inquire and make decisions about 
recycling of hazardous secondary materials and how generators manage 
potential liability and regulatory non-compliance risks. Several 
commenters suggested that not all generators currently audit or 
evaluate reclamation facilities despite having economic interests and 
existing liability concerns. Analysis of the environmental problems 
study also suggests that CERCLA liability alone is not enough to 
prevent damage and that increased generator inquiry of reclamation 
facilities may help avoid future cases of abandonment or discard, 
residuals mismanagement, sham recycling, and improper management of 
hazardous secondary materials and recycled products.
    By proposing the reasonable efforts condition, EPA intended to 
maintain RCRA liability for any hazardous secondary materials that are 
discarded. The condition clearly holds a generator accountable for 
determining that its hazardous secondary materials will not be 
discarded at a reclamation facility or any intermediate facility prior 
to transferring such materials to the facility. If a generator does not 
meet the condition, then the generator's hazardous secondary materials 
would not be eligible for the transfer-based exclusion and would be 
considered by EPA to be hazardous waste subject to the RCRA Subtitle C 
controls from the point of generation.
    EPA did intend, however, that if the hazardous secondary materials 
generator had satisfied the reasonable efforts condition and discard 
subsequently occurred while hazardous secondary materials were under 
the control of the reclamation or intermediate facility, then the 
reclamation or intermediate facility, not the generator, would be 
liable under RCRA. EPA acknowledges that meeting this condition will 
not affect CERCLA liability. (See section XIII for more information on 
CERCLA liability.) We recognize commenters' concern that in order to 
satisfy the reasonable efforts condition and be released from RCRA 
liability, hazardous secondary material generators could be tempted 
into making incomplete evaluations of reclamation and intermediate 
facilities. EPA believes that codifying an objective reasonable efforts 
standard that all generators must meet in order to satisfy the 
condition will alleviate this concern (see section VIII.C. of today's 
rulemaking for more discussion). We also believe that specifying a 
standard that hazardous secondary material generators must satisfy will 
assist both regulatory agencies and the regulated community in 
determining whether the condition of the exclusion has been met or 
violated.
Comments: Relationship Between the Reasonable Efforts Condition and the 
Legitimate Recycling Requirement
    EPA received a variety of comments on the relationship between the 
condition that hazardous secondary material generators must make a 
reasonable efforts inquiry of reclamation facilities and the 
requirement that hazardous secondary materials must be legitimately 
recycled. Several commenters stated that evaluating whether a reclaimer 
meets the legitimacy criteria should be part of a reasonable efforts 
inquiry to ensure that a generator's hazardous secondary materials are 
legitimately recycled. One commenter stated that while a hazardous 
secondary material generator would need to ensure that a recycling 
activity being considered is legitimate in order to protect its own 
liability interests, a legitimacy determination should be entirely 
separate from the reasonable efforts condition. Another commenter also 
stressed that, as a matter of good practice, many responsible 
generators already ensure that they send hazardous secondary materials 
to facilities engaged in legitimate recycling; therefore, a legitimacy 
evaluation within reasonable efforts is unnecessary. Furthermore, 
several commenters (mostly from industry) stated that a reasonable 
efforts condition is redundant since the proposed legitimate recycling 
requirement in 40 CFR 261.2(g) ensures that hazardous secondary 
materials transferred off-site are safely recycled.
EPA's Response: Relationship Between the Reasonable Efforts Condition 
and the Legitimate Recycling Requirement
    EPA agrees with the commenters who stated that determining whether 
a recycling activity is legitimate is a sound practice and, based on 
comments we received, that many responsible generators already use 
existing legitimacy guidance as a way to manage their potential 
liability. The reasonable efforts condition is intended to assist 
generators in determining that their chosen reclamation facilities will 
properly and legitimately recycle the generators' hazardous secondary 
materials. Consequently, EPA strongly believes that the reasonable 
efforts condition must contain a provision that explicitly refers 
generators to their obligation to ensure that their hazardous secondary 
materials are legitimately reclaimed. Including legitimacy as part of 
the reasonable efforts condition means that if the generator made 
reasonable efforts to ensure that its hazardous secondary materials are 
legitimately recycled in a way that satisfies this condition and, 
subsequently, the reclamation facility fails to recycle the materials 
legitimately, the reclamation facility, not the generator, becomes 
liable for violating RCRA (see section VIII.E. for more information).
Comments: Periodic Updates to Reasonable Efforts
    EPA requested comment on a requirement for making periodic updates 
to reasonable efforts, but did not propose an explicit time period. 
Some commenters favored requiring a specific time limit for updating 
the reasonable efforts provision, while others (a slightly smaller 
number) favored a flexible time frame for updating reasonable efforts, 
to be determined by the hazardous secondary material generator. The 
commenters who supported a specific time frame for updating the 
reasonable efforts condition included states, several representatives 
of the recycling industry, one industry generator, and one 
environmental organization. Several of these commenters stated that the 
hazardous secondary material generator needed to evaluate changes over 
time to the recycling facility (e.g., compliance status, financial 
assurance, permit renewals, impact of changes in recycling markets) to 
ensure that their hazardous secondary materials continue to be recycled 
properly and legitimately. Commenters also suggested that generators 
re-evaluate recyclers whenever the generator becomes aware of new, 
``material'' information about or changes to a reclamation facility. 
These commenters asked EPA to set a minimum schedule for updating 
reasonable efforts. The suggested schedules ranged from annually to 
every five years.
    Several industry generators and associations, as well as one waste 
management association, submitted comments in opposition to requiring 
specific periodic updates of the reasonable efforts provision. 
Commenters expressed concern that an arbitrary time frame would 
unnecessarily change generators' current schedules for auditing or 
making inquiries of recycling facilities. Several commenters suggested 
that schedules for evaluating reclaimers should vary from facility to 
facility and by industry and that a generator should be allowed to 
decide when to update reasonable efforts given a facility's history and 
the generator's familiarity

[[Page 64734]]

with the facility. One commenting organization cited its use of an 
internal risk-based audit schedule to determine when to review a 
reclamation facility. The stated criteria for judging the level of risk 
included facilities with lower financial health and the addition of 
``new processing capabilities and when ownership changes.'' Another 
generator requested EPA to ``suggest, and not require, the frequency of 
periodic updates.''
EPA's Response: Periodic Updates to Reasonable Efforts
    EPA agrees with the comments stating that requiring generators to 
conduct specific periodic updates of the reasonable efforts provision 
is critical for ensuring that reclamation facilities continue to 
properly and legitimately recycle the hazardous secondary materials 
into the future. We believe that if a hazardous secondary material 
generator evaluated a reclamation facility (or an intermediate facility 
if hazardous secondary material is sent to such a facility) only once 
before the initial transfer of hazardous secondary materials for 
recycling, it would not provide adequate assurance to regulators that 
hazardous secondary material generators have met the reasonable efforts 
condition to ensure discard will not occur 5, 10, or 20 years into the 
future. We understand that generators often evaluate recyclers or 
intermediate facilities on a recurring schedule determined by the 
generator's particular interests, concerns, and experience. However, 
EPA believes that hazardous secondary material generators are also 
interested in having regulatory certainty regarding the time frame for 
which reasonable efforts must be conducted, rather than a completely 
discretionary ``generator decides'' approach, which will present many 
disagreements and challenges as to what a ``reasonable'' schedule is. 
We are also aware that many generators do not currently conduct 
reasonable efforts, let alone re-evaluate such facilities over time. 
For these reasons, we are requiring that hazardous secondary material 
generators update their reasonable efforts evaluation at least every 
three years, at a minimum. Based on public comments, this appears to 
represent general industry practice and to be within the average time 
frame for those generators who currently conduct environmental audits 
of facilities to which they send their hazardous secondary materials.
    By specifying a time frame for periodic updates, EPA in no way 
intends to limit a generator to conducting evaluations only every three 
years. In fact, we acknowledge that shorter time frames could be 
appropriate for certain industries. Additionally, we would expect that 
any hazardous secondary material generator who has concerns about a 
reclamation or intermediate facility, or who gains new knowledge of 
significant changes or extraordinary situations at such facilities, 
would conduct reasonable efforts regardless of the minimum required 
update schedule.
Comments: Requiring Generators to Certify Reasonable Efforts
    EPA solicited comment on requiring hazardous secondary material 
generators to certify that they made reasonable efforts prior to 
arranging for transport of hazardous secondary materials to be 
recycled. As discussed in the preamble to the March 2007 supplemental 
proposal, the certification statement would be a form of documentation 
necessary for each reclamation facility and would be signed and dated 
by an authorized representative of the generator company. We also 
provided certification language as an example.
    Several commenters including recyclers, all responding states but 
one, and a few industry generators and associations, commented in favor 
of requiring hazardous secondary material generators to certify that 
they had met the reasonable efforts condition. All commenters that 
responded regarding the example certification statement supported the 
language. A few commenters reiterated that generators must certify 
reasonable efforts for each reclamation facility and that certification 
should not be necessary for RCRA Part B permitted facilities. One 
commenter requested that the certification must be made ``prior to 
implementing exempt operations.'' Another commenter believed that a 
certification statement would improve the enforceability of the 
reasonable efforts condition. A generator that currently audits its 
waste facilities stated that ``a letter signed and dated by the 
department manager is mailed to the audited facility stating the 
results of the audit,'' and that the letter should act as a 
certification. Another commenter suggested that given the large number 
of facilities for which reasonable efforts are required, having a 
company representative, as opposed to an ``authorized representative,'' 
sign and date a certification should be sufficient and would be less 
burdensome. One recycler requested that the generator certification and 
signature be built into the one-time notification that EPA is requiring 
for the exclusion.
    A smaller number of comments from generators opposed the 
certification requirement. A few generators found the certification 
statement to be overly burdensome and stated that it would stifle the 
use of third-party reclaimers. One generator, who currently audits 
reclamation facilities, stated it could not certify the accuracy of 
information prepared by third parties, nor could it certify responses 
by reclamation facilities to questions (B) through (E), which EPA 
discussed in the preamble. Another generator responded that without 
further clarification as to the minimum requirements for satisfying 
reasonable efforts, the generator could not certify that the condition 
was met. A commenter also suggested that requiring certification of 
reasonable efforts for reclamation facilities that recycle hazardous 
secondary materials was unnecessary if certification is not required 
for the storage, treatment, and disposal of hazardous waste.
EPA's Response: Requiring Generators To Certify Reasonable Efforts
    After evaluating the comments, EPA has concluded that certifying 
the reasonable efforts provision is a necessary and minimally 
burdensome requirement for ensuring that the reasonable efforts 
condition is met prior to transferring the hazardous secondary 
materials to a reclamation facility. We also strongly believe that 
requiring the signature of an authorized representative of the 
generator company, who can be any appointed company representative, is 
critical for ensuring accountability for satisfying the condition. In 
the event of an enforcement action, we believe that the certification 
will lend support to hazardous secondary material generators needing to 
prove that the reasonable efforts condition was met. Therefore, in 
today's final rulemaking, we are finalizing a requirement that 
hazardous secondary material generators must certify that reasonable 
efforts were made for each reclamation and intermediate facility prior 
to transferring hazardous secondary materials to such facilities.
    With respect to those commenters who opposed certification and 
specifically argued that requiring such certification would stifle the 
use of third-party auditors, it is our understanding that third-party 
auditors do not generally draw any conclusions based on their audits, 
but simply report the results. In addition, the reasonable efforts 
condition requires that the hazardous secondary material generator 
decide whether a reclaimer is acceptable. Therefore, we disagree with

[[Page 64735]]

those commenters who stated that requiring a certification would 
constitute a significant new burden. Rather, EPA believes that 
requiring a hazardous secondary material generator to certify the 
reasonable efforts condition would provide them the flexibility to use 
audits or other information necessary in certifying that the condition 
of the exclusion was met. We find that the commenter example of an 
existing practice of sending a letter with audit results to an audited 
facility would need to include the certification language in 40 CFR 
261.4(a)(24)(v)(C)(2) in order to meet the reasonable efforts 
condition.
Comments: Documenting of Reasonable Efforts
    While EPA proposed that generators conduct reasonable efforts 
before sending hazardous secondary materials to the reclamation 
facility, we did not propose that documentation records must be kept of 
such demonstrations. However, EPA requested comment on whether to 
require hazardous secondary material generators to maintain 
documentation at the generating facility demonstrating that the 
reasonable efforts condition was satisfied prior to transferring the 
hazardous secondary materials to a reclamation facility. No form of 
documentation or format was specified, although EPA did cite audits as 
one type of documentation that could be relevant. Additionally, EPA 
requested comment on whether hazardous secondary material generators 
should be required to maintain certification statements that reasonable 
efforts were conducted for each reclamation facility to which the 
generator transferred the hazardous secondary materials to be 
reclaimed.
    A majority of commenters supported a requirement that generators 
maintain documentation of reasonable efforts. A few commenters asked 
that documentation be kept on-site, while a few commenters asked that 
the documentation could be kept at a headquarters or other off-site 
location. Other commenters specifically requested that EPA not specify 
a location for the documentation. Commenters in favor of this 
requirement stated that documentation would be necessary for showing 
the basis for the reasonable efforts determination, as well as for 
improving the enforceability of the condition. A few commenters 
suggested that documentation be maintained for three years and one 
industry commenter asked that EPA set a time requirement specifying how 
long such documentation must be kept.
    On the other hand, a few commenters were opposed to a documentation 
requirement. These commenters cited the confidential and proprietary 
nature of the audits and reports used by generators for making 
reasonable efforts and stated they did not believe they should share 
this information with regulators. A few commenters, including one 
state, also argued that a certification statement of having made 
reasonable efforts, signed by an authorized representative of the 
generator company, would provide adequate documentation that reasonable 
efforts were made. One state commenter also suggested that it would be 
difficult for states to enforce the requirement of documentation, 
presumably because EPA proposed that ``any credible evidence 
available'' could be used to demonstrate that the condition is met.
EPA's Response: Documenting Reasonable Efforts
    After evaluating the comments, EPA has concluded that it is 
important for hazardous secondary material generators to produce 
documentation to demonstrate that the reasonable efforts condition has 
been met prior to transferring hazardous secondary materials to a 
reclamation and/or intermediate facility. We do not believe it is 
necessary to mandate that, for example, audits are specifically 
required for documentation and we prefer to maintain some flexibility 
in terms of the format for documenting the condition based on commenter 
input and the knowledge that each reasonable efforts inquiry will be 
unique. This flexibility for documentation is also in response to 
commenter concern about the confidentiality of audits. We do not 
believe that this flexibility will in any way impact the ability of 
regulatory authorities to determine whether the condition is satisfied. 
We believe that the certification statement is critical for ensuring 
accountability for satisfying the condition and that the act of making 
reasonable efforts is in fact genuine. We believe this requirement 
helps generators support their position that hazardous secondary 
materials have not been discarded and helps regulators determine 
whether a generator has satisfied this condition. Since updates of 
reasonable efforts are required at a minimum of every three years, EPA 
believes that such generators should maintain documentation for a 
minimum of three years to show that the requirement to update 
reasonable efforts has been satisfied.
    We understand that audits and evaluations of reclamation facilities 
are not always kept on-site and may be maintained at a generator's 
headquarters or at another off-site location. For this reason, EPA is 
requiring that documentation must be made available, upon request by a 
regulatory authority, within 72 hours, or within a longer period of 
time as specified by the regulatory authority. We understand that in 
the age of near-instantaneous communication, a hazardous secondary 
material generator that performed reasonable efforts prior to 
transferring hazardous secondary materials should be able to retrieve 
documentation with relative ease. We also note that time frames for 
producing documentation are generally determined by regulatory 
authorities on a case-by-case basis and time frames are clearly 
outlined by authorities within RCRA Section 3007 information request 
letters.

C. Financial Assurance Requirement

    In EPA's March 2007 supplemental proposal, EPA proposed that 
reclamation facilities receiving and recycling hazardous secondary 
materials under the transfer-based exclusion be required to demonstrate 
financial assurance in accordance with the requirements of subpart H of 
40 CFR part 265. As part of this proposal, EPA sought comment on 
whether the existing subpart H requirements should be modified in some 
way specifically for reclamation facilities affected by the proposed 
exclusion. EPA also requested comment on whether EPA should tailor the 
costing requirements associated with the subpart H financial assurance 
requirements. Because of these comments, EPA has made several revisions 
to the financial assurance condition, as explained below.
Comments: Financial Assurance
    Many commenters supported EPA's proposal that reclamation 
facilities receiving and recycling hazardous secondary materials under 
the transfer-based approach be required to demonstrate financial 
assurance in accordance with the current requirements of subpart H of 
40 CFR part 265 in order to demonstrate that the hazardous secondary 
materials are not being discarded. Commenters argued that without a 
codified financial assurance requirement, recyclers that mismanage 
hazardous secondary materials could simply close their doors (as has 
happened previously) and abandon their hazardous secondary materials, 
leaving an environmental problem for the public to address and imposing 
the financial burden of cleaning up recycling facilities on states and 
local authorities, which may not have the resources to do so.

[[Page 64736]]

Commenters also noted that EPA's environmental problems study shows 
that the primary cause of damage incidents has been the business 
failure of recycling facilities. Without financial assurance, the 
commenters argue that states and taxpayers have been left with the bill 
for cleaning up these abandoned sites. Finally, these commenters stated 
that a recycling facility that does not meet the financial test, cannot 
obtain an insurance policy or other financial instrument, and does not 
have the resources to establish a trust fund or other mechanism, should 
not be handling hazardous secondary materials under the conditional 
exclusion.
    Other commenters supported EPA's proposal on financial assurance, 
but also made suggestions for modifications. One commenter recommended 
that a financial assurance program be developed specifically for 
reclaimers. A few commenters recommended that reclamation facilities 
taking advantage of the exclusion maintain a closure plan that would be 
available for review, upon request, that substantiates and verifies the 
amount of financial assurance required.
    Still other commenters stated that reclamation facilities that 
receive hazardous secondary materials from off-site generators under 
the transfer-based approach should not be held to the same financial 
assurance standards as facilities with permits to manage hazardous 
waste. Instead, the financial assurance requirements for recycling 
facilities should reflect the relatively lower risks associated with 
the manufacturing/recycling activities. Commenters claimed that 
reclamation facilities are essentially processing raw materials for 
beneficial use as opposed to RCRA-permitted facilities that are 
treating, storing, and disposing hazardous waste.
    Finally, some commenters disagreed completely with EPA's approach 
to financial assurance. Commenters stated that EPA lacks the authority 
to subject facilities to the requirements or conditions when using 
hazardous secondary materials in production operations in which these 
materials are never discarded. Commenters stated that proposed 
conditions for the exclusion do not define the absence of discard and 
would effectively impose a waste management requirement upon a non-
waste.
EPA's Response: Financial Assurance
    EPA finds those comments that support the financial assurance 
condition persuasive and agrees with their conclusions. Requiring 
financial assurance for reclamation facilities (and intermediate 
facilities, which are included in the final rule) operating under the 
transfer-based exclusion is appropriate and reasonable for the Agency 
to determine that the hazardous secondary materials managed at these 
facilities are not discarded and is supported by the findings of the 
recycling studies conducted as part of this rulemaking effort. 
Financial assurance as a condition will ensure that the reclamation and 
intermediate facilities either have the financial wherewithal 
themselves, as demonstrated by qualifying for self insurance under the 
financial test, or that funds from a third party will be available to 
ensure that the hazardous secondary materials will not be abandoned. An 
owner or operator who must fully fund a trust to cover the retirement 
cost estimate will be careful not to discard the hazardous secondary 
materials so that he may recover the funds from the trust. Sureties, 
banks providing letters of credit and insurers will screen applicants 
to ensure that they are only providing assurance for good risks who are 
unlikely to abandon or discard such materials, thus demonstrating that 
the hazardous secondary material is not being discarded. As noted by 
the commenters, at least 138 of the 208 damage cases were firms that 
had gone out of business and abandoned the ``hazardous secondary 
material,'' a material that they presumably believed could be 
reclaimed.
    In addition, the market forces study indicates that recyclers of 
hazardous secondary materials can behave differently from traditional 
manufacturers due to differences in the economic forces and incentives 
involved in recycling. Unlike manufacturing, where the cost of raw 
materials or intermediates (or inputs) is greater than zero and revenue 
is generated primarily from the sale of the output, some models of 
hazardous secondary materials recycling involve generating revenue 
primarily from receipt of the hazardous secondary materials. This 
situation can lead to over-accumulation and abandonment of hazardous 
secondary materials, particularly in cases where the product of the 
recycling process has low value, the prices are unstable, and/or the 
firm has a low net worth.
    By requiring financial assurance, the public and federal, state and 
local governments can have confidence that the recycler's business 
model takes these market factors into consideration and that it will 
therefore not abandon the hazardous secondary materials, even if 
unforeseen market changes occur. The successful recycling study 
indicated that one of the main reasons that generators audit recyclers 
is to evaluate their financial health and resources to respond to 
accidents or other problems that could cause adverse environmental or 
human health consequences. This is primarily because of the joint-and-
several liability provisions of CERCLA, under which a generator becomes 
a ``responsible party'' obligated to pay (in part or in whole) for 
remediation expenses if (in this example) a recycler to whom he sent 
recyclable hazardous secondary materials were to create contamination 
problems, but lacked the resources to pay for the cleanup.
    Because American manufacturers have considerable experience with 
these types of CERCLA liability issues, evaluating the financial health 
of the reclamation facility before shipping recyclable hazardous 
secondary materials to them has become a standard business precaution 
for responsible generators. The condition for financial assurance thus 
can be seen as a way of addressing the same concern, thus ensuring that 
the reclamation and intermediate facility owner/operators who operate 
under the terms of this exclusion are financially sound and will not 
abandon or otherwise discard their hazardous secondary materials.
    Thus, EPA disagrees with the commenters who argued that recycling 
hazardous secondary materials is, as a general matter, the same as 
processing raw materials for beneficial use. Because of the nature of 
these materials (i.e., hazardous spent materials and listed by-products 
and listed sludges), they are frequently more difficult to process than 
most raw materials, and the nature of the economics of the transfer of 
these materials can create an incentive for discard. Requiring 
financial assurance is essential for helping to define those situations 
where the hazardous secondary material is not being discarded.
    However, EPA agrees that some adjustments to the existing 40 CFR 
part 265 financial assurance requirements would help better tailor them 
to hazardous secondary material reclamation and intermediate 
facilities. The current hazardous waste financial assurance regulations 
include provisions (such as post-closure) not appropriate to hazardous 
secondary material units, and the terminology is directed towards 
permitted TSDFs. EPA also agrees that the regulations need to be more 
explicit as to the documentation requirements for the financial 
assurance cost estimate. The financial assurance requirements in 40 CFR 
part 265 subpart H in turn

[[Page 64737]]

reference and rely on certain requirements in the 40 CFR part 265 
subpart G closure regulations. Although the hazardous secondary 
material units are not required to undergo Subtitle C closure, some of 
the provisions of 40 CFR part 265 subpart G are important to 
implementing 40 CFR part 265 subpart H and need to be clarified. As a 
convenience to the regulated community, EPA has placed the financial 
assurance requirements applicable to hazardous secondary materials in a 
stand-alone regulation (see 40 CFR part 261 subpart H). Substantively, 
these regulations generally mirror and include the same requirements as 
the 40 CFR part 265 financial assurance regulations, but they have been 
condensed and reframed to refer to reclamation and intermediate 
facilities rather than TSDFs and to directly incorporate (rather than 
just referencing) those aspects of 40 CFR part 265, subpart G that are 
necessary for implementing the financial assurance condition.
    For further discussion of how the financial assurance condition 
operates and how the provisions map to the requirements in 40 CFR part 
265, see section VIII.C of today's preamble.

D. Ability of Excluded Reclamation Facility To Accept Manifested 
Hazardous Waste

    In the March 2007 supplemental proposal, EPA proposed that 
reclaimers receiving hazardous secondary materials from generators that 
continue to manage such materials under the current hazardous waste 
regulatory system would still be able to claim the exclusion for those 
hazardous secondary materials. In essence, this would allow manifested 
hazardous waste to be sent to an unpermitted facility, as long as that 
facility met the conditions of the exclusion.
Comments and EPA's Response: Excluded Reclamation Facilities Accepting 
Manifested Waste
    Most of the commenters on this issue raised serious concerns about 
this provision, among other things arguing the fact that it would be 
unworkable. Commenters also raised concerns about the generator's 
liability under such a situation, particularly if the reclaimer failed 
to inform the generator that its hazardous waste would be managed under 
the exclusion. Commenters also noted that the lack of a requirement for 
``reasonable efforts'' on the part of the generator is contrary to the 
basic premise of the exclusion, which is that generators will be 
responsible and ensure reclaimers properly manage and recycle the 
hazardous materials.
    After considering the comments received, EPA is not allowing 
reclaimers to manage manifested federal hazardous waste under the 
exclusion. Although this provision may have increased recycling 
opportunities, the fact that the hazardous secondary material generator 
manages the hazardous secondary materials as manifested hazardous 
wastes would have decoupled the exclusion from the underlying rationale 
that the materials are not discarded.

E. Imports and Exports

    In the March 2007 supplemental proposal, the Agency proposed to 
exclude hazardous secondary materials that are exported from the United 
States for reclamation at a facility located in a foreign country, 
provided the hazardous secondary material generator complies with the 
generator requirements under the transfer-based exclusion (e.g., 
notification, reasonable efforts, etc.), as well as notice and consent 
regarding planned exports of such hazardous secondary materials. We 
also requested comment on whether the Agency should allow exports under 
the generator-controlled exclusion.
Comments: Scope of Exports
    Overall, commenters expressed few concerns with the specifics of 
the proposed export regulations, although a few disagreed with allowing 
exports of hazardous secondary materials under the proposed rule 
altogether. These commenters believed that allowing exports of such 
hazardous secondary materials would run contrary to international 
agreements (such as agreements established by the Organization for 
Economic Cooperation and Development (OECD) and the Basel Convention 
regarding transport of hazardous waste) and may also increase the risk 
of environmental damage in other countries. At least two commenters 
suggested limiting exports to our bilateral partners only (i.e., Canada 
and Mexico). On the other hand, some industry commenters argued that 
many companies have worldwide operations and would therefore benefit 
from broader provisions allowing exports of hazardous secondary 
materials to be managed under the control of the generator because it 
would improve the companies' ability to recycle hazardous secondary 
materials.
EPA's Response: Scope of Exports
    After considering these comments, the Agency is largely maintaining 
the export provisions as proposed, with some minor modifications 
described below. We believe that hazardous secondary materials exported 
for legitimate reclamation in accordance with today's final rule are 
not discarded and, thus, not solid wastes and, therefore, we have no 
basis for prohibiting exports when a hazardous secondary material 
generator complies with the regulatory requirements.
    We also disagree with commenters who believe today's rule runs 
contrary to international agreements controlling the movement of 
hazardous waste. We note the U.S. is an OECD Member and is, therefore, 
legally bound to comply with the OECD's ``Decision of the Council 
C(2001)107/FINAL, Concerning the Control of Transboundary Movements of 
Wastes Destined for Recovery Operations, as amended by C(2004)20,'' 
which provides a framework for OECD Member countries to control 
transboundary movements of recoverable waste in an environmentally 
sound manner. The Amended 2001 Decision recognizes that Member 
countries may develop their own regulations to determine whether or not 
materials are controlled as hazardous wastes. Under today's rule, 
hazardous secondary materials meeting certain conditions and exported 
for reclamation are not solid wastes under U.S. regulation. The Agency 
notes, however, that once hazardous secondary materials reach the 
border of the receiving country, the hazardous secondary material is 
regulated in accordance with the receiving country's laws and 
regulations. In other words, such hazardous secondary materials that 
are not solid and hazardous wastes under the U.S. hazardous waste 
regulations may be solid and hazardous wastes under the receiving 
country's regulations and, therefore, facilities should be aware of the 
requirements that competent authorities of receiving countries may 
impose.
    Additionally, some commenters asserted that today's rule was 
inconsistent with the Basel Convention, a separate multilateral 
international agreement governing the transboundary movements of 
hazardous wastes. The U.S., however, is not a party to the Basel 
Convention and thus is not held to the Convention's agreements 
(although, because the Convention prohibits exports between a Basel 
party and a non-Basel party, the U.S. may not export hazardous waste to 
any Basel party, absent a bilateral or multilateral agreement with that 
party). Beyond this point, EPA, in any case, considers today's rule to 
be consistent with Basel for the same reason that it is consistent with 
the OECD agreement described above.

[[Page 64738]]

    In response to comments on allowing exports under the generator-
controlled exclusion, we note this exclusion is subject to few 
restrictions and is largely based on the assumption that hazardous 
secondary materials are unlikely to be discarded because they would be 
closely managed and monitored by a single entity. However, this same 
assumption does not pertain to exports of hazardous secondary materials 
because EPA would not be able to ensure the close management and 
monitoring by a single entity of hazardous secondary materials in a 
foreign country. Accordingly, we believe that hazardous secondary 
materials exported for reclamation is excluded only if the receiving 
country has consented and is provided an opportunity to determine and 
ensure that hazardous secondary materials exported to its reclamation 
facilities are not discarded.
    Additionally, we note that in today's rule we have replaced the 
term ``exporter,'' which was used in the March 2007 supplemental 
proposal, with the term ``hazardous secondary material generator.'' 
This is because, under the exclusion for hazardous secondary materials 
exported for reclamation (today's 40 CFR 261.4(a)(25)), the 
``exporter'' is required to comply with the generator responsibilities 
listed under the transfer-based exclusion (such as reasonable efforts), 
as well as notice and consent and annual reports. By replacing the term 
``exporter'' with ``hazardous secondary material generator,'' we are 
clarifying that for hazardous secondary materials exported for 
reclamation, the hazardous secondary material generator is responsible 
for notice and consent and for submitting annual reports. We would also 
like to clarify that intermediate facilities can still be used for 
exports (as with the transfer-based exclusion), but the generator, not 
the intermediate facility, must comply with the notice and consent and 
annual report requirements. This is because the intermediate facility 
cannot perform the generator responsibilities under the transfer-based 
exclusions and, therefore, cannot perform the duties of the 
``exporter'' under this rule. We also note that this exclusion 
specifically references the condition in Sec.  261.4(a)(24)(iv) that 
recycling be legitimate as specified in Sec.  260.43.
Comments: Annual Reports
    In the proposed rule, we solicited comment on whether facilities 
managing hazardous secondary materials under the exclusions should be 
required to submit periodic (e.g., annual) reports detailing their 
recycling activities, such as information on the types or volumes of 
hazardous secondary materials reclaimed or other relevant information.
    With respect to exports, a few commenters suggested that we add to 
40 CFR 261.4(a)(25) a requirement that hazardous secondary material 
generators submit annual reports regarding the exports of their 
hazardous secondary materials. This requirement would be similar to the 
requirement currently in 40 CFR part 262 subpart E, in which primary 
exporters must submit annual reports regarding exports of hazardous 
waste. Conversely, a few commenters urged EPA to finalize the export 
requirements, as proposed with at least one commenter explicitly 
agreeing with EPA's proposal not to require annual reports for 
hazardous secondary material generators.
EPA's Response: Annual Reports
    The Agency agrees with those commenters who supported a requirement 
for hazardous secondary material generators to submit to EPA annual 
reports regarding the exports of their hazardous secondary materials. 
We believe that such a requirement will help determine that hazardous 
secondary materials exported for reclamation are handled as commodities 
and not discarded. We have, therefore, added a provision to 40 CFR 
261.4(a)(25) requiring hazardous secondary material generators who 
export hazardous secondary materials to file a report with the Office 
of Enforcement and Compliance Assurance \19\ that summarizes the types, 
quantities, frequency, and ultimate destination of all hazardous 
secondary materials exported for reclamation during the previous 
calendar year. Such reports would document the total amount of 
hazardous secondary materials exported during the calendar year, which 
is often not the same as the amount specified in an export notice. Such 
a report would also enable EPA to compare actual shipments in the 
annual report against proposed shipments in the export notice to ensure 
that the shipments occurred under the terms approved by the receiving 
country. Finally, such a report would enable EPA to provide summary 
information, if requested by a receiving country, that could assist the 
receiving country in determining what amount of hazardous secondary 
materials was received in that country for reclamation.
---------------------------------------------------------------------------

    \19\ The Office of Enforcement and Compliance Assurance (OECA) 
is the office within EPA that implements the notice and consent 
process for exports.
---------------------------------------------------------------------------

Comments and EPA's Response: Tacit Consent
    In the March 2007 supplemental proposal, we specified that the 
hazardous secondary material generator must receive consent (through 
EPA) in writing from the receiving country before the hazardous 
secondary materials could be exported. Some commenters pointed out that 
under the existing export regulations for hazardous wastes exported to 
OECD Member countries, the receiving country may use tacit consent to 
respond to the notification (40 CFR part 262 subpart H). Commenters 
expressed concern that this was a point of confusion, as fully 
regulated hazardous wastes are eligible for tacit consent, whereas 
excluded hazardous secondary materials would require consent in 
writing. To eliminate this confusion, EPA has added a provision to the 
regulations that allows tacit consent for hazardous secondary materials 
exported to OECD Member countries similar to that allowed for hazardous 
wastes under 40 CFR part 262 subpart H. We note that Canada and Mexico, 
though OECD Member countries, typically require written consent for 
exports to their countries.
    For a detailed description of today's exclusion for hazardous 
secondary materials exported for reclamation, see section VIII.C.5. of 
today's preamble.

F. Notification and Other Recordkeeping and Reporting Requirements

    EPA proposed a total of three recordkeeping and reporting 
requirements in the March 2007 supplemental proposal: (1) A one-time 
notification to be submitted by hazardous secondary material generators 
and reclaimers (required for both the generator-controlled and the 
transfer-based exclusions); (2) for the transfer-based exclusion, a 
requirement for both the hazardous secondary material generator and 
reclaimer to maintain for three years records of all off-site shipments 
of excluded hazardous secondary materials (either sent by the generator 
or received by the reclaimer); and (3) notice and consent for hazardous 
secondary materials exported for reclamation in foreign countries.
Comments: General Recordkeeping and Reporting Requirements
    Many commenters supported increasing the recordkeeping and 
reporting requirements in order to adequately monitor compliance with 
the exclusions and to measure increases in

[[Page 64739]]

safe hazardous waste recycling. Alternatively, some commenters urged 
EPA to finalize the requirements as proposed, cautioning that onerous 
reporting and recordkeeping requirements would discourage facilities 
from taking advantage of the exclusions. A few commenters questioned 
EPA's authority for including recordkeeping and reporting requirements 
altogether; these commenters argued that, since hazardous secondary 
materials are not solid wastes and thus not subject to regulation, 
recordkeeping and reporting requirements should not apply.
EPA's Response: General Recordkeeping and Reporting Requirements
    EPA agrees with the majority of commenters and believes that 
additional recordkeeping and reporting requirements are necessary to 
enable effective and credible oversight. We therefore consider the 
recordkeeping and reporting requirements in today's rule to be the 
minimum information necessary to determine that hazardous secondary 
materials are reclaimed and not discarded. Some of the recordkeeping 
requirements that we are finalizing today are discussed in detail 
within other relevant sections of today's preamble (see section XVII.B. 
for our response to comments on documentation and certification of 
reasonable efforts and section VII.C. for a detailed description of 
financial assurance). This section focuses on our response to comments 
regarding the notification requirement and, for the transfer-based 
exclusion, the requirement that the generator maintain confirmations of 
receipt of hazardous secondary materials from the reclamation facility 
and intermediate facility.
Comments: Notification as a Condition of the Exclusion
    In the March 2007 supplemental proposal, EPA noted that the one-
time notification requirement under the authority of RCRA section 3007 
would not be a condition of the exclusions, and that failure to notify, 
while constituting a violation of the notification regulations, would 
not affect the excluded status of the hazardous secondary materials.
    A number of commenters disagreed with this rationale and argued 
instead that the notification requirement should be made a condition of 
the exclusions. These commenters stated that, as proposed, the 
notification requirement would create an unintended incentive for 
hazardous secondary material generators and reclaimers not to notify, 
because those who chose not to notify would likely evade oversight for 
many years and, if caught, could simply regard the ``paperwork 
violation,'' and possible penalty for that violation, as a cost of 
doing business. These commenters maintained that the failure of a 
hazardous secondary material generator or reclaimer to provide 
notification is a strong indication that these entities are either 
unaware of or trying to circumvent the regulatory requirements, in both 
cases possibly increasing the likelihood for environmental damage. 
Therefore, these commenters argued that failure to notify should be 
regarded as more serious than a reporting violation and should, 
therefore, remove the excluded status of the hazardous secondary 
materials.
    Conversely, some commenters supported EPA's proposed approach, 
agreeing that if an entity fails to notify, it does not necessarily 
indicate that the hazardous secondary materials were discarded and, 
therefore, should not automatically affect the excluded status of the 
materials.
EPA's Response: Notification as a Condition of the Exclusion
    At issue here is not the requirement to submit a notification, but 
rather the consequences an entity would face for failing to notify. 
Notification as a requirement under the authority of RCRA section 3007 
of the exclusion means failure to notify would constitute a violation 
of the notification regulations. On the other hand, notification as a 
condition of the exclusion means failure to notify would potentially 
result in the loss of the exclusion for the hazardous secondary 
materials (i.e., the hazardous secondary materials would become solid 
and hazardous wastes and subject to full Subtitle C regulation). In 
context with this issue, EPA considered the intent of the notification, 
which is to provide basic information to regulatory agencies about who 
will be managing hazardous secondary materials under the exclusions. 
This basic information enables regulatory agencies to administer 
oversight and set enforcement priorities, but does not allow regulatory 
agencies to directly determine that hazardous secondary materials were 
discarded. In other words, a generator or reclaimer could fail to 
notify yet still be legitimately recycling their hazardous secondary 
materials according to the conditions of the exclusion. Therefore, EPA 
is retaining notification as a requirement under the authority of RCRA 
section 3007, and, thus, notification is not a condition of today's 
exclusions.
Comments: Format of Notification
    In the March 2007 supplemental proposal, EPA requested comment on 
whether the notification should be submitted in a particular format and 
discussed the option of using the Subtitle C Site Identification Form 
(EPA Form 8700-12) to collect the information. By far, the majority of 
commenters were in favor of using the Site ID form, pointing out that 
EPA would effectively minimize burden by leveraging this form because 
it is already familiar to the regulated community. Of the very few 
commenters opposed to using the Site ID form, some argued that the form 
was not appropriate for collecting information on hazardous secondary 
materials because it is primarily used to collect information regarding 
hazardous wastes. However, other commenters thought the Site ID form 
was appropriate because it is currently used to collect information on 
other types of recycling activities not subject to full Subtitle C 
regulation, such as used oil and universal waste activities. Finally, 
some commenters supported use of the Site ID form because it would 
result in standardized and consistent data that users could 
electronically access through EPA's databases.
EPA's Response: Format of Notification
    EPA agrees with the majority of commenters and is requiring 
hazardous secondary material generators, tolling contractors, toll 
manufacturers, reclaimers and intermediate facilities managing 
hazardous secondary materials to use the Site ID form (EPA Form 8700-
12) when notifying in accordance with today's rule. We believe that the 
Site ID form will provide standardized data, while minimizing the 
collection burden because many facilities notifying under today's rule 
are already familiar with the form and will not need to invest 
resources in learning a new form and process. EPA also agrees with 
commenters who stated that the form is appropriate for today's rule, 
since it already collects information on other types of recycling 
activities. However, EPA will modify the current Site ID form in order 
to accommodate the notification requirement for today's rule.
Comments: Types of Information in Notification
    In the March 2007 supplemental proposal, EPA proposed that 
generators and reclaimers of hazardous secondary materials include in 
the notification the name, address, and EPA ID number (if

[[Page 64740]]

applicable) of the generator or reclaimer; the name and number of a 
contact person; the type of hazardous secondary materials that would be 
managed according to the exclusion; and when the hazardous secondary 
materials would begin to be managed in accordance with the exclusion. 
Many commenters, particularly states, argued that this information was 
insufficient to monitor hazardous secondary material generators and 
reclaimers adequately and, instead, suggested additional types of 
information to include in the notification, such as quantity of the 
hazardous secondary materials managed under the exclusion, the name and 
EPA ID number of the reclaimer receiving the hazardous secondary 
materials and a description of the recycling process. These commenters 
argued that additional information was important to monitor compliance 
of the facilities with the exclusions and to measure increases in safe 
hazardous secondary materials recycling.
    On the other hand, some commenters urged EPA to retain the basic 
information in the notification as proposed. These commenters 
questioned how additional information would assist with defining 
discard and also noted that EPA, historically, has not required 
notification for the existing self-implementing exclusions from the 
definition of solid waste located in 40 CFR 261.4.
EPA's Response: Types of Information in Notification
    After carefully considering these comments, we agree with those 
commenters who support requiring additional information in the 
notification in order to monitor compliance with the exclusions 
adequately. We believe today's notification requirement reflects the 
minimum amount of information needed to identify which facilities will 
be managing hazardous secondary materials under today's rule in order 
to enable regulatory agencies to administer oversight and ensure that 
hazardous secondary materials are reclaimed and not discarded. We, 
however, did not include suggested data elements that might be 
difficult or complex to collect, such as a description of the recycling 
process, and did not include information that is more appropriately 
documented and maintained at the facility. For example, some commenters 
suggested adding a requirement that generators indicate the identity of 
the reclaimer receiving their hazardous secondary materials for 
reclamation; however, under today's transfer-based exclusion, this 
information is already documented as part of the requirement for 
hazardous secondary material generators to keep records of all off-site 
shipments.
    We consider the information we are requiring in the notification 
under today's rule to reflect what responsible companies would 
routinely collect as part of their normal business operations. For 
example, responsible companies track quantities of valuable commodities 
that are managed on-site or shipped off-site and, thus, we believe 
reporting quantities of hazardous secondary materials managed in the 
notification will not present an undue burden.
    Furthermore, we note that EPA currently requires notification under 
certain of the 261.4 exclusions, such as for spent materials generated 
and recovered within the primary mineral processing industry (40 CFR 
261.4(a)(17)) and for hazardous secondary materials used to make zinc 
micronutrient fertilizers (40 CFR 261.4(a)(20)) and, thus, we do not 
agree with those commenters who believe that the notification 
requirement is inconsistent with the existing solid waste exclusion 
requirements.
    For a detailed discussion on the notification requirement that EPA 
is finalizing today, see sections VII.C. and VIII.C.
Comments: Periodic Reporting
    In the March 2007 supplemental proposal, EPA proposed that 
hazardous secondary material generators and reclaimers submit a one-
time notification, but asked for comment on whether facilities using 
the exclusion should be required to submit periodic (e.g., annual) 
reports detailing their recycling activities.
    Several commenters supported requiring periodic reports (or 
periodic notification). These commenters argued that data collected in 
a one-time notification would become obsolete very quickly and would 
likely require substantial investment in order to `clean up' the 
information before it could be used, a resource burden that would 
likely fall on the states. For example, over time, some facilities that 
originally submitted a one-time notification would cease managing 
hazardous secondary materials according to the exclusion. Some 
commenters argued that, by using a one-time notification approach, it 
would be a challenge to identify these facilities and, subsequently, a 
challenge to compile a list of facilities who are currently managing 
hazardous secondary materials according to the exclusions, thereby 
inhibiting the states' ability to monitor compliance at these 
facilities.
    Furthermore, as one state commenter said, some generators managing 
hazardous secondary materials will go out of business and without a 
steady feed of updated information, states have no way of knowing which 
generating facilities have closed and, thus, are unable to ensure that 
their hazardous secondary materials were reclaimed and not discarded. 
This leaves states acutely vulnerable to costs incurred from potential 
environmental damage caused by abandonment of the hazardous secondary 
materials.
    Other commenters noted that periodic notifications would allow 
public agencies to compile credible information regarding hazardous 
secondary materials recycling that can be used to demonstrate success, 
target additional recycling opportunities, and improve the public's 
understanding and acceptance of recycling practices. One commenter also 
supported a clear requirement to file periodically in order to reduce 
confusion regarding when to re-notify and also to ensure that the 
information was kept accurate and current.
    On the other hand, some commenters urged EPA to finalize the 
notification requirements as proposed and stressed that numerous 
recordkeeping and reporting requirements may inhibit facilities from 
taking advantage of the exclusions, thereby discouraging further 
increases in recycling.
EPA's Response: Periodic Reporting
    In considering these comments, EPA reflected on the intent of the 
notification requirement, which is to provide basic information to 
regulatory agencies about who is managing hazardous secondary materials 
under the exclusions in order to monitor compliance with the 
exclusions. As commenters noted, with a one-time notification approach, 
there is no assurance that the information collected in EPA's databases 
over time will accurately reflect facilities that are managing 
hazardous secondary materials according to the exclusion. Therefore, 
the Agency can imagine instances where precious resources are required 
to be spent on `cleaning up' the data before regulatory authorities can 
use it to identify facilities who are currently managing hazardous 
secondary materials under the exclusions. With a one-time notification, 
we can also foresee problems where regulatory agencies spend time and 
resources monitoring compliance at facilities that have since stopped 
managing hazardous secondary materials at some point in the past. This 
inefficient use of resources would serve to lower the effectiveness of 
regulators

[[Page 64741]]

to monitor compliance overall and could potentially increase the risk 
of environmental damage from abuse of today's exclusions.
    EPA further believes that responsibility for submitting and 
maintaining updated information lies with the hazardous secondary 
material generators, reclaimers, and intermediate facilities that use 
today's exclusions. We understand arguments made by commenters that, as 
originally proposed, the one-time notification would in effect reverse 
this responsibility, placing an unreasonable burden on the states and 
EPA to `clean up' the data every time a regulating agency sought to use 
the information. Instead, the incremental burden to facilities who must 
submit periodic notifications is minimal compared to the considerable 
public expense that states and EPA would likely incur over time in 
order to use the information submitted in a one-time notification. Once 
an initial notification is submitted, to re-notify, a facility need 
only review the previous notification and either make changes if 
necessary or confirm that the information remains accurate. EPA has 
chosen to use the Site ID form for this notification because it is 
standardized, electronically-accessible, and familiar to the regulated 
community and, therefore, will assist facilities by reducing the 
overall time and effort required to report the information. Currently, 
large quantity generators on average spend $364 a year on biennial 
reporting under full Subtitle C regulation, whereas under today's rule, 
an initial notification is estimated to be only a third of that cost, 
with subsequent notifications likely costing even less.\20\ EPA has 
designed the notification requirement in today's rule to strike an 
appropriate balance between providing essential information to 
regulators, while keeping additional burden at a minimum.
---------------------------------------------------------------------------

    \20\ Estimates are from the Regulatory Impact Analysis for U.S. 
EPA's 2008 Final Rule Amendments to the Industrial Recycling 
Exclusions from the Definition of Solid Waste.
---------------------------------------------------------------------------

    We are convinced of the validity of the above arguments raised by 
commenters in support of periodic reporting and agree that the 
limitations of a one-time notification approach would undermine the 
purpose of the notification. Therefore, EPA is requiring hazardous 
secondary material generators, tolling contractors, toll manufacturers, 
reclaimers, and intermediate facilities managing hazardous secondary 
materials to notify the Regional Administrator prior to operating under 
the exclusions and by March 1 of each even-numbered year thereafter. We 
chose the two-year time frame to reflect both commenters' suggestions 
(of those who supported periodic reporting, most suggested annual or 
biennial reporting) and to best fit with the biennial reporting process 
for hazardous wastes (pursuant to 40 CFR 262.41, biennial reports are 
due by March 1 of each even-numbered year). Since many facilities are 
accustomed to the biennial reporting process and likely have structured 
their processes around the biennial report schedule, we chose the same 
calendar date for the notification requirement in order to allow 
facilities to leverage their existing processes and submit the 
notification at the same time their biennial report is due.
Comments: Confirmation of Receipt
    In the March 2007 supplemental proposal, EPA requested comment on 
whether hazardous secondary material generators should be required to 
maintain confirmations of receipt of the hazardous secondary materials 
by the reclaimer. Many commenters expressed support for this 
requirement, citing that responsible commercial recyclers routinely 
issue receipt confirmations or ``recycling certificates'' to assure the 
generator that its hazardous secondary materials reached the intended 
destination and were not discarded. Of those who supported the 
requirement, many argued that EPA should not specify a specific form of 
documentation so that facilities could leverage existing business 
practices already in place to track valuable commodities. A few 
commenters continued to urge EPA to be conscious of the imposition of 
additional recordkeeping and reporting requirements lest the Agency 
discourage recycling of hazardous secondary materials.
EPA's Response: Confirmation of Receipt
    We agree with commenters who support requiring confirmation of 
receipts and are, therefore, adding to 40 CFR 261.4(a)(24) a 
requirement that generators maintain confirmation of receipts from 
reclaimers and intermediate facilities for all off-site shipments of 
excluded hazardous secondary materials for a period of three years. 
Under today's rule, hazardous secondary materials may be transferred to 
intermediate facilities for storage or, where reclamation consists of 
multiple steps occurring at separate facilities, may be transferred to 
more than one reclaimer. This requirement would confirm that the 
hazardous secondary materials did in fact reach the reclaimer (or each 
reclaimer, if reclamation occurs at separate facilities) and any 
intermediate facility as originally intended and were not discarded. 
EPA also agrees with commenters that responsible companies would 
produce and maintain receipts as part of their normal business 
operations and, thus, the Agency believes this requirement will not 
pose an undue burden. The Agency is not specifying a certain form or 
format for this documentation, but instead provides examples of routine 
business records that would contain the appropriate information in 
section VIII.C.4. of today's preamble and in today's rule.

XVIII. Major Comments on Legitimacy

A. Codification of Legitimacy Factors

    EPA's October 2003 proposal to codify the legitimacy criteria was 
in response to the comments that have been made over the years by both 
industry and states that the existing legitimacy guidance is useful, 
but somewhat hard for members of the regulated community to know about 
because it could only be found in preamble discussions and guidance. 
The March 2007 supplemental proposal made some adjustments to the 
October 2003 proposal, including a change from the term ``criteria'' to 
``factors,'' but left intact the general intention to codify those 
legitimacy factors for all recycling. As expected, the Agency received 
public comments from both state environmental agencies and from 
industry on our approach.
Comments: Codification of Legitimacy.
    State commenters were unanimously in favor of codifying the 
legitimacy factors in the regulations. In response to the October 2003 
proposal, twenty-three states expressed their support for codification. 
In comments to the March 2007 supplemental proposal, two additional 
states supported codification of the proposed factors. All twelve 
states that commented on legitimacy in both proposals expressed their 
strong support for codification in both their 2003 and 2007 comments.
    States have long advocated for establishing regulations that 
specifically address the legitimacy of recycling. In response to EPA's 
proposals, many states commented that they are currently relying on the 
concept of legitimacy as laid out in definition of solid waste 
preambles and in the 1989 ``Lowrance Memo'' guidance because they are 
the best sources of information that can be used in evaluating a 
recycling operation. Codification is a

[[Page 64742]]

priority to the states because, as a regulation, the requirement for 
recycling to be legitimate would be better known and understood by the 
regulated community and it would be easier for states to monitor 
compliance. One commenter stated that it makes more sense to implement 
a regulation than a collection of statements found in guidance.
    Industry commenters, on the other hand, were split on the issue of 
codification. Including comments from both the October 2003 proposal 
and the March 2007 supplemental proposal, just over half of the 
industry commenters opposed codification of the legitimacy factors, 
although they tended to express support in their comments for the 
purpose and goals of the legitimacy factors and agree with the goal of 
identifying which processes are true recycling and which are sham 
recycling. Several industry commenters stated that the guidance is 
working well already and many of those opposed to codification 
expressed concern that if the legitimacy factors were codified, they 
would lose the flexibility in the guidance that allows the factors to 
apply to many varied industrial sectors and processes, automatically 
becoming more stringent. Another concern expressed by the commenters 
regarding codification of the legitimacy factors was that, in their 
view, the terms used in the regulatory text are too ambiguous and 
should be clarified before they can be part of a regulation. These 
commenters argue that codification of the factors without addressing 
these concerns would automatically be more stringent than having 
guidance, thereby inappropriately inhibiting legitimate recycling.
    About one-third of the forty-two industry commenters on the issue 
of whether or not to codify backed the codification of the legitimacy 
factors. Many of these commenters represented segments of the waste 
management industry, but a number of representatives of generating 
industries also made this comment. The industry commenters that 
supported codification stated that they did so because it would provide 
clarity, consistency, and predictability by making it more apparent 
which hazardous secondary materials and processes are covered by the 
recycling exclusions. One commenter noted the value in the legitimacy 
factors going through the notice and comment process since they are 
being used by the states in implementation of the regulations and 
another expressed an expectation that the codified requirements would 
lead to more uniformity in interpretation between implementing 
agencies. Several of these commenters also stated that they also valued 
the flexibility of the structure of the Lowrance memo and stressed the 
importance of the codified legitimacy factors retaining that 
flexibility.
    In addition, several more industry commenters stated that they saw 
the value in codifying the legitimacy factors and could support its 
codification under certain conditions. The suggested conditions 
included the codification of only the two proposed mandatory factors, 
codification of the factors in conjunction with finalizing what we 
called the ``broader exclusion'' option in the October 2003 proposal, 
and codification of legitimacy factors to be used only with the 
definition of solid waste exclusions that were included within the 
supplemental proposal in March 2007.
EPA's Response: Codification of Legitimacy.
    In today's final rule, EPA is codifying the legitimacy factors as a 
requirement for today's exclusions and for the non-waste 
determinations, but not for all recycling. To avoid confusion among the 
regulated community, as well as the state and other implementing 
regulatory agencies about the status of recycling under the existing 
exclusions, EPA is not codifying the legitimacy factors as specifically 
applicable to existing exemptions in today's final rule. In developing 
the codified legitimacy language, we did not intend to raise questions 
about the status of legitimacy determinations that underlie existing 
exclusions from the definition of solid waste, or about case-specific 
determinations that have been made by EPA or the states. Current 
exclusions and other prior solid waste determinations or variances, 
including determinations made in letters of interpretation and 
inspection reports, remain in effect.
    In codifying the legitimacy provisions for the exclusions and non-
waste determinations in today's final rule, EPA has taken into 
consideration all the comments it received in response to the October 
2003 proposal and March 2007 supplemental proposal on the structure of 
the legitimacy factors, as well as on the individual factors themselves 
and has made the appropriate changes to the factors to address those 
comments.
    In response to a general comment, EPA is aware of the comments that 
each of the terms in the legitimacy regulations should be more clearly 
defined and the suggestions for specific tests for each of the factors. 
We are, however, seeking a balance between having a set of specific 
tests and having the flexibility needed for a requirement that applies 
to the range of recycling practices in various industries in different 
industrial or commercial settings.
    Therefore, in response to comments, the discussion of legitimacy in 
today's preamble describes more clearly what EPA means by the terms we 
use in the regulatory text for this element of the final rule. The 
Agency also is providing more examples of both legitimate and sham 
recycling than were included in the discussions of the individual 
factors in the preambles for the October 2003 proposal and March 2007 
supplemental proposal to illustrate the meaning of the legitimacy 
factors. The Agency also is stressing the importance of case-by-case 
determinations that are based on the facts of a specific situation.

B. Effect on Current Determinations of Legitimate Recycling Activities

    In the March 2007 supplemental proposal, EPA stated its opinion 
that the concept of legitimate recycling originally proposed in October 
2003 is not substantively different from our longstanding policy, as 
articulated in the 1989 Lowrance Memo and subsequent preambles. We 
stated that we were simply reorganizing, streamlining, and clarifying 
the existing legitimacy principles. Thus, we stated in the March 2007 
supplemental proposal that we believe that the regulatory definition of 
legitimate recycling, when applied to specific recycling scenarios, 
would result in determinations that were consistent with EPA's earlier 
policy. We went on to say that we did not believe the regulated 
community or implementing agencies would need to revisit previous 
legitimacy determinations. However, we did request examples of 
determinations which could be impacted by the codification.
Comments: Relationships With Existing Determinations
    Commenters expressed concern that, in spite of EPA's intentions, 
the codification could prompt implementing agencies to revisit past 
legitimacy determinations. In addition, comments on the October 2003 
proposed rule suggested that implementing agencies could interpret the 
proposed regulatory text as meaning that a recycling activity must 
satisfy all four of the factors to be considered legitimate. Several 
commenters on the March 2007 supplemental proposal stated that 
legitimacy should not apply to the existing recycling exclusions in the 
current regulations and others were

[[Page 64743]]

concerned that codification may lead implementing agencies to consider 
only the four factors and not consider other key information about the 
recycling activity.
EPA's Response: Relationships With Existing Determinations
    Regarding the existing exclusions in the regulations, EPA 
acknowledges that, in establishing a specific exclusion, we have 
already determined in the rulemaking record that the specific recycling 
practice is excluded from the definition of solid waste provided all 
the conditions of the rule are met. However, the Agency has always 
enforced its rules on the basis that any recycling must be legitimate 
(See U.S. v. Self, 2 F. 3d 1071, 1079 (10th Cir. 1993); U.S. v. Marine 
Shale Processors, 81 F. 3d 1361, 1366 (5th Cir. 1996): Marine Shale 
Processors v. EPA, 81 F. 3d 1371, 1381-83 (5th Cir. 1996)). This is 
meant to prevent a company from claiming to be operating under an 
existing exclusion and simply using that as a way to avoid full RCRA 
Subtitle C regulation.
    However, to avoid confusion among the regulated community and state 
and other implementing agencies about the status of recycling under 
existing exclusions, we have decided that the focus of this rule should 
be the specific changes it is making to the definition of solid waste 
in the form of the exclusions and non-waste determinations finalized 
today. Thus, the legitimacy factors codified in 40 CFR 260.43 only 
apply to the exclusions and non-waste determination process being 
finalized in this rule and we do not expect implementing agencies to 
revisit past legitimacy determinations based on this final rule 
preamble language.
    Also, it should be noted that the regulatory language does not 
preclude other considerations when looking at the codified factors for 
making legitimacy determinations. We recognize that additional 
information about the recycling activity could be helpful and could be 
used when assessing the four legitimacy factors and in making a 
determination about whether a specific recycling activity is 
legitimate. In fact, we encourage the regulated community and 
implementing agencies to use any and all information about the 
recycling process to come to an informed decision on the legitimacy of 
a hazardous secondary material recycling operation. However, given the 
public comment on the October 2003 proposed rule and the March 2007 
supplemental proposal, no other factors have been identified and we 
believe that the four legitimacy factors codified in this rule include 
the relevant principles of legitimate recycling for the purposes of the 
exclusions and non-waste determinations being finalized today.

C. Revised Structure for the Definition of Legitimate Recycling

    In the March 2007 supplemental proposal, we proposed a new 
structure for the definition of legitimate recycling. The first part 
consisted of those factors that must be met, which included a 
requirement that the hazardous secondary materials being recycled 
provide a useful contribution to the recycling process or to the 
product of the recycling process and a requirement that the product of 
the recycling process be valuable. EPA considers these two factors to 
be fundamental to legitimate recycling and if a recycling process does 
not meet them, it is sham recycling (i.e., treatment or disposal of a 
hazardous waste under the guise of recycling).
    The second part of the proposed structure included two additional 
factors that must be taken into account when a legitimacy determination 
is being made. We explained that while these two additional factors are 
important in determining whether a particular process is legitimate, 
there may be circumstances under which a legitimate recycling process 
might not conform to one or both of these factors. The two additional 
factors are whether the hazardous secondary materials are managed as a 
valuable commodity and whether the product of the recycling process 
contains significant concentrations of hazardous constituents. We note, 
however, that in cases where a recycling practice does not meet one or 
both of these factors, the hazardous secondary material generator and/
or recycler should be able to demonstrate why the recycling is in fact 
still legitimate.
Comments: Revised Structure
    The public comments on the individual factors in the March 2007 
supplemental proposal showed that, as in the comments to the October 
2003 proposal, there continues to be general agreement from industry 
and state commenters on two factors (useful contribution and valuable 
product/intermediate). Commenters were virtually unanimous in their 
agreement that these two factors are crucial indicators of legitimacy 
and should be included in the concept of legitimacy. In other words, 
there was agreement that recycling cannot be legitimate if the material 
being recycled does not provide a useful contribution to the process or 
to the product and if the recycling process does not yield a product or 
intermediate that is valuable to someone. Certain commenters requested 
that EPA provide additional information on how it defines these terms 
and, while there was some disagreement with the specifics laid out in 
the preamble, there was little disagreement with the basic overarching 
concepts.
    Although there was support for the structure for legitimacy that 
was proposed in the March 2007 supplemental proposal, most states, the 
environmental community, and the waste management industry argued that 
all four of the factors should be mandatory requirements-that is, they 
must all be met for the recycling activity to be considered legitimate 
recycling. Industry had a more mixed response to this issue with some 
supporting the proposed structure and others preferring that the 
factors be finalized as balancing factors. Others expressed their 
opinion that while they preferred non-mandatory criteria, the proposed 
approach was reasonable. Several commenters expressed their preference 
for keeping the legitimacy factors as guidance, but stated that if the 
Agency decided to codify the legitimacy factors, they preferred the 
structure as proposed in the March 2007 supplemental proposal.
EPA's Response: Revised Structure
    EPA agrees with the commenters on the importance of the two factors 
(useful contribution and valuable product/intermediate) that were 
proposed to be mandatory in evaluating legitimate recycling and, for 
this final rule, we have decided that these two concepts are, in fact, 
at the very core of what it means to recycle legitimately. Therefore, 
the final regulatory language states in 40 CFR 260.43(b) that 
``[l]egitimate recycling must involve a hazardous secondary material 
that provides a useful contribution to the recycling process or to a 
product of the recycling process, and the recycling process must 
produce a valuable product or intermediate.'' This statement is 
followed by clauses (1) and (2) that give more details on how the 
Agency defines these concepts.
    EPA has determined that the other two factors are still important 
in making legitimacy determinations, but do not necessarily have to be 
met for the recycling activity to be considered legitimate. Instead, 
the regulations state that a person making a legitimacy determination 
must consider these two factors, which are found in Sec.  260.43(c) of 
the final language. In stating that the factors must be considered, EPA 
expects that those making legitimacy determinations will evaluate how 
the

[[Page 64744]]

hazardous secondary materials in question are managed as compared to 
analogous raw materials and how levels of hazardous constituents in 
their products compare with the levels of hazardous constituents in 
analogous products. If the generator or recycler determines that one or 
both of these factors are not met, that person should be prepared to 
explain why their recycling activity is nevertheless still legitimate. 
As described in Sec.  260.43(c)(3) of the regulatory text, in 
evaluating the extent to which these factors are met and in determining 
whether a process that does not meet one or both of these factors is 
still legitimate, persons can consider the protectiveness of the 
storage methods, exposure from toxics in the product, the 
bioavailability of the toxics in the product, and other relevant 
considerations. We would note that the facility may be requested to 
demonstrate the legitimacy of their recycling process and explain why 
failure to meet one or both of these factors does not affect the 
legitimacy of the recycling process.
Comments: Mandatory Factors
    As part of the October 2003 proposal, the Agency solicited comment 
on whether the factors should continue to be used in the same way as 
the previous guidance had been used, as factors to be balanced or 
considered in making an overall determination, or whether the factors 
should be structured differently in the final rule, such as in the form 
of mandatory requirements that must all be met. Based on the comments 
received on that proposed rulemaking, we proposed a new structure in 
the March 2007 supplemental proposal with two mandatory factors and two 
factors that must be taken into account, but not necessarily met in 
every situation (72 FR 14198).
    Many state implementing agencies argued that all the factors should 
be written as mandatory requirements that must be met. Most industry 
commenters (but not all) did not. The main argument in favor of making 
the factors mandatory requirements is that commenters argued that this 
approach would result in legitimacy determinations that are more 
objective and more enforceable. The main arguments against making all 
the factors mandatory requirements is that the overall determination is 
made on a case-by-case basis, which is often facility-specific, and not 
all legitimate recycling can fit into such a rigid system.
EPA's Response: Mandatory Factors
    The Agency can see both state and industry viewpoints and, in the 
end, as described above, has decided upon a course of action that 
results in a compromise between the two approaches. In section IX of 
this preamble, we explain in detail the final design of the legitimacy 
factors, which includes two factors that must be met (useful 
contribution and valuable product/intermediate) and two factors that 
must be taken into account in making an overall legitimacy 
determination. We believe this approach and the attendant regulatory 
language is clearer than the existing guidance, yet retains enough 
flexibility to account for the variety of legitimate hazardous 
secondary materials recycling practices that exist today.

D. Comments on the Specific Factors

    In developing the legitimacy factors, the Agency sought a balance 
between having a set of specific tests and having the flexibility that 
is necessary to allow the four legitimacy factors to apply to hazardous 
secondary material recycling practices in the many industrial or 
commercial settings to which the factors would be applied. As a result, 
each of the legitimacy factors included a term or terms that drew 
public comments arguing that the factors were not clearly enough 
defined. The underlined terms in the following excerpts from the 
regulatory text demonstrate what these terms are:
    <bullet> Factor 1: ``Legitimate recycling must involve a hazardous 
secondary material that provides a useful contribution to the recycling 
process or to a product of the recycling process.''
    <bullet> Factor 2: ``The recycling process must produce a valuable 
product or intermediate.''
    <bullet> Factor 3: ``The generator and recycler should manage the 
material as a valuable commodity * * * Where there is no analogous raw 
material, the hazardous secondary material should be contained.''
    <bullet> Factor 4: ``The product of the recycling process does not 
contain significant concentrations of hazardous constituents [or] 
contain concentrations * * * at levels that are significantly elevated 
from those found in analogous products.''
    The October 2003 proposal gave some narrative descriptions of these 
terms to explain what they mean in the context of legitimate recycling, 
but that proposal did not provide any concrete tests for how those 
specific terms are to be used when judging whether a process and/or 
hazardous secondary material meets these factors.
Comments: Defining Legitimacy Terms
    For each of the four factors, the Agency received public comments 
that focused specifically on the meaning of and the difficulties in 
implementing these factors when the terms are not accompanied by a test 
for the hazardous secondary material generators and recyclers to use 
when making determinations of legitimacy. For the first factor, the 
Agency received several comments on the definition of ``useful 
contribution'' from the October 2003 proposal. For the second factor, 
over twenty commenters submitted comments on the definition of 
``valuable'' in response to the October 2003 proposal. In addition, the 
Agency received several comments on the definition of ``valuable'' and 
on the definition of ``contained'' related to the third factor and over 
twenty comments on the definition of ``significant'' in the fourth 
factor. We also received some additional comments on the March 2007 
supplemental proposal relating to the same definitional terms in each 
factor.
    The comments on these terms will be described in more depth in the 
discussion below for each of the applicable factors, but, in general, 
the comments showed a wide range of opinions: Some commenters found the 
discussion in the preamble to define the terms was adequate and 
appropriate, other commenters objected to the terms as not being 
clearly defined, while still other commenters found the terms to be too 
subjective to be a useful tool. We also received comments that 
suggested alternative ways to define the terms to be clearer or to 
better meet the Agency's objectives.
EPA's Response: Defining Legitimacy Terms
    The Agency has incorporated the ideas generated by the comment 
process into the final rule, as appropriate. The final language and 
decisions regarding the legitimacy factors are laid out below in this 
section and in section IX of this preamble, where the final legitimacy 
language is discussed more fully. However, after considering the 
comments, we have decided that we would not develop specific 
definitions or precise tests that hazardous secondary material 
generators and recyclers must use when making legitimacy 
determinations. Instead, the Agency has bolstered our preamble 
discussion on the meaning of these terms and has included more examples 
than we had in the preambles to the October 2003 proposal and the March 
2007 supplemental proposal.

[[Page 64745]]

    EPA's decision not to include specific bright-line tests for the 
final legitimacy factors reflects the fact that legitimacy 
determinations do not lend themselves to the application of absolute 
distinctions, especially given the breadth of recycling practices and 
recycled hazardous secondary materials that exist in industry. The main 
argument we received for developing specific tests was that, without 
specific tests, those making legitimacy determinations may be uncertain 
about whether their regulatory agency would agree with that 
interpretation of the recycling scenario. This may lead to reduced 
recycling rates if companies choose not to take advantage of the 
exclusions for recycling rather than risk interpreting their activities 
differently than the regulator does.
    Although we understand the concerns behind this argument, we are 
addressing them by including more discussion and explanations of the 
final factors in the preamble to the final rule. The complexities of 
defining ``valuable commodity/product,'' ``useful contribution,'' 
``contained,'' and ``significant'' so that they can be determined 
through a bright-line test and are still appropriate for all 
industries, all recycling processes, and all recycled hazardous 
secondary materials are too great for the Agency to be able to design a 
simple and straightforward system of tests to be used in making such 
determinations. The complex regulatory system of tests for different 
types of industries or different processes that would be necessary 
would not be efficient or accessible to most generators, especially 
small businesses.
    In addition, we believe that legitimacy determinations are best 
made on a case-by-case basis, which has always been the case, with the 
facts of a specific situation in hand. In a case-by-case determination, 
a series of specific tests may not be as useful and as accurate in 
determining legitimacy as careful consideration of the hazardous 
secondary material, the recycling process, and the specifics of the 
situation would be. If a person has any questions as to the legitimacy 
of a particular recycling activity, he can always approach the 
appropriate regulatory agency for assistance in making a legitimacy 
determination.
Comments: Factor 1--The Hazardous Secondary Material Provides a Useful 
Contribution
    Factor 1 expresses the fundamental principle that hazardous 
secondary materials must actually be useful (i.e., contribute 
positively) to the recycling process and is intended to prevent the 
practice of incorporating hazardous secondary materials within 
manufacturing operations simply as a means of disposing of them. The 
Agency firmly believes that this concept is crucial to the definition 
of legitimacy and is finalizing it as part of the core definition. This 
factor, along with the second factor described below, must be met for 
any recycling activity to be considered legitimate recycling. The 
regulatory text for this factor is found in 40 CFR 260.43(b)(1).
    In general, we received much support for and agreement with the 
underlying principle of this factor--that the hazardous secondary 
materials must provide some useful contribution to either the recycling 
process or the recycled product. Commenters asked for clarification on 
a number of issues related to this factor, specifically in regard to 
the October 2003 proposal and how the economics of recycling is 
connected to this factor and how the economics of recycling should be 
evaluated. In the March 2007 supplemental proposal, we described how 
the economics of recycling relates not only to the useful contribution 
factor but, in fact, to all of the factors of legitimacy and explained 
our thinking about how evaluating the economics of recycling 
transactions should be undertaken.
EPA's Response: Factor 1--The Hazardous Secondary Material Provides a 
Useful Contribution
    The Agency is today finalizing this factor as part of the core 
definition of legitimate recycling and as a factor that must be met for 
the recycling to be considered legitimate under Sec.  260.43. We also 
revised the October 2003 proposal discussion regarding the 
consideration of economics related to this criterion, and we expanded 
its consideration beyond just the useful contribution criterion. Today, 
we are offering further guidance, similar to the March 2007 
supplemental proposal, which explains how economics may be considered 
in making legitimacy determinations and how it may apply to the 
mandatory factors and the factors that must be taken into account.
Comments and EPA's Response: Factor 1--Contribution to the Process
    EPA also received comments on our statements in the October 2003 
proposal that indicated that not every component of a hazardous 
secondary material does or must contribute to the recycling process or 
product of the recycling process in order for there to be an overall 
contribution. In particular, one state agency favored allowing the non-
hazardous component of hazardous secondary materials to provide the 
useful contribution and one industry commenter agreed that not all of 
the hazardous secondary material would have to contribute for this 
factor to be met. Another state agency asked us to clarify that the 
statement ``not every component of a hazardous secondary material would 
necessarily have to contribute to the product or the process to meet 
this criterion'' was applicable only in the context of this factor.
    It has been the Agency's longstanding policy that in a legitimacy 
determination not every constituent or component in a hazardous 
secondary material would have to contribute to a product of the 
recycling process or intermediate or to the recycling process in order 
for there to be an overall contribution and this applies to the 
provision in Sec.  260.43 as well. For example, the use of hazardous 
secondary materials in zinc fertilizer is considered legitimate 
recycling when the zinc, a non-hazardous constituent, is the main 
contribution to the fertilizer. Another example is the use of CRT glass 
used in copper smelters as a fluxing agent. In this case, the glass 
provides a useful contribution by facilitating the manufacturing 
process. Thus, we agree with those commenters who raised questions 
about this issue and are restating our position here.
Comments and EPA's Response: Factor 1--Efficiency of the Process
    Another issue that was discussed in the October 2003 proposal 
arising in the context of useful contribution was the efficiency of a 
recycling process in recovering or regenerating the useful component of 
the hazardous secondary material. One example we used was the recovery 
of copper from a hazardous secondary material. We stated that where the 
process was reasonably efficient and recovered all but a small 
percentage of the copper, it looked like legitimate recycling. However, 
where a small percentage of copper in the hazardous secondary material 
is recovered, sham recycling may be indicated. However, we did not 
discuss recovery rates in the middle range (e.g., 50% of copper 
recovered from a particular recycling process) and some commenters 
asked for clarification, including how the factor applies to hazardous 
secondary materials that are contributing to the recycling process 
either as a carrier or a catalyst.
    The Agency is clarifying in today's preamble and regulatory text 
that the useful contribution of a hazardous secondary material to the 
recycling

[[Page 64746]]

process or product can be demonstrated in a number of ways. We provided 
a number of different ways such a material could contribute to the 
process in the preamble to the October 2003 proposed rule (68 FR 61584-
61585) and did not mean to imply that the hazardous secondary material 
would have to meet all of the examples to provide a useful 
contribution. For example, hazardous secondary materials could provide 
a useful contribution to a process by serving as a carrier or catalyst 
and the process efficiency would not factor into the demonstration of 
this factor in this example.
    In general, the regulated community should look to typical industry 
recovery rates to determine if the recycling recovery rates are 
reasonably efficient in terms of making a useful contribution to the 
recycling process or product. In addition, it should be noted that EPA 
would generally look at the quantity or the rate of recovery of the 
overall process, not the recovery rate of a single step in the process, 
when analyzing this factor for legitimacy. For example, if one step in 
the process recovers a small percentage of the constituent, but the 
overall process recovers a much larger percentage, the Agency would 
consider the overall efficiency of the recycling process in determining 
whether hazardous secondary materials are providing a useful 
contribution. This assumes that there is enough of the target 
constituent present in the hazardous secondary materials to contribute 
meaningfully to the recycling activity.
Comments and EPA's Response: Factor 1--Residuals
    In the discussion of useful contribution in the October 2003 
proposal, in the context of process efficiency, we stated that a 
``pattern of mismanagement of the residues'' may be an indicator of 
sham recycling (68 FR 61584). We received several comments asking us to 
explain the connection between useful contribution of the hazardous 
secondary materials and management of residues. Several commenters 
questioned this statement and disagreed that how a facility managed its 
residues had any bearing on whether the hazardous secondary materials 
going into a recycling process were being legitimately recycled.
    We agree with the commenters who suggested that the management of 
residuals from the recycling process is not an indicator of whether the 
hazardous secondary materials provide a useful contribution and thus is 
not a factor in determining whether legitimate recycling is occurring. 
For these reasons, we are making it clear that the management of 
recycling residuals is not a consideration in making legitimacy 
determinations. Instead, as part of today's final rule, we are 
requiring that any residuals that are generated from the recycling 
process be managed in a manner that is protective of human health and 
the environment. Specifically, there is a requirement for hazardous 
secondary material generators to make reasonable efforts to ensure that 
the hazardous secondary materials are legitimately recycled and, among 
other things, that the reclaimer manages the hazardous secondary 
materials in a manner that is protective of human health and the 
environment, including how any recycling residuals are managed. 
Finally, we note that the generation of residuals that are solid wastes 
are subject to the waste characterization and identification 
requirements in 40 CFR Part 261 as a newly generated waste.
Comments: Factor 2--The Recycling Process Yields a Valuable Product/
Intermediate
    This factor is intended to capture the fundamental concept that 
legitimate recycling must produce something of value. For the purposes 
of evaluating this factor, a product of the recycling process or 
intermediate would be considered valuable if it can be shown to have 
either economic value or value that is more intrinsic (i.e., it is 
useful to the end user, even though it may not be salable as a product 
or commodity in the open marketplace). The regulatory text for this 
factor can be found in 40 CFR 260.43(b)(2).
    In general, most commenters agreed with the concept that the 
recycling process must produce something of value. Many commenters also 
stressed the importance of keeping the concept of ``intrinsic'' value--
that is, a product does not have to be sold to have value. Instead, it 
can be used as an effective substitute for a commercial product or as a 
useful ingredient in an industrial process. However, other commenters 
disagreed, contending that intrinsic value is too subjective to use to 
determine compliance. One commenter also thought this factor was 
redundant with the factor that hazardous secondary materials must 
provide a useful contribution and should be deleted.
    Another common concern in the comments was how to evaluate whether 
the product or intermediate is valuable. Some commenters stressed the 
importance of evaluating this factor over time, given that markets and 
prices fluctuate, and others argued that it must be done on a case-by-
case basis.
EPA's Response: Factor 2--The Recycling Process Yields a Valuable 
Product
    In general, the Agency agrees with the commenters who stated that a 
product's value can be either monetary or intrinsic. Clearly, not all 
valuable products are sold. For example, many legitimate recycling 
situations exist where the intermediate or product of the recycling 
process has value and is used on-site, sent off-site to another 
facility owned by the same company, or even traded between companies. 
There are a number of already established networks where hazardous 
secondary materials are exchanged among and across industries. This 
rule does not interfere with those ongoing exchanges where such 
materials are being legitimately recycled. One example of such a 
program is the U.S. Business Council for Sustainable Development's by-
product synergy program which has conducted a number of regional pilots 
in which diverse industries are brought together to facilitate 
feedstock and by-product exchanges. No money is exchanged in these 
types of programs.
    We are also clarifying in the regulatory text that the product of 
the recycling process can be either a commercial product or 
intermediate, as long as it has value to the end user. In addition, we 
are further clarifying that the regulated community does not need to 
evaluate each step in the recycling process to determine if the final 
products or intermediates are valuable. Rather, an individual recycler 
or generator would look at its final product or intermediate and must 
be able to demonstrate why it has value.
    We understand the concerns of some commenters that intrinsic value 
is harder to demonstrate than the value of a product of the recycling 
process that is sold in the open marketplace. While this demonstration 
is not as straightforward, there are a number of ways the end user can 
demonstrate the intrinsic value of the recycled intermediate or 
product. Some examples include showing that the product of the 
recycling process replaces an alternative product or material that 
would otherwise have to be purchased or by demonstrating that a product 
of the recycling process or intermediate meets specific product 
specifications or established industry standards. Another approach to 
demonstrating the value of a product of the recycling process or 
intermediate would be to compare its characteristics (e.g., its 
physical/chemical properties or its usefulness for

[[Page 64747]]

certain applications) with comparable products or intermediates made 
from raw materials.
    Finally, we disagree with the commenter who stated that this factor 
is equivalent to the hazardous secondary material making a useful 
contribution to a product or intermediate. It is certainly possible for 
a recycling process to result in the production of a valuable product 
or intermediate without the hazardous secondary materials added to the 
process making any contribution whatsoever. For example, this would be 
the case when hazardous secondary materials are added to the process 
and all of the hazardous secondary materials, including the hazardous 
constituents, end up in the residuals, which are discarded, and the 
materials added to the process provide no benefit whatsoever. This is 
the essence of sham recycling. A vast majority of the commenters saw 
the need for both factors and after exploring the concept of legitimate 
recycling further, we were unable to find any examples of legitimate 
recycling that did not meet both of the core factors (i.e., the 
hazardous secondary material provides a useful contribution and the 
recycling process produces a product of value), nor did any commenters 
provide us with such examples. Thus, we are retaining both concepts as 
factors that must be met in order for a process to be considered 
legitimate recycling.
Comments: Factor 3--How the Hazardous Secondary Material To Be Recycled 
Is Managed
    This factor on the management of hazardous secondary materials was 
designed to illustrate that hazardous secondary materials that are 
bound for recycling should be managed to prevent releases into the 
environment in the same way that valuable commodities would reasonably 
be expected to be managed. Hazardous secondary materials that are 
recycled are valuable production inputs. As such, we believe that such 
materials should be managed in a way that retains their value and 
prevents significant losses to the environment. Hazardous secondary 
materials that are mismanaged to the extent that they are released into 
the environment are not recycled.
    This factor is one of the two legitimacy factors that EPA believes 
needs to be considered. However, in some cases, it may not be clear 
that the factor is met or it may not be met, yet the recycling activity 
can still be legitimate. The regulatory text for the factor can be 
found in 40 CFR 260.43(c)(1) and it states that the handler should 
manage the hazardous secondary material ``as a valuable commodity.'' If 
an analogous raw material exists, the hazardous secondary material 
should be managed, ``at a minimum, in a manner consistent with the 
management of the raw material.'' If there is no analogous raw 
material, the proposal states that the hazardous secondary material 
should be ``contained.''
    The response from commenters on this factor was mixed in response 
to both the October 2003 proposal and the March 2007 supplemental 
proposal. Many states and environmental organizations commented that 
the factor should be mandatory and some argued that it should include a 
strict test. Many commenters from the generating industry and the waste 
management industry stated that they support this factor and believe 
that it is a fair and reasonable indicator of legitimacy. Some industry 
commenters thought that this factor should be mandatory, whereas others 
commented that the factor should neither be codified nor mandatory. At 
least one commenter stated that the factor was not necessary because of 
other existing disincentives for mismanagement. Representatives from 
extractive industries were most strongly opposed to this factor, 
stating that EPA cannot include legitimacy requirements on secondary 
materials that are going to be recycled because they are not in EPA's 
jurisdiction.
EPA's Response: Factor 3--How the Hazardous Secondary Material To Be 
Recycled Is Managed
    Today, we are finalizing this factor as one of the two factors that 
must be considered during a legitimacy determination, but not 
necessarily met. We modified the language of this factor since the 
October 2003 proposal and are finalizing it basically as proposed in 
the March 2007 supplemental proposal.
    EPA has decided that it is most appropriate to finalize this factor 
as one of the factors that must be considered rather than as a 
mandatory factor. Although we believe that this factor is an important 
part of a legitimacy determination because hazardous secondary 
materials that are not being managed carefully may be materials that 
the recycler does not value for its process, the factor is not part of 
what the Agency considers the core of legitimacy. In addition, as 
discussed in section IX of this preamble, EPA and commenters were able 
to identify situations in which this factor is not met, but the 
recycling appears to be legitimate because the hazardous secondary 
materials are still being managed in a responsible manner. EPA does not 
want to restrict legitimate recycling and, therefore, in these cases, 
the facility could make a determination of legitimacy without meeting 
this factor, but should be prepared to explain why its recycling is 
legitimate.
    EPA also believes that this factor can be critical when considering 
whether hazardous secondary materials are legitimately recycled and EPA 
disagrees with commenters who argued that evaluating ``materials 
management'' is outside the scope of RCRA because hazardous secondary 
materials are not solid wastes due to being excluded. EPA believes that 
the commenters' argument is circular. The hazardous secondary materials 
are excluded only if the recycling is legitimate. How materials are 
managed is part of determining legitimate recycling. EPA has the 
authority to define legitimate recycling and, therefore, has the 
authority to require this evaluation.
Comments: Definition of Terms in Factor 3
    Commenters stated that compliance with this factor is dependent on 
the regulated community and regulators understanding what EPA means by 
it. In the October 2003 proposal, we proposed that the factor read, 
``[w]here there is no analogous raw material, the secondary material 
should be managed to minimize the potential for releases to the 
environment.'' Many commenters stated that the term ``minimize'' in 
this context was particularly unclear. State commenters argued that the 
term ``minimize'' did not provide enough guidance or could be 
interpreted to allow unclear amounts of hazardous secondary materials 
to be released, leaving room for potential mismanagement of that 
material, whereas some industry commenters asked if this standard meant 
they would have to meet or exceed controls required for regulated 
hazardous wastes in their recycling operations. Several commenters also 
asked about the term ``valuable commodity'' and how ``valuable'' is 
defined.
EPA's Response: Definition of Terms in Factor 3
    EPA agrees that terms for this factor should be more clear to 
facilitate compliance. Although we have not developed a specific test 
or codified definitions to explain this factor, we have adjusted some 
of the language in the factor to address this concern and are providing 
further explanation of what we intend by this factor in today's 
preamble so that it is better understood and can be consistently 
applied.

[[Page 64748]]

    In the March 2007 supplemental proposal, we modified the language 
for this factor to state instead that ``[w]here there is no analogous 
raw material, the hazardous secondary material should be contained.'' 
This change addressed the ambiguity of the word ``minimize,'' as well 
as state comments that the storage requirements in this factor needed 
to be better defined. The Agency believes that facilities that value 
hazardous secondary materials as part of their manufacturing process 
will contain those materials to prevent their release. The term 
``contained'' is also being used elsewhere in the exclusions being 
finalized. EPA is defining this term in the same way throughout: A 
recyclable material is ``contained'' if it is placed in a unit that 
controls the movement of that material out of the unit into the 
environment. We also believe that the standard for contained is more 
clear for states and industry than the standard to minimize potential 
releases to the environment was in the October 2003 proposal.
    We also want to clarify the use of several other terms on which we 
received comments. These terms are discussed briefly here and in more 
depth in section IX of this preamble, where the legitimacy factors are 
fully described. ``Analogous raw material,'' also defined elsewhere in 
the exclusions, is a raw material for which a hazardous secondary 
material is a substitute and which serves the same function and has 
similar physical and chemical properties as the hazardous secondary 
material. Materials generally would not be considered analogous if 
their chemical makeup were very different from one another--
particularly if the hazardous secondary materials contain hazardous 
constituents that necessitate management processes that the raw 
material does not--or if their physical properties are different.
    Regarding the term ``valuable commodity,'' EPA believes that 
hazardous secondary materials should be managed in the same or similar 
manner as raw materials that have been purchased or obtained at some 
cost. The legitimacy criteria are designed to determine whether a 
process is like manufacturing rather than like waste management. We 
believe that the standard for management of the hazardous secondary 
materials is reasonable for helping assess whether disposal in the 
guise of normal manufacturing is occurring.
Comments: Factor 4--Comparisons of Toxics in the Product
    This factor was designed to prevent hazardous constituents from 
being ``discarded'' by being incorporated into a product made from 
hazardous secondary materials. The factor identifies this situation as 
being hazardous constituents that are in a product made from hazardous 
secondary materials when they are not in analogous products, or when 
hazardous constituents are at significantly higher levels in products 
made from hazardous secondary materials than in analogous products that 
contain such hazardous constituents, or when the product exhibits one 
or more of the hazardous characteristics and the analogous product does 
not. An analogous product can either be the final product of 
manufacturing or, in some cases, an intermediate in a process. These 
hazardous constituents are often called ``toxics along for the ride'' 
(TARs) and, if present, could be an indicator of discard.
    This factor is the second of the two legitimacy factors that EPA 
believes needs to be considered but, in some cases, does not need to be 
met for the recycling activity to be considered legitimate. We modified 
the language of this factor since the October 2003 proposal and are 
finalizing the factor basically as proposed in the March 2007 
supplemental proposal. The regulatory text for the factor can be found 
in 40 CFR 260.43(c)(2) and it states that the person making the 
determination should look at the product of the recycling process and 
compare it to analogous products that are made without hazardous 
secondary materials. The person making the determination should examine 
the concentrations of hazardous constituents to learn whether the 
product of the recycling process contains significant concentrations of 
hazardous constituents when the analogous product contains none, 
whether it contains significantly elevated levels of hazardous 
constituents when compared to the analogous product that contain such 
hazardous constituents, or whether it exhibits a hazardous 
characteristic when the analogous product does not.
    The Agency received many comments on the fourth factor in response 
to both the October 2003 proposal and the March 2007 supplemental 
proposal. The comments the Agency received on Factor 4 were very mixed, 
ranging from commenters who argued that this factor should be one of 
the factors that must be met to those who stated that the factor is 
irrelevant and should not be considered as part of a legitimacy 
determination.
EPA's Response: Factor 4--Comparisons of Toxics in the Product
    Today, we are finalizing this factor as one of the two factors that 
must be considered during a legitimacy determination, but not 
necessarily met. EPA maintains that this factor is an important way of 
determining whether a recycling process is, in fact, true recycling 
rather than a ``sham.''
    If hazardous secondary materials with a toxic constituent or toxic 
constituents in amounts or concentrations greater than analogous raw 
materials are simply being run through a manufacturing process, it is 
an indication that those hazardous secondary materials may be being 
discarded in the guise of recycling. Toxics that are illegally disposed 
of in this manner can become exposure risks and could harm human health 
and the environment. EPA has jurisdiction over materials being 
discarded and, therefore, is requiring that this factor be considered 
in legitimacy determinations. The factor is not one of the mandatory 
factors because the Agency has identified situations where higher 
levels of toxic constituents may not be relevant or applicable and, 
thus, would not be an indicator of ``sham'' recycling if this factor is 
not met, as discussed in section IX of this preamble. In these cases, 
the facility could make a determination of legitimacy without meeting 
this factor, but should be prepared to explain why its recycling is 
legitimate.
Comments: Factor 4--the Term ``Significant'' and Alternative Approaches
    Many of these comments sought further guidance on the meaning of 
the term ``significant'' in the proposed regulatory text, stating that 
the definition in the proposal was unclear or subjective, which may 
lead to a wide range of possible interpretations of the term. 
Commenters also expressed concern that a definition that is too vague 
may discourage recycling. In a related topic, commenters also responded 
to EPA's request for comments on two alternate approaches in the 
October 2003 proposal: (1) An approach that would establish a ``bright 
line'' for complying with the factor by specifically defining the terms 
``significant amounts'' and ``significantly elevated'' in the 
regulatory text and (2) an approach that would require the use of risk 
assessment tools to determine if a product with elevated levels of a 
hazardous constituent due to use of hazardous secondary materials in 
its manufacture process posed a greater risk to human

[[Page 64749]]

health or the environment than the analogous product made from raw 
materials.
    On the whole, commenters were not enthusiastic about the two 
alternative approaches that EPA suggested. Most commenters stated that 
a specific test of either nature would not be appropriate because of 
the wide variety of recycling situations to which it would have to 
apply.
EPA's Response: Factor 4--the Term ``Significant'' and Alternative 
Approaches
    The Agency believes that designing a specific test, such as those 
described in the preamble to the October 2003 proposal, that is 
applicable to the many different recycling scenarios possible in the 
exclusions and non-waste determinations would be difficult, if not 
impossible. Thus, we agree with those commenters who argued against 
adopting such a specific test. Therefore, the Agency has more clearly 
described in this preamble to the final rule what it means by 
``significant'' so that members of the regulated community can be 
confident in their evaluations of whether their products made from 
hazardous secondary materials contain ``toxics along for the ride.'' 
Therefore, members of the regulated community will neither be 
discouraged from recycling nor be forced to seek an opinion from a 
regulatory agency in every case. Details on implementation of this 
factor are in section IX of today's preamble.
Comments: Factor 4--Comparing the Products Instead of Hazardous 
Secondary Materials
    Most commenters responded positively to a change the Agency made in 
its October 2003 proposal to compare the product of the recycling 
process to the analogous product made from raw materials rather than 
comparing the hazardous secondary materials to the analogous raw 
materials. EPA discussed this shift in its October 2003 proposal at 68 
FR 61586-61587.
    However, several commenters argued that the change is an attempt by 
the Agency to regulate products or stated that certain unique elements 
of their production processes made it so that this factor should not 
apply to their industry or their particular process. In addition, some 
commenters were concerned that under this factor, in some cases, the 
generator would have to know what was being done with its hazardous 
secondary material several steps downstream in the recycling process 
when it was incorporated into a final product.
EPA's Response: Factor 4--Comparing the Products Instead of Hazardous 
Secondary Materials
    The Agency believes that for an entity to ensure that hazardous 
secondary materials are being legitimately recycled and not discarded, 
it needs to know what happens to the hazardous secondary materials once 
they leave the generator's control. However, in response to these 
comments, we are clarifying in today's preamble that the final 
legitimacy factor allows the entity conducting the legitimacy 
determination to make the comparison on ``toxics'' either between the 
final products or between the hazardous secondary material and the 
analogous raw material it replaces. If the comparison of materials 
going into the process shows no significant difference in levels of 
toxics, the product of the recycling process will not significantly 
differ from analogous products in those levels either. In cases where 
the generator finds it too complex to compare the product from its 
recycling process to the analogous product made from the virgin raw 
material, it can, instead, compare the chemistry of the materials going 
into the process to evaluate this factor.
Comments and EPA's Response: Relevance of Factor 4 to a Particular 
Process
    Regarding the implementation of this factor, several commenters 
raised the concern that many products that are made from hazardous 
secondary materials do not have analogous products made from raw 
materials because they are always or have always been made from a 
combination of primary and in-process materials and that these are 
cases where this factor is not relevant to that particular recycling 
process. The commenters stated that this is especially true in the 
mineral extraction industries, but also may be the case in other 
industries as well.
    The Agency is aware that there are situations where there may not 
be analogous products made from raw materials. In that case, the 
facility can opt to compare the toxic constituents in the hazardous 
secondary material it is using against those in an analogous raw 
material instead. We also note that while this factor needs to be 
considered, it is not mandatory because EPA recognizes that in some 
situations, it will not be relevant to a particular industrial process. 
In the case where the facility considers this factor and decides that 
it is not applicable to its process, the Agency suggests that the 
facility evaluate the presence of hazardous constituents in its product 
and document both that it considered this factor and the reasons it 
believes the factor is not relevant.

E. Consideration of Economics in Legitimacy

Comments: Economics Considerations
    EPA received several comments in response to the preamble 
discussion about how to consider economics in the context of making 
legitimacy determinations in the March 2007 supplemental proposal. EPA 
did not propose that economic consideration be codified within the 
regulatory definition of legitimate recycling and instead offered 
guidance on how economic consideration is relevant to determining the 
legitimacy of a recycling operation.
    EPA received only positive comments on the preamble discussion 
about consideration of economics in legitimacy. Specifically, EPA 
agrees with commenters who supported our position on the following: The 
economics of recycling are relevant to making legitimacy 
determinations, the economics of recycling are in fact different from 
traditional manufacturing, a recycling activity can be legitimate if a 
recycler charges a fee to accept hazardous secondary materials, 
economic considerations need to take into account the fluctuations in 
market prices of raw materials, and negative economic factors can 
contribute to environmental problems, such as speculative accumulation, 
abandonment, and sham recycling.
    However, EPA received many comments from both industry and 
recycling associations that opposed the October 2003 proposal to codify 
the economics consideration as a separate ``factor to be considered.'' 
These commenters generally argued that consideration of economics was 
inherent within the four legitimacy factors (e.g., both of the 
mandatory factors, as well as the two factors which must be considered) 
and, therefore, a separate factor was not warranted. On the other hand, 
a few commenters (primarily states) requested that EPA codify a 
separate economics factor to be considered and they supported the 
inclusion of an enforceable factor for legitimacy determinations.
EPA's Response: Economics Considerations
    EPA agrees with those commenters who argued that economic 
considerations are inherent within the legitimacy factors. We believe 
that one specific factor cannot encompass all

[[Page 64750]]

economic scenarios for the entire universe of hazardous secondary 
materials recycling. Furthermore, we do not believe that a separate 
enforceable factor in the regulations strengthens the definition of 
legitimate recycling, but we do believe that articulating how economic 
considerations can influence the legitimacy factors adds real value to 
the legitimacy determinations made by state regulators and the 
regulated community.
    Based on the comments we received, the Agency is not codifying 
specific regulatory language on economic considerations. Instead, 
today's preamble offers guidance and clarification on how economics may 
be considered in making legitimacy determinations, similar to the 
preamble discussion in the March 2007 supplemental proposal. For more 
detailed information on economic considerations, please refer to ``How 
consideration of economics applies to legitimacy'' in section IX of 
today's rulemaking.
Comments and EPA's Response: Specific Test for Economics
    EPA received some comments on the need for a specific test for 
consideration of economics. Commenters that supported a specific test 
believed it could include an accounting of economic flows over a period 
of time to determine longevity; an annual regulatory review of markets 
and a facility's economics; a ``rebuttable presumption that the 
recycling is legitimate where the recycler pays for the secondary 
materials,'' similar to manufacturing operations; and a requirement 
that payment for recycled products and intermediates be more than 
nominal if considered to be a sign of positive economics. One comment 
was also submitted which expressly opposed a specific test, citing that 
markets fluctuate too much to analyze the flows of revenues.
    EPA believes that none of the examples suggested by the commenters 
are applicable to a broad universe of recycling activities. We also 
acknowledge that fluctuations in markets for hazardous secondary 
materials and recycled products, and subsequent impacts in revenue 
flows, create another challenging aspect of developing a test for the 
consideration of economics. Therefore, we believe that it is not 
possible to craft an economic test for legitimacy that can accommodate 
all legitimate recycling activities. As stated in section IX of today's 
rulemaking, we believe that this preamble discussion provides 
sufficient guidance on how to consider economics in legitimacy 
determinations.

F. Documentation of Legitimacy

Comments and EPA's Response: Documentation of Legitimacy
    Several of the public comments stated that it is important that the 
hazardous secondary material generator or recycler of a recycled 
material maintain documentation that substantiates how the recycling 
activity complies with the legitimacy requirements. The comments stated 
that these records would show how the recycling activity meets the 
factors or, if a factor is not applicable, the records would document 
why it is not necessary for it to meet that factor. In this way, the 
hazardous secondary material generator or recycler could show that it 
considered all the factors. Other commenters objected to any 
recordkeeping requirements documenting that a recycling activity is 
legitimate.
    After considering the comments, the Agency has determined that for 
the purpose of the legitimacy factors in the final rule, 40 CFR 
261.2(f) applies. Section 261.2(f) states that, in the context of an 
enforcement action to implement Subtitle C of RCRA, a person claiming 
that a material is not a solid waste or is conditionally exempt from 
regulation is responsible for showing that they meet the terms of the 
exclusion and must provide appropriate documentation to show why they 
are eligible. For the legitimacy requirements finalized today, this 
provision would require that persons claiming that their recycling 
activity is legitimate would have the burden to provide documentation 
showing how the hazardous secondary materials provide a useful 
contribution to the recycling process and how the product of the 
recycling activity--whether it is a consumer product or a process 
intermediate--is valuable. In addition, the documentation would have to 
show that the hazardous secondary material generator or recycler 
considered the other two factors and determined for each of them that 
either the activity meets the factor or that the factor does not apply 
to this recycling activity and why it is not relevant or appropriate to 
consider.
    In addition, as part of today's transfer-based exclusion, the 
hazardous secondary material generator has to undertake reasonable 
efforts to ensure its hazardous secondary materials will be 
legitimately recycled pursuant to Sec.  260.43. As part of the 
reasonable efforts requirements, generators must document their 
reasonable efforts per Sec.  261.4(a)(24)(v)(C).

XIX. Major Comments on the Non-Waste Determination Process

    In the March 2007 supplemental proposal, EPA proposed a non-waste 
determination process that would provide persons with an administrative 
process for receiving a formal determination that their hazardous 
secondary materials are not discarded and, therefore, not solid waste. 
The process would be voluntary and available in addition to the two 
self-implementing exclusions. EPA proposed three types of non-waste 
determinations: (1) For hazardous secondary materials reclaimed in a 
continuous industrial process; (2) for hazardous secondary materials 
indistinguishable in all relevant aspects from a product or 
intermediate; and (3) for hazardous secondary materials reclaimed under 
the control of the generator, such as through contracts similar to 
tolling arrangements. For each type of non-waste determination, EPA 
proposed a set of criteria which the hazardous secondary materials 
would have to meet in order to receive a formal non-waste determination 
from the regulatory authority. For a detailed description of the non-
waste determination process that EPA is finalizing today, see section X 
of today's preamble.
Comments: Finalizing the Non-Waste Determination Process
    Overall, many commenters supported the non-waste determination 
process because it provides persons with regulatory certainty and 
offers a flexible alternative to the self-implementing exclusions 
included in today's rule. On the other hand, some commenters argued 
that the non-waste determination process would be resource-intensive, 
placing a significant burden on the states that would have to perform a 
case-by-case review of each application. One commenter said that, 
historically, many hazardous waste facilities have sought formal 
approval of their recycling practices from regulators and that EPA may 
be underestimating the number of applications that states would receive 
from the regulated community. Additionally, one state commenter 
mentioned that the non-waste determination process would increase 
regulatory inconsistency between states and at least two state 
commenters saw no reason to establish a formal non-waste determination 
process since they viewed the current variance procedure under 40 CFR 
260.33 and their own state

[[Page 64751]]

determination processes as an effective means to the same end. Finally, 
a few commenters did not support the non-waste determination process 
because of its lack of explicit conditions, such as those conditions 
required for the two self-implementing exclusions in today's rule.
EPA's Response: Finalizing the Non-Waste Determination Process
    EPA agrees with the majority of commenters who support the non-
waste determination process as an alternative way for hazardous 
secondary material generators to seek regulatory certainty in 
circumstances involving reclamation of hazardous secondary materials 
which do not clearly fit under today's self-implementing exclusions. 
EPA, however, does not agree with commenters who believe the non-waste 
determination would cause significant burden to states. Instead, we 
anticipate that the vast majority of persons will choose to use the 
self-implementing exclusions because this would be less resource 
intensive for the facility. In fact, the Agency does not envision any 
person submitting such an application if they are considered ``under 
the control of the generator'' because there are relatively few 
restrictions for this exclusion, and, indeed, it would probably require 
less effort than seeking a non-waste determination. Thus, the Agency 
only expects a limited number of persons to submit applications where 
the regulatory status is unclear under today's exclusions and a formal 
non-waste determination may be appropriate. EPA further believes that, 
by modeling the non-waste determination process after the current 
variance procedures, it has kept the additional burden to the states at 
a minimum because states can leverage their existing processes.
    EPA believes that requiring explicit conditions, such as those 
required for today's self-implementing exclusions, is not warranted for 
hazardous secondary materials receiving non-waste determinations 
because persons are, instead, required to make specific demonstrations 
as to how the hazardous secondary materials meet the eligibility 
criteria. Furthermore, regulatory authorities, if they so choose, may 
stipulate conditions within the non-waste determination as appropriate 
and relevant on a case-by-case basis. One purpose of the non-waste 
determination is to provide a measure of flexibility not provided by 
the self-implementing solid waste exclusions and specifying the 
conditions to be imposed would defeat this purpose.
    With respect to the comment regarding inconsistency among state 
non-waste determinations, EPA notes that, by allowing states to become 
authorized to conduct their own RCRA hazardous waste programs, the RCRA 
statute provides states flexibility to regulate hazardous waste more 
stringently than required under the federal regulations. Additionally, 
states sometimes take different interpretations of the same or similar 
regulations. This situation ultimately leads to variations between 
state regulations and interpretations, which EPA views as inherent to 
the RCRA structure and, thus, not a quality unique to the non-waste 
determination process.
    We also want to clarify that, although today's non-waste 
determination process is similar to the current variance procedures, 
non-waste determinations are technically not variances in which EPA 
regulations otherwise classify materials as solid wastes and facilities 
may apply for an exception. Instead, the new procedure would apply to 
cases in which hazardous secondary materials are not discarded, but 
which do not fit within the self-implementing exclusions, or for which 
the restrictions and conditions of the exclusions are not applicable.

A. Eligibility for Non-Waste Determination Process

Comments: Scope of Non-Waste Determinations
    In the March 2007 supplemental proposal, EPA indicated that non-
waste determinations would be limited to reclamation activities and 
would not apply to recycling of ``inherently waste-like'' materials, as 
defined at 40 CFR 261.2(d), recycling of materials that are ``used in a 
manner constituting disposal,'' or ``used to produce products that are 
placed on the land,'' (40 CFR 261.2(c)(1)), or ``burning materials for 
energy recovery'' or ``used to produce a fuel or otherwise contained in 
fuels'' (40 CFR 261.2(c)(2)).
    EPA received a number of comments urging the Agency to broaden the 
non-waste determinations to include all recycling scenarios in which 
hazardous secondary materials are not discarded. Some commenters 
supported expanding the scope to allow recycling for ``burning for 
energy recovery'' and ``use constituting disposal.'' These commenters 
argued that EPA could achieve further increases in recycling if the 
Agency broadened the scope of the hazardous secondary materials 
eligible to apply for a non-waste determination. On the other hand, 
some commenters agreed with EPA's proposed scope and supported limiting 
eligibility to only hazardous secondary materials being reclaimed. 
Alternatively, a few commenters supported limiting eligibility only to 
those circumstances where the recycling of hazardous secondary 
materials would not meet either a condition of the self-implementing 
exclusions or one of the legitimacy criteria, but still would not be 
considered discard. These commenters also argued that narrowing the 
eligibility would effectively limit the number of applications 
submitted and thus reduce the overall burden on the states.
EPA's Response: Scope of Non-Waste Determinations
    EPA agrees with those commenters who supported limiting non-waste 
determinations to reclamation activities. With respect to ``burning for 
energy recovery'' and ``use constituting disposal,'' EPA confirms that 
these types of recycling are ineligible for today's non-waste 
determination process. EPA believes that these types of recycling 
activities would best be left to other rulemaking proceedings. 
Furthermore, we disagree with those commenters who suggest further 
limiting the eligibility to only those cases where reclamation of the 
hazardous secondary materials would specifically violate a condition of 
today's self-implementing exclusions. We believe that by modeling the 
non-waste determination procedure after the existing variance 
procedure, we have ensured that any additional burden to the states 
will be kept at a minimum and thus further limits on eligibility are 
not necessary.
Comments: Whether the Hazardous Constituents in the Hazardous Secondary 
Materials Are Reclaimed Rather Than Released to the Air, Water, or Land
    Overall, we received only a few comments that discussed the 
specific criteria that EPA proposed for the non-waste determinations. 
For the criterion regarding whether the hazardous constituents in the 
hazardous secondary materials are reclaimed rather than released to the 
air, water, or land at significantly higher concentrations, some 
commenters argued that this criterion was inappropriate for determining 
discard because these types of releases are inevitable when reclaiming 
hazardous secondary materials. At least two commenters suggested that 
EPA should establish a ``bright line'' to clearly define 
``significantly higher concentrations'' in order to provide persons 
with greater

[[Page 64752]]

regulatory certainty. Other commenters expressed concern that this 
criterion (as well as the other criteria within 40 CFR 260.34) would be 
construed to apply to other types of recycling, including those 
eligible for today's self-implementing exclusions.
EPA's Response: Whether the Hazardous Constituents in the Hazardous 
Secondary Materials Are Reclaimed Rather Than Released to the Air, 
Water, or Land
    EPA disagrees with commenters who believe this criterion is not 
relevant for determining if hazardous secondary materials are being 
discarded. By indicating that such releases must not be at 
``significantly higher concentrations'' than would otherwise be 
released during the production process, we believe we have set a 
reasonable and meaningful bar that applicants must meet in order to 
demonstrate that their hazardous secondary materials are reclaimed and 
not discarded. Hazardous secondary materials that fail to meet this 
criterion may exhibit an indication that they are discarded and that 
such handling may present a greater risk of adverse impacts to human 
health and the environment. Regarding those commenters who support a 
``bright line'' in order to define ``significantly higher 
concentrations,'' EPA believes that, given the wide variety of 
production processes and recycling practices, establishing a ``one size 
fits all'' objective standard is not practical and would invite 
inefficiency.
    EPA also confirms that this criterion, and the other criteria in 40 
CFR 260.34, are specific to the relevant non-waste determinations, and 
thus are not required for the self-implementing exclusions or those 
exclusions found in 40 CFR 261.4, unless they are specifically included 
under state regulations as a criteria to consider.
Comments and EPA's Response: Whether the Capacity of the Production 
Process Would Allow for Use of the Hazardous Secondary Material in a 
Reasonable Time Frame
    For the criterion regarding whether the capacity of the production 
process would allow for use of the hazardous secondary material in a 
reasonable time frame (proposed explicitly for the non-waste 
determination for hazardous secondary materials reclaimed in a 
continuous industrial process), some commenters regarded this criterion 
as consistent with judicial direction and, thus, supported adding this 
criterion to the other non-waste determinations. Since EPA would 
consider hazardous secondary materials that were eternally ``stored'' 
for future recycling to be akin to discard, EPA agrees with these 
commenters that all non-waste determinations should take into account 
whether the hazardous secondary materials will be reclaimed within a 
``reasonable time frame.'' Therefore, in this final rule, EPA has added 
this criterion (with appropriate modifications to the language) to the 
non-waste determination for hazardous secondary materials 
indistinguishable in all relevant aspects from a product or 
intermediate. As with the non-waste determination for hazardous 
secondary materials reclaimed in a continuous industrial process, a 
person does not need to demonstrate that the hazardous secondary 
material meets the speculative accumulation limits per 40 CFR 
261.1(c)(8), but he must provide sufficient information about the 
hazardous secondary material and the process to demonstrate that the 
material will in fact be reclaimed in a reasonable time frame and will 
not be abandoned. However, a person may still choose to use the 
speculative accumulation time frame as a default if he so chooses.
Comments: Non-Waste Determination for Hazardous Secondary Materials 
Reclaimed Under the Control of the Generator
    A few commenters disagreed with the non-waste determination for 
hazardous secondary materials reclaimed under the control of the 
generator via a tolling arrangement or similar contractual arrangement. 
These commenters believed that the generator would be unable to 
maintain control over its hazardous secondary materials and residuals 
once at the reclamation facility and, thus, could not reliably meet the 
criteria for this non-waste determination. One state foresaw major 
enforcement problems with situations involving a commercial facility 
that handles hazardous secondary materials from multiple customers in a 
single process and then mismanages the residuals from that unit. As the 
residuals would be linked back to multiple generators, the liability 
for the mismanaged residuals would be difficult to detangle. On the 
other hand, some commenters felt that all tolling arrangements, 
including those eligible for the self-implementing exclusion, would 
best be evaluated through the non-waste determination process. These 
commenters argued that the regulatory authority should be required to 
review all tolling arrangements and their respective liability 
provisions in order to ensure that the hazardous secondary materials 
will not be discarded.
EPA's Response: Non-Waste Determination for Hazardous Secondary 
Materials Reclaimed Under the Control of the Generator
    We did not intend for such circumstances where a hazardous 
secondary material generator was unable to maintain control and 
responsibility over his hazardous secondary materials to be eligible 
for a non-waste determination for hazardous secondary materials 
reclaimed under the control of the generator. Where an applicant's 
hazardous secondary materials are intermingled with materials from 
other hazardous secondary material generators in a way that renders the 
applicant unable to maintain control and liability over his specific 
materials, the applicant would have been effectively precluded from 
obtaining this formal non-waste determination since he would ultimately 
fail the first criterion.
    EPA, however, has decided not to finalize the non-waste 
determination for materials reclaimed under the control of the 
generator because EPA could not identify any comments which described 
in detail other specific situations involving tolling or contractual 
arrangements that would not already be covered under today's self-
implementing generator-controlled exclusion. We, therefore, remain 
unclear as to what other arrangements exist where the generator would 
retain control over its hazardous secondary materials to ensure they 
are reclaimed and not discarded. Without this clear picture, EPA 
believes we cannot finalize this non-waste determination and thus we 
are not including it in today's final rule.

B. Process for Non-Waste Determinations

    In the March 2007 supplemental proposal, EPA proposed that the non-
waste determination process would be the same as that for the solid 
waste variances found in 40 CFR 260.33. In order to obtain a non-waste 
determination, a facility must apply to the Administrator or the 
authorized state. The Administrator or authorized state evaluates the 
application and issues a draft notice and opportunity for comment in 
the locality where the facility is located. The Administrator or 
authorized state would then issue a final decision based on the 
evaluation of the comments received.
Comments and EPA's Response: Requirement To Renew Applications
    A few commenters argued that non-waste determinations should be

[[Page 64753]]

renewed, either periodically or in the event of certain changes to the 
recycling process, so that regulators can ensure that the hazardous 
secondary materials continue to be reclaimed and not discarded.
    EPA agrees with those commenters who believe that certain changes 
in the recycling process should logically trigger a re-review of the 
circumstances. Therefore, in the event of a change that affects how 
hazardous secondary materials meet one or more of the criteria upon 
which a non-waste determination has been based, EPA is requiring 
persons to re-apply to the Administrator or the authorized state for a 
formal determination that the hazardous secondary material continues to 
meet the relevant criteria and is not discarded and, therefore, not a 
solid waste.
Comments and EPA's Response: Timelines for Regulators
    Some commenters expressed concerns about the length of time an 
applicant would need to wait before receiving a formal determination 
from their regulatory authority, explaining that particularly lengthy 
delays would adversely affect business operations. Although we 
understand this concern, requiring non-waste determinations to be made 
within a specific time frame would be difficult, as each case varies in 
complexity with some requiring more time to review than others. 
Furthermore, EPA would be challenged to prescribe one time frame that 
would accommodate numerous state regulatory agencies that vary in 
staffing and workloads. Therefore, we are not requiring regulators to 
issue determinations within a certain period of time.
Comments and EPA's Response: Public Comment Process
    At least two commenters suggested updating the format for public 
notice. For example, instead of requiring notice through a ``newspaper 
advertisement or radio broadcast'' (as EPA proposed), public notice 
should be allowed to include electronic formats, such as posting on a 
Web site or distribution through e-mail, in order to reduce costs. 
Other commenters supported requiring public notice for a broader 
audience, not necessarily limited to the ``locality where the recycler 
is located.'' These commenters argued that non-waste determinations may 
have national implications and would be more appropriately published in 
the Federal Register or made available through the EPA Docket Center.
    In response to these comments, EPA notes the non-waste 
determination process was purposely structured to follow the same 
procedures as outlined for solid waste variances in 40 CFR 260.33 in 
order to leverage the existing structure and keep additional burden on 
the states to a minimum. EPA, furthermore, believes that any changes to 
the type of format required for public notice would be more 
appropriately handled as part of a separate, wholesale effort to update 
all public notice requirements in the federal hazardous waste 
regulations. Therefore, for today's rule, EPA is retaining the same 
public notice provisions as proposed and required in 40 CFR 260.33.

XX. How Will These Regulatory Changes Be Administered and Enforced in 
the States?

A. Applicability of Rules in Authorized States

    Under section 3006 of RCRA, EPA may authorize qualified states to 
administer the RCRA Subtitle C hazardous waste program within the 
state. Following authorization, EPA retains Subtitle C enforcement 
authority, although authorized states have primary enforcement 
responsibility. EPA retains authority under sections 3007, 3008, 3013, 
3017 and 7003. The standards and requirements for state authorization 
are found at 40 CFR part 271.
    Prior to enactment of the Hazardous and Solid Waste Amendments of 
1984 (HSWA), a state with final RCRA authorization administered its 
hazardous waste program entirely in lieu of EPA administering the 
federal program in that state. The federal requirements no longer 
applied in the authorized state and EPA could not issue permits for any 
facilities in that state, since only the state was authorized to issue 
RCRA permits. When new, more stringent federal requirements were 
promulgated, the state was obligated to enact equivalent authorities 
within specified time frames. However, the new federal requirements did 
not take effect in an authorized state until the state adopted the 
federal requirements as state law.
    In contrast, under RCRA section 3006(g) (42 U.S.C. 6926(g)), which 
was added by HSWA, new requirements and prohibitions imposed under HSWA 
authority take effect in authorized states at the same time that they 
take effect in unauthorized states. EPA is directed by the statute to 
implement these requirements and prohibitions in authorized states, 
including the issuance of permits, until the state is granted 
authorization to do so. While states must still adopt HSWA related 
provisions as state law to retain final authorization, EPA implements 
the HSWA provisions in authorized states until the states do so.
    Authorized states are required to modify their programs only when 
EPA enacts federal requirements that are more stringent or broader in 
scope than existing federal requirements. RCRA section 3009 allows the 
states to impose standards more stringent than those in the federal 
program (see 40 CFR 271.1). Therefore, authorized states may, but are 
not required to, adopt federal regulations, both HSWA and non-HSWA, 
that are considered less stringent than previous federal regulations.

B. Effect on State Authorization

    Today's rule eliminates specific requirements that apply to 
hazardous secondary materials currently managed as hazardous waste. EPA 
believes that today's final rule describes the appropriate scope of the 
federal program under RCRA. These exclusions will encourage recycling 
and are consistent with RCRA's statutory objective of conserving 
valuable material and energy resources.
    EPA strongly encourages states to adopt the regulations being 
finalized today. When EPA authorizes a state to implement the RCRA 
hazardous waste program, EPA determines whether the state program is 
consistent with the federal program and whether it is no less 
stringent. This process, codified in 40 CFR part 271, ensures national 
consistency and minimum standards, while providing flexibility to the 
states in implementing the rules. In making this determination, EPA 
evaluates the state requirements to ensure they are no less stringent 
than the federal requirements. Because today's rule eliminates specific 
requirements for hazardous secondary materials that are currently 
managed as hazardous waste, state programs would no longer need to 
include those specific requirements in order to be consistent with 
EPA's regulations.
    However, if a state were, through implementation of state waiver 
authorities or other state laws, to allow compliance with the 
provisions of today's rule in advance of adoption or authorization, EPA 
would not generally consider such implementation a concern for purposes 
of enforcement or state authorization. Of course, the state could not 
implement the requirements in a way that was less stringent than the 
federal requirements in today's rule.

[[Page 64754]]

    In the case of the case-by-case non-waste determinations found in 
40 CFR 260.34, a non-waste determination may be granted by the state if 
the state is either authorized for this provision or if the following 
conditions are met: (1) The state determines the hazardous secondary 
material meets the applicable criteria for the non-waste determination; 
(2) the state requests that EPA review its determination; and (3) EPA 
approves the state determination.
    It should be noted that, under RCRA section 3009, a state may adopt 
standards that are more stringent than the federal program. Thus, a 
state is not required to adopt today's final rule or a state may choose 
to adopt only parts of today's final rule. Some states incorporate the 
federal regulations by reference or have specific state statutory 
requirements that their state program can be no more stringent than the 
federal regulations. In those cases, EPA anticipates that the 
exclusions in today's final rule will be adopted by these states, 
consistent with state laws and state administrative procedures, unless 
they take explicit action as specified by their respective state laws 
to decline the revisions. We note that if states choose not to adopt 
the provisions of today's final rule concerning exports, then any 
hazardous secondary materials that are exported would be subject to the 
hazardous waste export requirements in 40 CFR part 262 subparts E or H, 
or analogous export requirements that are part of a state's RCRA 
authorized program. EPA also notes that, as described in this preamble, 
we believe that the legitimacy provision finalized in Sec.  260.43 is 
substantially the same as and no more stringent than the existing 
regulatory scheme in which all recycling must be legitimate. If a state 
agency were to adopt the four legitimacy factors in Sec.  260.43 for 
all recycling, EPA would consider their regulations to be equivalent to 
the federal requirements.

XXI. Administrative Requirements for This Rulemaking?

A. Executive Order 12866: Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order (EO) 12866 (58 FR 51735, 
October 4, 1993), this action is a ``significant regulatory action'' 
because today's action contains novel policy issues (EO 12866 Section 
3(f)(4)) and because its potential impact on the economy will be 
greater than the $100 million or more annual effect, meeting the 
``economically significant'' threshold of EO 12866 Section 3(f)(1). 
Because this rule meets two of the EO 12866 ``significant'' criteria, 
EPA submitted this action to the Office of Management and Budget (OMB) 
for review under EO 12866 and any changes made in response to OMB's 
recommendations have been documented in the docket for this action. EPA 
also prepared an analysis of the potential economic costs and benefits 
associated with this proposed action. The analysis is contained in our 
``Regulatory Impact Analysis'' (RIA) which is available from the docket 
(http://www.regulations.gov) and is briefly summarized below.
    Assuming full adoption of this final rule by all RCRA-authorized 
states, EPA's best estimate (i.e., ``expected value'') of the future 
average annual net benefits of this final rule to the national economy 
is $95 million per year, affecting about 5,600 facilities in 280 
industries in 21 economic sectors. However, the sensitivity analysis 
section of our RIA for this final rule identifies 11 numerical 
uncertainty factors behind our calculation of this best estimate. 
Future variation in one or more of these factors may result in future 
annual net benefits ranging between $19 million to $333 million in any 
given future year. Therefore, EPA is classifying this final rule as 
``economically significant'' because the $333 million per year upper-
bound of our net benefits uncertainty range exceeds the $100 million 
``annual effect'' threshold established by section 3(f)(1) of the 1993 
Executive Order 12866.''
    This action is expected to remove from RCRA regulation 1.5 million 
tons per year of hazardous secondary materials currently managed as 
RCRA hazardous waste. These affected hazardous secondary materials 
consist of about 98% that are currently reclaimed as RCRA hazardous 
waste, and about 2% of hazardous waste that is currently disposed of 
(e.g., landfilled, incinerated, or deepwell injected), which EPA 
expects may switch from disposal to reclamation as a result of this 
action. This $95 million annual net cost savings estimate is 11% less 
than the $107 million annual net cost savings estimated in our 2007 RIA 
in support of the March 2007 supplemental proposal for this action. 
This difference is largely explained by enhancements made to the 
methodology of the RIA based on public comments received from 30 
organizations on our 2003 and 2007 RIA's in support of this action, as 
well as by updates of key data underlying the RIA.
    These impact estimates are EPA's best estimates within the economic 
impact estimation uncertainty range of $19 million to $333 million in 
annual materials management cost savings for the net effect of the 
exclusions. These impact ranges reflect the overall uncertainty range 
of -80% to +249% across eleven different uncertainty factors addressed 
as a sensitivity analysis in our RIA. The specific uncertainty factors 
evaluated are (1) state government adoption, (2) future fluctuations in 
affected hazardous secondary materials generation tonnages, (3) within-
year discrepancies between hazardous secondary materials generation and 
corresponding management tonnages, (4) future industrial production 
levels, (5) omission of SQG facility counts in our impact estimates by 
artifact that we based the impacts on LQG and TSDRF data from the RCRA 
Biennial Report database, (6) Biennial Report database quality 
assurance considerations, (7) physical and chemical quality of the 
hazardous secondary materials affected, (8) impact estimation 
methodology level of effort, (9) changes in future market price of 
commodities recovered from recycled material, (10) the possibility of 
same-company facilities sharing offsite captive recycling facility, and 
(11) the possibility of baseline disposal switchover to onsite 
recycling. Concerning the uncertainty of state government adoption, 
included as one component of potential industry cost savings is the 
transfer effect of an expected $5 million reduction in future annual 
state government hazardous waste fee revenues if all state governments 
adopt today's rule.
    With respect to each of the regulatory exclusions in today's 
action, the $95 million per year net cost savings effect consists of 
approximately (a) $7 million per year for hazardous secondary materials 
reclaimed under the control of the generator in either land or non-land 
based units (which includes on-site, same-company, and tolling 
exclusions), plus (b) $87 million per year cost savings for exclusion 
of other offsite transfers, plus (c) $1 million per year in cost 
savings for case-by-case non-waste determinations.
    Embedded in this overall impact estimate is $4.7 million per year 
in potential commodity market value of three categories of 15 
constituents in affected materials we expect may begin to be recovered 
from hazardous secondary materials that would otherwise continue to be 
disposed of as hazardous wastes in the absence of today's action: (1) 
Commodity metals (chromium, copper, lead, molybdenum disulfide, nickel, 
zinc), (2) commodity solvents (acetone, alkyl benzenes, C9-C10 alkyl 
benzenes, methanol, methyl ethyl ketone, toluene, xylene), and (3)

[[Page 64755]]

other commodity materials (acids, carbon). However, the RIA estimate of 
potential new induced recycling does not include an evaluation of 
whether the U.S. or global recycling markets are large enough to 
sustain this potential future increase in supply of recovered 
materials. Market conditions for recycled hazardous secondary materials 
can vary considerably over time. Demand for recycled solvents, for 
example, is largely dependent on the petroleum market because virgin 
solvents are made from petroleum products, and high petroleum prices 
encourage solvent recycling. Similarly, high metals prices obviously 
favor the recycling of metal-bearing hazardous secondary materials.
    The RIA, available from the docket (http://www.regulations.gov), 
provides many more details and descriptions about these assorted 
components of expected economic impacts, including potential 
distributional effects on other industries not directly subject to 
today's action.

B. Paperwork Reduction Act (Information Collection Request)

    The information collection requirements in this rule have been 
submitted for approval to OMB under the Paperwork Reduction Act, 44 
U.S.C. 3501 et seq. The information collection requirements are not 
enforceable until OMB approves them. The information collection request 
has been updated since the March 2007 supplemental proposal to reflect 
the final rule requirements and to respond to public comments.
    The information requirements established for this action are 
voluntary to the extent that the exclusions being finalized today are 
voluntary and represent an overall reduction in burden as compared with 
the alternative information requirements associated with managing the 
hazardous secondary materials as hazardous waste. The information 
requirements help ensure that (1) entities operating under the 
regulatory exclusions contained in today's action are held accountable 
to the applicable requirements; (2) state inspectors can verify 
compliance with the restrictions and conditions of the exclusions when 
needed; and (3) hazardous secondary materials exported for recycling 
are actually handled as commodities abroad.
    For the recordkeeping and reporting requirements applicable to 
hazardous secondary materials sent for reclamation, the aggregate 
annual burden to respondents over the three-year period covered by this 
ICR is estimated to be 11,552 hours, with a cost to affected entities 
(i.e., industrial facilities) of $1,417,242. However, this represents 
an annual reduction in burden to respondents of 52,050 hours, 
representing a cost reduction of $3,474,035 per year. The estimated 
annual operation and maintenance costs to affected entities are 
$739,469 per year, primarily for purchasing audit or other similar type 
reports. There are no startup costs and no costs for purchases of 
services. Administrative costs to the Agency are estimated to be 1,257 
hours per year, representing an annual cost of $49,891. Burden is 
defined at 5 CFR 1320.3(b).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is 
approved by OMB, the Agency will publish a technical amendment to 40 
CFR part 9 in the Federal Register to display the OMB control number 
for the approved information collection requirements contained in this 
final rule.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 
601 et seq., generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to notice and comment 
rulemaking requirements under the Administrative Procedure Act or any 
other statute, unless the agency certifies that the rule will not have 
a significant economic impact on a substantial number of small 
entities. Small entities include small businesses, small organizations, 
and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR 
121.201; (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field. For more information regarding the 
expected economic impact of this action, please refer to our 
``Regulatory Impact Analysis'' available from the docket for this final 
rule.
    After considering the economic impacts of this final rule on small 
entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. In 
determining whether a rule has a significant economic impact on a 
substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the rule on small entities.'' 5 U.S.C. 603 and 604. 
Thus, an agency may certify that a rule will not have a significant 
economic impact on a substantial number of small entities if the rule 
relieves regulatory burden, or otherwise has a positive economic effect 
on all of the small entities subject to the rule. Because today's 
action is designed to lower the cost of industrial hazardous secondary 
materials management for entities subject to today's requirements, this 
final rule will not result in an adverse economic impact effect on 
affected small entities. EPA therefore concludes that today's action 
will relieve regulatory burden for all size entities, including small 
entities.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to state, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed

[[Page 64756]]

under section 203 of the UMRA a small government agency plan. The plan 
must provide for notifying potentially affected small governments, 
enabling officials of affected small governments to have meaningful and 
timely input in the development of EPA regulatory proposals with 
significant Federal intergovernmental mandates, and informing, 
educating, and advising small governments on compliance with the 
regulatory requirements.
    EPA has determined that this rule does not include a Federal 
mandate that may result in expenditures of $100 million or more for 
state, local, or tribal governments, in the aggregate, or the private 
sector in any one year. This is because this rule imposes no 
enforceable duty on any state, local, or tribal governments. Although 
one public commenter noted that many states choose to incorporate EPA's 
regulations by reference, EPA does not require them to do so. EPA also 
has determined that this rule contains no regulatory requirements that 
might significantly or uniquely affect small governments. In addition, 
as discussed above, the private sector is not expected to incur costs 
exceeding $100 million. Therefore, today's rule is not subject to the 
requirements of sections 202 and 205 of UMRA.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 
1999), requires EPA to develop an accountable process to ensure 
meaningful and timely input by state and local officials in the 
development of regulatory policies that have federalism implications. 
Policies that have federalism implications are defined in the Executive 
Order to include regulations that have substantial direct effects on 
the states, on the relationship between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government.
    This final rule does not have federalism implications. It will not 
have substantial direct effects on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. There are no state and local 
government bodies that incur direct compliance costs by this 
rulemaking. State and local government implementation expenditures are 
expected to be less than $500,000 in any one year. Thus, the 
requirements of Section 6 of the Executive Order do not apply to this 
final rule. Although one public commenter noted that many states choose 
to incorporate EPA's regulations by reference, EPA does not require 
them to do so.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, entitled Consultation and Coordination with 
Indian Tribal Governments (65 FR 67249, November 9, 2000), requires EPA 
to develop an accountable process to ensure a meaningful and timely 
input by tribal officials in the development of regulatory policies 
that have tribal implications. This final rule does not have tribal 
implications, as specified in Executive Order 13175. It does not 
significantly or uniquely affect the communities of Indian tribal 
governments, nor would it impose substantial direct compliance costs on 
them. Thus, Executive Order 13175 does not apply to this final rule.

G. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    This action is not subject to EO 13045 (62 FR 19885, April 23, 
1997) because the Agency does not believe the environmental health 
risks or safety risks addressed by this action present a 
disproportionate risk to children. An assessment of countervailing risk 
and a discussion of how today's rule addresses those risks can be found 
in Chapter 11 of the Regulatory Impact Analysis, found in the docket 
for today's rulemaking.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This final rule is not a ``significant energy action'' as defined 
in Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001) because it is not likely to have a significant 
adverse effect on the supply, distribution, or use of energy. This 
final rule reduces regulatory burden and as explained in our Regulatory 
Impact Analysis, may possibly induce fuel efficiency and energy savings 
from the voluntary shifting of some types of hazardous secondary 
materials, where it is cost-effective for firms to do so, from current 
landfill and incineration to reclamation. It therefore should not 
adversely affect energy supply, distribution, or use.

I. National Technology Transfer and Advancement Act of 1995

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 104-113, 12(d) (15 U.S.C. 272 
note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. NTTAA directs EPA to 
provide Congress, through OMB, explanations of when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This action does not involve technical standards. Therefore, EPA 
did not consider the use of any voluntary consensus standards.

J. Executive Order 12898: Environmental Justice

    Executive Order 12898, Federal Actions to Address Environmental 
Justice in Minority Populations and Low-Income Population (February 11, 
1994), is designed to address the environmental and human health 
conditions of minority and low-income populations. EPA is committed to 
addressing environmental justice concerns and has assumed a leadership 
role in environmental justice initiatives to enhance environmental 
quality for all citizens of the United States. The Agency's goals are 
to ensure that no segment of the population, regardless of race, color, 
national origin, income, or net worth bears disproportionately high and 
adverse human health and environmental impacts as a result of EPA's 
policies, programs, and activities. Our goal is to ensure that all 
citizens live in clean and sustainable communities. In response to 
Executive Order 12898, and to the concerns voiced by many groups 
outside the Agency, EPA's Office of Solid Waste and Emergency Response 
(OSWER) formed an Environmental Justice Task Force to analyze the array 
of environmental justice issues specific to waste programs and to 
develop an overall strategy to identify and address these issues (OSWER 
Directive No. 9200.3-17).
    This final rule would streamline the requirements for certain 
hazardous secondary materials sent for reclamation. Facilities that 
would be affected by today's final rule include those generating 
hazardous secondary materials, as well as facilities which reclaim such 
materials. Disposal and treatment facilities would not be affected by 
this final rule. While commenters assert that minorities now comprise a 
majority in neighborhoods

[[Page 64757]]

with commercial hazardous waste facilities, and much larger (over two-
thirds) majorities can be found in neighborhoods with clustered 
facilities, EPA does not believe that such neighborhoods will be 
adversely impacted by today's rule. As explained in Chapter 11 of the 
Regulatory Impact Analysis found in the docket to today's rule, EPA has 
performed an assessment of potential countervailing risks and has 
determined that the conditions address those risks and no net impact is 
expected. Thus, overall, no disproportionate impacts to minorities or 
low income communities are expected.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by 
Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA), generally provides that before a rule may take effect, 
the agency promulgating the rule must submit a report containing the 
rule and other required information to the U.S. Senate, the U.S. House 
of Representatives, and to the Comptroller General of the United 
States, prior to publication of the rule in the Federal Register. 
Furthermore, a ``major rule'' cannot take effect until 60 days after it 
is published in the Federal Register. Today's action is expected to be 
a ``major rule'' as defined by 5 U.S.C. 804(2) according to the first 
of its three ``major rule'' definitions: ``The term ``major rule'' 
means any rule that the Administrator of the Office of Information and 
Regulatory Affairs of OMB finds has resulted in or is likely to result 
in--(A) an annual effect on the economy of $100,000,000 or more; (B) a 
major increase in costs or prices for consumers, individual industries, 
Federal, state, or local government agencies, or geographic regions; or 
(C) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.'' EPA has submitted a copy of this rule to each House 
of the Congress and to the Comptroller General, and this rule will be 
effective December 29, 2008.

List of Subjects

40 CFR Part 260

    Environmental protection, Administrative practice and procedure, 
Confidential business information, Hazardous waste, Reporting and 
recordkeeping requirements.

40 CFR Part 261

    Environmental protection, Hazardous waste, Recycling, Reporting and 
recordkeeping requirements.

40 CFR Part 270

    Administrative practice and procedure, Hazardous waste, Reporting 
and recordkeeping requirements, Permit application requirements, Permit 
modification procedures, Waste treatment and disposal.

    Dated: October 7, 2008.
Stephen L. Johnson,
Administrator.

0
For the reasons stated in the preamble, title 40, chapter I of the Code 
of Federal Regulations is amended to read as follows:

PART 260--HAZARDOUS WASTE MANAGEMENT SYSTEM: GENERAL

0
1. The authority citation for part 260 continues to read as follows:

    Authority: 42 U.S.C. 6905, 6912(a), 6921-6927, 6930, 6935, 6937, 
6938, 6939 and 6974.

Subpart B--Definitions

0
2. Section 260.10 is amended by revising the definitions of 
``Facility'' and ``Transfer facility'' and by adding in alphabetical 
order the definitions of ``Hazardous secondary material,'' ``Hazardous 
secondary material generated and reclaimed under the control of the 
generator'' and ``Hazardous secondary material generator,'' 
``Intermediate facility,'' and ``Land-based unit'' to read as follows:


Sec.  260.10  Definitions.

* * * * *
    Facility means:
    (1) All contiguous land, and structures, other appurtenances, and 
improvements on the land, used for treating, storing, or disposing of 
hazardous waste, or for managing hazardous secondary materials prior to 
reclamation. A facility may consist of several treatment, storage, or 
disposal operational units (e.g., one or more landfills, surface 
impoundments, or combinations of them).
    (2) For the purpose of implementing corrective action under 40 CFR 
264.101 or 267.101, all contiguous property under the control of the 
owner or operator seeking a permit under Subtitle C of RCRA. This 
definition also applies to facilities implementing corrective action 
under RCRA Section 3008(h).
    (3) Notwithstanding paragraph (2) of this definition, a remediation 
waste management site is not a facility that is subject to 40 CFR 
264.101, but is subject to corrective action requirements if the site 
is located within such a facility.
* * * * *
    Hazardous secondary material means a secondary material (e.g., 
spent material, by-product, or sludge) that, when discarded, would be 
identified as hazardous waste under part 261 of this chapter.
    Hazardous secondary material generated and reclaimed under the 
control of the generator means:
    (1) That such material is generated and reclaimed at the generating 
facility (for purposes of this defintion, generating facility means all 
contiguous property owned, leased, or otherwise controlled by the 
hazardous secondary material generator); or
    (2) That such material is generated and reclaimed at different 
facilities, if the reclaiming facility is controlled by the generator 
or if both the generating facility and the reclaiming facility are 
controlled by a person as defined in Sec.  260.10, and if the generator 
provides one of the following certifications: ``on behalf of [insert 
generator facility name], I certify that this facility will send the 
indicated hazardous secondary material to [insert reclaimer facility 
name], which is controlled by [insert generator facility name] and that 
[insert the name of either facility] has acknowledged full 
responsibility for the safe management of the hazardous secondary 
material,'' or ``on behalf of [insert generator facility name] I 
certify that this facility will send the indicated hazardous secondary 
material to [insert reclaimer facility name], that both facilities are 
under common control, and that [insert name of either facility] has 
acknowledged full responsibility for the safe management of the 
hazardous secondary material.'' For purposes of this paragraph, 
``control'' means the power to direct the policies of the facility, 
whether by the ownership of stock, voting rights, or otherwise, except 
that contractors who operate facilities on behalf of a different person 
as defined in Sec.  260.10 shall not be deemed to ``control'' such 
facilities, or
    (3) That such material is generated pursuant to a written contract 
between a tolling contractor and a toll manufacturer and is reclaimed 
by the tolling contractor, if the tolling contractor certifies the 
following: ``On behalf of [insert tolling contractor name], I certify 
that [insert tolling contractor name], has a written contract with 
[insert toll manufacturer name] to manufacture [insert name of product 
or intermediate] which is made from specified unused materials, and 
that [insert tolling contractor name] will

[[Page 64758]]

reclaim the hazardous secondary materials generated during this 
manufacture. On behalf of [insert tolling contractor name], I also 
certify that [insert tolling contractor name] retains ownership of, and 
responsibility for, the hazardous secondary materials that are 
generated during the course of the manufacture, including any releases 
of hazardous secondary materials that occur during the manufacturing 
process. For purposes of this paragraph, tolling contractor means a 
person who arranges for the production of a product or intermediate 
made from specified unused materials through a written contract with a 
toll manufacturer. Toll manufacturer means a person who produces a 
product or intermediate made from specified unused materials pursuant 
to a written contract with a tolling contractor.
    Hazardous secondary material generator means any person whose act 
or process produces hazardous secondary materials at the generating 
facility. For purposes of this paragraph, ``generating facility'' means 
all contiguous property owned, leased, or otherwise controlled by the 
hazardous secondary material generator. For the purposes of Sec.  
261.2(a)(2)(ii) and Sec.  261.4(a)(23), a facility that collects 
hazardous secondary materials from other persons is not the hazardous 
secondary material generator.
* * * * *
    Intermediate facility means any facility that stores hazardous 
secondary materials for more than 10 days, other than a hazardous 
secondary material generator or reclaimer of such material.
* * * * *
    Land-based unit means an area where hazardous secondary materials 
are placed in or on the land before recycling. This definition does not 
include land-based production units.
* * * * *
    Transfer facility means any transportation-related facility, 
including loading docks, parking areas, storage areas and other similar 
areas where shipments of hazardous waste or hazardous secondary 
materials are held during the normal course of transportation.
* * * * *

0
3. Section 260.30 is amended by revising the section heading, the 
introductory text, paragraph (b), and adding paragraphs (d) and (e) to 
read as follows:


Sec.  260.30  Non-waste determinations and variances from 
classification as a solid waste.

    In accordance with the standards and criteria in Sec.  260.31 and 
Sec.  260.34 and the procedures in Sec.  260.33, the Administrator may 
determine on a case-by-case basis that the following recycled materials 
are not solid wastes:
* * * * *
    (b) Materials that are reclaimed and then reused within the 
original production process in which they were generated;
* * * * *
    (d) Hazardous secondary materials that are reclaimed in a 
continuous industrial process; and
    (e) Hazardous secondary materials that are indistinguishable in all 
relevant aspects from a product or intermediate.
* * * * *

0
4. Section 260.33 is amended by revising the section heading, the 
introductory text, paragraph (a) and adding paragraph (c) to read as 
follows:


Sec.  260.33  Procedures for variances from classification as a solid 
waste, for variances to be classified as a boiler, or for non-waste 
determinations.

    The Administrator will use the following procedures in evaluating 
applications for variances from classification as a solid waste, 
applications to classify particular enclosed controlled flame 
combustion devices as boilers, or applications for non-waste 
determinations.
    (a) The applicant must apply to the Administrator for the variance 
or non-waste determination. The application must address the relevant 
criteria contained in Sec.  260.31, Sec.  260.32, or Sec.  260.34, as 
applicable.
* * * * *
    (c) For non-waste determinations, in the event of a change in 
circumstances that affect how a hazardous secondary material meets the 
relevant criteria contained in Sec.  260.34 upon which a non-waste 
determination has been based, the applicant must re-apply to the 
Administrator for a formal determination that the hazardous secondary 
material continues to meet the relevant criteria and therefore is not a 
solid waste.

0
5. Section 260.34 is added to Subpart C to read as follows:


Sec.  260.34  Standards and criteria for non-waste determinations.

    (a) An applicant may apply to the Administrator for a formal 
determination that a hazardous secondary material is not discarded and 
therefore not a solid waste. The determinations will be based on the 
criteria contained in paragraphs (b) or (c) of this section, as 
applicable. If an application is denied, the hazardous secondary 
material might still be eligible for a solid waste variance or 
exclusion (for example, one of the solid waste variances under Sec.  
260.31). Determinations may also be granted by the State if the State 
is either authorized for this provision or if the following conditions 
are met:
    (1) The State determines the hazardous secondary material meets the 
criteria in paragraphs (b) or (c) of this section, as applicable;
    (2) The State requests that EPA review its determination; and
    (3) EPA approves the State determination.
    (b) The Administrator may grant a non-waste determination for 
hazardous secondary material which is reclaimed in a continuous 
industrial process if the applicant demonstrates that the hazardous 
secondary material is a part of the production process and is not 
discarded. The determination will be based on whether the hazardous 
secondary material is legitimately recycled as specified in Sec.  
260.43 and on the following criteria:
    (1) The extent that the management of the hazardous secondary 
material is part of the continuous primary production process and is 
not waste treatment;
    (2) Whether the capacity of the production process would use the 
hazardous secondary material in a reasonable time frame and ensure that 
the hazardous secondary material will not be abandoned (for example, 
based on past practices, market factors, the nature of the hazardous 
secondary material, or any contractual arrangements);
    (3) Whether the hazardous constituents in the hazardous secondary 
material are reclaimed rather than released to the air, water or land 
at significantly higher levels from either a statistical or from a 
health and environmental risk perspective than would otherwise be 
released by the production process; and
    (4) Other relevant factors that demonstrate the hazardous secondary 
material is not discarded.
    (c) The Administrator may grant a non-waste determination for 
hazardous secondary material which is indistinguishable in all relevant 
aspects from a product or intermediate if the applicant demonstrates 
that the hazardous secondary material is comparable to a product or 
intermediate and is not discarded. The determination will be based on 
whether the hazardous secondary material is legitimately

[[Page 64759]]

recycled as specified in Sec.  260.43 and on the following criteria:
    (1) Whether market participants treat the hazardous secondary 
material as a product or intermediate rather than a waste (for example, 
based on the current positive value of the hazardous secondary 
material, stability of demand, or any contractual arrangements);
    (2) Whether the chemical and physical identity of the hazardous 
secondary material is comparable to commercial products or 
intermediates;
    (3) Whether the capacity of the market would use the hazardous 
secondary material in a reasonable time frame and ensure that the 
hazardous secondary material will not be abandoned (for example, based 
on past practices, market factors, the nature of the hazardous 
secondary material, or any contractual arrangements);
    (4) Whether the hazardous constituents in the hazardous secondary 
material are reclaimed rather than released to the air, water or land 
at significantly higher levels from either a statistical or from a 
health and environmental risk perspective than would otherwise be 
released by the production process; and
    (5) Other relevant factors that demonstrate the hazardous secondary 
material is not discarded.

0
6. Section 260.42 is added to Subpart C to read as follows:


Sec.  260.42  Notification requirement for hazardous secondary 
materials.

    (a) Hazardous secondary material generators, tolling contractors, 
toll manufacturers, reclaimers, and intermediate facilities managing 
hazardous secondary materials which are excluded from regulation under 
Sec.  261.2(a)(2)(ii), Sec.  261.4(a)(23), (24), or (25) must send a 
notification prior to operating under the exclusion(s) and by March 1 
of each even numbered year thereafter to the Regional Administrator 
using EPA Form 8700-12 that includes the following information:
    (1) The name, address, and EPA ID number (if applicable) of the 
facility;
    (2) The name and telephone number of a contact person;
    (3) The NAICS code of the facility;
    (4) The exclusion under which the hazardous secondary materials 
will be managed (e.g., Sec.  261.2(a)(2)(ii), Sec.  261.4(a)(23), (24), 
and/or (25));
    (5) For reclaimers and intermediate facilities managing hazardous 
secondary materials in accordance with Sec.  261.4(a)(24) or (25), 
whether the reclaimer or intermediate facility has financial assurance 
(not applicable for persons managing hazardous secondary materials 
generated and reclaimed under the control of the generator);
    (6) When the facility expects to begin managing the hazardous 
secondary materials in accordance with the exclusion;
    (7) A list of hazardous secondary materials that will be managed 
according to the exclusion (reported as the EPA hazardous waste numbers 
that would apply if the hazardous secondary materials were managed as 
hazardous wastes);
    (8) For each hazardous secondary material, whether the hazardous 
secondary material, or any portion thereof, will be managed in a land-
based unit;
    (9) The quantity of each hazardous secondary material to be managed 
annually; and
    (10) The certification (included in EPA Form 8700-12) signed and 
dated by an authorized representative of the facility.
    (b) If a hazardous secondary material generator, tolling 
contractor, toll manufacturer, reclaimer or intermediate facility has 
submitted a notification, but then subsequently stops managing 
hazardous secondary materials in accordance with the exclusion(s), the 
facility must notify the Regional Administrator within thirty (30) days 
using EPA Form 8700-12. For purposes of this section, a facility has 
stopped managing hazardous secondary materials if the facility no 
longer generates, manages and/or reclaims hazardous secondary materials 
under the exclusion(s) and does not expect to manage any amount of 
hazardous secondary materials for at least one year.

0
7. Section 260.43 is added to Subpart C to read as follows:


Sec.  260.43  Legitimate recycling of hazardous secondary materials 
regulated under Sec.  260.34, Sec.  261.2(a)(2)(ii), and Sec.  
261.4(a)(23), (24), or (25).

    (a) Persons regulated under Sec.  260.34 or claiming to be excluded 
from hazardous waste regulation under Sec.  261.2(a)(2)(ii), Sec.  
261.4(a)(23), (24), or (25) because they are engaged in reclamation 
must be able to demonstrate that the recycling is legitimate. Hazardous 
secondary material that is not legitimately recycled is discarded 
material and is a solid waste. In determining if their recycling is 
legitimate, persons must address the requirements of Sec.  260.43(b) 
and must consider the requirements of Sec.  260.43(c) below.
    (b) Legitimate recycling must involve a hazardous secondary 
material that provides a useful contribution to the recycling process 
or to a product or intermediate of the recycling process, and the 
recycling process must produce a valuable product or intermediate.
    (1) The hazardous secondary material provides a useful contribution 
if it
    (i) Contributes valuable ingredients to a product or intermediate; 
or
    (ii) Replaces a catalyst or carrier in the recycling process; or
    (iii) Is the source of a valuable constituent recovered in the 
recycling process; or
    (iv) Is recovered or regenerated by the recycling process; or
    (v) Is used as an effective substitute for a commercial product.
    (2) The product or intermediate is valuable if it is
    (i) Sold to a third party; or
    (ii) Used by the recycler or the generator as an effective 
substitute for a commercial product or as an ingredient or intermediate 
in an industrial process.
    (c) The following factors must be considered in making a 
determination as to the overall legitimacy of a specific recycling 
activity.
    (1) The generator and the recycler should manage the hazardous 
secondary material as a valuable commodity. Where there is an analogous 
raw material, the hazardous secondary material should be managed, at a 
minimum, in a manner consistent with the management of the raw 
material. Where there is no analogous raw material, the hazardous 
secondary material should be contained. Hazardous secondary materials 
that are released to the environment and are not recovered immediately 
are discarded.
    (2) The product of the recycling process does not
    (i) Contain significant concentrations of any hazardous 
constituents found in Appendix VIII of part 261 that are not found in 
analogous products; or
    (ii) Contain concentrations of any hazardous constituents found in 
Appendix VIII of part 261 at levels that are significantly elevated 
from those found in analogous products; or
    (iii) Exhibit a hazardous characteristic (as defined in part 261 
subpart C) that analogous products do not exhibit.
    (3) In making a determination that a hazardous secondary material 
is legitimately recycled, persons must evaluate all factors and 
consider legitimacy as a whole. If, after careful evaluation of these 
other considerations, one or both of the factors are not met, then this 
fact may be an indication that the material is not legitimately 
recycled.
    However, the factors in this paragraph do not have to be met for 
the recycling to be considered legitimate. In evaluating the extent to 
which these factors are met and in determining

[[Page 64760]]

whether a process that does not meet one or both of these factors is 
still legitimate, persons can consider the protectiveness of the 
storage methods, exposure from toxics in the product, the 
bioavailability of the toxics in the product, and other relevant 
considerations.

PART 261--IDENTIFICATION AND LISTING OF HAZARDOUS WASTE

0
8. The authority citation for part 261 continues to read as follows:

    Authority: 42 U.S.C. 6905, 6912(a), 6921, 6922, 6924(y), and 
6938.

Subpart A--[Amended]

0
9. Section 261.1 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  261.1  Purpose and scope.

* * * * *
    (c) * * *
    (4) A material is ``reclaimed'' if it is processed to recover a 
usable product, or if it is regenerated. Examples are recovery of lead 
values from spent batteries and regeneration of spent solvents. In 
addition, for purposes of Sec. Sec.  261.2(a)(2)(ii), 261.4(a)(23), and 
261.4(a)(24) smelting, melting and refining furnaces are considered to 
be solely engaged in metals reclamation if the metal recovery from the 
hazardous secondary materials meets the same requirements as those 
specified for metals recovery from hazardous waste found in Sec.  
266.100(d)(1)-(3) of this chapter, and if the residuals meet the 
requirements specified in Sec.  266.112 of this chapter.
* * * * *

0
10. Section 261.2 is amended by revising paragraph (a)(1), (a)(2), 
(c)(3) and Table 1 in paragraph (c)(4) to read as follows:


Sec.  261.2  Definition of solid waste.

* * * * *
    (a)(1) A solid waste is any discarded material that is not excluded 
under Sec.  261.4(a) or that is not excluded by a variance granted 
under Sec. Sec.  260.30 and 260.31 or that is not excluded by a non-
waste determination under Sec. Sec.  260.30 and 260.34.
    (2)(i) A discarded material is any material which is:
    (A) Abandoned, as explained in paragraph (b) of this section; or
    (B) Recycled, as explained in paragraph (c) of this section; or
    (C) Considered inherently waste-like, as explained in paragraph (d) 
of this section; or
    (D) A military munition identified as a solid waste in Sec.  
266.202.
    (ii) A hazardous secondary material is not discarded if it is 
generated and reclaimed under the control of the generator as defined 
in Sec.  260.10, it is not speculatively accumulated as defined in 
Sec.  261.1(c)(8), it is handled only in non-land-based units and is 
contained in such units, it is generated and reclaimed within the 
United States and its territories, it is not otherwise subject to 
material-specific management conditions under Sec.  261.4(a) when 
reclaimed, it is not a spent lead acid battery (see Sec.  266.80 and 
Sec.  273.2), it does not meet the listing description for K171 or K172 
in Sec.  261.32, and the reclamation of the material is legitimate, as 
specified under Sec.  260.43. (See also the notification requirements 
of Sec.  260.42). (For hazardous secondary materials managed in land-
based units, see Sec.  261.4(a)(23)).
* * * * *
    (c) * * *
    (3) Reclaimed. Materials noted with a ``--'' in column 3 of Table 1 
are not solid wastes when reclaimed. Materials noted with an ``*'' in 
column 3 of Table 1 are solid wastes when reclaimed unless they meet 
the requirements of Sec. Sec.  261.2(a)(2)(ii), or 261.4(a)(17), or 
261.4(a)(23), or 261.4(a)(24) or 261.4(a)(25).
    (4) * * *

                                                     Table 1
----------------------------------------------------------------------------------------------------------------
                                                                              Reclamation
                                                                            (261.2(c)(3)),
                                                                               except as
                                                                           provided in Sec.       Speculative
                                   Use constituting    Energy recovery/          Sec.         accumulation (Sec.
                                    disposal (Sec.        fuel (Sec.       261.2(a)(2)(ii),       261.2(c)(4))
                                     261.2(c)(1))        261.2(c)(2))        261.4(a)(17),
                                                                             261.4(a)(23),
                                                                           261.4(a)(24), or
                                                                             261.4(a)(25)
----------------------------------------------------------------------------------------------------------------
                                                  1                   2                   3                   4
----------------------------------------------------------------------------------------------------------------
Spent Materials.................                (*)                 (*)                 (*)                 (*)
Sludges (listed in 40 CFR Part                  (*)                 (*)                 (*)                 (*)
 261.31 or 261.32)..............
Sludges exhibiting a                            (*)                 (*)                  --                 (*)
 characteristic of hazardous
 waste..........................
By-products (listed in 40 CFR                   (*)                 (*)                 (*)                 (*)
 261.31 or 261.32)..............
By-products exhibiting a                        (*)                 (*)                  --                 (*)
 characteristic of hazardous
 waste..........................
Commercial chemical products                    (*)                 (*)                  --                  --
 listed in 40 CFR 261.33........
Scrap metal other than excluded                 (*)                 (*)                 (*)                 (*)
 scrap metal (see 261.1(c)(9))..
----------------------------------------------------------------------------------------------------------------
Note: The terms ``spent materials,'' ``sludges,'' ``by-products,'' and ``scrap metal'' and ``processed scrap
  metal'' are defined in Sec.   261.1.

* * * * *

0
11. Section 261.4 is amended by adding new paragraphs (a)(23), (24), 
and (25) to read as follows:


Sec.  261.4  Exclusions.

    (a) * * *
    (23) Hazardous secondary material generated and reclaimed within 
the United States or its territories and managed in land-based units as 
defined in Sec.  260.10 of this chapter is not a solid waste provided 
that:
    (i) The material is contained;
    (ii) The material is a hazardous secondary material generated and 
reclaimed under the control of the generator, as defined in Sec.  
260.10;
    (iii) The material is not speculatively accumulated, as defined in 
Sec.  261.1(c)(8);
    (iv) The material is not otherwise subject to material-specific 
management conditions under paragraph (a) of this section when 
reclaimed, it is not a spent lead acid battery (see Sec.  266.80 and 
Sec.  273.2 of this chapter), and it does not meet the listing 
description for K171 or K172 in Sec.  261.32;

[[Page 64761]]

    (v) The reclamation of the material is legitimate, as specified 
under Sec.  260.43 of this chapter; and
    (vi) In addition, persons claiming the exclusion under this 
paragraph (a)(23) must provide notification as required by Sec.  260.42 
of this chapter. (For hazardous secondary material managed in a non-
land-based unit, see Sec.  261.2(a)(2)(ii)).
    (24) Hazardous secondary material that is generated and then 
transferred to another person for the purpose of reclamation is not a 
solid waste, provided that:
    (i) The material is not speculatively accumulated, as defined in 
Sec.  261.1(c)(8);
    (ii) The material is not handled by any person or facility other 
than the hazardous secondary material generator, the transporter, an 
intermediate facility or a reclaimer, and, while in transport, is not 
stored for more than 10 days at a transfer facility, as defined in 
Sec.  260.10 of this chapter, and is packaged according to applicable 
Department of Transportation regulations at 49 CFR Parts 173, 178, and 
179 while in transport;
    (iii) The material is not otherwise subject to material-specific 
management conditions under paragraph (a) of this section when 
reclaimed, it is not a spent lead-acid battery (see Sec.  266.80 and 
Sec.  273.2 of this chapter), and it does not meet the listing 
description for K171 or K172 in Sec.  261.32;
    (iv) The reclamation of the material is legitimate, as specified 
under Sec.  260.43 of this chapter;
    (v) The hazardous secondary material generator satisfies all of the 
following conditions:
    (A) The material must be contained.
    (B) Prior to arranging for transport of hazardous secondary 
materials to a reclamation facility (or facilities) where the 
management of the hazardous secondary materials is not addressed under 
a RCRA Part B permit or interim status standards, the hazardous 
secondary material generator must make reasonable efforts to ensure 
that each reclaimer intends to properly and legitimately reclaim the 
hazardous secondary material and not discard it, and that each 
reclaimer will manage the hazardous secondary material in a manner that 
is protective of human health and the environment. If the hazardous 
secondary material will be passing through an intermediate facility 
where the management of the hazardous secondary materials is not 
addressed under a RCRA Part B permit or interim status standards, the 
hazardous secondary material generator must make contractual 
arrangements with the intermediate facility to ensure that the 
hazardous secondary material is sent to the reclamation facility 
identified by the hazardous secondary material generator, and the 
hazardous secondary material generator must perform reasonable efforts 
to ensure that the intermediate facility will manage the hazardous 
secondary material in a manner that is protective of human health and 
the environment. Reasonable efforts must be repeated at a minimum of 
every three years for the hazardous secondary material generator to 
claim the exclusion and to send the hazardous secondary materials to 
each reclaimer and any intermediate facility. In making these 
reasonable efforts, the generator may use any credible evidence 
available, including information gathered by the hazardous secondary 
material generator, provided by the reclaimer or intermediate facility, 
and/or provided by a third party. The hazardous secondary material 
generator must affirmatively answer all of the following questions for 
each reclamation facility and any intermediate facility:
    (1) Does the available information indicate that the reclamation 
process is legitimate pursuant to Sec.  260.43 of this chapter? In 
answering this question, the hazardous secondary material generator can 
rely on their existing knowledge of the physical and chemical 
properties of the hazardous secondary material, as well as information 
from other sources (e.g., the reclamation facility, audit reports, 
etc.) about the reclamation process. (By responding to this question, 
the hazardous secondary material generator has also satisfied its 
requirement in Sec.  260.43(a) of this chapter to be able to 
demonstrate that the recycling is legitimate).
    (2) Does the publicly available information indicate that the 
reclamation facility and any intermediate facility that is used by the 
hazardous secondary material generator notified the appropriate 
authorities of hazardous secondary materials reclamation activities 
pursuant to Sec.  260.42 of this chapter and have they notified the 
appropriate authorities that the financial assurance condition is 
satisfied per paragraph (a)(24)(vi)(F) of this section? In answering 
these questions, the hazardous secondary material generator can rely on 
the available information documenting the reclamation facility's and 
any intermediate facility's compliance with the notification 
requirements per Sec.  260.42 of this chapter, including the 
requirement in Sec.  260.42(a)(5) to notify EPA whether the reclaimer 
or intermediate facility has financial assurance.
    (3) Does publicly available information indicate that the 
reclamation facility or any intermediate facility that is used by the 
hazardous secondary material generator has not had any formal 
enforcement actions taken against the facility in the previous three 
years for violations of the RCRA hazardous waste regulations and has 
not been classified as a significant non-complier with RCRA Subtitle C? 
In answering this question, the hazardous secondary material generator 
can rely on the publicly available information from EPA or the state. 
If the reclamation facility or any intermediate facility that is used 
by the hazardous secondary material generator has had a formal 
enforcement action taken against the facility in the previous three 
years for violations of the RCRA hazardous waste regulations and has 
been classified as a significant non-complier with RCRA Subtitle C, 
does the hazardous secondary material generator have credible evidence 
that the facilities will manage the hazardous secondary materials 
properly? In answering this question, the hazardous secondary material 
generator can obtain additional information from EPA, the state, or the 
facility itself that the facility has addressed the violations, taken 
remedial steps to address the violations and prevent future violations, 
or that the violations are not relevant to the proper management of the 
hazardous secondary materials.
    (4) Does the available information indicate that the reclamation 
facility and any intermediate facility that is used by the hazardous 
secondary material generator have the equipment and trained personnel 
to safely recycle the hazardous secondary material? In answering this 
question, the generator may rely on a description by the reclamation 
facility or by an independent third party of the equipment and trained 
personnel to be used to recycle the generator's hazardous secondary 
material.
    (5) If residuals are generated from the reclamation of the excluded 
hazardous secondary materials, does the reclamation facility have the 
permits required (if any) to manage the residuals? If not, does the 
reclamation facility have a contract with an appropriately permitted 
facility to dispose of the residuals? If not, does the hazardous 
secondary material generator have credible evidence that the residuals 
will be managed in a manner that is protective of human health and the 
environment? In answering these questions, the hazardous secondary 
material generator can rely on publicly available information from EPA 
or the

[[Page 64762]]

state, or information provided by the facility itself.
    (C) The hazardous secondary material generator must maintain for a 
minimum of three years documentation and certification that reasonable 
efforts were made for each reclamation facility and, if applicable, 
intermediate facility where the management of the hazardous secondary 
materials is not addressed under a RCRA Part B permit or interim status 
standards prior to transferring hazardous secondary material. 
Documentation and certification must be made available upon request by 
a regulatory authority within 72 hours, or within a longer period of 
time as specified by the regulatory authority. The certification 
statement must:
    (1) Include the printed name and official title of an authorized 
representative of the hazardous secondary material generator company, 
the authorized representative's signature, and the date signed;
    (2) Incorporate the following language: ``I hereby certify in good 
faith and to the best of my knowledge that, prior to arranging for 
transport of excluded hazardous secondary materials to [insert name(s) 
of reclamation facility and any intermediate facility], reasonable 
efforts were made in accordance with Sec.  261.4(a)(24)(v)(B) to ensure 
that the hazardous secondary materials would be recycled legitimately, 
and otherwise managed in a manner that is protective of human health 
and the environment, and that such efforts were based on current and 
accurate information.''
    (D) The hazardous secondary material generator must maintain at the 
generating facility for no less than three (3) years records of all 
off-site shipments of hazardous secondary materials. For each shipment, 
these records must, at a minimum, contain the following information:
    (1) Name of the transporter and date of the shipment;
    (2) Name and address of each reclaimer and, if applicable, the name 
and address of each intermediate facility to which the hazardous 
secondary material was sent;
    (3) The type and quantity of hazardous secondary material in the 
shipment.
    (E) The hazardous secondary material generator must maintain at the 
generating facility for no less than three (3) years confirmations of 
receipt from each reclaimer and, if applicable, each intermediate 
facility for all off-site shipments of hazardous secondary materials. 
Confirmations of receipt must include the name and address of the 
reclaimer (or intermediate facility), the type and quantity of the 
hazardous secondary materials received and the date which the hazardous 
secondary materials were received. This requirement may be satisfied by 
routine business records (e.g., financial records, bills of lading, 
copies of DOT shipping papers, or electronic confirmations of receipt); 
and
    (vi) Reclaimers of hazardous secondary material excluded from 
regulation under this exclusion and intermediate facilities as defined 
in Sec.  260.10 of this chapter satisfy all of the following 
conditions:
    (A) The reclaimer and intermediate facility must maintain at its 
facility for no less than three (3) years records of all shipments of 
hazardous secondary material that were received at the facility and, if 
applicable, for all shipments of hazardous secondary materials that 
were received and subsequently sent off-site from the facility for 
further reclamation. For each shipment, these records must at a minimum 
contain the following information:
    (1) Name of the transporter and date of the shipment;
    (2) Name and address of the hazardous secondary material generator 
and, if applicable, the name and address of the reclaimer or 
intermediate facility which the hazardous secondary materials were 
received from;
    (3) The type and quantity of hazardous secondary material in the 
shipment; and
    (4) For hazardous secondary materials that, after being received by 
the reclaimer or intermediate facility, were subsequently transferred 
off-site for further reclamation, the name and address of the 
(subsequent) reclaimer and, if applicable, the name and address of each 
intermediate facility to which the hazardous secondary material was 
sent.
    (B) The intermediate facility must send the hazardous secondary 
material to the reclaimer(s) designated by the hazardous secondary 
materials generator.
    (C) The reclaimer and intermediate facility must send to the 
hazardous secondary material generator confirmations of receipt for all 
off-site shipments of hazardous secondary materials. Confirmations of 
receipt must include the name and address of the reclaimer (or 
intermediate facility), the type and quantity of the hazardous 
secondary materials received and the date which the hazardous secondary 
materials were received. This requirement may be satisfied by routine 
business records (e.g., financial records, bills of lading, copies of 
DOT shipping papers, or electronic confirmations of receipt).
    (D) The reclaimer and intermediate facility must manage the 
hazardous secondary material in a manner that is at least as protective 
as that employed for analogous raw material and must be contained. An 
``analogous raw material'' is a raw material for which a hazardous 
secondary material is a substitute and serves the same function and has 
similar physical and chemical properties as the hazardous secondary 
material.
    (E) Any residuals that are generated from reclamation processes 
will be managed in a manner that is protective of human health and the 
environment. If any residuals exhibit a hazardous characteristic 
according to subpart C of 40 CFR part 261, or if they themselves are 
specifically listed in subpart D of 40 CFR part 261, such residuals are 
hazardous wastes and must be managed in accordance with the applicable 
requirements of 40 CFR parts 260 through 272.
    (F) The reclaimer and intermediate facility has financial assurance 
as required under subpart H of 40 CFR part 261.
    (vii) In addition, all persons claiming the exclusion under this 
paragraph (a)(24) of this section must provide notification as required 
under Sec.  260.42 of this chapter.
    (25) Hazardous secondary material that is exported from the United 
States and reclaimed at a reclamation facility located in a foreign 
country is not a solid waste, provided that the hazardous secondary 
material generator complies with the applicable requirements of 
paragraph (a)(24)(i)-(v) of this section (excepting paragraph 
(a)(v)(B)(2) of this section for foreign reclaimers and foreign 
intermediate facilities), and that the hazardous secondary material 
generator also complies with the following requirements:
    (i) Notify EPA of an intended export before the hazardous secondary 
material is scheduled to leave the United States. A complete 
notification must be submitted at least sixty (60) days before the 
initial shipment is intended to be shipped off-site. This notification 
may cover export activities extending over a twelve (12) month or 
lesser period. The notification must be in writing, signed by the 
hazardous secondary material generator, and include the following 
information:
    (A) Name, mailing address, telephone number and EPA ID number (if 
applicable) of the hazardous secondary material generator;
    (B) A description of the hazardous secondary material and the EPA 
hazardous waste number that would

[[Page 64763]]

apply if the hazardous secondary material was managed as hazardous 
waste and the U.S. DOT proper shipping name, hazard class and ID number 
(UN/NA) for each hazardous secondary material as identified in 49 CFR 
parts 171 through 177;
    (C) The estimated frequency or rate at which the hazardous 
secondary material is to be exported and the period of time over which 
the hazardous secondary material is to be exported;
    (D) The estimated total quantity of hazardous secondary material;
    (E) All points of entry to and departure from each foreign country 
through which the hazardous secondary material will pass;
    (F) A description of the means by which each shipment of the 
hazardous secondary material will be transported (e.g., mode of 
transportation vehicle (air, highway, rail, water, etc.), type(s) of 
container (drums, boxes, tanks, etc.));
    (G) A description of the manner in which the hazardous secondary 
material will be reclaimed in the receiving country;
    (H) The name and address of the reclaimer, any intermediate 
facility and any alternate reclaimer and intermediate facilities; and
    (I) The name of any transit countries through which the hazardous 
secondary material will be sent and a description of the approximate 
length of time it will remain in such countries and the nature of its 
handling while there (for purposes of this section, the terms 
``Acknowledgement of Consent'', ``receiving country'' and ``transit 
country'' are used as defined in 40 CFR 262.51 with the exception that 
the terms in this section refer to hazardous secondary materials, 
rather than hazardous waste):
    (ii) Notifications submitted by mail should be sent to the 
following mailing address: Office of Enforcement and Compliance 
Assurance, Office of Federal Activities, International Compliance 
Assurance Division, (Mail Code 2254A), Environmental Protection Agency, 
1200 Pennsylvania Ave., NW., Washington, DC 20460. Hand-delivered 
notifications should be delivered to: Office of Enforcement and 
Compliance Assurance, Office of Federal Activities, International 
Compliance Assurance Division, Environmental Protection Agency, Ariel 
Rios Bldg., Room 6144, 12th St. and Pennsylvania Ave., NW., Washington, 
DC 20004. In both cases, the following shall be prominently displayed 
on the front of the envelope: ``Attention: Notification of Intent to 
Export.''
    (iii) Except for changes to the telephone number in paragraph 
(a)(25)(i)(A) of this section and decreases in the quantity of 
hazardous secondary material indicated pursuant to paragraph 
(a)(25)(i)(D) of this section, when the conditions specified on the 
original notification change (including any exceedance of the estimate 
of the quantity of hazardous secondary material specified in the 
original notification), the hazardous secondary material generator must 
provide EPA with a written renotification of the change. The shipment 
cannot take place until consent of the receiving country to the changes 
(except for changes to paragraph (a)(25)(i)(I) of this section and in 
the ports of entry to and departure from transit countries pursuant to 
paragraphs (a)(25)(i)(E) of this section) has been obtained and the 
hazardous secondary material generator receives from EPA an 
Acknowledgment of Consent reflecting the receiving country's consent to 
the changes.
    (iv) Upon request by EPA, the hazardous secondary material 
generator shall furnish to EPA any additional information which a 
receiving country requests in order to respond to a notification.
    (v) EPA will provide a complete notification to the receiving 
country and any transit countries. A notification is complete when EPA 
receives a notification which EPA determines satisfies the requirements 
of paragraph (a)(25)(i) of this section. Where a claim of 
confidentiality is asserted with respect to any notification 
information required by paragraph (a)(25)(i) of this section, EPA may 
find the notification not complete until any such claim is resolved in 
accordance with 40 CFR 260.2.
    (vi) The export of hazardous secondary material under this 
paragraph (a)(25) is prohibited unless the receiving country consents 
to the intended export. When the receiving country consents in writing 
to the receipt of the hazardous secondary material, EPA will send an 
Acknowledgment of Consent to the hazardous secondary material 
generator. Where the receiving country objects to receipt of the 
hazardous secondary material or withdraws a prior consent, EPA will 
notify the hazardous secondary material generator in writing. EPA will 
also notify the hazardous secondary material generator of any responses 
from transit countries.
    (vii) For exports to OECD Member countries, the receiving country 
may respond to the notification using tacit consent. If no objection 
has been lodged by any receiving country or transit countries to a 
notification provided pursuant to paragraph (a)(25)(i) of this section 
within thirty (30) days after the date of issuance of the 
acknowledgement of receipt of notification by the competent authority 
of the receiving country, the transboundary movement may commence. In 
such cases, EPA will send an Acknowledgment of Consent to inform the 
hazardous secondary material generator that the receiving country and 
any relevant transit countries have not objected to the shipment, and 
are thus presumed to have consented tacitly. Tacit consent expires one 
(1) calendar year after the close of the thirty (30) day period; 
renotification and renewal of all consents is required for exports 
after that date.
    (viii) A copy of the Acknowledgment of Consent must accompany the 
shipment. The shipment must conform to the terms of the Acknowledgment 
of Consent.
    (ix) If a shipment cannot be delivered for any reason to the 
reclaimer, intermediate facility or the alternate reclaimer or 
alternate intermediate facility, the hazardous secondary material 
generator must re-notify EPA of a change in the conditions of the 
original notification to allow shipment to a new reclaimer in 
accordance with paragraph (iii) of this section and obtain another 
Acknowledgment of Consent.
    (x) Hazardous secondary material generators must keep a copy of 
each notification of intent to export and each Acknowledgment of 
Consent for a period of three years following receipt of the 
Acknowledgment of Consent.
    (xi) Hazardous secondary material generators must file with the 
Administrator no later than March 1 of each year, a report summarizing 
the types, quantities, frequency and ultimate destination of all 
hazardous secondary materials exported during the previous calendar 
year. Annual reports submitted by mail should be sent to the following 
address: Office of Enforcement and Compliance Assurance, Office of 
Federal Activities, International Compliance Assurance Division (Mail 
Code 2254A), Environmental Protection Agency, 1200 Pennsylvania Ave., 
NW., Washington, DC 20460. Hand-delivered reports should be delivered 
to: Office of Enforcement and Compliance Assurance, Office of Federal 
Activities, International Compliance Assurance Division, Environmental 
Protection Agency, Ariel Rios Bldg., Room 6144, 12th St. and 
Pennsylvania Ave., NW., Washington, DC 20004. Such reports must include 
the following information:
    (A) Name, mailing and site address, and EPA ID number (if 
applicable) of

[[Page 64764]]

the hazardous secondary material generator;
    (B) The calendar year covered by the report;
    (C) The name and site address of each reclaimer and intermediate 
facility;
    (D) By reclaimer and intermediate facility, for each hazardous 
secondary material exported, a description of the hazardous secondary 
material and the EPA hazardous waste number that would apply if the 
hazardous secondary material was managed as hazardous waste, DOT hazard 
class, the name and U.S. EPA ID number (where applicable) for each 
transporter used, the total amount of hazardous secondary material 
shipped and the number of shipments pursuant to each notification;
    (E) A certification signed by the hazardous secondary material 
generator which states: ``I certify under penalty of law that I have 
personally examined and am familiar with the information submitted in 
this and all attached documents, and that based on my inquiry of those 
individuals immediately responsible for obtaining the information, I 
believe that the submitted information is true, accurate, and complete. 
I am aware that there are significant penalties for submitting false 
information including the possibility of fine and imprisonment.''
    (xii) All persons claiming an exclusion under this paragraph 
(a)(25) must provide notification as required by Sec.  260.42 of this 
chapter.
* * * * *

Subparts F-G [Reserved]

0
12. In part 261, Subpart F and Subpart G are added and reserved.
0
13. Part 261 is amended by adding new Subpart H to read as follows:
Subpart H--Financial Requirements for Management of Excluded Hazardous 
Secondary Materials
Sec.
261.140 Applicability.
261.141 Definitions of terms as used in this subpart.
261.142 Cost estimate.
261.143 Financial assurance condition.
261.144-261.146 [reserved].
261.147 Liability requirements.
261.148 Incapacity of owners or operators, guarantors, or financial 
institutions.
261.149 Use of State-required mechanisms.
261.150 State assumption of responsibility.
261.151 Wording of the instruments.

Subpart H--Financial Requirements for Management of Excluded 
Hazardous Secondary Materials


Sec.  261.140  Applicability.

    (a) The requirements of this subpart apply to owners or operators 
of reclamation and intermediate facilities managing hazardous secondary 
materials excluded under 40 CFR Sec.  261.4(a)(24), except as provided 
otherwise in this section.
    (b) States and the Federal government are exempt from the financial 
assurance requirements of this subpart.


Sec.  261.141  Definitions of terms as used in this subpart.

    The terms defined in Sec.  265.141(d), (f), (g), and (h) of this 
chapter have the same meaning in this subpart as they do in Sec.  
265.141 of this chapter.


Sec.  261.142  Cost estimate.

    (a) The owner or operator must have a detailed written estimate, in 
current dollars, of the cost of disposing of any hazardous secondary 
material as listed or characteristic hazardous waste, and the potential 
cost of closing the facility as a treatment, storage, and disposal 
facility.
    (1) The estimate must equal the cost of conducting the activities 
described in paragraph (a) of this section at the point when the extent 
and manner of the facility's operation would make these activities the 
most expensive; and
    (2) The cost estimate must be based on the costs to the owner or 
operator of hiring a third party to conduct these activities. A third 
party is a party who is neither a parent nor a subsidiary of the owner 
or operator. (See definition of parent corporation in Sec.  265.141(d) 
of this chapter.) The owner or operator may use costs for on-site 
disposal in accordance with applicable requirements if he can 
demonstrate that on-site disposal capacity will exist at all times over 
the life of the facility.
    (3) The cost estimate may not incorporate any salvage value that 
may be realized with the sale of hazardous secondary materials, or 
hazardous or non-hazardous wastes if applicable under Sec.  265.5113(d) 
of this chapter, facility structures or equipment, land, or other 
assets associated with the facility.
    (4) The owner or operator may not incorporate a zero cost for 
hazardous secondary materials, or hazardous or non-hazardous wastes if 
applicable under Sec.  265.5113(d) of this chapter that might have 
economic value.
    (b) During the active life of the facility, the owner or operator 
must adjust the cost estimate for inflation within 60 days prior to the 
anniversary date of the establishment of the financial instrument(s) 
used to comply with Sec.  261.143. For owners and operators using the 
financial test or corporate guarantee, the cost estimate must be 
updated for inflation within 30 days after the close of the firm's 
fiscal year and before submission of updated information to the 
Regional Administrator as specified in Sec.  261.143(e)(3). The 
adjustment may be made by recalculating the cost estimate in current 
dollars, or by using an inflation factor derived from the most recent 
Implicit Price Deflator for Gross National Product published by the 
U.S. Department of Commerce in its Survey of Current Business, as 
specified in paragraphs (b)(1) and (2) of this section. The inflation 
factor is the result of dividing the latest published annual Deflator 
by the Deflator for the previous year.
    (1) The first adjustment is made by multiplying the cost estimate 
by the inflation factor. The result is the adjusted cost estimate.
    (2) Subsequent adjustments are made by multiplying the latest 
adjusted cost estimate by the latest inflation factor.
    (c) During the active life of the facility, the owner or operator 
must revise the cost estimate no later than 30 days after a change in a 
facility's operating plan or design that would increase the costs of 
conducting the activities described in paragraph (a) or no later than 
60 days after an unexpected event which increases the cost of 
conducting the activities described in paragraph (a) of this section. 
The revised cost estimate must be adjusted for inflation as specified 
in paragraph (b) of this section.
    (d) The owner or operator must keep the following at the facility 
during the operating life of the facility: The latest cost estimate 
prepared in accordance with paragraphs (a) and (c) and, when this 
estimate has been adjusted in accordance with paragraph (b), the latest 
adjusted cost estimate.


Sec.  261.143  Financial assurance condition.

    Per Sec.  261.4(a)(24)(vi)(F) of this chapter, an owner or operator 
of a reclamation or intermediate facility must have financial assurance 
as a condition of the exclusion as required under Sec.  261.4(a)(24) of 
this chapter. He must choose from the options as specified in 
paragraphs (a) through (e) of this section.
    (a) Trust fund. (1) An owner or operator may satisfy the 
requirements of this section by establishing a trust fund which 
conforms to the requirements of this paragraph and submitting an 
originally signed duplicate of the trust agreement to the Regional 
Administrator. The trustee must be an entity which has the authority to 
act as a trustee and whose trust operations are regulated and examined 
by a Federal or State agency.

[[Page 64765]]

    (2) The wording of the trust agreement must be identical to the 
wording specified in Sec.  261.151(a)(1), and the trust agreement must 
be accompanied by a formal certification of acknowledgment (for 
example, see Sec.  261.151(a)(2)). Schedule A of the trust agreement 
must be updated within 60 days after a change in the amount of the 
current cost estimate covered by the agreement.
    (3) The trust fund must be funded for the full amount of the 
current cost estimate before it may be relied upon to satisfy the 
requirements of this section.
    (4) Whenever the current cost estimate changes, the owner or 
operator must compare the new estimate with the trustee's most recent 
annual valuation of the trust fund. If the value of the fund is less 
than the amount of the new estimate, the owner or operator, within 60 
days after the change in the cost estimate, must either deposit an 
amount into the fund so that its value after this deposit at least 
equals the amount of the current cost estimate, or obtain other 
financial assurance as specified in this section to cover the 
difference.
    (5) If the value of the trust fund is greater than the total amount 
of the current cost estimate, the owner or operator may submit a 
written request to the Regional Administrator for release of the amount 
in excess of the current cost estimate.
    (6) If an owner or operator substitutes other financial assurance 
as specified in this section for all or part of the trust fund, he may 
submit a written request to the Regional Administrator for release of 
the amount in excess of the current cost estimate covered by the trust 
fund.
    (7) Within 60 days after receiving a request from the owner or 
operator for release of funds as specified in paragraph (a) (5) or (6) 
of this section, the Regional Administrator will instruct the trustee 
to release to the owner or operator such funds as the Regional 
Administrator specifies in writing. If the owner or operator begins 
final closure under subpart G of 40 CFR part 264 or 265, an owner or 
operator may request reimbursements for partial or final closure 
expenditures by submitting itemized bills to the Regional 
Administrator. The owner or operator may request reimbursements for 
partial closure only if sufficient funds are remaining in the trust 
fund to cover the maximum costs of closing the facility over its 
remaining operating life. No later than 60 days after receiving bills 
for partial or final closure activities, the Regional Administrator 
will instruct the trustee to make reimbursements in those amounts as 
the Regional Administrator specifies in writing, if the Regional 
Administrator determines that the partial or final closure expenditures 
are in accordance with the approved closure plan, or otherwise 
justified. If the Regional Administrator has reason to believe that the 
maximum cost of closure over the remaining life of the facility will be 
significantly greater than the value of the trust fund, he may withhold 
reimbursements of such amounts as he deems prudent until he determines, 
in accordance with Sec.  265.143(i) that the owner or operator is no 
longer required to maintain financial assurance for final closure of 
the facility. If the Regional Administrator does not instruct the 
trustee to make such reimbursements, he will provide to the owner or 
operator a detailed written statement of reasons.
    (8) The Regional Administrator will agree to termination of the 
trust when:
    (i) An owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (ii) The Regional Administrator releases the owner or operator from 
the requirements of this section in accordance with paragraph (i) of 
this section.
    (b) Surety bond guaranteeing payment into a trust fund. (1) An 
owner or operator may satisfy the requirements of this section by 
obtaining a surety bond which conforms to the requirements of this 
paragraph and submitting the bond to the Regional Administrator. The 
surety company issuing the bond must, at a minimum, be among those 
listed as acceptable sureties on Federal bonds in Circular 570 of the 
U.S. Department of the Treasury.
    (2) The wording of the surety bond must be identical to the wording 
specified in Sec.  261.151(b).
    (3) The owner or operator who uses a surety bond to satisfy the 
requirements of this section must also establish a standby trust fund. 
Under the terms of the bond, all payments made thereunder will be 
deposited by the surety directly into the standby trust fund in 
accordance with instructions from the Regional Administrator. This 
standby trust fund must meet the requirements specified in paragraph 
(a) of this section, except that:
    (i) An originally signed duplicate of the trust agreement must be 
submitted to the Regional Administrator with the surety bond; and
    (ii) Until the standby trust fund is funded pursuant to the 
requirements of this section, the following are not required by these 
regulations:
    (A) Payments into the trust fund as specified in paragraph (a) of 
this section;
    (B) Updating of Schedule A of the trust agreement (see Sec.  
261.151(a)) to show current cost estimates;
    (C) Annual valuations as required by the trust agreement; and
    (D) Notices of nonpayment as required by the trust agreement.
    (4) The bond must guarantee that the owner or operator will:
    (i) Fund the standby trust fund in an amount equal to the penal sum 
of the bond before loss of the exclusion under Sec.  261.4(a)(24) of 
this chapter or
    (ii) Fund the standby trust fund in an amount equal to the penal 
sum within 15 days after an administrative order to begin closure 
issued by the Regional Administrator becomes final, or within 15 days 
after an order to begin closure is issued by a U.S. district court or 
other court of competent jurisdiction; or
    (iii) Provide alternate financial assurance as specified in this 
section, and obtain the Regional Administrator's written approval of 
the assurance provided, within 90 days after receipt by both the owner 
or operator and the Regional Administrator of a notice of cancellation 
of the bond from the surety.
    (5) Under the terms of the bond, the surety will become liable on 
the bond obligation when the owner or operator fails to perform as 
guaranteed by the bond.
    (6) The penal sum of the bond must be in an amount at least equal 
to the current cost estimate, except as provided in paragraph (f) of 
this section.
    (7) Whenever the current cost estimate increases to an amount 
greater than the penal sum, the owner or operator, within 60 days after 
the increase, must either cause the penal sum to be increased to an 
amount at least equal to the current cost estimate and submit evidence 
of such increase to the Regional Administrator, or obtain other 
financial assurance as specified in this section to cover the increase. 
Whenever the current cost estimate decreases, the penal sum may be 
reduced to the amount of the current cost estimate following written 
approval by the Regional Administrator.
    (8) Under the terms of the bond, the surety may cancel the bond by 
sending notice of cancellation by certified mail to the owner or 
operator and to the Regional Administrator. Cancellation may not occur, 
however, during the 120 days beginning on the date of receipt of the 
notice of cancellation by both the owner or operator and the Regional 
Administrator, as evidenced by the return receipts.
    (9) The owner or operator may cancel the bond if the Regional 
Administrator has given prior written consent based on his receipt of 
evidence of alternate

[[Page 64766]]

financial assurance as specified in this section.
    (c) Letter of credit. (1) An owner or operator may satisfy the 
requirements of this section by obtaining an irrevocable standby letter 
of credit which conforms to the requirements of this paragraph and 
submitting the letter to the Regional Administrator. The issuing 
institution must be an entity which has the authority to issue letters 
of credit and whose letter-of-credit operations are regulated and 
examined by a Federal or State agency.
    (2) The wording of the letter of credit must be identical to the 
wording specified in Sec.  261.151(c).
    (3) An owner or operator who uses a letter of credit to satisfy the 
requirements of this section must also establish a standby trust fund. 
Under the terms of the letter of credit, all amounts paid pursuant to a 
draft by the Regional Administrator will be deposited by the issuing 
institution directly into the standby trust fund in accordance with 
instructions from the Regional Administrator. This standby trust fund 
must meet the requirements of the trust fund specified in paragraph (a) 
of this section, except that:
    (i) An originally signed duplicate of the trust agreement must be 
submitted to the Regional Administrator with the letter of credit; and
    (ii) Unless the standby trust fund is funded pursuant to the 
requirements of this section, the following are not required by these 
regulations:
    (A) Payments into the trust fund as specified in paragraph (a) of 
this section;
    (B) Updating of Schedule A of the trust agreement (see Sec.  
261.151(a)) to show current cost estimates;
    (C) Annual valuations as required by the trust agreement; and
    (D) Notices of nonpayment as required by the trust agreement.
    (4) The letter of credit must be accompanied by a letter from the 
owner or operator referring to the letter of credit by number, issuing 
institution, and date, and providing the following information: The EPA 
Identification Number (if any issued), name, and address of the 
facility, and the amount of funds assured for the facility by the 
letter of credit.
    (5) The letter of credit must be irrevocable and issued for a 
period of at least 1 year. The letter of credit must provide that the 
expiration date will be automatically extended for a period of at least 
1 year unless, at least 120 days before the current expiration date, 
the issuing institution notifies both the owner or operator and the 
Regional Administrator by certified mail of a decision not to extend 
the expiration date. Under the terms of the letter of credit, the 120 
days will begin on the date when both the owner or operator and the 
Regional Administrator have received the notice, as evidenced by the 
return receipts.
    (6) The letter of credit must be issued in an amount at least equal 
to the current cost estimate, except as provided in paragraph (f) of 
this section.
    (7) Whenever the current cost estimate increases to an amount 
greater than the amount of the credit, the owner or operator, within 60 
days after the increase, must either cause the amount of the credit to 
be increased so that it at least equals the current cost estimate and 
submit evidence of such increase to the Regional Administrator, or 
obtain other financial assurance as specified in this section to cover 
the increase. Whenever the current cost estimate decreases, the amount 
of the credit may be reduced to the amount of the current cost estimate 
following written approval by the Regional Administrator.
    (8) Following a determination by the Regional Administrator that 
the hazardous secondary materials do not meet the conditions of the 
exclusion under Sec.  261.4(a)(24), the Regional Administrator may draw 
on the letter of credit.
    (9) If the owner or operator does not establish alternate financial 
assurance as specified in this section and obtain written approval of 
such alternate assurance from the Regional Administrator within 90 days 
after receipt by both the owner or operator and the Regional 
Administrator of a notice from the issuing institution that it has 
decided not to extend the letter of credit beyond the current 
expiration date, the Regional Administrator will draw on the letter of 
credit. The Regional Administrator may delay the drawing if the issuing 
institution grants an extension of the term of the credit. During the 
last 30 days of any such extension the Regional Administrator will draw 
on the letter of credit if the owner or operator has failed to provide 
alternate financial assurance as specified in this section and obtain 
written approval of such assurance from the Regional Administrator.
    (10) The Regional Administrator will return the letter of credit to 
the issuing institution for termination when:
    (i) An owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (ii) The Regional Administrator releases the owner or operator from 
the requirements of this section in accordance with paragraph (i) of 
this section.
    (d) Insurance. (1) An owner or operator may satisfy the 
requirements of this section by obtaining insurance which conforms to 
the requirements of this paragraph and submitting a certificate of such 
insurance to the Regional Administrator At a minimum, the insurer must 
be licensed to transact the business of insurance, or eligible to 
provide insurance as an excess or surplus lines insurer, in one or more 
States.
    (2) The wording of the certificate of insurance must be identical 
to the wording specified in Sec.  261.151(d).
    (3) The insurance policy must be issued for a face amount at least 
equal to the current cost estimate, except as provided in paragraph (f) 
of this section. The term ``face amount'' means the total amount the 
insurer is obligated to pay under the policy. Actual payments by the 
insurer will not change the face amount, although the insurer's future 
liability will be lowered by the amount of the payments.
    (4) The insurance policy must guarantee that funds will be 
available whenever needed to pay the cost of removal of all hazardous 
secondary materials from the unit, to pay the cost of decontamination 
of the unit, to pay the costs of the performance of activities required 
under subpart G of 40 CFR parts 264 or 265, as applicable, for the 
facilities covered by this policy. The policy must also guarantee that 
once funds are needed, the insurer will be responsible for paying out 
funds, up to an amount equal to the face amount of the policy, upon the 
direction of the Regional Administrator, to such party or parties as 
the Regional Administrator specifies.
    (5) After beginning partial or final closure under 40 CFR parts 264 
or 265, as applicable, an owner or operator or any other authorized 
person may request reimbursements for closure expenditures by 
submitting itemized bills to the Regional Administrator. The owner or 
operator may request reimbursements only if the remaining value of the 
policy is sufficient to cover the maximum costs of closing the facility 
over its remaining operating life. Within 60 days after receiving bills 
for closure activities, the Regional Administrator will instruct the 
insurer to make reimbursements in such amounts as the Regional 
Administrator specifies in writing if the Regional Administrator 
determines that the expenditures are in accordance with the approved 
plan or otherwise justified. If the Regional Administrator has reason 
to believe that the maximum cost over the remaining life of the 
facility will be significantly greater than the face

[[Page 64767]]

amount of the policy, he may withhold reimbursement of such amounts as 
he deems prudent until he determines, in accordance with paragraph (h) 
of this section, that the owner or operator is no longer required to 
maintain financial assurance for the particular facility. If the 
Regional Administrator does not instruct the insurer to make such 
reimbursements, he will provide to the owner or operator a detailed 
written statement of reasons.
    (6) The owner or operator must maintain the policy in full force 
and effect until the Regional Administrator consents to termination of 
the policy by the owner or operator as specified in paragraph (i)(10) 
of this section. Failure to pay the premium, without substitution of 
alternate financial assurance as specified in this section, will 
constitute a significant violation of these regulations warranting such 
remedy as the Regional Administrator deems necessary. Such violation 
will be deemed to begin upon receipt by the Regional Administrator of a 
notice of future cancellation, termination, or failure to renew due to 
nonpayment of the premium, rather than upon the date of expiration.
    (7) Each policy must contain a provision allowing assignment of the 
policy to a successor owner or operator. Such assignment may be 
conditional upon consent of the insurer, provided such consent is not 
unreasonably refused.
    (8) The policy must provide that the insurer may not cancel, 
terminate, or fail to renew the policy except for failure to pay the 
premium. The automatic renewal of the policy must, at a minimum, 
provide the insured with the option of renewal at the face amount of 
the expiring policy. If there is a failure to pay the premium, the 
insurer may elect to cancel, terminate, or fail to renew the policy by 
sending notice by certified mail to the owner or operator and the 
Regional Administrator. Cancellation, termination, or failure to renew 
may not occur, however, during the 120 days beginning with the date of 
receipt of the notice by both the Regional Administrator and the owner 
or operator, as evidenced by the return receipts. Cancellation, 
termination, or failure to renew may not occur and the policy will 
remain in full force and effect in the event that on or before the date 
of expiration:
    (i) The Regional Administrator deems the facility abandoned; or
    (ii) Conditional exclusion or interim status is lost, terminated, 
or revoked; or
    (iii) Closure is ordered by the Regional Administrator or a U.S. 
district court or other court of competent jurisdiction; or
    (iv) The owner or operator is named as debtor in a voluntary or 
involuntary proceeding under Title 11 (Bankruptcy), U.S. Code; or
    (v) The premium due is paid.
    (9) Whenever the current cost estimate increases to an amount 
greater than the face amount of the policy, the owner or operator, 
within 60 days after the increase, must either cause the face amount to 
be increased to an amount at least equal to the current cost estimate 
and submit evidence of such increase to the Regional Administrator, or 
obtain other financial assurance as specified in this section to cover 
the increase. Whenever the current cost estimate decreases, the face 
amount may be reduced to the amount of the current cost estimate 
following written approval by the Regional Administrator.
    (10) The Regional Administrator will give written consent to the 
owner or operator that he may terminate the insurance policy when:
    (i) An owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (ii) The Regional Administrator releases the owner or operator from 
the requirements of this section in accordance with paragraph (i) of 
this section.
    (e) Financial test and corporate guarantee. (1) An owner or 
operator may satisfy the requirements of this section by demonstrating 
that he passes a financial test as specified in this paragraph. To pass 
this test the owner or operator must meet the criteria of either 
paragraph (e)(1) (i) or (ii) of this section:
    (i) The owner or operator must have:
    (A) Two of the following three ratios: A ratio of total liabilities 
to net worth less than 2.0; a ratio of the sum of net income plus 
depreciation, depletion, and amortization to total liabilities greater 
than 0.1; and a ratio of current assets to current liabilities greater 
than 1.5; and
    (B) Net working capital and tangible net worth each at least six 
times the sum of the current cost estimates and the current plugging 
and abandonment cost estimates; and
    (C) Tangible net worth of at least $10 million; and
    (D) Assets located in the United States amounting to at least 90 
percent of total assets or at least six times the sum of the current 
cost estimates and the current plugging and abandonment cost estimates.
    (ii) The owner or operator must have:
    (A) A current rating for his most recent bond issuance of AAA, AA, 
A, or BBB as issued by Standard and Poor's or Aaa, Aa, A, or Baa as 
issued by Moody's; and
    (B) Tangible net worth at least six times the sum of the current 
cost estimates and the current plugging and abandonment cost estimates; 
and
    (C) Tangible net worth of at least $10 million; and
    (D) Assets located in the United States amounting to at least 90 
percent of total assets or at least six times the sum of the current 
cost estimates and the current plugging and abandonment cost estimates.
    (2) The phrase ``current cost estimates'' as used in paragraph 
(e)(1) of this section refers to the cost estimates required to be 
shown in paragraphs 1-4 of the letter from the owner's or operator's 
chief financial officer (Sec.  261.151(e)). The phrase ``current 
plugging and abandonment cost estimates'' as used in paragraph (e)(1) 
of this section refers to the cost estimates required to be shown in 
paragraphs 1-4 of the letter from the owner's or operator's chief 
financial officer (Sec.  144.70(f) of this chapter).
    (3) To demonstrate that he meets this test, the owner or operator 
must submit the following items to the Regional Administrator:
    (i) A letter signed by the owner's or operator's chief financial 
officer and worded as specified in Sec.  261.151(e); and
    (ii) A copy of the independent certified public accountant's report 
on examination of the owner's or operator's financial statements for 
the latest completed fiscal year; and
    (iii) If the chief financial officer's letter providing evidence of 
financial assurance includes financial data showing that the owner or 
operator satisfies paragraph (e)(1)(i) of this section that are 
different from the data in the audited financial statements referred to 
in paragraph (e)(3)(ii)of this section or any other audited financial 
statement or data filed with the SEC, then a special report from the 
owner's or operator's independent certified public accountant to the 
owner or operator is required. The special report shall be based upon 
an agreed upon procedures engagement in accordance with professional 
auditing standards and shall describe the procedures performed in 
comparing the data in the chief financial officer's letter derived from 
the independently audited, year-end financial statements for the latest 
fiscal year with the amounts in such financial statements, the findings 
of the comparison, and the reasons for any differences.
    (4) The owner or operator may obtain an extension of the time 
allowed for

[[Page 64768]]

submission of the documents specified in paragraph (e)(3) of this 
section if the fiscal year of the owner or operator ends during the 90 
days prior to the effective date of these regulations and if the year-
end financial statements for that fiscal year will be audited by an 
independent certified public accountant. The extension will end no 
later than 90 days after the end of the owner's or operator's fiscal 
year. To obtain the extension, the owner's or operator's chief 
financial officer must send, by the effective date of these 
regulations, a letter to the Regional Administrator of each Region in 
which the owner's or operator's facilities to be covered by the 
financial test are located. This letter from the chief financial 
officer must:
    (i) Request the extension;
    (ii) Certify that he has grounds to believe that the owner or 
operator meets the criteria of the financial test;
    (iii) Specify for each facility to be covered by the test the EPA 
Identification Number (if any issued), name, address, and current cost 
estimates to be covered by the test;
    (iv) Specify the date ending the owner's or operator's last 
complete fiscal year before the effective date of these regulations in 
this subpart;
    (v) Specify the date, no later than 90 days after the end of such 
fiscal year, when he will submit the documents specified in paragraph 
(e)(3) of this section; and
    (vi) Certify that the year-end financial statements of the owner or 
operator for such fiscal year will be audited by an independent 
certified public accountant.
    (5) After the initial submission of items specified in paragraph 
(e)(3) of this section, the owner or operator must send updated 
information to the Regional Administrator within 90 days after the 
close of each succeeding fiscal year. This information must consist of 
all three items specified in paragraph (e)(3) of this section.
    (6) If the owner or operator no longer meets the requirements of 
paragraph (e)(1) of this section, he must send notice to the Regional 
Administrator of intent to establish alternate financial assurance as 
specified in this section. The notice must be sent by certified mail 
within 90 days after the end of the fiscal year for which the year-end 
financial data show that the owner or operator no longer meets the 
requirements. The owner or operator must provide the alternate 
financial assurance within 120 days after the end of such fiscal year.
    (7) The Regional Administrator may, based on a reasonable belief 
that the owner or operator may no longer meet the requirements of 
paragraph (e)(1) of this section, require reports of financial 
condition at any time from the owner or operator in addition to those 
specified in paragraph (e)(3) of this section. If the Regional 
Administrator finds, on the basis of such reports or other information, 
that the owner or operator no longer meets the requirements of 
paragraph (e)(1) of this section, the owner or operator must provide 
alternate financial assurance as specified in this section within 30 
days after notification of such a finding.
    (8) The Regional Administrator may disallow use of this test on the 
basis of qualifications in the opinion expressed by the independent 
certified public accountant in his report on examination of the owner's 
or operator's financial statements (see paragraph (e)(3)(ii) of this 
section). An adverse opinion or a disclaimer of opinion will be cause 
for disallowance. The Regional Administrator will evaluate other 
qualifications on an individual basis. The owner or operator must 
provide alternate financial assurance as specified in this section 
within 30 days after notification of the disallowance.
    (9) The owner or operator is no longer required to submit the items 
specified in paragraph (e)(3) of this section when:
    (i) An owner or operator substitutes alternate financial assurance 
as specified in this section; or
    (ii) The Regional Administrator releases the owner or operator from 
the requirements of this section in accordance with paragraph (i) of 
this section.
    (10) An owner or operator may meet the requirements of this section 
by obtaining a written guarantee. The guarantor must be the direct or 
higher-tier parent corporation of the owner or operator, a firm whose 
parent corporation is also the parent corporation of the owner or 
operator, or a firm with a ``substantial business relationship'' with 
the owner or operator. The guarantor must meet the requirements for 
owners or operators in paragraphs (e)(1) through (8) of this section 
and must comply with the terms of the guarantee. The wording of the 
guarantee must be identical to the wording specified in Sec.  
261.151(g)(1). A certified copy of the guarantee must accompany the 
items sent to the Regional Administrator as specified in paragraph 
(e)(3) of this section. One of these items must be the letter from the 
guarantor's chief financial officer. If the guarantor's parent 
corporation is also the parent corporation of the owner or operator, 
the letter must describe the value received in consideration of the 
guarantee. If the guarantor is a firm with a ``substantial business 
relationship'' with the owner or operator, this letter must describe 
this ``substantial business relationship'' and the value received in 
consideration of the guarantee. The terms of the guarantee must provide 
that:
    (i) Following a determination by the Regional Administrator that 
the hazardous secondary materials at the owner or operator's facility 
covered by this guarantee do not meet the conditions of the exclusion 
under Sec.  261.4(a)(24) of this chapter, the guarantor will dispose of 
any hazardous secondary material as hazardous waste and close the 
facility in accordance with closure requirements found in parts 264 or 
265 of this chapter, as applicable, or establish a trust fund as 
specified in paragraph (a) of this section in the name of the owner or 
operator in the amount of the current cost estimate.
    (ii) The corporate guarantee will remain in force unless the 
guarantor sends notice of cancellation by certified mail to the owner 
or operator and to the Regional Administrator. Cancellation may not 
occur, however, during the 120 days beginning on the date of receipt of 
the notice of cancellation by both the owner or operator and the 
Regional Administrator, as evidenced by the return receipts.
    (iii) If the owner or operator fails to provide alternate financial 
assurance as specified in this section and obtain the written approval 
of such alternate assurance from the Regional Administrator within 90 
days after receipt by both the owner or operator and the Regional 
Administrator of a notice of cancellation of the corporate guarantee 
from the guarantor, the guarantor will provide such alternate financial 
assurance in the name of the owner or operator.
    (f) Use of multiple financial mechanisms. An owner or operator may 
satisfy the requirements of this section by establishing more than one 
financial mechanism per facility. These mechanisms are limited to trust 
funds, surety bonds, letters of credit, and insurance. The mechanisms 
must be as specified in paragraphs (a) through (d) of this section, 
respectively, of this section, except that it is the combination of 
mechanisms, rather than the single mechanism, which must provide 
financial assurance for an amount at least equal to the current cost 
estimate. If an owner or operator uses a trust fund in combination with 
a surety bond or a letter of credit, he may use the trust fund as the 
standby trust fund for the other mechanisms. A single standby trust 
fund may be established for two or more mechanisms. The Regional

[[Page 64769]]

Administrator may use any or all of the mechanisms to provide for the 
facility.
    (g) Use of a financial mechanism for multiple facilities. An owner 
or operator may use a financial assurance mechanism specified in this 
section to meet the requirements of this section for more than one 
facility. Evidence of financial assurance submitted to the Regional 
Administrator must include a list showing, for each facility, the EPA 
Identification Number (if any issued), name, address, and the amount of 
funds assured by the mechanism. If the facilities covered by the 
mechanism are in more than one Region, identical evidence of financial 
assurance must be submitted to and maintained with the Regional 
Administrators of all such Regions. The amount of funds available 
through the mechanism must be no less than the sum of funds that would 
be available if a separate mechanism had been established and 
maintained for each facility. In directing funds available through the 
mechanism for any of the facilities covered by the mechanism, the 
Regional Administrator may direct only the amount of funds designated 
for that facility, unless the owner or operator agrees to the use of 
additional funds available under the mechanism.
    (h) Removal and Decontamination Plan for Release (1) An owner or 
operator of a reclamation facility or an intermediate facility who 
wishes to be released from his financial assurance obligations under 
Sec.  261.4(a)(24)(vi)(F) of this chapter must submit a plan for 
removing all hazardous secondary material residues to the Regional 
Administrator at least 180 days prior to the date on which he expects 
to cease to operate under the exclusion.
    (2) The plan must include, at least:
    (A) For each hazardous secondary materials storage unit subject to 
financial assurance requirements under Sec.  261.4(a)(24)(vi)(F), a 
description of how all excluded hazardous secondary materials will be 
recycled or sent for recycling, and how all residues, contaminated 
containment systems (liners, etc), contaminated soils, subsoils, 
structures, and equipment will be removed or decontaminated as 
necessary to protect human health and the environment, and
    (B) A detailed description of the steps necessary to remove or 
decontaminate all hazardous secondary material residues and 
contaminated containment system components, equipment, structures, and 
soils including, but not limited to, procedures for cleaning equipment 
and removing contaminated soils, methods for sampling and testing 
surrounding soils, and criteria for determining the extent of 
decontamination necessary to protect human health and the environment; 
and
    (C) A detailed description of any other activities necessary to 
protect human health and the environment during this timeframe, 
including, but not limited to, leachate collection, run-on and run-off 
control, etc; and
    (D) A schedule for conducting the activities described which, at a 
minimum, includes the total time required to remove all excluded 
hazardous secondary materials for recycling and decontaminate all units 
subject to financial assurance under Sec.  261.4(a)(24)(vi)(F) and the 
time required for intervening activities which will allow tracking of 
the progress of decontamination.
    (3) The Regional Administrator will provide the owner or operator 
and the public, through a newspaper notice, the opportunity to submit 
written comments on the plan and request modifications to the plan no 
later than 30 days from the date of the notice. He will also, in 
response to a request or at his discretion, hold a public hearing 
whenever such a hearing might clarify one or more issues concerning the 
plan. The Regional Administrator will give public notice of the hearing 
at least 30 days before it occurs. (Public notice of the hearing may be 
given at the same time as notice of the opportunity for the public to 
submit written comments, and the two notices may be combined.) The 
Regional Administrator will approve, modify, or disapprove the plan 
within 90 days of its receipt. If the Regional Administrator does not 
approve the plan, he shall provide the owner or operator with a 
detailed written statement of reasons for the refusal and the owner or 
operator must modify the plan or submit a new plan for approval within 
30 days after receiving such written statement. The Regional 
Administrator will approve or modify this plan in writing within 60 
days. If the Regional Administrator modifies the plan, this modified 
plan becomes the approved plan. The Regional Administrator must assure 
that the approved plan is consistent with paragraph (h) of this 
section. A copy of the modified plan with a detailed statement of 
reasons for the modifications must be mailed to the owner or operator.
    (4) Within 60 days of completion of the activities described for 
each hazardous secondary materials management unit, the owner or 
operator must submit to the Regional Administrator, by registered mail, 
a certification that all hazardous secondary materials have been 
removed from the unit and the unit has been decontaminated in 
accordance with the specifications in the approved plan. The 
certification must be signed by the owner or operator and by a 
qualified Professional Engineer. Documentation supporting the 
Professional Engineer's certification must be furnished to the Regional 
Administrator, upon request, until he releases the owner or operator 
from the financial assurance requirements for Sec.  
261.4(a)(24)(vi)(F).
    (i) Release of the owner or operator from the requirements of this 
section. Within 60 days after receiving certifications from the owner 
or operator and a qualified Professional Engineer that all hazardous 
secondary materials have been removed from the facility or a unit at 
the facility and the facility or a unit has been decontaminated in 
accordance with the approved plan per paragraph (h), the Regional 
Administrator will notify the owner or operator in writing that he is 
no longer required under Sec.  261.4(a)(24)(vi)(F) to maintain 
financial assurance for that facility or a unit at the facility, unless 
the Regional Administrator has reason to believe that all hazardous 
secondary materials have not been removed from the facility or unit at 
a facility or that the facility or unit has not been decontaminated in 
accordance with the approved plan. The Regional Administrator shall 
provide the owner or operator a detailed written statement of any such 
reason to believe that all hazardous secondary materials have not been 
removed from the unit or that the unit has not been decontaminated in 
accordance with the approved plan.


Sec. Sec.  261.144-261.146  [Reserved]


Sec.  261.147  Liability requirements.

    (a) Coverage for sudden accidental occurrences. An owner or 
operator of a hazardous secondary material reclamation facility or an 
intermediate facility subject to financial assurance requirements under 
Sec.  261.4(a)(24)(vi)(F) of this chapter, or a group of such 
facilities, must demonstrate financial responsibility for bodily injury 
and property damage to third parties caused by sudden accidental 
occurrences arising from operations of the facility or group of 
facilities. The owner or operator must have and maintain liability 
coverage for sudden accidental occurrences in the amount of at least $1 
million per occurrence with an annual aggregate of at least $2 million, 
exclusive of legal defense costs. This liability coverage may be 
demonstrated as specified in paragraphs (a) (1), (2), (3), (4), (5), or 
(6) of this section:

[[Page 64770]]

    (1) An owner or operator may demonstrate the required liability 
coverage by having liability insurance as specified in this paragraph.
    (i) Each insurance policy must be amended by attachment of the 
Hazardous Secondary Material Facility Liability Endorsement, or 
evidenced by a Certificate of Liability Insurance. The wording of the 
endorsement must be identical to the wording specified in Sec.  
261.151(h). The wording of the certificate of insurance must be 
identical to the wording specified in Sec.  261.151(i). The owner or 
operator must submit a signed duplicate original of the endorsement or 
the certificate of insurance to the Regional Administrator, or Regional 
Administrators if the facilities are located in more than one Region. 
If requested by a Regional Administrator, the owner or operator must 
provide a signed duplicate original of the insurance policy.
    (ii) Each insurance policy must be issued by an insurer which, at a 
minimum, is licensed to transact the business of insurance, or eligible 
to provide insurance as an excess or surplus lines insurer, in one or 
more States.
    (2) An owner or operator may meet the requirements of this section 
by passing a financial test or using the guarantee for liability 
coverage as specified in paragraphs (f) and (g) of this section.
    (3) An owner or operator may meet the requirements of this section 
by obtaining a letter of credit for liability coverage as specified in 
paragraph (h) of this section.
    (4) An owner or operator may meet the requirements of this section 
by obtaining a surety bond for liability coverage as specified in 
paragraph (i) of this section.
    (5) An owner or operator may meet the requirements of this section 
by obtaining a trust fund for liability coverage as specified in 
paragraph (j) of this section.
    (6) An owner or operator may demonstrate the required liability 
coverage through the use of combinations of insurance, financial test, 
guarantee, letter of credit, surety bond, and trust fund, except that 
the owner or operator may not combine a financial test covering part of 
the liability coverage requirement with a guarantee unless the 
financial statement of the owner or operator is not consolidated with 
the financial statement of the guarantor. The amounts of coverage 
demonstrated must total at least the minimum amounts required by this 
section. If the owner or operator demonstrates the required coverage 
through the use of a combination of financial assurances under this 
paragraph, the owner or operator shall specify at least one such 
assurance as ``primary'' coverage and shall specify other assurance as 
``excess'' coverage.
    (7) An owner or operator shall notify the Regional Administrator in 
writing within 30 days whenever:
    (i) A claim results in a reduction in the amount of financial 
assurance for liability coverage provided by a financial instrument 
authorized in paragraphs (a)(1) through (a)(6) of this section; or
    (ii) A Certification of Valid Claim for bodily injury or property 
damages caused by a sudden or non-sudden accidental occurrence arising 
from the operation of a hazardous secondary material reclamation 
facility or intermediate facility is entered between the owner or 
operator and third-party claimant for liability coverage under 
paragraphs (a)(1) through (a)(6) of this section; or
    (iii) A final court order establishing a judgment for bodily injury 
or property damage caused by a sudden or non-sudden accidental 
occurrence arising from the operation of a hazardous secondary material 
reclamation facility or intermediate facility is issued against the 
owner or operator or an instrument that is providing financial 
assurance for liability coverage under paragraphs (a)(1) through (a)(6) 
of this section.
    (b) Coverage for nonsudden accidental occurrences. An owner or 
operator of a hazardous secondary material reclamation facility or 
intermediate facility with land-based units, as defined in Sec.  260.10 
of this chapter, which are used to manage hazardous secondary materials 
excluded under Sec.  261.4(a)(24) of this chapter or a group of such 
facilities, must demonstrate financial responsibility for bodily injury 
and property damage to third parties caused by nonsudden accidental 
occurrences arising from operations of the facility or group of 
facilities. The owner or operator must have and maintain liability 
coverage for nonsudden accidental occurrences in the amount of at least 
$3 million per occurrence with an annual aggregate of at least $6 
million, exclusive of legal defense costs. An owner or operator who 
must meet the requirements of this section may combine the required 
per-occurrence coverage levels for sudden and nonsudden accidental 
occurrences into a single per-occurrence level, and combine the 
required annual aggregate coverage levels for sudden and nonsudden 
accidental occurrences into a single annual aggregate level. Owners or 
operators who combine coverage levels for sudden and nonsudden 
accidental occurrences must maintain liability coverage in the amount 
of at least $4 million per occurrence and $8 million annual aggregate. 
This liability coverage may be demonstrated as specified in paragraph 
(b)(1), (2), (3), (4), (5), or (6) of this section:
    (1) An owner or operator may demonstrate the required liability 
coverage by having liability insurance as specified in this paragraph.
    (i) Each insurance policy must be amended by attachment of the 
Hazardous Secondary Material Facility Liability Endorsement or 
evidenced by a Certificate of Liability Insurance. The wording of the 
endorsement must be identical to the wording specified in Sec.  
261.151(h). The wording of the certificate of insurance must be 
identical to the wording specified in Sec.  261.151(i). The owner or 
operator must submit a signed duplicate original of the endorsement or 
the certificate of insurance to the Regional Administrator, or Regional 
Administrators if the facilities are located in more than one Region. 
If requested by a Regional Administrator, the owner or operator must 
provide a signed duplicate original of the insurance policy.
    (ii) Each insurance policy must be issued by an insurer which, at a 
minimum, is licensed to transact the business of insurance, or eligible 
to provide insurance as an excess or surplus lines insurer, in one or 
more States.
    (2) An owner or operator may meet the requirements of this section 
by passing a financial test or using the guarantee for liability 
coverage as specified in paragraphs (f) and (g) of this section.
    (3) An owner or operator may meet the requirements of this section 
by obtaining a letter of credit for liability coverage as specified in 
paragraph (h) of this section.
    (4) An owner or operator may meet the requirements of this section 
by obtaining a surety bond for liability coverage as specified in 
paragraph (i) of this section.
    (5) An owner or operator may meet the requirements of this section 
by obtaining a trust fund for liability coverage as specified in 
paragraph (j) of this section.
    (6) An owner or operator may demonstrate the required liability 
coverage through the use of combinations of insurance, financial test, 
guarantee, letter of credit, surety bond, and trust fund, except that 
the owner or operator may not combine a

[[Page 64771]]

financial test covering part of the liability coverage requirement with 
a guarantee unless the financial statement of the owner or operator is 
not consolidated with the financial statement of the guarantor. The 
amounts of coverage demonstrated must total at least the minimum 
amounts required by this section. If the owner or operator demonstrates 
the required coverage through the use of a combination of financial 
assurances under this paragraph, the owner or operator shall specify at 
least one such assurance as ``primary'' coverage and shall specify 
other assurance as ``excess'' coverage.
    (7) An owner or operator shall notify the Regional Administrator in 
writing within 30 days whenever:
    (i) A claim results in a reduction in the amount of financial 
assurance for liability coverage provided by a financial instrument 
authorized in paragraphs (b)(1) through (b)(6) of this section; or
    (ii) A Certification of Valid Claim for bodily injury or property 
damages caused by a sudden or non-sudden accidental occurrence arising 
from the operation of a hazardous secondary material treatment and/or 
storage facility is entered between the owner or operator and third-
party claimant for liability coverage under paragraphs (b)(1) through 
(b)(6) of this section; or
    (iii) A final court order establishing a judgment for bodily injury 
or property damage caused by a sudden or non-sudden accidental 
occurrence arising from the operation of a hazardous secondary material 
treatment and/or storage facility is issued against the owner or 
operator or an instrument that is providing financial assurance for 
liability coverage under paragraphs (b)(1) through (b)(6) of this 
section.
    (c) Request for variance. If an owner or operator can demonstrate 
to the satisfaction of the Regional Administrator that the levels of 
financial responsibility required by paragraph (a) or (b) of this 
section are not consistent with the degree and duration of risk 
associated with treatment and/or storage at the facility or group of 
facilities, the owner or operator may obtain a variance from the 
Regional Administrator. The request for a variance must be submitted in 
writing to the Regional Administrator. If granted, the variance will 
take the form of an adjusted level of required liability coverage, such 
level to be based on the Regional Administrator's assessment of the 
degree and duration of risk associated with the ownership or operation 
of the facility or group of facilities. The Regional Administrator may 
require an owner or operator who requests a variance to provide such 
technical and engineering information as is deemed necessary by the 
Regional Administrator to determine a level of financial responsibility 
other than that required by paragraph (a) or (b) of this section.
    (d) Adjustments by the Regional Administrator. If the Regional 
Administrator determines that the levels of financial responsibility 
required by paragraph (a) or (b) of this section are not consistent 
with the degree and duration of risk associated with treatment and/or 
storage at the facility or group of facilities, the Regional 
Administrator may adjust the level of financial responsibility required 
under paragraph (a) or (b) of this section as may be necessary to 
protect human health and the environment. This adjusted level will be 
based on the Regional Administrator's assessment of the degree and 
duration of risk associated with the ownership or operation of the 
facility or group of facilities. In addition, if the Regional 
Administrator determines that there is a significant risk to human 
health and the environment from nonsudden accidental occurrences 
resulting from the operations of a facility that is not a surface 
impoundment, pile, or land treatment facility, he may require that an 
owner or operator of the facility comply with paragraph (b) of this 
section. An owner or operator must furnish to the Regional 
Administrator, within a reasonable time, any information which the 
Regional Administrator requests to determine whether cause exists for 
such adjustments of level or type of coverage.
    (e) Period of coverage. Within 60 days after receiving 
certifications from the owner or operator and a qualified Professional 
Engineer that all hazardous secondary materials have been removed from 
the facility or a unit at the facility and the facility or a unit has 
been decontaminated in accordance with the approved plan per Sec.  
261.143(h), the Regional Administrator will notify the owner or 
operator in writing that he is no longer required under Sec.  
261.4(a)(24)(vi)(F) to maintain liability coverage for that facility or 
a unit at the facility, unless the Regional Administrator has reason to 
believe that that all hazardous secondary materials have not been 
removed from the facility or unit at a facility or that the facility or 
unit has not been decontaminated in accordance with the approved plan.
    (f) Financial test for liability coverage. (1) An owner or operator 
may satisfy the requirements of this section by demonstrating that he 
passes a financial test as specified in this paragraph. To pass this 
test the owner or operator must meet the criteria of paragraph (f)(1) 
(i) or (ii) of this section:
    (i) The owner or operator must have:
    (A) Net working capital and tangible net worth each at least six 
times the amount of liability coverage to be demonstrated by this test; 
and
    (B) Tangible net worth of at least $10 million; and
    (C) Assets in the United States amounting to either:
    (1) At least 90 percent of his total assets; or
    (2) at least six times the amount of liability coverage to be 
demonstrated by this test.
    (ii) The owner or operator must have:
    (A) A current rating for his most recent bond issuance of AAA, AA, 
A, or BBB as issued by Standard and Poor's, or Aaa, Aa, A, or Baa as 
issued by Moody's; and
    (B) Tangible net worth of at least $10 million; and
    (C) Tangible net worth at least six times the amount of liability 
coverage to be demonstrated by this test; and
    (D) Assets in the United States amounting to either:
    (1) At least 90 percent of his total assets; or
    (2) at least six times the amount of liability coverage to be 
demonstrated by this test.
    (2) The phrase ``amount of liability coverage'' as used in 
paragraph (f)(1) of this section refers to the annual aggregate amounts 
for which coverage is required under paragraphs (a) and (b) of this 
section and the annual aggregate amounts for which coverage is required 
under paragraphs (a) and (b) of 40 CFR 264.147 and 265.147.
    (3) To demonstrate that he meets this test, the owner or operator 
must submit the following three items to the Regional Administrator:
    (i) A letter signed by the owner's or operator's chief financial 
officer and worded as specified in Sec.  261.151(f). If an owner or 
operator is using the financial test to demonstrate both assurance as 
specified by Sec.  261.143(e), and liability coverage, he must submit 
the letter specified in Sec.  261.151(f) to cover both forms of 
financial responsibility; a separate letter as specified in Sec.  
261.151(e) is not required.
    (ii) A copy of the independent certified public accountant's report 
on examination of the owner's or operator's financial statements for 
the latest completed fiscal year.
    (iii) If the chief financial officer's letter providing evidence of 
financial assurance includes financial data showing that the owner or 
operator satisfies paragraph (f)(1)(i) of this

[[Page 64772]]

section that are different from the data in the audited financial 
statements referred to in paragraph (f)(3)(ii) of this section or any 
other audited financial statement or data filed with the SEC, then a 
special report from the owner's or operator's independent certified 
public accountant to the owner or operator is required. The special 
report shall be based upon an agreed upon procedures engagement in 
accordance with professional auditing standards and shall describe the 
procedures performed in comparing the data in the chief financial 
officer's letter derived from the independently audited, year-end 
financial statements for the latest fiscal year with the amounts in 
such financial statements, the findings of the comparison, and the 
reasons for any difference.
    (4) The owner or operator may obtain a one-time extension of the 
time allowed for submission of the documents specified in paragraph 
(f)(3) of this section if the fiscal year of the owner or operator ends 
during the 90 days prior to the effective date of these regulations and 
if the year-end financial statements for that fiscal year will be 
audited by an independent certified public accountant. The extension 
will end no later than 90 days after the end of the owner's or 
operator's fiscal year. To obtain the extension, the owner's or 
operator's chief financial officer must send, by the effective date of 
these regulations, a letter to the Regional Administrator of each 
Region in which the owner's or operator's facilities to be covered by 
the financial test are located. This letter from the chief financial 
officer must:
    (i) Request the extension;
    (ii) Certify that he has grounds to believe that the owner or 
operator meets the criteria of the financial test;
    (iii) Specify for each facility to be covered by the test the EPA 
Identification Number, name, address, the amount of liability coverage 
and, when applicable, current closure and post-closure cost estimates 
to be covered by the test;
    (iv) Specify the date ending the owner's or operator's last 
complete fiscal year before the effective date of these regulations;
    (v) Specify the date, no later than 90 days after the end of such 
fiscal year, when he will submit the documents specified in paragraph 
(f)(3) of this section; and
    (vi) Certify that the year-end financial statements of the owner or 
operator for such fiscal year will be audited by an independent 
certified public accountant.
    (5) After the initial submission of items specified in paragraph 
(f)(3) of this section, the owner or operator must send updated 
information to the Regional Administrator within 90 days after the 
close of each succeeding fiscal year. This information must consist of 
all three items specified in paragraph (f)(3) of this section.
    (6) If the owner or operator no longer meets the requirements of 
paragraph (f)(1) of this section, he must obtain insurance, a letter of 
credit, a surety bond, a trust fund, or a guarantee for the entire 
amount of required liability coverage as specified in this section. 
Evidence of liability coverage must be submitted to the Regional 
Administrator within 90 days after the end of the fiscal year for which 
the year-end financial data show that the owner or operator no longer 
meets the test requirements.
    (7) The Regional Administrator may disallow use of this test on the 
basis of qualifications in the opinion expressed by the independent 
certified public accountant in his report on examination of the owner's 
or operator's financial statements (see paragraph (f)(3)(ii) of this 
section). An adverse opinion or a disclaimer of opinion will be cause 
for disallowance. The Regional Administrator will evaluate other 
qualifications on an individual basis. The owner or operator must 
provide evidence of insurance for the entire amount of required 
liability coverage as specified in this section within 30 days after 
notification of disallowance.
    (g) Guarantee for liability coverage. (1) Subject to paragraph 
(g)(2) of this section, an owner or operator may meet the requirements 
of this section by obtaining a written guarantee, hereinafter referred 
to as ``guarantee.'' The guarantor must be the direct or higher-tier 
parent corporation of the owner or operator, a firm whose parent 
corporation is also the parent corporation of the owner or operator, or 
a firm with a ``substantial business relationship'' with the owner or 
operator. The guarantor must meet the requirements for owners or 
operators in paragraphs (f)(1) through (f)(6) of this section. The 
wording of the guarantee must be identical to the wording specified in 
Sec.  261.151(g)(2). A certified copy of the guarantee must accompany 
the items sent to the Regional Administrator as specified in paragraph 
(f)(3) of this section. One of these items must be the letter from the 
guarantor's chief financial officer. If the guarantor's parent 
corporation is also the parent corporation of the owner or operator, 
this letter must describe the value received in consideration of the 
guarantee. If the guarantor is a firm with a ``substantial business 
relationship'' with the owner or operator, this letter must describe 
this ``substantial business relationship'' and the value received in 
consideration of the guarantee.
    (i) If the owner or operator fails to satisfy a judgment based on a 
determination of liability for bodily injury or property damage to 
third parties caused by sudden or nonsudden accidental occurrences (or 
both as the case may be), arising from the operation of facilities 
covered by this corporate guarantee, or fails to pay an amount agreed 
to in settlement of claims arising from or alleged to arise from such 
injury or damage, the guarantor will do so up to the limits of 
coverage.
    (ii) [Reserved]
    (2)(i) In the case of corporations incorporated in the United 
States, a guarantee may be used to satisfy the requirements of this 
section only if the Attorneys General or Insurance Commissioners of:
    (A) The State in which the guarantor is incorporated; and
    (B) Each State in which a facility covered by the guarantee is 
located have submitted a written statement to EPA that a guarantee 
executed as described in this section and Sec.  264.151(g)(2) is a 
legally valid and enforceable obligation in that State.
    (ii) In the case of corporations incorporated outside the United 
States, a guarantee may be used to satisfy the requirements of this 
section only if:
    (A) The non-U.S. corporation has identified a registered agent for 
service of process in each State in which a facility covered by the 
guarantee is located and in the State in which it has its principal 
place of business; and if
    (B) The Attorney General or Insurance Commissioner of each State in 
which a facility covered by the guarantee is located and the State in 
which the guarantor corporation has its principal place of business, 
has submitted a written statement to EPA that a guarantee executed as 
described in this section and Sec.  261.151(h)(2) is a legally valid 
and enforceable obligation in that State.
    (h) Letter of credit for liability coverage. (1) An owner or 
operator may satisfy the requirements of this section by obtaining an 
irrevocable standby letter of credit that conforms to the requirements 
of this paragraph and submitting a copy of the letter of credit to the 
Regional Administrator.
    (2) The financial institution issuing the letter of credit must be 
an entity that has the authority to issue letters of credit and whose 
letter of credit operations are regulated and examined by a Federal or 
State agency.

[[Page 64773]]

    (3) The wording of the letter of credit must be identical to the 
wording specified in Sec.  261.151(j).
    (4) An owner or operator who uses a letter of credit to satisfy the 
requirements of this section may also establish a standby trust fund. 
Under the terms of such a letter of credit, all amounts paid pursuant 
to a draft by the trustee of the standby trust will be deposited by the 
issuing institution into the standby trust in accordance with 
instructions from the trustee. The trustee of the standby trust fund 
must be an entity which has the authority to act as a trustee and whose 
trust operations are regulated and examined by a Federal or State 
agency.
    (5) The wording of the standby trust fund must be identical to the 
wording specified in Sec.  261.151(m).
    (i) Surety bond for liability coverage. (1) An owner or operator 
may satisfy the requirements of this section by obtaining a surety bond 
that conforms to the requirements of this paragraph and submitting a 
copy of the bond to the Regional Administrator.
    (2) The surety company issuing the bond must be among those listed 
as acceptable sureties on Federal bonds in the most recent Circular 570 
of the U.S. Department of the Treasury.
    (3) The wording of the surety bond must be identical to the wording 
specified in Sec.  261.151(k) of this chapter.
    (4) A surety bond may be used to satisfy the requirements of this 
section only if the Attorneys General or Insurance Commissioners of:
    (i) The State in which the surety is incorporated; and
    (ii) Each State in which a facility covered by the surety bond is 
located have submitted a written statement to EPA that a surety bond 
executed as described in this section and Sec.  261.151(k) is a legally 
valid and enforceable obligation in that State.
    (j) Trust fund for liability coverage. (1) An owner or operator may 
satisfy the requirements of this section by establishing a trust fund 
that conforms to the requirements of this paragraph and submitting an 
originally signed duplicate of the trust agreement to the Regional 
Administrator.
    (2) The trustee must be an entity which has the authority to act as 
a trustee and whose trust operations are regulated and examined by a 
Federal or State agency.
    (3) The trust fund for liability coverage must be funded for the 
full amount of the liability coverage to be provided by the trust fund 
before it may be relied upon to satisfy the requirements of this 
section. If at any time after the trust fund is created the amount of 
funds in the trust fund is reduced below the full amount of the 
liability coverage to be provided, the owner or operator, by the 
anniversary date of the establishment of the Fund, must either add 
sufficient funds to the trust fund to cause its value to equal the full 
amount of liability coverage to be provided, or obtain other financial 
assurance as specified in this section to cover the difference. For 
purposes of this paragraph, ``the full amount of the liability coverage 
to be provided'' means the amount of coverage for sudden and/or 
nonsudden occurrences required to be provided by the owner or operator 
by this section, less the amount of financial assurance for liability 
coverage that is being provided by other financial assurance mechanisms 
being used to demonstrate financial assurance by the owner or operator.
    (4) The wording of the trust fund must be identical to the wording 
specified in Sec.  261.151(l).


Sec.  261.148  Incapacity of owners or operators, guarantors, or 
financial institutions.

    (a) An owner or operator must notify the Regional Administrator by 
certified mail of the commencement of a voluntary or involuntary 
proceeding under Title 11 (Bankruptcy), U.S. Code, naming the owner or 
operator as debtor, within 10 days after commencement of the 
proceeding. A guarantor of a corporate guarantee as specified in Sec.  
261.143(e) must make such a notification if he is named as debtor, as 
required under the terms of the corporate guarantee.
    (b) An owner or operator who fulfills the requirements of Sec.  
261.143 or Sec.  261.147 by obtaining a trust fund, surety bond, letter 
of credit, or insurance policy will be deemed to be without the 
required financial assurance or liability coverage in the event of 
bankruptcy of the trustee or issuing institution, or a suspension or 
revocation of the authority of the trustee institution to act as 
trustee or of the institution issuing the surety bond, letter of 
credit, or insurance policy to issue such instruments. The owner or 
operator must establish other financial assurance or liability coverage 
within 60 days after such an event.


Sec.  261.149  Use of State-required mechanisms.

    (a) For a reclamation or intermediate facility located in a State 
where EPA is administering the requirements of this subpart but where 
the State has regulations that include requirements for financial 
assurance of closure or liability coverage, an owner or operator may 
use State-required financial mechanisms to meet the requirements of 
Sec.  261.143 or Sec.  261.147 if the Regional Administrator determines 
that the State mechanisms are at least equivalent to the financial 
mechanisms specified in this subpart. The Regional Administrator will 
evaluate the equivalency of the mechanisms principally in terms of 
certainty of the availability of: Funds for the required closure 
activities or liability coverage; and the amount of funds that will be 
made available. The Regional Administrator may also consider other 
factors as he deems appropriate. The owner or operator must submit to 
the Regional Administrator evidence of the establishment of the 
mechanism together with a letter requesting that the State-required 
mechanism be considered acceptable for meeting the requirements of this 
subpart. The submission must include the following information: The 
facility's EPA Identification Number (if available), name, and address, 
and the amount of funds for closure or liability coverage assured by 
the mechanism. The Regional Administrator will notify the owner or 
operator of his determination regarding the mechanism's acceptability 
in lieu of financial mechanisms specified in this subpart. The Regional 
Administrator may require the owner or operator to submit additional 
information as is deemed necessary to make this determination. Pending 
this determination, the owner or operator will be deemed to be in 
compliance with the requirements of Sec.  261.143 or Sec.  261.147, as 
applicable.
    (b) If a State-required mechanism is found acceptable as specified 
in paragraph (a) of this section except for the amount of funds 
available, the owner or operator may satisfy the requirements of this 
subpart by increasing the funds available through the State-required 
mechanism or using additional financial mechanisms as specified in this 
subpart. The amount of funds available through the State and Federal 
mechanisms must at least equal the amount required by this subpart.


Sec.  261.150  State assumption of responsibility.

    (a) If a State either assumes legal responsibility for an owner's 
or operator's compliance with the closure or liability requirements of 
this part or assures that funds will be available from State sources to 
cover those requirements, the owner or operator will be in compliance 
with the requirements of Sec.  261.143 or Sec.  261.147 if the Regional 
Administrator determines that the State's assumption of responsibility 
is at

[[Page 64774]]

least equivalent to the financial mechanisms specified in this subpart. 
The Regional Administrator will evaluate the equivalency of State 
guarantees principally in terms of: Certainty of the availability of 
funds for the required closure activities or liability coverage; and 
the amount of funds that will be made available. The Regional 
Administrator may also consider other factors as he deems appropriate. 
The owner or operator must submit to the Regional Administrator a 
letter from the State describing the nature of the State's assumption 
of responsibility together with a letter from the owner or operator 
requesting that the State's assumption of responsibility be considered 
acceptable for meeting the requirements of this subpart. The letter 
from the State must include, or have attached to it, the following 
information: The facility's EPA Identification Number (if available), 
name, and address, and the amount of funds for closure or liability 
coverage that are guaranteed by the State. The Regional Administrator 
will notify the owner or operator of his determination regarding the 
acceptability of the State's guarantee in lieu of financial mechanisms 
specified in this subpart. The Regional Administrator may require the 
owner or operator to submit additional information as is deemed 
necessary to make this determination. Pending this determination, the 
owner or operator will be deemed to be in compliance with the 
requirements of Sec.  265.143 or Sec.  265.147, as applicable.
    (b) If a State's assumption of responsibility is found acceptable 
as specified in paragraph (a) of this section except for the amount of 
funds available, the owner or operator may satisfy the requirements of 
this subpart by use of both the State's assurance and additional 
financial mechanisms as specified in this subpart. The amount of funds 
available through the State and Federal mechanisms must at least equal 
the amount required by this subpart.


Sec.  261.151  Wording of the instruments.

    (a)(1) A trust agreement for a trust fund, as specified in Sec.  
261.143(a) must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Trust Agreement

    Trust Agreement, the ``Agreement,'' entered into as of [date] by 
and between [name of the owner or operator], a [name of State] 
[insert ``corporation,'' ``partnership,'' ``association,'' or 
``proprietorship''], the ``Grantor,'' and [name of corporate 
trustee], [insert ``incorporated in the State of -----------'' or 
``a national bank''], the ``Trustee.''
    Whereas, the United States Environmental Protection Agency, 
``EPA,'' an agency of the United States Government, has established 
certain regulations applicable to the Grantor, requiring that an 
owner or operator of a facility regulated under parts 264, or 265, 
or satisfying the conditions of the exclusion under Sec.  
261.4(a)(24) shall provide assurance that funds will be available if 
needed for care of the facility under 40 CFR parts 264 or 265, 
subparts G, as applicable ,
    Whereas, the Grantor has elected to establish a trust to provide 
all or part of such financial assurance for the facilities 
identified herein,
    Whereas, the Grantor, acting through its duly authorized 
officers, has selected the Trustee to be the trustee under this 
agreement, and the Trustee is willing to act as trustee,
    Now, Therefore, the Grantor and the Trustee agree as follows:
    Section 1. Definitions. As used in this Agreement:
    (a) The term ``Grantor'' means the owner or operator who enters 
into this Agreement and any successors or assigns of the Grantor.
    (b) The term ``Trustee'' means the Trustee who enters into this 
Agreement and any successor Trustee.
    Section 2. Identification of Facilities and Cost Estimates. This 
Agreement pertains to the facilities and cost estimates identified 
on attached Schedule A [on Schedule A, for each facility list the 
EPA Identification Number (if available), name, address, and the 
current cost estimates, or portions thereof, for which financial 
assurance is demonstrated by this Agreement].
    Section 3. Establishment of Fund. The Grantor and the Trustee 
hereby establish a trust fund, the ``Fund,'' for the benefit of EPA 
in the event that the hazardous secondary materials of the grantor 
no longer meet the conditions of the exclusion under Sec.  
261.4(a)(24). The Grantor and the Trustee intend that no third party 
have access to the Fund except as herein provided. The Fund is 
established initially as consisting of the property, which is 
acceptable to the Trustee, described in Schedule B attached hereto. 
Such property and any other property subsequently transferred to the 
Trustee is referred to as the Fund, together with all earnings and 
profits thereon, less any payments or distributions made by the 
Trustee pursuant to this Agreement. The Fund shall be held by the 
Trustee, IN TRUST, as hereinafter provided. The Trustee shall not be 
responsible nor shall it undertake any responsibility for the amount 
or adequacy of, nor any duty to collect from the Grantor, any 
payments necessary to discharge any liabilities of the Grantor 
established by EPA.
    Section 4. Payments from the Fund. The Trustee shall make 
payments from the Fund as the EPA Regional Administrator shall 
direct, in writing, to provide for the payment of the costs of the 
performance of activities required under subpart G of 40 CFR parts 
264 or 265 for the facilities covered by this Agreement. The Trustee 
shall reimburse the Grantor or other persons as specified by the EPA 
Regional Administrator from the Fund for expenditures for such 
activities in such amounts as the beneficiary shall direct in 
writing. In addition, the Trustee shall refund to the Grantor such 
amounts as the EPA Regional Administrator specifies in writing. Upon 
refund, such funds shall no longer constitute part of the Fund as 
defined herein.
    Section 5. Payments Comprising the Fund. Payments made to the 
Trustee for the Fund shall consist of cash or securities acceptable 
to the Trustee.
    Section 6. Trustee Management. The Trustee shall invest and 
reinvest the principal and income of the Fund and keep the Fund 
invested as a single fund, without distinction between principal and 
income, in accordance with general investment policies and 
guidelines which the Grantor may communicate in writing to the 
Trustee from time to time, subject, however, to the provisions of 
this section. In investing, reinvesting, exchanging, selling, and 
managing the Fund, the Trustee shall discharge his duties with 
respect to the trust fund solely in the interest of the beneficiary 
and with the care, skill, prudence, and diligence under the 
circumstances then prevailing which persons of prudence, acting in a 
like capacity and familiar with such matters, would use in the 
conduct of an enterprise of a like character and with like aims; 
except that:
    (i) Securities or other obligations of the Grantor, or any other 
owner or operator of the facilities, or any of their affiliates as 
defined in the Investment Company Act of 1940, as amended, 15 U.S.C. 
80a-2.(a), shall not be acquired or held, unless they are securities 
or other obligations of the Federal or a State government;
    (ii) The Trustee is authorized to invest the Fund in time or 
demand deposits of the Trustee, to the extent insured by an agency 
of the Federal or State government; and
    (iii) The Trustee is authorized to hold cash awaiting investment 
or distribution uninvested for a reasonable time and without 
liability for the payment of interest thereon.
    Section 7. Commingling and Investment. The Trustee is expressly 
authorized in its discretion:
    (a) To transfer from time to time any or all of the assets of 
the Fund to any common, commingled, or collective trust fund created 
by the Trustee in which the Fund is eligible to participate, subject 
to all of the provisions thereof, to be commingled with the assets 
of other trusts participating therein; and
    (b) To purchase shares in any investment company registered 
under the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., 
including one which may be created, managed, underwritten, or to 
which investment advice is rendered or the shares of which are sold 
by the Trustee. The Trustee may vote such shares in its discretion.
    Section 8. Express Powers of Trustee. Without in any way 
limiting the powers and discretions conferred upon the Trustee by 
the other provisions of this Agreement or by law, the Trustee is 
expressly authorized and empowered:
    (a) To sell, exchange, convey, transfer, or otherwise dispose of 
any property held by it, by public or private sale. No person 
dealing

[[Page 64775]]

with the Trustee shall be bound to see to the application of the 
purchase money or to inquire into the validity or expediency of any 
such sale or other disposition;
    (b) To make, execute, acknowledge, and deliver any and all 
documents of transfer and conveyance and any and all other 
instruments that may be necessary or appropriate to carry out the 
powers herein granted;
    (c) To register any securities held in the Fund in its own name 
or in the name of a nominee and to hold any security in bearer form 
or in book entry, or to combine certificates representing such 
securities with certificates of the same issue held by the Trustee 
in other fiduciary capacities, or to deposit or arrange for the 
deposit of such securities in a qualified central depositary even 
though, when so deposited, such securities may be merged and held in 
bulk in the name of the nominee of such depositary with other 
securities deposited therein by another person, or to deposit or 
arrange for the deposit of any securities issued by the United 
States Government, or any agency or instrumentality thereof, with a 
Federal Reserve bank, but the books and records of the Trustee shall 
at all times show that all such securities are part of the Fund;
    (d) To deposit any cash in the Fund in interest-bearing accounts 
maintained or savings certificates issued by the Trustee, in its 
separate corporate capacity, or in any other banking institution 
affiliated with the Trustee, to the extent insured by an agency of 
the Federal or State government; and
    (e) To compromise or otherwise adjust all claims in favor of or 
against the Fund.
    Section 9. Taxes and Expenses. All taxes of any kind that may be 
assessed or levied against or in respect of the Fund and all 
brokerage commissions incurred by the Fund shall be paid from the 
Fund. All other expenses incurred by the Trustee in connection with 
the administration of this Trust, including fees for legal services 
rendered to the Trustee, the compensation of the Trustee to the 
extent not paid directly by the Grantor, and all other proper 
charges and disbursements of the Trustee shall be paid from the 
Fund.
    Section 10. Annual Valuation. The Trustee shall annually, at 
least 30 days prior to the anniversary date of establishment of the 
Fund, furnish to the Grantor and to the appropriate EPA Regional 
Administrator a statement confirming the value of the Trust. Any 
securities in the Fund shall be valued at market value as of no more 
than 60 days prior to the anniversary date of establishment of the 
Fund. The failure of the Grantor to object in writing to the Trustee 
within 90 days after the statement has been furnished to the Grantor 
and the EPA Regional Administrator shall constitute a conclusively 
binding assent by the Grantor, barring the Grantor from asserting 
any claim or liability against the Trustee with respect to matters 
disclosed in the statement.
    Section 11. Advice of Counsel. The Trustee may from time to time 
consult with counsel, who may be counsel to the Grantor, with 
respect to any question arising as to the construction of this 
Agreement or any action to be taken hereunder. The Trustee shall be 
fully protected, to the extent permitted by law, in acting upon the 
advice of counsel.
    Section 12. Trustee Compensation. The Trustee shall be entitled 
to reasonable compensation for its services as agreed upon in 
writing from time to time with the Grantor.
    Section 13. Successor Trustee. The Trustee may resign or the 
Grantor may replace the Trustee, but such resignation or replacement 
shall not be effective until the Grantor has appointed a successor 
trustee and this successor accepts the appointment. The successor 
trustee shall have the same powers and duties as those conferred 
upon the Trustee hereunder. Upon the successor trustee's acceptance 
of the appointment, the Trustee shall assign, transfer, and pay over 
to the successor trustee the funds and properties then constituting 
the Fund. If for any reason the Grantor cannot or does not act in 
the event of the resignation of the Trustee, the Trustee may apply 
to a court of competent jurisdiction for the appointment of a 
successor trustee or for instructions. The successor trustee shall 
specify the date on which it assumes administration of the trust in 
a writing sent to the Grantor, the EPA Regional Administrator, and 
the present Trustee by certified mail 10 days before such change 
becomes effective. Any expenses incurred by the Trustee as a result 
of any of the acts contemplated by this Section shall be paid as 
provided in Section 9.
    Section 14. Instructions to the Trustee. All orders, requests, 
and instructions by the Grantor to the Trustee shall be in writing, 
signed by such persons as are designated in the attached Exhibit A 
or such other designees as the Grantor may designate by amendment to 
Exhibit A. The Trustee shall be fully protected in acting without 
inquiry in accordance with the Grantor's orders, requests, and 
instructions. All orders, requests, and instructions by the EPA 
Regional Administrator to the Trustee shall be in writing, signed by 
the EPA Regional Administrators of the Regions in which the 
facilities are located, or their designees, and the Trustee shall 
act and shall be fully protected in acting in accordance with such 
orders, requests, and instructions. The Trustee shall have the right 
to assume, in the absence of written notice to the contrary, that no 
event constituting a change or a termination of the authority of any 
person to act on behalf of the Grantor or EPA hereunder has 
occurred. The Trustee shall have no duty to act in the absence of 
such orders, requests, and instructions from the Grantor and/or EPA, 
except as provided for herein.
    Section 15. Amendment of Agreement. This Agreement may be 
amended by an instrument in writing executed by the Grantor, the 
Trustee, and the appropriate EPA Regional Administrator, or by the 
Trustee and the appropriate EPA Regional Administrator if the 
Grantor ceases to exist.
    Section 16. Irrevocability and Termination. Subject to the right 
of the parties to amend this Agreement as provided in Section 16, 
this Trust shall be irrevocable and shall continue until terminated 
at the written agreement of the Grantor, the Trustee, and the EPA 
Regional Administrator, or by the Trustee and the EPA Regional 
Administrator, if the Grantor ceases to exist. Upon termination of 
the Trust, all remaining trust property, less final trust 
administration expenses, shall be delivered to the Grantor.
    Section 17. Immunity and Indemnification. The Trustee shall not 
incur personal liability of any nature in connection with any act or 
omission, made in good faith, in the administration of this Trust, 
or in carrying out any directions by the Grantor or the EPA Regional 
Administrator issued in accordance with this Agreement. The Trustee 
shall be indemnified and saved harmless by the Grantor or from the 
Trust Fund, or both, from and against any personal liability to 
which the Trustee may be subjected by reason of any act or conduct 
in its official capacity, including all expenses reasonably incurred 
in its defense in the event the Grantor fails to provide such 
defense.
    Section 18. Choice of Law. This Agreement shall be administered, 
construed, and enforced according to the laws of the State of 
[insert name of State].
    Section 19. Interpretation. As used in this Agreement, words in 
the singular include the plural and words in the plural include the 
singular. The descriptive headings for each Section of this 
Agreement shall not affect the interpretation or the legal efficacy 
of this Agreement.
    In Witness Whereof the parties have caused this Agreement to be 
executed by their respective officers duly authorized and their 
corporate seals to be hereunto affixed and attested as of the date 
first above written: The parties below certify that the wording of 
this Agreement is identical to the wording specified in 40 CFR 
261.151(a)(1) as such regulations were constituted on the date first 
above written.
    [Signature of Grantor]
    [Title]

Attest:
    [Title]
    [Seal]
    [Signature of Trustee]

Attest:
    [Title]
    [Seal]
    (2) The following is an example of the certification of 
acknowledgment which must accompany the trust agreement for a trust 
fund as specified in Sec.  261.143(a) of this chapter. State 
requirements may differ on the proper content of this 
acknowledgment.
State of---------------------------------------------------------------
County of--------------------------------------------------------------
    On this [date], before me personally came [owner or operator] to 
me known, who, being by me duly sworn, did depose and say that she/
he resides at [address], that she/he is [title] of [corporation], 
the corporation described in and which executed the above 
instrument; that she/he knows the seal of said corporation; that the 
seal affixed to such instrument is such corporate seal; that it was 
so affixed by order of the Board of Directors of said corporation, 
and that she/he signed her/his name thereto by like order.
    [Signature of Notary Public]
    (b) A surety bond guaranteeing payment into a trust fund, as 
specified in Sec.  261.143(b) of this chapter, must be worded as 
follows, except that instructions in brackets are to be replaced 
with the relevant information and the brackets deleted:

[[Page 64776]]

Financial Guarantee Bond

Date bond executed:
Effective date:
Principal: [legal name and business address of owner or operator]
Type of Organization: [insert ``individual,'' ``joint venture,'' 
``partnership,'' or ``corporation'']
State of incorporation:------------------------------------------------
Surety(ies): [name(s) and business address(es)]
EPA Identification Number, name, address and amount(s) for each 
facility guaranteed by this bond:--------------------------------------
Total penal sum of bond: $---------------------------------------------
Surety's bond number:--------------------------------------------------
    Know All Persons By These Presents, That we, the Principal and 
Surety(ies) are firmly bound to the U.S. EPA in the event that the 
hazardous secondary materials at the reclamation or intermediate 
facility listed below no longer meet the conditions of the exclusion 
under 40 CFR 261.4(a)(24), in the above penal sum for the payment of 
which we bind ourselves, our heirs, executors, administrators, 
successors, and assigns jointly and severally; provided that, where 
the Surety(ies) are corporations acting as co-sureties, we, the 
Sureties, bind ourselves in such sum ``jointly and severally'' only 
for the purpose of allowing a joint action or actions against any or 
all of us, and for all other purposes each Surety binds itself, 
jointly and severally with the Principal, for the payment of such 
sum only as is set forth opposite the name of such Surety, but if no 
limit of liability is indicated, the limit of liability shall be the 
full amount of the penal sum.
    Whereas said Principal is required, under the Resource 
Conservation and Recovery Act as amended (RCRA), to have a permit or 
interim status in order to own or operate each facility identified 
above, or to meet conditions under 40 CFR sections 261.4(a)(24), and
    Whereas said Principal is required to provide financial 
assurance as a condition of permit or interim status or as a 
condition of an exclusion under 40 CFR sections 261.4(a)(24) and
    Whereas said Principal shall establish a standby trust fund as 
is required when a surety bond is used to provide such financial 
assurance;
    Now, Therefore, the conditions of the obligation are such that 
if the Principal shall faithfully, before the beginning of final 
closure of each facility identified above, fund the standby trust 
fund in the amount(s) identified above for the facility,
    Or, if the Principal shall satisfy all the conditions 
established for exclusion of hazardous secondary materials from 
coverage as solid waste under 40 CFR sections 261.4(a)(24),
    Or, if the Principal shall fund the standby trust fund in such 
amount(s) within 15 days after a final order to begin closure is 
issued by an EPA Regional Administrator or a U.S. district court or 
other court of competent jurisdiction,
    Or, if the Principal shall provide alternate financial 
assurance, as specified in subpart H of 40 CFR part 261, as 
applicable, and obtain the EPA Regional Administrator's written 
approval of such assurance, within 90 days after the date notice of 
cancellation is received by both the Principal and the EPA Regional 
Administrator(s) from the Surety(ies), then this obligation shall be 
null and void; otherwise it is to remain in full force and effect.
    The Surety(ies) shall become liable on this bond obligation only 
when the Principal has failed to fulfill the conditions described 
above. Upon notification by an EPA Regional Administrator that the 
Principal has failed to perform as guaranteed by this bond, the 
Surety(ies) shall place funds in the amount guaranteed for the 
facility(ies) into the standby trust fund as directed by the EPA 
Regional Administrator.
    The liability of the Surety(ies) shall not be discharged by any 
payment or succession of payments hereunder, unless and until such 
payment or payments shall amount in the aggregate to the penal sum 
of the bond, but in no event shall the obligation of the Surety(ies) 
hereunder exceed the amount of said penal sum.
    The Surety(ies) may cancel the bond by sending notice of 
cancellation by certified mail to the Principal and to the EPA 
Regional Administrator(s) for the Region(s) in which the 
facility(ies) is (are) located, provided, however, that cancellation 
shall not occur during the 120 days beginning on the date of receipt 
of the notice of cancellation by both the Principal and the EPA 
Regional Administrator(s), as evidenced by the return receipts.
    The Principal may terminate this bond by sending written notice 
to the Surety(ies), provided, however, that no such notice shall 
become effective until the Surety(ies) receive(s) written 
authorization for termination of the bond by the EPA Regional 
Administrator(s) of the EPA Region(s) in which the bonded 
facility(ies) is (are) located.
    [The following paragraph is an optional rider that may be 
included but is not required.]
    Principal and Surety(ies) hereby agree to adjust the penal sum 
of the bond yearly so that it guarantees a new amount, provided that 
the penal sum does not increase by more than 20 percent in any one 
year, and no decrease in the penal sum takes place without the 
written permission of the EPA Regional Administrator(s).
    In Witness Whereof, the Principal and Surety(ies) have executed 
this Financial Guarantee Bond and have affixed their seals on the 
date set forth above.
    The persons whose signatures appear below hereby certify that 
they are authorized to execute this surety bond on behalf of the 
Principal and Surety(ies) and that the wording of this surety bond 
is identical to the wording specified in 40 CFR 261.151(b) as such 
regulations were constituted on the date this bond was executed.

Principal

[Signature(s)]

-----------------------------------------------------------------------
[Name(s)]

-----------------------------------------------------------------------
[Title(s)]

-----------------------------------------------------------------------
[Corporate seal]-------------------------------------------------------

Corporate Surety(ies)

[Name and address]
State of incorporation:------------------------------------------------
Liability limit:
$----------------------------------------------------------------------
[Signature(s)]
[Name(s) and title(s)]
[Corporate seal]
[For every co-surety, provide signature(s), corporate seal, and 
other information in the same manner as for Surety above.]
Bond premium: $--------------------------------------------------------
    (c) A letter of credit, as specified in Sec.  261.143(c) of this 
chapter, must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Irrevocable Standby Letter of Credit

Regional Administrator(s)

Region(s)--------------------------------------------------------------

U.S. Environmental Protection Agency

    Dear Sir or Madam: We hereby establish our Irrevocable Standby 
Letter of Credit No.-------- in your favor, in the event that the 
hazardous secondary materials at the covered reclamation or 
intermediary facility(ies) no longer meet the conditions of the 
exclusion under 40 CFR 261.4(a)(24), at the request and for the 
account of [owner's or operator's name and address] up to the 
aggregate amount of [in words] U.S. dollars $--------, available 
upon presentation of
    (1) your sight draft, bearing reference to this letter of credit 
No.----, and
    (2) your signed statement reading as follows: ``I certify that 
the amount of the draft is payable pursuant to regulations issued 
under authority of the Resource Conservation and Recovery Act of 
1976 as amended.''
    This letter of credit is effective as of [date] and shall expire 
on [date at least 1 year later], but such expiration date shall be 
automatically extended for a period of [at least 1 year] on [date] 
and on each successive expiration date, unless, at least 120 days 
before the current expiration date, we notify both you and [owner's 
or operator's name] by certified mail that we have decided not to 
extend this letter of credit beyond the current expiration date. In 
the event you are so notified, any unused portion of the credit 
shall be available upon presentation of your sight draft for 120 
days after the date of receipt by both you and [owner's or 
operator's name], as shown on the signed return receipts.
    Whenever this letter of credit is drawn on under and in 
compliance with the terms of this credit, we shall duly honor such 
draft upon presentation to us, and we shall deposit the amount of 
the draft directly into the standby trust fund of [owner's or 
operator's name] in accordance with your instructions.
    We certify that the wording of this letter of credit is 
identical to the wording specified in 40 CFR 261.151(c) as such 
regulations were constituted on the date shown immediately below.

[Signature(s) and title(s) of official(s) of issuing institution] 
[Date]

    This credit is subject to [insert ``the most recent edition of 
the Uniform Customs and Practice for Documentary Credits, published

[[Page 64777]]

and copyrighted by the International Chamber of Commerce,'' or ``the 
Uniform Commercial Code''].
    (d) A certificate of insurance, as specified in Sec.  261.143(e) 
of this chapter, must be worded as follows, except that instructions 
in brackets are to be replaced with the relevant information and the 
brackets deleted:

Certificate of Insurance

Name and Address of Insurer (herein called the ``Insurer''):

-----------------------------------------------------------------------

Name and Address of Insured (herein called the ``Insured''):

-----------------------------------------------------------------------

    Facilities Covered: [List for each facility: The EPA 
Identification Number (if any issued), name, address, and the amount 
of insurance for all facilities covered, which must total the face 
amount shown below.

Face Amount:

-----------------------------------------------------------------------

Policy Number:---------------------------------------------------------

Effective Date:

-----------------------------------------------------------------------

    The Insurer hereby certifies that it has issued to the Insured 
the policy of insurance identified above to provide financial 
assurance so that in accordance with applicable regulations all 
hazardous secondary materials can be removed from the facility or 
any unit at the facility and the facility or any unit at the 
facility can be decontaminated at the facilities identified above. 
The Insurer further warrants that such policy conforms in all 
respects with the requirements of 40 CFR 261.143(d) as applicable 
and as such regulations were constituted on the date shown 
immediately below. It is agreed that any provision of the policy 
inconsistent with such regulations is hereby amended to eliminate 
such inconsistency.
    Whenever requested by the EPA Regional Administrator(s) of the 
U.S. Environmental Protection Agency, the Insurer agrees to furnish 
to the EPA Regional Administrator(s) a duplicate original of the 
policy listed above, including all endorsements thereon.
    I hereby certify that the wording of this certificate is 
identical to the wording specified in 40 CFR 261.151(d) such 
regulations were constituted on the date shown immediately below.

[Authorized signature for Insurer]

[Name of person signing]

[Title of person signing]

Signature of witness or notary:----------------------------------------

[Date]

    (e) A letter from the chief financial officer, as specified in 
Sec.  261.143(e) of this chapter, must be worded as follows, except 
that instructions in brackets are to be replaced with the relevant 
information and the brackets deleted:

Letter From Chief Financial Officer

    [Address to Regional Administrator of every Region in which 
facilities for which financial responsibility is to be demonstrated 
through the financial test are located].
    I am the chief financial officer of [name and address of firm]. 
This letter is in support of this firm's use of the financial test 
to demonstrate financial assurance, as specified in subpart H of 40 
CFR part 261.
    [Fill out the following nine paragraphs regarding facilities and 
associated cost estimates. If your firm has no facilities that 
belong in a particular paragraph, write ``None'' in the space 
indicated. For each facility, include its EPA Identification Number 
(if any issued), name, address, and current cost estimates.]
    1. This firm is the owner or operator of the following 
facilities for which financial assurance is demonstrated through the 
financial test specified in subpart H of 40 CFR 261. The current 
cost estimates covered by the test are shown for each facility: ----
---- .
    2. This firm guarantees, through the guarantee specified in 
subpart H of 40 CFR part 261, the following facilities owned or 
operated by the guaranteed party. The current cost estimates so 
guaranteed are shown for each facility: -------- . The firm 
identified above is [insert one or more: (1) The direct or higher-
tier parent corporation of the owner or operator; (2) owned by the 
same parent corporation as the parent corporation of the owner or 
operator, and receiving the following value in consideration of this 
guarantee--------, or (3) engaged in the following substantial 
business relationship with the owner or operator --------, and 
receiving the following value in consideration of this guarantee----
----]. [Attach a written description of the business relationship or 
a copy of the contract establishing such relationship to this 
letter].
    3. In States where EPA is not administering the financial 
requirements of subpart H of 40 CFR part 261, this firm, as owner or 
operator or guarantor, is demonstrating financial assurance for the 
following facilities through the use of a test equivalent or 
substantially equivalent to the financial test specified in subpart 
H of 40 CFR part 261. The current cost estimates covered by such a 
test are shown for each facility:--------.
    4. This firm is the owner or operator of the following hazardous 
secondary materials management facilities for which financial 
assurance is not demonstrated either to EPA or a State through the 
financial test or any other financial assurance mechanism specified 
in subpart H of 40 CFR part 261 or equivalent or substantially 
equivalent State mechanisms. The current cost estimates not covered 
by such financial assurance are shown for each facility:--------.
    5. This firm is the owner or operator of the following UIC 
facilities for which financial assurance for plugging and 
abandonment is required under part 144. The current closure cost 
estimates as required by 40 CFR 144.62 are shown for each 
facility:--------.
    6. This firm is the owner or operator of the following 
facilities for which financial assurance for closure or post-closure 
care is demonstrated through the financial test specified in subpart 
H of 40 CFR parts 264 and 265. The current closure and/or post-
closure cost estimates covered by the test are shown for each 
facility: -------- .
    7. This firm guarantees, through the guarantee specified in 
subpart H of 40 CFR parts 264 and 265, the closure or post-closure 
care of the following facilities owned or operated by the guaranteed 
party. The current cost estimates for the closure or post-closure 
care so guaranteed are shown for each facility: --------. The firm 
identified above is [insert one or more: (1) The direct or higher-
tier parent corporation of the owner or operator; (2) owned by the 
same parent corporation as the parent corporation of the owner or 
operator, and receiving the following value in consideration of this 
guarantee ------; or (3) engaged in the following substantial 
business relationship with the owner or operator ----, and receiving 
the following value in consideration of this guarantee ----]. 
[Attach a written description of the business relationship or a copy 
of the contract establishing such relationship to this letter].
    8. In States where EPA is not administering the financial 
requirements of subpart H of 40 CFR part 264 or 265, this firm, as 
owner or operator or guarantor, is demonstrating financial assurance 
for the closure or post-closure care of the following facilities 
through the use of a test equivalent or substantially equivalent to 
the financial test specified in subpart H of 40 CFR parts 264 and 
265. The current closure and/or post-closure cost estimates covered 
by such a test are shown for each facility: ----.
    9. This firm is the owner or operator of the following hazardous 
waste management facilities for which financial assurance for 
closure or, if a disposal facility, post-closure care, is not 
demonstrated either to EPA or a State through the financial test or 
any other financial assurance mechanism specified in subpart H of 40 
CFR parts 264 and 265 or equivalent or substantially equivalent 
State mechanisms. The current closure and/or post-closure cost 
estimates not covered by such financial assurance are shown for each 
facility: ----.
    This firm [insert ``is required'' or ``is not required''] to 
file a Form 10K with the Securities and Exchange Commission (SEC) 
for the latest fiscal year.
    The fiscal year of this firm ends on [month, day]. The figures 
for the following items marked with an asterisk are derived from 
this firm's independently audited, year-end financial statements for 
the latest completed fiscal year, ended [date].
    [Fill in Alternative I if the criteria of paragraph (e)(1)(i) of 
Sec.  261.143 of this chapter are used. Fill in Alternative II if 
the criteria of paragraph (e)(1)(ii) of Sec.  261.143(e) of this 
chapter are used.]

Alternative I

    1. Sum of current cost estimates [total of all cost estimates 
shown in the nine paragraphs above] $----
    *2. Total liabilities [if any portion of the cost estimates is 
included in total liabilities, you may deduct the amount of that 
portion from this line and add that amount to lines 3 and 4] $----
    *3. Tangible net worth $--------
    *4. Net worth $---------
    *5. Current assets $--------
    *6. Current liabilities $--------

[[Page 64778]]

    7. Net working capital [line 5 minus line 6] $--------
    *8. The sum of net income plus depreciation, depletion, and 
amortization $---------
    *9. Total assets in U.S. (required only if less than 90% of 
firm's assets are located in the U.S.) $---------
    10. Is line 3 at least $10 million? (Yes/No) --------
    11. Is line 3 at least 6 times line 1? (Yes/No) ---------
    12. Is line 7 at least 6 times line 1? (Yes/No) ---------
    *13. Are at least 90% of firm's assets located in the U.S.? If 
not, complete line 14 (Yes/No) --------
    14. Is line 9 at least 6 times line 1? (Yes/No) ---------
    15. Is line 2 divided by line 4 less than 2.0? (Yes/No) --------
-
    16. Is line 8 divided by line 2 greater than 0.1? (Yes/No) ----
-----
    17. Is line 5 divided by line 6 greater than 1.5? (Yes/No) ----
-----

Alternative II

    1. Sum of current cost estimates [total of all cost estimates 
shown in the eight paragraphs above] $---------
    2. Current bond rating of most recent issuance of this firm and 
name of rating service ---------
    3. Date of issuance of bond ---------
    4. Date of maturity of bond ---------
    *5. Tangible net worth [if any portion of the cost estimates is 
included in ``total liabilities'' on your firm's financial 
statements, you may add the amount of that portion to this line] $--
-------
    *6. Total assets in U.S. (required only if less than 90% of 
firm's assets are located in the U.S.) $---------
    7. Is line 5 at least $10 million? (Yes/No) --------
    8. Is line 5 at least 6 times line 1? (Yes/No) --------
    *9. Are at least 90% of firm's assets located in the U.S.? If 
not, complete line 10 (Yes/No) --------
    10. Is line 6 at least 6 times line 1? (Yes/No) ---------
    I hereby certify that the wording of this letter is identical to 
the wording specified in 40 CFR 261.151(e) as such regulations were 
constituted on the date shown immediately below.
[Signature]------------------------------------------------------------
[Name]-----------------------------------------------------------------
[Title]----------------------------------------------------------------

[Date]

-----------------------------------------------------------------------

    (f) A letter from the chief financial officer, as specified in 
Sec. 261.147(f) of this chapter, must be worded as follows, except 
that instructions in brackets are to be replaced with the relevant 
information and the brackets deleted.

Letter From Chief Financial Officer

    [Address to Regional Administrator of every Region in which 
facilities for which financial responsibility is to be demonstrated 
through the financial test are located].
    I am the chief financial officer of [firm's name and address]. 
This letter is in support of the use of the financial test to 
demonstrate financial responsibility for liability coverage under 
Sec.  261.147[insert ``and costs assured Sec.  261.143(e)'' if 
applicable] as specified in subpart H of 40 CFR part 261.
    [Fill out the following paragraphs regarding facilities and 
liability coverage. If there are no facilities that belong in a 
particular paragraph, write ``None'' in the space indicated. For 
each facility, include its EPA Identification Number (if any 
issued), name, and address].
    The firm identified above is the owner or operator of the 
following facilities for which liability coverage for [insert 
``sudden'' or ``nonsudden'' or ``both sudden and nonsudden''] 
accidental occurrences is being demonstrated through the financial 
test specified in subpart H of 40 CFR part 261:--------
    The firm identified above guarantees, through the guarantee 
specified in subpart H of 40 CFR part 261, liability coverage for 
[insert ``sudden'' or ``nonsudden'' or ``both sudden and 
nonsudden''] accidental occurrences at the following facilities 
owned or operated by the following: ---------. The firm identified 
above is [insert one or more: (1) The direct or higher-tier parent 
corporation of the owner or operator; (2) owned by the same parent 
corporation as the parent corporation of the owner or operator, and 
receiving the following value in consideration of this guarantee ---
------; or (3) engaged in the following substantial business 
relationship with the owner or operator ---------, and receiving the 
following value in consideration of this guarantee ---------]. 
[Attach a written description of the business relationship or a copy 
of the contract establishing such relationship to this letter.]
    The firm identified above is the owner or operator of the 
following facilities for which liability coverage for [insert 
``sudden'' or ``nonsudden'' or ``both sudden and nonsudden''] 
accidental occurrences is being demonstrated through the financial 
test specified in subpart H of 40 CFR parts 264 and 265:--------
     The firm identified above guarantees, through the guarantee 
specified in subpart H of 40 CFR parts 264 and 265, liability 
coverage for [insert ``sudden'' or ``nonsudden'' or ``both sudden 
and nonsudden''] accidental occurrences at the following facilities 
owned or operated by the following: ----. The firm identified above 
is [insert one or more: (1) The direct or higher-tier parent 
corporation of the owner or operator; (2) owned by the same parent 
corporation as the parent corporation of the owner or operator, and 
receiving the following value in consideration of this guarantee --
--; or (3) engaged in the following substantial business 
relationship with the owner or operator ----, and receiving the 
following value in consideration of this guarantee ----]. [Attach a 
written description of the business relationship or a copy of the 
contract establishing such relationship to this letter.]
    [If you are using the financial test to demonstrate coverage of 
both liability and costs assured under Sec.  261.143(e) or closure 
or post-closure care costs under 40 CFR 264.143, 264.145, 265.143 or 
265.145, fill in the following nine paragraphs regarding facilities 
and associated cost estimates. If there are no facilities that 
belong in a particular paragraph, write ``None'' in the space 
indicated. For each facility, include its EPA identification number 
(if any issued), name, address, and current cost estimates.]
    1. This firm is the owner or operator of the following 
facilities for which financial assurance is demonstrated through the 
financial test specified in subpart H of 40 CFR 261. The current 
cost estimates covered by the test are shown for each facility:----
----.
    2. This firm guarantees, through the guarantee specified in 
subpart H of 40 CFR part 261, the following facilities owned or 
operated by the guaranteed party. The current cost estimates so 
guaranteed are shown for each facility:--------. The firm identified 
above is [insert one or more: (1) The direct or higher-tier parent 
corporation of the owner or operator; (2) owned by the same parent 
corporation as the parent corporation of the owner or operator, and 
receiving the following value in consideration of this guarantee----
----, or (3) engaged in the following substantial business 
relationship with the owner or operator --------, and receiving the 
following value in consideration of this guarantee--------]. [Attach 
a written description of the business relationship or a copy of the 
contract establishing such relationship to this letter].
    3. In States where EPA is not administering the financial 
requirements of subpart H of 40 CFR part 261, this firm, as owner or 
operator or guarantor, is demonstrating financial assurance for the 
following facilities through the use of a test equivalent or 
substantially equivalent to the financial test specified in subpart 
H of 40 CFR part 261. The current cost estimates covered by such a 
test are shown for each facility:--------.
    4. This firm is the owner or operator of the following hazardous 
secondary materials management facilities for which financial 
assurance is not demonstrated either to EPA or a State through the 
financial test or any other financial assurance mechanism specified 
in subpart H of 40 CFR part 261 or equivalent or substantially 
equivalent State mechanisms. The current cost estimates not covered 
by such financial assurance are shown for each facility:--------.
    5. This firm is the owner or operator of the following UIC 
facilities for which financial assurance for plugging and 
abandonment is required under part 144. The current closure cost 
estimates as required by 40 CFR 144.62 are shown for each 
facility:--------.
    6. This firm is the owner or operator of the following 
facilities for which financial assurance for closure or post-closure 
care is demonstrated through the financial test specified in subpart 
H of 40 CFR parts 264 and 265. The current closure and/or post-
closure cost estimates covered by the test are shown for each 
facility: --------.
    7. This firm guarantees, through the guarantee specified in 
subpart H of 40 CFR parts 264 and 265, the closure or post-closure 
care of the following facilities owned or operated by the guaranteed 
party. The

[[Page 64779]]

current cost estimates for the closure or post-closure care so 
guaranteed are shown for each facility: --------. The firm 
identified above is [insert one or more: (1) The direct or higher-
tier parent corporation of the owner or operator; (2) owned by the 
same parent corporation as the parent corporation of the owner or 
operator, and receiving the following value in consideration of this 
guarantee --------; or (3) engaged in the following substantial 
business relationship with the owner or operator --------, and 
receiving the following value in consideration of this guarantee --
------].
    [Attach a written description of the business relationship or a 
copy of the contract establishing such relationship to this letter].
    8. In States where EPA is not administering the financial 
requirements of subpart H of 40 CFR part 264 or 265, this firm, as 
owner or operator or guarantor, is demonstrating financial assurance 
for the closure or post-closure care of the following facilities 
through the use of a test equivalent or substantially equivalent to 
the financial test specified in subpart H of 40 CFR parts 264 and 
265. The current closure and/or post-closure cost estimates covered 
by such a test are shown for each facility: --------.
    9. This firm is the owner or operator of the following hazardous 
waste management facilities for which financial assurance for 
closure or, if a disposal facility, post-closure care, is not 
demonstrated either to EPA or a State through the financial test or 
any other financial assurance mechanism specified in subpart H of 40 
CFR parts 264 and 265 or equivalent or substantially equivalent 
State mechanisms. The current closure and/or post-closure cost 
estimates not covered by such financial assurance are shown for each 
facility: --------.
    This firm [insert ``is required'' or ``is not required''] to 
file a Form 10K with the Securities and Exchange Commission (SEC) 
for the latest fiscal year.
    The fiscal year of this firm ends on [month, day]. The figures 
for the following items marked with an asterisk are derived from 
this firm's independently audited, year-end financial statements for 
the latest completed fiscal year, ended [date].

Part A. Liability Coverage for Accidental Occurrences

    [Fill in Alternative I if the criteria of paragraph (f)(1)(i) of 
Sec. 261.147 are used. Fill in Alternative II if the criteria of 
paragraph (f)(1)(ii) of Sec. 261.147 are used.]

Alternative I

    1. Amount of annual aggregate liability coverage to be 
demonstrated $---------.
    *2. Current assets $---------.
    *3. Current liabilities $---------.
    4. Net working capital (line 2 minus line 3) $---------.
    *5. Tangible net worth $---------.
    *6. If less than 90% of assets are located in the U.S., give 
total U.S. assets $---------.
    7. Is line 5 at least $10 million? (Yes/No) ---------.
    8. Is line 4 at least 6 times line 1? (Yes/No) ---------.
    9. Is line 5 at least 6 times line 1? (Yes/No) ---------.
    *10. Are at least 90% of assets located in the U.S.? (Yes/No) --
------. If not, complete line 11.
    11. Is line 6 at least 6 times line 1? (Yes/No) --------.

Alternative II

    1. Amount of annual aggregate liability coverage to be 
demonstrated $---------.
    2. Current bond rating of most recent issuance and name of 
rating service ------------------.
    3. Date of issuance of bond ------------------.
    4. Date of maturity of bond ------------------.
    *5. Tangible net worth $---------.
    *6. Total assets in U.S. (required only if less than 90% of 
assets are located in the U.S.) $---------.
    7. Is line 5 at least $10 million? (Yes/No) ---------.
    8. Is line 5 at least 6 times line 1? ---------.
    9. Are at least 90% of assets located in the U.S.? If not, 
complete line 10. (Yes/No) ----.
    10. Is line 6 at least 6 times line 1? ---------.
    [Fill in part B if you are using the financial test to 
demonstrate assurance of both liability coverage and costs assured 
under Sec.  261.143(e) or closure or post-closure care costs under 
40 CFR 264.143, 264.145, 265.143 or 265.145.]

Part B. Facility Care and Liability Coverage

    [Fill in Alternative I if the criteria of paragraphs (e)(1)(i) 
of Sec. 261.143 and (f)(1)(i) of Sec. 261.147 are used. Fill in 
Alternative II if the criteria of paragraphs (e)(1)(ii) of Sec. 
261.143 and (f)(1)(ii) of Sec. 261.147 are used.]

Alternative I

    1. Sum of current cost estimates (total of all cost estimates 
listed above) $---------
    2. Amount of annual aggregate liability coverage to be 
demonstrated $---------
    3. Sum of lines 1 and 2 $--------
    *4. Total liabilities (if any portion of your cost estimates is 
included in your total liabilities, you may deduct that portion from 
this line and add that amount to lines 5 and 6) $---------
    *5. Tangible net worth $--------
    *6. Net worth $---------
    *7. Current assets $--------
    *8. Current liabilities $--------
    9. Net working capital (line 7 minus line 8) $--------
    *10. The sum of net income plus depreciation, depletion, and 
amortization $---------
    *11. Total assets in U.S. (required only if less than 90% of 
assets are located in the U.S.) $--------
    12. Is line 5 at least $10 million? (Yes/No)
    13. Is line 5 at least 6 times line 3? (Yes/No)
    14. Is line 9 at least 6 times line 3? (Yes/No)
    *15. Are at least 90% of assets located in the U.S.? (Yes/No) If 
not, complete line 16.
    16. Is line 11 at least 6 times line 3? (Yes/No)
    17. Is line 4 divided by line 6 less than 2.0? (Yes/No)
    18. Is line 10 divided by line 4 greater than 0.1? (Yes/No)
    19. Is line 7 divided by line 8 greater than 1.5? (Yes/No)

Alternative II

    1. Sum of current cost estimates (total of all cost estimates 
listed above) $---------
    2. Amount of annual aggregate liability coverage to be 
demonstrated $---------
    3. Sum of lines 1 and 2 $--------
    4. Current bond rating of most recent issuance and name of 
rating service -------------
    5. Date of issuance of bond --------------
    6. Date of maturity of bond --------------
    *7. Tangible net worth (if any portion of the cost estimates is 
included in ``total liabilities'' on your financial statements you 
may add that portion to this line) $---------
    *8. Total assets in the U.S. (required only if less than 90% of 
assets are located in the U.S.) $---------
    9. Is line 7 at least $10 million? (Yes/No)
    10. Is line 7 at least 6 times line 3? (Yes/No)
    *11. Are at least 90% of assets located in the U.S.? (Yes/No) If 
not complete line 12.
    12. Is line 8 at least 6 times line 3? (Yes/No)
    I hereby certify that the wording of this letter is identical to 
the wording specified in 40 CFR 261.151(f) as such regulations were 
constituted on the date shown immediately below.
[Signature]------------------------------------------------------------
[Name]-----------------------------------------------------------------
[Title]----------------------------------------------------------------
[Date]-----------------------------------------------------------------
    (g)(1) A corporate guarantee, as specified in Sec.  261.143(e) 
of this chapter, must be worded as follows, except that instructions 
in brackets are to be replaced with the relevant information and the 
brackets deleted:

Corporate Guarantee for Facility Care

    Guarantee made this [date] by [name of guaranteeing entity], a 
business corporation organized under the laws of the State of 
[insert name of State], herein referred to as guarantor. This 
guarantee is made on behalf of the [owner or operator] of [business 
address], which is [one of the following: ``our subsidiary''; ``a 
subsidiary of [name and address of common parent corporation], of 
which guarantor is a subsidiary''; or ``an entity with which 
guarantor has a substantial business relationship, as defined in 40 
CFR 264.141(h) and 265.141(h)'' to the United States Environmental 
Protection Agency (EPA).

Recitals

    1. Guarantor meets or exceeds the financial test criteria and 
agrees to comply with the reporting requirements for guarantors as 
specified in 40 CFR 261.143(e).
    2. [Owner or operator] owns or operates the following 
facility(ies) covered by this guarantee: [List for each facility: 
EPA Identification Number (if any issued), name, and address.
    3. ``Closure plans'' as used below refer to the plans maintained 
as required by subpart H of 40 CFR part 261 for the care of 
facilities as identified above.

[[Page 64780]]

    4. For value received from [owner or operator], guarantor 
guarantees that in the event of a determination by the Regional 
Administrator that the hazardous secondary materials at the owner or 
operator's facility covered by this guarantee do not meet the 
conditions of the exclusion under Sec.  261.4(a)(24), the guarantor 
will dispose of any hazardous secondary material as hazardous waste, 
and close the facility in accordance with closure requirements found 
in parts 264 or 265 of this chapter, as applicable, or establish a 
trust fund as specified in Sec.  261.143(a) in the name of the owner 
or operator in the amount of the current cost estimate.
    5. Guarantor agrees that if, at the end of any fiscal year 
before termination of this guarantee, the guarantor fails to meet 
the financial test criteria, guarantor shall send within 90 days, by 
certified mail, notice to the EPA Regional Administrator(s) for the 
Region(s) in which the facility(ies) is(are) located and to [owner 
or operator] that he intends to provide alternate financial 
assurance as specified in subpart H of 40 CFR part 261, as 
applicable, in the name of [owner or operator]. Within 120 days 
after the end of such fiscal year, the guarantor shall establish 
such financial assurance unless [owner or operator] has done so.
    6. The guarantor agrees to notify the EPA Regional Administrator 
by certified mail, of a voluntary or involuntary proceeding under 
Title 11 (Bankruptcy), U.S. Code, naming guarantor as debtor, within 
10 days after commencement of the proceeding.
    7. Guarantor agrees that within 30 days after being notified by 
an EPA Regional Administrator of a determination that guarantor no 
longer meets the financial test criteria or that he is disallowed 
from continuing as a guarantor, he shall establish alternate 
financial assurance as specified in of 40 CFR parts 264, 265, or 
subpart H of 40 CFR part 261, as applicable, in the name of [owner 
or operator] unless [owner or operator] has done so.
    8. Guarantor agrees to remain bound under this guarantee 
notwithstanding any or all of the following: amendment or 
modification of the closure plan, the extension or reduction of the 
time of performance, or any other modification or alteration of an 
obligation of the owner or operator pursuant to 40 CFR parts 264, 
265, or Subpart H of 40 CFR part 261.
    9. Guarantor agrees to remain bound under this guarantee for as 
long as [owner or operator] must comply with the applicable 
financial assurance requirements of 40 CFR parts 264 and 265 or the 
financial assurance condition of 40 CFR 261.4(a)(24)(vi)(F) for the 
above-listed facilities, except as provided in paragraph 10 of this 
agreement.
    10. [Insert the following language if the guarantor is (a) a 
direct or higher-tier corporate parent, or (b) a firm whose parent 
corporation is also the parent corporation of the owner or 
operator]:
    Guarantor may terminate this guarantee by sending notice by 
certified mail to the EPA Regional Administrator(s) for the 
Region(s) in which the facility(ies) is(are) located and to [owner 
or operator], provided that this guarantee may not be terminated 
unless and until [the owner or operator] obtains, and the EPA 
Regional Administrator(s) approve(s), alternate coverage complying 
with 40 CFR 261.143.
    [Insert the following language if the guarantor is a firm 
qualifying as a guarantor due to its ``substantial business 
relationship'' with the owner or operator]
    Guarantor may terminate this guarantee 120 days following the 
receipt of notification, through certified mail, by the EPA Regional 
Administrator(s) for the Region(s) in which the facility(ies) 
is(are) located and by [the owner or operator].
    11. Guarantor agrees that if [owner or operator] fails to 
provide alternate financial assurance as specified in 40 CFR parts 
264, 265, or subpart H of 40 CFR 261, as applicable, and obtain 
written approval of such assurance from the EPA Regional 
Administrator(s) within 90 days after a notice of cancellation by 
the guarantor is received by an EPA Regional Administrator from 
guarantor, guarantor shall provide such alternate financial 
assurance in the name of [owner or operator].
    12. Guarantor expressly waives notice of acceptance of this 
guarantee by the EPA or by [owner or operator]. Guarantor also 
expressly waives notice of amendments or modifications of the 
closure plan and of amendments or modifications of the applicable 
requirements of 40 CFR parts 264, 265, or subpart H of 40 CFR 261.
    I hereby certify that the wording of this guarantee is identical 
to the wording specified in 40 CFR 261.151(g)(1) as such regulations 
were constituted on the date first above written.
Effective date:--------------------------------------------------------
[Name of guarantor]----------------------------------------------------
[Authorized signature for guarantor]-----------------------------------
[Name of person signing]-----------------------------------------------
[Title of person signing]----------------------------------------------
Signature of witness or notary:----------------------------------------
    (2) A guarantee, as specified in Sec. 261.147(g) of this 
chapter, must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Guarantee for Liability Coverage

    Guarantee made this [date] by [name of guaranteeing entity], a 
business corporation organized under the laws of [if incorporated 
within the United States insert ``the State of ---------'' and 
insert name of State; if incorporated outside the United States 
insert the name of the country in which incorporated, the principal 
place of business within the United States, and the name and address 
of the registered agent in the State of the principal place of 
business], herein referred to as guarantor. This guarantee is made 
on behalf of [owner or operator] of [business address], which is one 
of the following: ``our subsidiary;'' ``a subsidiary of [name and 
address of common parent corporation], of which guarantor is a 
subsidiary;'' or ``an entity with which guarantor has a substantial 
business relationship, as defined in 40 CFR [either 264.141(h) or 
265.141(h)]'', to any and all third parties who have sustained or 
may sustain bodily injury or property damage caused by [sudden and/
or nonsudden] accidental occurrences arising from operation of the 
facility(ies) covered by this guarantee.

Recitals

    1. Guarantor meets or exceeds the financial test criteria and 
agrees to comply with the reporting requirements for guarantors as 
specified in 40 CFR 261.147(g).
    2. [Owner or operator] owns or operates the following 
facility(ies) covered by this guarantee: [List for each facility: 
EPA identification number (if any issued), name, and address; and if 
guarantor is incorporated outside the United States list the name 
and address of the guarantor's registered agent in each State.] This 
corporate guarantee satisfies RCRA third-party liability 
requirements for [insert ``sudden'' or ``nonsudden'' or ``both 
sudden and nonsudden''] accidental occurrences in above-named owner 
or operator facilities for coverage in the amount of [insert dollar 
amount] for each occurrence and [insert dollar amount] annual 
aggregate.
    3. For value received from [owner or operator], guarantor 
guarantees to any and all third parties who have sustained or may 
sustain bodily injury or property damage caused by [sudden and/or 
nonsudden] accidental occurrences arising from operations of the 
facility(ies) covered by this guarantee that in the event that 
[owner or operator] fails to satisfy a judgment or award based on a 
determination of liability for bodily injury or property damage to 
third parties caused by [sudden and/or nonsudden] accidental 
occurrences, arising from the operation of the above-named 
facilities, or fails to pay an amount agreed to in settlement of a 
claim arising from or alleged to arise from such injury or damage, 
the guarantor will satisfy such judgment(s), award(s) or settlement 
agreement(s) up to the limits of coverage identified above.
    4. Such obligation does not apply to any of the following:
    (a) Bodily injury or property damage for which [insert owner or 
operator] is obligated to pay damages by reason of the assumption of 
liability in a contract or agreement. This exclusion does not apply 
to liability for damages that [insert owner or operator] would be 
obligated to pay in the absence of the contract or agreement.
    (b) Any obligation of [insert owner or operator] under a 
workers' compensation, disability benefits, or unemployment 
compensation law or any similar law.
    (c) Bodily injury to:
    (1) An employee of [insert owner or operator] arising from, and 
in the course of, employment by [insert owner or operator]; or
    (2) The spouse, child, parent, brother, or sister of that 
employee as a consequence of, or arising from, and in the course of 
employment by [insert owner or operator]. This exclusion applies:
    (A) Whether [insert owner or operator] may be liable as an 
employer or in any other capacity; and
    (B) To any obligation to share damages with or repay another 
person who must pay damages because of the injury to persons 
identified in paragraphs (1) and (2).
    (d) Bodily injury or property damage arising out of the 
ownership, maintenance, use, or entrustment to others of any 
aircraft, motor vehicle or watercraft.

[[Page 64781]]

    (e) Property damage to:
    (1) Any property owned, rented, or occupied by [insert owner or 
operator];
    (2) Premises that are sold, given away or abandoned by [insert 
owner or operator] if the property damage arises out of any part of 
those premises;
    (3) Property loaned to [insert owner or operator];
    (4) Personal property in the care, custody or control of [insert 
owner or operator];
    (5) That particular part of real property on which [insert owner 
or operator] or any contractors or subcontractors working directly 
or indirectly on behalf of [insert owner or operator] are performing 
operations, if the property damage arises out of these operations.
    5. Guarantor agrees that if, at the end of any fiscal year 
before termination of this guarantee, the guarantor fails to meet 
the financial test criteria, guarantor shall send within 90 days, by 
certified mail, notice to the EPA Regional Administrator[s] for the 
Region[s] in which the facility[ies] is[are] located and to [owner 
or operator] that he intends to provide alternate liability coverage 
as specified in 40 CFR 261.147, as applicable, in the name of [owner 
or operator]. Within 120 days after the end of such fiscal year, the 
guarantor shall establish such liability coverage unless [owner or 
operator] has done so.
    6. The guarantor agrees to notify the EPA Regional Administrator 
by certified mail of a voluntary or involuntary proceeding under 
title 11 (Bankruptcy), U.S. Code, naming guarantor as debtor, within 
10 days after commencement of the proceeding. Guarantor agrees that 
within 30 days after being notified by an EPA Regional Administrator 
of a determination that guarantor no longer meets the financial test 
criteria or that he is disallowed from continuing as a guarantor, he 
shall establish alternate liability coverage as specified in 40 CFR 
261.147 in the name of [owner or operator], unless [owner or 
operator] has done so.
    7. Guarantor reserves the right to modify this agreement to take 
into account amendment or modification of the liability requirements 
set by 40 CFR 261.147, provided that such modification shall become 
effective only if a Regional Administrator does not disapprove the 
modification within 30 days of receipt of notification of the 
modification.
    8. Guarantor agrees to remain bound under this guarantee for so 
long as [owner or operator] must comply with the applicable 
requirements of 40 CFR 261.147 for the above-listed facility(ies), 
except as provided in paragraph 10 of this agreement.
    9. [Insert the following language if the guarantor is (a) a 
direct or higher-tier corporate parent, or (b) a firm whose parent 
corporation is also the parent corporation of the owner or 
operator]:
    10. Guarantor may terminate this guarantee by sending notice by 
certified mail to the EPA Regional Administrator(s) for the 
Region(s) in which the facility(ies) is(are) located and to [owner 
or operator], provided that this guarantee may not be terminated 
unless and until [the owner or operator] obtains, and the EPA 
Regional Administrator(s) approve(s), alternate liability coverage 
complying with 40 CFR 261.147.
    [Insert the following language if the guarantor is a firm 
qualifying as a guarantor due to its ``substantial business 
relationship'' with the owner or operator]:
    Guarantor may terminate this guarantee 120 days following 
receipt of notification, through certified mail, by the EPA Regional 
Administrator(s) for the Region(s) in which the facility(ies) 
is(are) located and by [the owner or operator].
    11. Guarantor hereby expressly waives notice of acceptance of 
this guarantee by any party.
    12. Guarantor agrees that this guarantee is in addition to and 
does not affect any other responsibility or liability of the 
guarantor with respect to the covered facilities.
    13. The Guarantor shall satisfy a third-party liability claim 
only on receipt of one of the following documents:
    (a) Certification from the Principal and the third-party 
claimant(s) that the liability claim should be paid. The 
certification must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Certification of Valid Claim

    The undersigned, as parties [insert Principal] and [insert name 
and address of third-party claimant(s)], hereby certify that the 
claim of bodily injury and/or property damage caused by a [sudden or 
nonsudden] accidental occurrence arising from operating 
[Principal's] facility should be paid in the amount of $ .
[Signatures]-----------------------------------------------------------
Principal--------------------------------------------------------------
(Notary) Date----------------------------------------------------------
[Signatures]-----------------------------------------------------------
Claimant(s)------------------------------------------------------------
(Notary) Date----------------------------------------------------------
    (b) A valid final court order establishing a judgment against 
the Principal for bodily injury or property damage caused by sudden 
or nonsudden accidental occurrences arising from the operation of 
the Principal's facility or group of facilities.
    14. In the event of combination of this guarantee with another 
mechanism to meet liability requirements, this guarantee will be 
considered [insert ``primary'' or ``excess''] coverage.
    I hereby certify that the wording of the guarantee is identical 
to the wording specified in 40 CFR 261.151(g)(2) as such regulations 
were constituted on the date shown immediately below.
Effective date:--------------------------------------------------------
[Name of guarantor]----------------------------------------------------
[Authorized signature for guarantor]-----------------------------------
[Name of person signing]-----------------------------------------------
[Title of person signing]----------------------------------------------
Signature of witness or notary:----------------------------------------
    (h) A hazardous waste facility liability endorsement as required 
Sec.  261.147 must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Hazardous Secondary Material Reclamation/Intermediate Facility 
Liability Endorsement

    1. This endorsement certifies that the policy to which the 
endorsement is attached provides liability insurance covering bodily 
injury and property damage in connection with the insured's 
obligation to demonstrate financial responsibility under 40 CFR 
261.147. The coverage applies at [list EPA Identification Number (if 
any issued), name, and address for each facility] for [insert 
``sudden accidental occurrences,'' ``nonsudden accidental 
occurrences,'' or ``sudden and nonsudden accidental occurrences''; 
if coverage is for multiple facilities and the coverage is different 
for different facilities, indicate which facilities are insured for 
sudden accidental occurrences, which are insured for nonsudden 
accidental occurrences, and which are insured for both]. The limits 
of liability are [insert the dollar amount of the ``each 
occurrence'' and ``annual aggregate'' limits of the Insurer's 
liability], exclusive of legal defense costs.
    2. The insurance afforded with respect to such occurrences is 
subject to all of the terms and conditions of the policy; provided, 
however, that any provisions of the policy inconsistent with 
subsections (a) through (e) of this Paragraph 2 are hereby amended 
to conform with subsections (a) through (e):
    (a) Bankruptcy or insolvency of the insured shall not relieve 
the Insurer of its obligations under the policy to which this 
endorsement is attached.
    (b) The Insurer is liable for the payment of amounts within any 
deductible applicable to the policy, with a right of reimbursement 
by the insured for any such payment made by the Insurer. This 
provision does not apply with respect to that amount of any 
deductible for which coverage is demonstrated as specified in 40 CFR 
261.147(f).
    (c) Whenever requested by a Regional Administrator of the U.S. 
Environmental Protection Agency (EPA), the Insurer agrees to furnish 
to the Regional Administrator a signed duplicate original of the 
policy and all endorsements.
    (d) Cancellation of this endorsement, whether by the Insurer, 
the insured, a parent corporation providing insurance coverage for 
its subsidiary, or by a firm having an insurable interest in and 
obtaining liability insurance on behalf of the owner or operator of 
the facility, will be effective only upon written notice and only 
after the expiration of 60 days after a copy of such written notice 
is received by the Regional Administrator(s) of the EPA Region(s) in 
which the facility(ies) is(are) located.
    (e) Any other termination of this endorsement will be effective 
only upon written notice and only after the expiration of thirty 
(30) days after a copy of such written notice is received by the 
Regional Administrator(s) of the EPA Region(s) in which the 
facility(ies) is (are) located.
    Attached to and forming part of policy No. ---- issued by [name 
of Insurer], herein called the Insurer, of [address of Insurer] to 
[name of insured] of [address] this ---------------- day of --------
--------, 19----. The effective date of said policy is ------------
---- day of ----------------, 19----.
    I hereby certify that the wording of this endorsement is 
identical to the wording specified in 40 CFR 261.151(h) as such

[[Page 64782]]

regulation was constituted on the date first above written, and that 
the Insurer is licensed to transact the business of insurance, or 
eligible to provide insurance as an excess or surplus lines insurer, 
in one or more States.
[Signature of Authorized Representative of Insurer]
[Type name]
[Title], Authorized Representative of [name of Insurer]
[Address of Representative]
    (i) A certificate of liability insurance as required in Sec.  
261.147 must be worded as follows, except that the instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Hazardous Secondary Material Reclamation/Intermediate Facility 
Certificate of Liability Insurance

    1. [Name of Insurer], (the ``Insurer''), of [address of Insurer] 
hereby certifies that it has issued liability insurance covering 
bodily injury and property damage to [name of insured], (the 
``insured''), of [address of insured] in connection with the 
insured's obligation to demonstrate financial responsibility under 
40 CFR parts 264, 265, and the financial assurance condition of 40 
CFR 261.4(a)(24)(vi)(F). The coverage applies at [list EPA 
Identification Number (if any issued), name, and address for each 
facility] for [insert ``sudden accidental occurrences,'' ``nonsudden 
accidental occurrences,'' or ``sudden and nonsudden accidental 
occurrences''; if coverage is for multiple facilities and the 
coverage is different for different facilities, indicate which 
facilities are insured for sudden accidental occurrences, which are 
insured for nonsudden accidental occurrences, and which are insured 
for both]. The limits of liability are [insert the dollar amount of 
the ``each occurrence'' and ``annual aggregate'' limits of the 
Insurer's liability], exclusive of legal defense costs. The coverage 
is provided under policy number, issued on [date]. The effective 
date of said policy is [date].
    2. The Insurer further certifies the following with respect to 
the insurance described in Paragraph 1:
    (a) Bankruptcy or insolvency of the insured shall not relieve 
the Insurer of its obligations under the policy.
    (b) The Insurer is liable for the payment of amounts within any 
deductible applicable to the policy, with a right of reimbursement 
by the insured for any such payment made by the Insurer. This 
provision does not apply with respect to that amount of any 
deductible for which coverage is demonstrated as specified in 40 CFR 
261.147.
    (c) Whenever requested by a Regional Administrator of the U.S. 
Environmental Protection Agency (EPA), the Insurer agrees to furnish 
to the Regional Administrator a signed duplicate original of the 
policy and all endorsements.
    (d) Cancellation of the insurance, whether by the insurer, the 
insured, a parent corporation providing insurance coverage for its 
subsidiary, or by a firm having an insurable interest in and 
obtaining liability insurance on behalf of the owner or operator of 
the hazardous waste management facility, will be effective only upon 
written notice and only after the expiration of 60 days after a copy 
of such written notice is received by the Regional Administrator(s) 
of the EPA Region(s) in which the facility(ies) is(are) located.
    (e) Any other termination of the insurance will be effective 
only upon written notice and only after the expiration of thirty 
(30) days after a copy of such written notice is received by the 
Regional Administrator(s) of the EPA Region(s) in which the 
facility(ies) is (are) located.

I hereby certify that the wording of this instrument is identical to 
the wording specified in 40 CFR 261.151(i) as such regulation was 
constituted on the date first above written, and that the Insurer is 
licensed to transact the business of insurance, or eligible to 
provide insurance as an excess or surplus lines insurer, in one or 
more States.
[Signature of authorized representative of Insurer]
[Type name]
[Title], Authorized Representative of [name of Insurer]
[Address of Representative]
    (j) A letter of credit, as specified in Sec.  261.147(h) of this 
chapter, must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Irrevocable Standby Letter of Credit

Name and Address of Issuing Institution--------------------------------
Regional Administrator(s)----------------------------------------------
Region(s)--------------------------------------------------------------
U.S. Environmental Protection Agency-----------------------------------
    Dear Sir or Madam: We hereby establish our Irrevocable Standby 
Letter of Credit No. ------------- in the favor of [''any and all 
third-party liability claimants'' or insert name of trustee of the 
standby trust fund], at the request and for the account of [owner or 
operator's name and address] for third-party liability awards or 
settlements up to [in words] U.S. dollars $------------- per 
occurrence and the annual aggregate amount of [in words] U.S. 
dollars $----, for sudden accidental occurrences and/or for third-
party liability awards or settlements up to the amount of [in words] 
U.S. dollars $------------- per occurrence, and the annual aggregate 
amount of [in words] U.S. dollars $-------------, for nonsudden 
accidental occurrences available upon presentation of a sight draft 
bearing reference to this letter of credit No. -------------, and 
[insert the following language if the letter of credit is being used 
without a standby trust fund: (1) a signed certificate reading as 
follows:

Certificate of Valid Claim

    The undersigned, as parties [insert principal] and [insert name 
and address of third party claimant(s)], hereby certify that the 
claim of bodily injury and/or property damage caused by a [sudden or 
nonsudden] accidental occurrence arising from operations of 
[principal's] facility should be paid in the amount of $[ ]. We 
hereby certify that the claim does not apply to any of the 
following:
    (a) Bodily injury or property damage for which [insert 
principal] is obligated to pay damages by reason of the assumption 
of liability in a contract or agreement. This exclusion does not 
apply to liability for damages that [insert principal] would be 
obligated to pay in the absence of the contract or agreement.
    (b) Any obligation of [insert principal] under a workers' 
compensation, disability benefits, or unemployment compensation law 
or any similar law.
    (c) Bodily injury to:
    (1) An employee of [insert principal] arising from, and in the 
course of, employment by [insert principal]; or
    (2) The spouse, child, parent, brother or sister of that 
employee as a consequence of, or arising from, and in the course of 
employment by [insert principal].
    This exclusion applies:
    (A) Whether [insert principal] may be liable as an employer or 
in any other capacity; and
    (B) To any obligation to share damages with or repay another 
person who must pay damages because of the injury to persons 
identified in paragraphs (1) and (2).
    (d) Bodily injury or property damage arising out of the 
ownership, maintenance, use, or entrustment to others of any 
aircraft, motor vehicle or watercraft.
    (e) Property damage to:
    (1) Any property owned, rented, or occupied by [insert 
principal];
    (2) Premises that are sold, given away or abandoned by [insert 
principal] if the property damage arises out of any part of those 
premises;
    (3) Property loaned to [insert principal];
    (4) Personal property in the care, custody or control of [insert 
principal];
    (5) That particular part of real property on which [insert 
principal] or any contractors or subcontractors working directly or 
indirectly on behalf of [insert principal] are performing 
operations, if the property damage arises out of these operations.

[Signatures]-----------------------------------------------------------
Grantor----------------------------------------------------------------
[Signatures]-----------------------------------------------------------
Claimant(s)------------------------------------------------------------

or (2) a valid final court order establishing a judgment against the 
Grantor for bodily injury or property damage caused by sudden or 
nonsudden accidental occurrences arising from the operation of the 
Grantor's facility or group of facilities.]
    This letter of credit is effective as of [date] and shall expire 
on [date at least one year later], but such expiration date shall be 
automatically extended for a period of [at least one year] on [date 
and on each successive expiration date, unless, at least 120 days 
before the current expiration date, we notify you, the USEPA 
Regional Administrator for Region [Region], and [owner's or 
operator's name] by certified mail that we have decided not to 
extend this letter of credit beyond the current expiration date.
    Whenever this letter of credit is drawn on under and in 
compliance with the terms of this credit, we shall duly honor such 
draft upon presentation to us.
    [Insert the following language if a standby trust fund is not 
being used: ``In the event that this letter of credit is used in 
combination with another mechanism for

[[Page 64783]]

liability coverage, this letter of credit shall be considered 
[insert ``primary'' or ``excess'' coverage].''
    We certify that the wording of this letter of credit is 
identical to the wording specified in 40 CFR 261.151(j) as such 
regulations were constituted on the date shown immediately below. 
[Signature(s) and title(s) of official(s) of issuing institution] 
[Date].
    This credit is subject to [insert ``the most recent edition of 
the Uniform Customs and Practice for Documentary Credits, published 
and copyrighted by the International Chamber of Commerce,'' or ``the 
Uniform Commercial Code''].
    (k) A surety bond, as specified in Sec. 261.147(i) of this 
chapter, must be worded as follows: except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Payment Bond

Surety Bond No. [Insert number]
    Parties [Insert name and address of owner or operator], 
Principal, incorporated in [Insert State of incorporation] of 
[Insert city and State of principal place of business] and [Insert 
name and address of surety company(ies)], Surety Company(ies), of 
[Insert surety(ies) place of business].
    EPA Identification Number (if any issued), name, and address for 
each facility guaranteed by this bond: ----

-----------------------------------------------------------------------
-----------------------------------------------------------------------

Nonsudden

Sudden accidental

accidental

 occurrences

occurrences

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Penal Sum Per Occurrence..............  [insert amount]....................  [insert amount]
Annual Aggregate......................  [insert amount]....................  [insert amount]
 

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    Purpose: This is an agreement between the Surety(ies) and the 
Principal under which the Surety(ies), its(their) successors and 
assignees, agree to be responsible for the payment of claims against 
the Principal for bodily injury and/or property damage to third 
parties caused by [``sudden'' and/or ``nonsudden''] accidental 
occurrences arising from operations of the facility or group of 
facilities in the sums prescribed herein; subject to the governing 
provisions and the following conditions.
    Governing Provisions:
    (1) Section 3004 of the Resource Conservation and Recovery Act 
of 1976, as amended.
    (2) Rules and regulations of the U.S. Environmental Protection 
Agency (EPA), particularly 40 CFR parts 264, 265, and Subpart H of 
40 CFR part 261 (if applicable).
    (3) Rules and regulations of the governing State agency (if 
applicable) [insert citation].
    Conditions:
    (1) The Principal is subject to the applicable governing 
provisions that require the Principal to have and maintain liability 
coverage for bodily injury and property damage to third parties 
caused by [``sudden'' and/or ``nonsudden''] accidental occurrences 
arising from operations of the facility or group of facilities. Such 
obligation does not apply to any of the following:
    (a) Bodily injury or property damage for which [insert 
Principal] is obligated to pay damages by reason of the assumption 
of liability in a contract or agreement. This exclusion does not 
apply to liability for damages that [insert Principal] would be 
obligated to pay in the absence of the contract or agreement.
    (b) Any obligation of [insert Principal] under a workers' 
compensation, disability benefits, or unemployment compensation law 
or similar law.
    (c) Bodily injury to:
    (1) An employee of [insert Principal] arising from, and in the 
course of, employment by [insert principal]; or
    (2) The spouse, child, parent, brother or sister of that 
employee as a consequence of, or arising from, and in the course of 
employment by [insert Principal]. This exclusion applies:
    (A) Whether [insert Principal] may be liable as an employer or 
in any other capacity; and
    (B) To any obligation to share damages with or repay another 
person who must pay damages because of the injury to persons 
identified in paragraphs (1) and (2).
    (d) Bodily injury or property damage arising out of the 
ownership, maintenance, use, or entrustment to others of any 
aircraft, motor vehicle or watercraft.
    (e) Property damage to:
    (1) Any property owned, rented, or occupied by [insert 
Principal];
    (2) Premises that are sold, given away or abandoned by [insert 
Principal] if the property damage arises out of any part of those 
premises;
    (3) Property loaned to [insert Principal];
    (4) Personal property in the care, custody or control of [insert 
Principal];
    (5) That particular part of real property on which [insert 
Principal] or any contractors or subcontractors working directly or 
indirectly on behalf of [insert Principal] are performing 
operations, if the property damage arises out of these operations.
    (2) This bond assures that the Principal will satisfy valid 
third party liability claims, as described in condition 1.
    (3) If the Principal fails to satisfy a valid third party 
liability claim, as described above, the Surety(ies) becomes liable 
on this bond obligation.
    (4) The Surety(ies) shall satisfy a third party liability claim 
only upon the receipt of one of the following documents:
    (a) Certification from the Principal and the third party 
claimant(s) that the liability claim should be paid. The 
certification must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Certification of Valid Claim

    The undersigned, as parties [insert name of Principal] and 
[insert name and address of third party claimant(s)], hereby certify 
that the claim of bodily injury and/or property damage caused by a 
[sudden or nonsudden] accidental occurrence arising from operating 
[Principal's] facility should be paid in the amount of $[ ].

    [Signature]
    Principal
    [Notary] Date
    [Signature(s)]
    Claimant(s)

    [Notary] Date
or (b) A valid final court order establishing a judgment against the 
Principal for bodily injury or property damage caused by sudden or 
nonsudden accidental occurrences arising from the operation of the 
Principal's facility or group of facilities.
    (5) In the event of combination of this bond with another 
mechanism for liability coverage, this bond will be considered 
[insert ``primary'' or ``excess''] coverage.
    (6) The liability of the Surety(ies) shall not be discharged by 
any payment or succession of payments hereunder, unless and until 
such payment or payments shall amount in the aggregate to the penal 
sum of the bond. In no event shall the obligation of the Surety(ies) 
hereunder exceed the amount of said annual aggregate penal sum, 
provided that the Surety(ies) furnish(es) notice to the Regional 
Administrator forthwith of all claims filed and payments made by the 
Surety(ies) under this bond.
    (7) The Surety(ies) may cancel the bond by sending notice of 
cancellation by certified mail to the Principal and the USEPA 
Regional Administrator for Region [Region ], provided, however, that 
cancellation shall not occur during the 120 days beginning on the 
date of receipt of the notice of cancellation by the Principal and 
the Regional Administrator, as evidenced by the return receipt.
    (8) The Principal may terminate this bond by sending written 
notice to the Surety(ies) and to the EPA Regional Administrator(s) 
of the EPA Region(s) in which the bonded facility(ies) is (are) 
located.
    (9) The Surety(ies) hereby waive(s) notification of amendments 
to applicable laws, statutes, rules and regulations and agree(s) 
that no such amendment shall in any way alleviate its (their) 
obligation on this bond.
    (10) This bond is effective from [insert date] (12:01 a.m., 
standard time, at the address of the Principal as stated herein) and 
shall continue in force until terminated as described above.
    In Witness Whereof, the Principal and Surety(ies) have executed 
this Bond and have affixed their seals on the date set forth above.
    The persons whose signatures appear below hereby certify that 
they are authorized

[[Page 64784]]

to execute this surety bond on behalf of the Principal and 
Surety(ies) and that the wording of this surety bond is identical to 
the wording specified in 40 CFR 261.151(k), as such regulations were 
constituted on the date this bond was executed.

PRINCIPAL

[Signature(s)]
[Name(s)]
[Title(s)]
[Corporate Seal]

CORPORATE SURETY[IES]

[Name and address]
State of incorporation:------------------------------------------------
Liability Limit: $-----------------------------------------------------
[Signature(s)]
[Name(s) and title(s)]
[Corporate seal]
[For every co-surety, provide signature(s), corporate seal, and 
other information in the same manner as for Surety above.]
Bond premium: $--------------------------------------------------------
    (l)(1) A trust agreement, as specified in Sec.  261.147(j) of 
this chapter, must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Trust Agreement

    Trust Agreement, the ``Agreement,'' entered into as of [date] by 
and between [name of the owner or operator] a [name of State] 
[insert ``corporation,'' ``partnership,'' ``association,'' or 
``proprietorship''], the ``Grantor,'' and [name of corporate 
trustee], [insert, ``incorporated in the State of --------'' or ``a 
national bank''], the ``trustee.''
    Whereas, the United States Environmental Protection Agency, 
``EPA,'' an agency of the United States Government, has established 
certain regulations applicable to the Grantor, requiring that an 
owner or operator must demonstrate financial responsibility for 
bodily injury and property damage to third parties caused by sudden 
accidental and/or nonsudden accidental occurrences arising from 
operations of the facility or group of facilities.
    Whereas, the Grantor has elected to establish a trust to assure 
all or part of such financial responsibility for the facilities 
identified herein.
    Whereas, the Grantor, acting through its duly authorized 
officers, has selected the Trustee to be the trustee under this 
agreement, and the Trustee is willing to act as trustee.
    Now, therefore, the Grantor and the Trustee agree as follows:
    Section 1. Definitions. As used in this Agreement:
    (a) The term ``Grantor'' means the owner or operator who enters 
into this Agreement and any successors or assigns of the Grantor.
    (b) The term ``Trustee'' means the Trustee who enters into this 
Agreement and any successor Trustee.
    Section 2. Identification of Facilities. This agreement pertains 
to the facilities identified on attached schedule A [on schedule A, 
for each facility list the EPA Identification Number (if any 
issued), name, and address of the facility(ies) and the amount of 
liability coverage, or portions thereof, if more than one instrument 
affords combined coverage as demonstrated by this Agreement].
    Section 3. Establishment of Fund. The Grantor and the Trustee 
hereby establish a trust fund, hereinafter the ``Fund,'' for the 
benefit of any and all third parties injured or damaged by [sudden 
and/or nonsudden] accidental occurrences arising from operation of 
the facility(ies) covered by this guarantee, in the amounts of ----
-----[up to $1 million] per occurrence and [up to $2 million] annual 
aggregate for sudden accidental occurrences and -------- [up to $3 
million] per occurrence and ---------[up to $6 million] annual 
aggregate for nonsudden occurrences, except that the Fund is not 
established for the benefit of third parties for the following:
    (a) Bodily injury or property damage for which [insert Grantor] 
is obligated to pay damages by reason of the assumption of liability 
in a contract or agreement. This exclusion does not apply to 
liability for damages that [insert Grantor] would be obligated to 
pay in the absence of the contract or agreement.
    (b) Any obligation of [insert Grantor] under a workers' 
compensation, disability benefits, or unemployment compensation law 
or any similar law.
    (c) Bodily injury to:
    (1) An employee of [insert Grantor] arising from, and in the 
course of, employment by [insert Grantor]; or
    (2) The spouse, child, parent, brother or sister of that 
employee as a consequence of, or arising from, and in the course of 
employment by [insert Grantor]. This exclusion applies:
    (A) Whether [insert Grantor] may be liable as an employer or in 
any other capacity; and
    (B) To any obligation to share damages with or repay another 
person who must pay damages because of the injury to persons 
identified in paragraphs (1) and (2).
    (d) Bodily injury or property damage arising out of the 
ownership, maintenance, use, or entrustment to others of any 
aircraft, motor vehicle or watercraft.
    (e) Property damage to:
    (1) Any property owned, rented, or occupied by [insert Grantor];
    (2) Premises that are sold, given away or abandoned by [insert 
Grantor] if the property damage arises out of any part of those 
premises;
    (3) Property loaned to [insert Grantor];
    (4) Personal property in the care, custody or control of [insert 
Grantor];
    (5) That particular part of real property on which [insert 
Grantor] or any contractors or subcontractors working directly or 
indirectly on behalf of [insert Grantor] are performing operations, 
if the property damage arises out of these operations.
    In the event of combination with another mechanism for liability 
coverage, the Fund shall be considered [insert ``primary'' or 
``excess''] coverage.
    The Fund is established initially as consisting of the property, 
which is acceptable to the Trustee, described in Schedule B attached 
hereto. Such property and any other property subsequently 
transferred to the Trustee is referred to as the Fund, together with 
all earnings and profits thereon, less any payments or distributions 
made by the Trustee pursuant to this Agreement. The Fund shall be 
held by the Trustee, IN TRUST, as hereinafter provided. The Trustee 
shall not be responsible nor shall it undertake any responsibility 
for the amount or adequacy of, nor any duty to collect from the 
Grantor, any payments necessary to discharge any liabilities of the 
Grantor established by EPA.
    Section 4. Payment for Bodily Injury or Property Damage. The 
Trustee shall satisfy a third party liability claim by making 
payments from the Fund only upon receipt of one of the following 
documents;
    (a) Certification from the Grantor and the third party 
claimant(s) that the liability claim should be paid. The 
certification must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Certification of Valid Claim

    The undersigned, as parties [insert Grantor] and [insert name 
and address of third party claimant(s)], hereby certify that the 
claim of bodily injury and/or property damage caused by a [sudden or 
nonsudden] accidental occurrence arising from operating [Grantor's] 
facility or group of facilities should be paid in the amount of $[ 
].

[Signatures]

Grantor

[Signatures]

Claimant(s)

    (b) A valid final court order establishing a judgment against 
the Grantor for bodily injury or property damage caused by sudden or 
nonsudden accidental occurrences arising from the operation of the 
Grantor's facility or group of facilities.
    Section 5. Payments Comprising the Fund. Payments made to the 
Trustee for the Fund shall consist of cash or securities acceptable 
to the Trustee.
    Section 6. Trustee Management. The Trustee shall invest and 
reinvest the principal and income, in accordance with general 
investment policies and guidelines which the Grantor may communicate 
in writing to the Trustee from time to time, subject, however, to 
the provisions of this section. In investing, reinvesting, 
exchanging, selling, and managing the Fund, the Trustee shall 
discharge his duties with respect to the trust fund solely in the 
interest of the beneficiary and with the care, skill, prudence, and 
diligence under the circumstance then prevailing which persons of 
prudence, acting in a like capacity and familiar with such matters, 
would use in the conduct of an enterprise of a like character and 
with like aims; except that:
    (i) Securities or other obligations of the Grantor, or any other 
owner or operator of the facilities, or any of their affiliates as 
defined in the Investment Company Act of 1940, as amended, 15 U.S.C. 
80a-2.(a), shall not be acquired or held unless they are securities 
or other obligations of the Federal or a State government;
    (ii) The Trustee is authorized to invest the Fund in time or 
demand deposits of the Trustee, to the extent insured by an agency 
of the Federal or State government; and

[[Page 64785]]

    (iii) The Trustee is authorized to hold cash awaiting investment 
or distribution uninvested for a reasonable time and without 
liability for the payment of interest thereon. Section 7. 
Commingling and Investment. The Trustee is expressly authorized in 
its discretion:
    (a) To transfer from time to time any or all of the assets of 
the Fund to any common commingled, or collective trust fund created 
by the Trustee in which the fund is eligible to participate, subject 
to all of the provisions thereof, to be commingled with the assets 
of other trusts participating therein; and
    (b) To purchase shares in any investment company registered 
under the Investment Company Act of 1940, 15 U.S.C. 81a-1 et seq., 
including one which may be created, managed, underwritten, or to 
which investment advice is rendered or the shares of which are sold 
by the Trustee. The Trustee may vote such shares in its discretion.
    Section 8. Express Powers of Trustee. Without in any way 
limiting the powers and discretions conferred upon the Trustee by 
the other provisions of this Agreement or by law, the Trustee is 
expressly authorized and empowered:
    (a) To sell, exchange, convey, transfer, or otherwise dispose of 
any property held by it, by public or private sale. No person 
dealing with the Trustee shall be bound to see to the application of 
the purchase money or to inquire into the validity or expediency of 
any such sale or other disposition;
    (b) To make, execute, acknowledge, and deliver any and all 
documents of transfer and conveyance and any and all other 
instruments that may be necessary or appropriate to carry out the 
powers herein granted;
    (c) To register any securities held in the Fund in its own name 
or in the name of a nominee and to hold any security in bearer form 
or in book entry, or to combine certificates representing such 
securities with certificates of the same issue held by the Trustee 
in other fiduciary capacities, or to deposit or arrange for the 
deposit of such securities in a qualified central depository even 
though, when so deposited, such securities may be merged and held in 
bulk in the name of the nominee of such depository with other 
securities deposited therein by another person, or to deposit or 
arrange for the deposit of any securities issued by the United 
States Government, or any agency or instrumentality thereof, with a 
Federal Reserve bank, but the books and records of the Trustee shall 
at all times show that all such securities are part of the Fund;
    (d) To deposit any cash in the Fund in interest-bearing accounts 
maintained or savings certificates issued by the Trustee, in its 
separate corporate capacity, or in any other banking institution 
affiliated with the Trustee, to the extent insured by an agency of 
the Federal or State government; and
    (e) To compromise or otherwise adjust all claims in favor of or 
against the Fund.
    Section 9. Taxes and Expenses. All taxes of any kind that may be 
assessed or levied against or in respect of the Fund and all 
brokerage commissions incurred by the Fund shall be paid from the 
Fund. All other expenses incurred by the Trustee in connection with 
the administration of this Trust, including fees for legal services 
rendered to the Trustee, the compensation of the Trustee to the 
extent not paid directly by the Grantor, and all other proper 
charges and disbursements of the Trustee shall be paid from the 
Fund.
    Section 10. Annual Valuations. The Trustee shall annually, at 
least 30 days prior to the anniversary date of establishment of the 
Fund, furnish to the Grantor and to the appropriate EPA Regional 
Administrator a statement confirming the value of the Trust. Any 
securities in the Fund shall be valued at market value as of no more 
than 60 days prior to the anniversary date of establishment of the 
Fund. The failure of the Grantor to object in writing to the Trustee 
within 90 days after the statement has been furnished to the Grantor 
and the EPA Regional Administrator shall constitute a conclusively 
binding assent by the Grantor barring the Grantor from asserting any 
claim or liability against the Trustee with respect to matters 
disclosed in the statement.
    Section 11. Advice of Counsel. The Trustee may from time to time 
consult with counsel, who may be counsel to the Grantor with respect 
to any question arising as to the construction of this Agreement or 
any action to be taken hereunder. The Trustee shall be fully 
protected, to the extent permitted by law, in acting upon the advice 
of counsel.
    Section 12. Trustee Compensation. The Trustee shall be entitled 
to reasonable compensation for its services as agreed upon in 
writing from time to time with the Grantor.
    Section 13. Successor Trustee. The Trustee may resign or the 
Grantor may replace the Trustee, but such resignation or replacement 
shall not be effective until the Grantor has appointed a successor 
trustee and this successor accepts the appointment. The successor 
trustee shall have the same powers and duties as those conferred 
upon the Trustee hereunder. Upon the successor trustee's acceptance 
of the appointment, the Trustee shall assign, transfer, and pay over 
to the successor trustee the funds and properties then constituting 
the Fund. If for any reason the Grantor cannot or does not act in 
the event of the resignation of the Trustee, the Trustee may apply 
to a court of competent jurisdiction for the appointment of a 
successor trustee or for instructions. The successor trustee shall 
specify the date on which it assumes administration of the trust in 
a writing sent to the Grantor, the EPA Regional Administrator, and 
the present Trustee by certified mail 10 days before such change 
becomes effective. Any expenses incurred by the Trustee as a result 
of any of the acts contemplated by this section shall be paid as 
provided in Section 9.
    Section 14. Instructions to the Trustee. All orders, requests, 
and instructions by the Grantor to the Trustee shall be in writing, 
signed by such persons as are designated in the attached Exhibit A 
or such other designees as the Grantor may designate by amendments 
to Exhibit A. The Trustee shall be fully protected in acting without 
inquiry in accordance with the Grantor's orders, requests, and 
instructions. All orders, requests, and instructions by the EPA 
Regional Administrator to the Trustee shall be in writing, signed by 
the EPA Regional Administrators of the Regions in which the 
facilities are located, or their designees, and the Trustee shall 
act and shall be fully protected in acting in accordance with such 
orders, requests, and instructions. The Trustee shall have the right 
to assume, in the absence of written notice to the contrary, that no 
event constituting a change or a termination of the authority of any 
person to act on behalf of the Grantor or EPA hereunder has 
occurred. The Trustee shall have no duty to act in the absence of 
such orders, requests, and instructions from the Grantor and/or EPA, 
except as provided for herein.
    Section 15. Notice of Nonpayment. If a payment for bodily injury 
or property damage is made under Section 4 of this trust, the 
Trustee shall notify the Grantor of such payment and the amount(s) 
thereof within five (5) working days. The Grantor shall, on or 
before the anniversary date of the establishment of the Fund 
following such notice, either make payments to the Trustee in 
amounts sufficient to cause the trust to return to its value 
immediately prior to the payment of claims under Section 4, or shall 
provide written proof to the Trustee that other financial assurance 
for liability coverage has been obtained equaling the amount 
necessary to return the trust to its value prior to the payment of 
claims. If the Grantor does not either make payments to the Trustee 
or provide the Trustee with such proof, the Trustee shall within 10 
working days after the anniversary date of the establishment of the 
Fund provide a written notice of nonpayment to the EPA Regional 
Administrator.
    Section 16. Amendment of Agreement. This Agreement may be 
amended by an instrument in writing executed by the Grantor, the 
Trustee, and the appropriate EPA Regional Administrator, or by the 
Trustee and the appropriate EPA Regional Administrator if the 
Grantor ceases to exist.
    Section 17. Irrevocability and Termination. Subject to the right 
of the parties to amend this Agreement as provided in Section 16, 
this Trust shall be irrevocable and shall continue until terminated 
at the written agreement of the Grantor, the Trustee, and the EPA 
Regional Administrator, or by the Trustee and the EPA Regional 
Administrator, if the Grantor ceases to exist. Upon termination of 
the Trust, all remaining trust property, less final trust 
administration expenses, shall be delivered to the Grantor.
    The Regional Administrator will agree to termination of the 
Trust when the owner or operator substitutes alternate financial 
assurance as specified in this section.
    Section 18. Immunity and Indemnification. The Trustee shall not 
incur personal liability of any nature in connection with any act or 
omission, made in good faith, in the administration of this Trust, 
or in carrying out any directions by the Grantor or the EPA Regional 
Administrator issued in accordance with this Agreement. The Trustee 
shall be indemnified and saved harmless by the Grantor or from the 
Trust Fund, or both, from and against any personal liability to 
which the Trustee may be subjected by reason of any act or conduct 
in its official capacity,

[[Page 64786]]

including all expenses reasonably incurred in its defense in the 
event the Grantor fails to provide such defense.
    Section 19. Choice of Law. This Agreement shall be administered, 
construed, and enforced according to the laws of the State of [enter 
name of State].
    Section 20. Interpretation. As used in this Agreement, words in 
the singular include the plural and words in the plural include the 
singular. The descriptive headings for each section of this 
Agreement shall not affect the interpretation or the legal efficacy 
of this Agreement.
    In Witness Whereof the parties have caused this Agreement to be 
executed by their respective officers duly authorized and their 
corporate seals to be hereunto affixed and attested as of the date 
first above written. The parties below certify that the wording of 
this Agreement is identical to the wording specified in 40 CFR 
261.151(l) as such regulations were constituted on the date first 
above written.

[Signature of Grantor]

[Title]

Attest:

[Title]

[Seal]

[Signature of Trustee]

Attest:

[Title]

[Seal]

    (2) The following is an example of the certification of 
acknowledgement which must accompany the trust agreement for a trust 
fund as specified in Sec. 261.147(j) of this chapter. State 
requirements may differ on the proper
State of---------------------------------------------------------------

County of--------------------------------------------------------------

    On this [date], before me personally came [owner or operator] to 
me known, who, being by me duly sworn, did depose and say that she/
he resides at [address], that she/he is [title] of [corporation], 
the corporation described in and which executed the above 
instrument; that she/he knows the seal of said corporation; that the 
seal affixed to such instrument is such corporate seal; that it was 
so affixed by order of the Board of Directors of said corporation, 
and that she/he signed her/ his name thereto by like order.

[Signature of Notary Public]

    (m)(1) A standby trust agreement, as specified in Sec.  
261.147(h) of this chapter, must be worded as follows, except that 
instructions in brackets are to be replaced with the relevant 
information and the brackets deleted:

Standby Trust Agreement

    Trust Agreement, the ``Agreement,'' entered into as of [date] by 
and between [name of the owner or operator] a [name of a State] 
[insert ``corporation,'' ``partnership,'' ``association,'' or 
``proprietorship''], the ``Grantor,'' and [name of corporate 
trustee], [insert, ``incorporated in the State of ----------------'' 
or ``a national bank''], the ``trustee.''
    Whereas the United States Environmental Protection Agency, 
``EPA,'' an agency of the United States Government, has established 
certain regulations applicable to the Grantor, requiring that an 
owner or operator must demonstrate financial responsibility for 
bodily injury and property damage to third parties caused by sudden 
accidental and/or nonsudden accidental occurrences arising from 
operations of the facility or group of facilities.
    Whereas, the Grantor has elected to establish a standby trust 
into which the proceeds from a letter of credit may be deposited to 
assure all or part of such financial responsibility for the 
facilities identified herein.
    Whereas, the Grantor, acting through its duly authorized 
officers, has selected the Trustee to be the trustee under this 
agreement, and the Trustee is willing to act as trustee.
    Now, therefore, the Grantor and the Trustee agree as follows:
    Section 1. Definitions. As used in this Agreement:
    (a) The term Grantor means the owner or operator who enters into 
this Agreement and any successors or assigns of the Grantor.
    (b) The term Trustee means the Trustee who enters into this 
Agreement and any successor Trustee.
    Section 2. Identification of Facilities. This Agreement pertains 
to the facilities identified on attached schedule A [on schedule A, 
for each facility list the EPA Identification Number (if any 
issued), name, and address of the facility(ies) and the amount of 
liability coverage, or portions thereof, if more than one instrument 
affords combined coverage as demonstrated by this Agreement].
    Section 3. Establishment of Fund. The Grantor and the Trustee 
hereby establish a standby trust fund, hereafter the ``Fund,'' for 
the benefit of any and all third parties injured or damaged by 
[sudden and/or nonsudden] accidental occurrences arising from 
operation of the facility(ies) covered by this guarantee, in the 
amounts of ---------[up to $1 million] per occurrence and ---------
[up to $2 million] annual aggregate for sudden accidental 
occurrences and ---------[up to $3 million] per occurrence and ----
-----[up to $6 million] annual aggregate for nonsudden occurrences, 
except that the Fund is not established for the benefit of third 
parties for the following:
    (a) Bodily injury or property damage for which [insert Grantor] 
is obligated to pay damages by reason of the assumption of liability 
in a contract or agreement. This exclusion does not apply to 
liability for damages that [insert Grantor] would be obligated to 
pay in the absence of the contract or agreement.
    (b) Any obligation of [insert Grantor] under a workers' 
compensation, disability benefits, or unemployment compensation law 
or any similar law.
    (c) Bodily injury to:
    (1) An employee of [insert Grantor] arising from, and in the 
course of, employment by [insert Grantor]; or
    (2) The spouse, child, parent, brother or sister of that 
employee as a consequence of, or arising from, and in the course of 
employment by [insert Grantor].
    This exclusion applies:
    (A) Whether [insert Grantor] may be liable as an employer or in 
any other capacity; and
    (B) To any obligation to share damages with or repay another 
person who must pay damages because of the injury to persons 
identified in paragraphs (1) and (2).
    (d) Bodily injury or property damage arising out of the 
ownership, maintenance, use, or entrustment to others of any 
aircraft, motor vehicle or watercraft.
    (e) Property damage to:
    (1) Any property owned, rented, or occupied by [insert Grantor];
    (2) Premises that are sold, given away or abandoned by [insert 
Grantor] if the property damage arises out of any part of those 
premises;
    (3) Property loaned by [insert Grantor];
    (4) Personal property in the care, custody or control of [insert 
Grantor];
    (5) That particular part of real property on which [insert 
Grantor] or any contractors or subcontractors working directly or 
indirectly on behalf of [insert Grantor] are performing operations, 
if the property damage arises out of these operations.
    In the event of combination with another mechanism for liability 
coverage, the Fund shall be considered [insert ``primary'' or 
``excess''] coverage.
    The Fund is established initially as consisting of the proceeds 
of the letter of credit deposited into the Fund. Such proceeds and 
any other property subsequently transferred to the Trustee is 
referred to as the Fund, together with all earnings and profits 
thereon, less any payments or distributions made by the Trustee 
pursuant to this Agreement. The Fund shall be held by the Trustee, 
IN TRUST, as hereinafter provided. The Trustee shall not be 
responsible nor shall it undertake any responsibility for the amount 
or adequacy of, nor any duty to collect from the Grantor, any 
payments necessary to discharge any liabilities of the Grantor 
established by EPA.
    Section 4. Payment for Bodily Injury or Property Damage. The 
Trustee shall satisfy a third party liability claim by drawing on 
the letter of credit described in Schedule B and by making payments 
from the Fund only upon receipt of one of the following documents:
    (a) Certification from the Grantor and the third party 
claimant(s) that the liability claim should be paid. The 
certification must be worded as follows, except that instructions in 
brackets are to be replaced with the relevant information and the 
brackets deleted:

Certification of Valid Claim

    The undersigned, as parties [insert Grantor] and [insert name 
and address of third party claimant(s)], hereby certify that the 
claim of bodily injury and/or property damage caused by a [sudden or 
nonsudden] accidental occurrence arising from operating [Grantor's] 
facility should be paid in the amount of $[ ]
[Signature]------------------------------------------------------------

Grantor----------------------------------------------------------------

[Signatures]-----------------------------------------------------------

Claimant(s)------------------------------------------------------------


[[Page 64787]]

-----------------------------------------------------------------------
    (b) A valid final court order establishing a judgment against 
the Grantor for bodily injury or property damage caused by sudden or 
nonsudden accidental occurrences arising from the operation of the 
Grantor's facility or group of facilities.
    Section 5. Payments Comprising the Fund. Payments made to the 
Trustee for the Fund shall consist of the proceeds from the letter 
of credit drawn upon by the Trustee in accordance with the 
requirements of 40 CFR 261.151(k) and Section 4 of this Agreement.
    Section 6. Trustee Management. The Trustee shall invest and 
reinvest the principal and income, in accordance with general 
investment policies and guidelines which the Grantor may communicate 
in writing to the Trustee from time to time, subject, however, to 
the provisions of this Section. In investing, reinvesting, 
exchanging, selling, and managing the Fund, the Trustee shall 
discharge his duties with respect to the trust fund solely in the 
interest of the beneficiary and with the care, skill, prudence, and 
diligence under the circumstances then prevailing which persons of 
prudence, acting in a like capacity and familiar with such matters, 
would use in the conduct of an enterprise of a like character and 
with like aims; except that:
    (i) Securities or other obligations of the Grantor, or any other 
owner or operator of the facilities, or any of their affiliates as 
defined in the Investment Company Act of 1940, as amended, 15 U.S.C. 
80a-2(a), shall not be acquired or held, unless they are securities 
or other obligations of the Federal or a State government;
    (ii) The Trustee is authorized to invest the Fund in time or 
demand deposits of the Trustee, to the extent insured by an agency 
of the Federal or a State government; and
    (iii) The Trustee is authorized to hold cash awaiting investment 
or distribution uninvested for a reasonable time and without 
liability for the payment of interest thereon.
    Section 7. Commingling and Investment. The Trustee is expressly 
authorized in its discretion:
    (a) To transfer from time to time any or all of the assets of 
the Fund to any common, commingled, or collective trust fund created 
by the Trustee in which the Fund is eligible to participate, subject 
to all of the provisions thereof, to be commingled with the assets 
of other trusts participating therein; and
    (b) To purchase shares in any investment company registered 
under the Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., 
including one which may be created, managed, underwritten, or to 
which investment advice is rendered or the shares of which are sold 
by the Trustee. The Trustee may vote such shares in its discretion.
    Section 8. Express Powers of Trustee. Without in any way 
limiting the powers and discretions conferred upon the Trustee by 
the other provisions of this Agreement or by law, the Trustee is 
expressly authorized and empowered:
    (a) To sell, exchange, convey, transfer, or otherwise dispose of 
any property held by it, by public or private sale. No person 
dealing with the Trustee shall be bound to see to the application of 
the purchase money or to inquire into the validity or expediency of 
any such sale or other disposition;
    (b) To make, execute, acknowledge, and deliver any and all 
documents of transfer and conveyance and any and all other 
instruments that may be necessary or appropriate to carry out the 
powers herein granted;
    (c) To register any securities held in the Fund in its own name 
or in the name of a nominee and to hold any security in bearer form 
or in book entry, or to combine certificates representing such 
securities with certificates of the same issue held by the Trustee 
in other fiduciary capacities, or to deposit or arrange for the 
deposit of such securities in a qualified central depositary even 
though, when so deposited, such securities may be merged and held in 
bulk in the name of the nominee of such depositary with other 
securities deposited therein by another person, or to deposit or 
arrange for the deposit of any securities issued by the United 
States Government, or any agency or instrumentality thereof, with a 
Federal Reserve Bank, but the books and records of the Trustee shall 
at all times show that all such securities are part of the Fund;
    (d) To deposit any cash in the Fund in interest-bearing accounts 
maintained or savings certificates issued by the Trustee, in its 
separate corporate capacity, or in any other banking institution 
affiliated with the Trustee, to the extent insured by an agency of 
the Federal or State government; and
    (e) To compromise or otherwise adjust all claims in favor of or 
against the Fund.
    Section 9. Taxes and Expenses. All taxes of any kind that may be 
assessed or levied against or in respect of the Fund and all 
brokerage commissions incurred by the Fund shall be paid from the 
Fund. All other expenses incurred by the Trustee in connection with 
the administration of this Trust, including fees for legal services 
rendered to the Trustee, the compensation of the Trustee to the 
extent not paid directly by the Grantor, and all other proper 
charges and disbursements to the Trustee shall be paid from the 
Fund.
    Section 10. Advice of Counsel. The Trustee may from time to time 
consult with counsel, who may be counsel to the Grantor, with 
respect to any question arising as to the construction of this 
Agreement or any action to be taken hereunder. The Trustee shall be 
fully protected, to the extent permitted by law, in acting upon the 
advice of counsel.
    Section 11. Trustee Compensation. The Trustee shall be entitled 
to reasonable compensation for its services as agreed upon in 
writing from time to time with the Grantor.
    Section 12. Successor Trustee. The Trustee may resign or the 
Grantor may replace the Trustee, but such resignation or replacement 
shall not be effective until the Grantor has appointed a successor 
trustee and this successor accepts the appointment. The successor 
trustee shall have the same powers and duties as those conferred 
upon the Trustee hereunder. Upon the successor trustee's acceptance 
of the appointment, the Trustee shall assign, transfer, and pay over 
to the successor trustee the funds and properties then constituting 
the Fund. If for any reason the Grantor cannot or does not act in 
the event of the resignation of the Trustee, the Trustee may apply 
to a court of competent jurisdiction for the appointment of a 
successor trustee or for instructions. The successor trustee shall 
specify the date on which it assumes administration of the trust in 
a writing sent to the Grantor, the EPA Regional Administrator and 
the present Trustee by certified mail 10 days before such change 
becomes effective. Any expenses incurred by the Trustee as a result 
of any of the acts contemplated by this Section shall be paid as 
provided in Section 9.
    Section 13. Instructions to the Trustee. All orders, requests, 
certifications of valid claims, and instructions to the Trustee 
shall be in writing, signed by such persons as are designated in the 
attached Exhibit A or such other designees as the Grantor may 
designate by amendments to Exhibit A. The Trustee shall be fully 
protected in acting without inquiry in accordance with the Grantor's 
orders, requests, and instructions. The Trustee shall have the right 
to assume, in the absence of written notice to the contrary, that no 
event constituting a change or a termination of the authority of any 
person to act on behalf of the Grantor or the EPA Regional 
Administrator hereunder has occurred. The Trustee shall have no duty 
to act in the absence of such orders, requests, and instructions 
from the Grantor and/or EPA, except as provided for herein.
    Section 14. Amendment of Agreement. This Agreement may be 
amended by an instrument in writing executed by the Grantor, the 
Trustee, and the EPA Regional Administrator, or by the Trustee and 
the EPA Regional Administrator if the Grantor ceases to exist.
    Section 15. Irrevocability and Termination. Subject to the right 
of the parties to amend this Agreement as provided in Section 14, 
this Trust shall be irrevocable and shall continue until terminated 
at the written agreement of the Grantor, the Trustee, and the EPA 
Regional Administrator, or by the Trustee and the EPA Regional 
Administrator, if the Grantor ceases to exist. Upon termination of 
the Trust, all remaining trust property, less final trust 
administration expenses, shall be paid to the Grantor.
    The Regional Administrator will agree to termination of the 
Trust when the owner or operator substitutes alternative financial 
assurance as specified in this section.
    Section 16. Immunity and indemnification. The Trustee shall not 
incur personal liability of any nature in connection with any act or 
omission, made in good faith, in the administration of this Trust, 
or in carrying out any directions by the Grantor and the EPA 
Regional Administrator issued in accordance with this Agreement. The 
Trustee shall be indemnified and saved harmless by the Grantor or 
from the Trust Fund, or both, from and against any personal 
liability to which the Trustee may be subjected by reason of any act 
or conduct in its official capacity, including all expenses 
reasonably incurred in its defense in the event the Grantor fails to 
provide such defense.
    Section 17. Choice of Law. This Agreement shall be administered, 
construed, and enforced according to the laws of the State of [enter 
name of State].
    Section 18. Interpretation. As used in this Agreement, words in 
the singular include the

[[Page 64788]]

plural and words in the plural include the singular. The descriptive 
headings for each Section of this Agreement shall not affect the 
interpretation of the legal efficacy of this Agreement.
    In Witness Whereof the parties have caused this Agreement to be 
executed by their respective officers duly authorized and their 
corporate seals to be hereunto affixed and attested as of the date 
first above written. The parties below certify that the wording of 
this Agreement is identical to the wording specified in 40 CFR 
261.151(m) as such regulations were constituted on the date first 
above written.

[Signature of Grantor]

[Title]

Attest:

[Title]

[Seal]

[Signature of Trustee]

Attest:

[Title]

[Seal]

    (2) The following is an example of the certification of 
acknowledgement which must accompany the trust agreement for a 
standby trust fund as specified in section 261.147(h) of this 
chapter. State requirements may differ on the proper content of this 
acknowledgement.

State of---------------------------------------------------------------

County of--------------------------------------------------------------

    On this [date], before me personally came [owner or operator] to 
me known, who, being by me duly sworn, did depose and say that she/
he resides at [address], that she/he is [title] of [corporation], 
the corporation described in and which executed the above 
instrument; that she/he knows the seal of said corporation; that the 
seal affixed to such instrument is such corporate seal; that it was 
so affixed by order of the Board of Directors of said corporation, 
and that she/he signed her/ his name thereto by like order.

[Signature of Notary Public]

PART 270--EPA ADMINISTERED PERMIT PROGRAMS: THE HAZARDOUS WASTE 
PERMIT PROGRAM

0
13. The authority citation for part 270 continues to read as follows:

    Authority: 42 U.S.C. 6905, 6912, 6924, 6925, 6927, 6939 and 
6974.

Subpart D--Changes to Permits

0
14. In Sec.  270.42, Appendix I is amended to add a new A. 9 and A. 10 
to read as follows:


Sec.  270.42  Permit modification at the request of the permittee.

* * * * *

Appendix I to Sec.  270.42--Classification of permit modification

------------------------------------------------------------------------
                        Modifications                            Class
------------------------------------------------------------------------
A. General Permit Provisions.
 
                              * * * * * * *
    9. Changes to remove permit conditions applicable to a         \1\ 1
     unit excluded under the provisions of Sec.   261.4......
    10. Changes in the expiration date of a permit issued to       \1\ 1
     a facility at which all units are excluded under the
     provisions of Sec.   261.4..............................
 
                             * * * * * * *
------------------------------------------------------------------------
\1\ Class 1 modifications requiring prior Agency approval.

[FR Doc. E8-24399 Filed 10-29-08; 8:45 am]
BILLING CODE 6560-50-P


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