The Superfund Recycling Equity Act (SREA) became law in late 1999, clarifying that recycling is not disposal and that shipping material for recycling is not arranging for disposal. The law protects recyclers from Superfund liability, provided they demonstrate they are adhering to a few conditions, including taking “reasonable care” to ascertain the facility receiving the recyclables is in compliance with applicable environmental laws.
Danielle Waterfield, chief policy officer and assistant general counsel at the Institute of Scrap Recycling Industries (ISRI), Washington, credits Mark Reiter, ISRI’s former vice president of government relations, who died earlier this year, for his work on behalf of the industry to get SREA passed.
She says when CERCLA, or the Comprehensive Environmental Response, Compensation and Liability Act, was enacted in 1980, the courts interpreted that arranging for recycling was the same thing as arranging for disposal. Waterfield says, “The recycling industry almost ceased to exist” because incidents of “hazardous contamination that we were not responsible for” led to numerous companies filing for bankruptcy. “It was an inequitable situation, and it couldn’t continue,” she adds.
That led to the nearly decade-long legislative battle that would eventually result in SREA. “The law was written to correct the unintended consequences of Superfund and the hundreds of millions of dollars in liability imposed on the recycling industry,” Waterfield says.
However, the liability protection offered through SREA is not automatic. “It comes with some specific requirements,” she says, adding that it also does not cover recyclers that have a hazardous incident on their own properties.
Waterfield says SREA is “one of the most straightforward laws I’ve ever seen.” The protection is extended to recyclers that can demonstrate three basic conditions:
- The material shipped to the consuming facility conforms with the definition of a “recyclable material.”
- The transaction meets the conditions for “arranging for recycling.”
- Transactions that take place after Feb. 27, 2000, must show that “reasonable care” has been taken to determine the environmental compliance status of the facility that received the recyclables.
Waterfield explains that the “consuming” facility can be a mill or another company that will further process the scrap so that it meets a specification grade.
“The statute includes a clear definition of what is traditional scrap,” she says, including scrap paper, plastics, glass, metals and rubber other than whole tires.
Three exceptions also are clearly stated in the law:
- any material that contains or is contaminated by polychlorinated biphenyls (PCBs) at a concentration of more than 50 parts per million at the time of the transaction;
- whole scrap tires; and
- contaminated shipping containers.
Waterfield says recyclers could be asked to prove that a majority or substantial portion of the material that was shipped to a facility was used as feedstock to manufacture a new product, which is also a required component of the law.
When it comes to showing reasonable care in the case of transactions after Feb. 27, 2000, Waterfield says recyclers are required to perform due diligence by looking into the environmental records of the facilities they are shipping material to.
“The various stakeholders involved in negotiation of the SREA law were concerned that recyclers in the future would use the law as an allowance to proverbially stick their heads in the sand and keep shipping to bad actors while claiming liability protection,” Waterfield says. “The reasonable care provision was a compromise to ensure recyclers would do their part in ensuring they would not knowingly send materials to facilities doing bad things. If they did not take such care, they would not be able to take advantage of liability protection,” she continues.
Recyclers must take reasonable steps to determine the facilities they are shipping to are being responsible under environmental laws, Waterfield explains. This can be a costly and time-consuming process that requires expertise.
However, ISRI says its SREA Reasonable Care Compliance Program is designed to assist recyclers in defending a Superfund liability claim by allowing them to order reports on consuming facilities compiled from more than 1,200 federal, state and local databases; Freedom of Information Act requests; and facility questionnaires. The reports also include supporting data for the information contained in each report, according to the association.
“The law was written to correct the unintended consequences of Superfund and the hundreds of millions of dollars in liability imposed on the recycling industry.” – Danielle Waterfield, chief policy officer and assistant general counsel, Institute of Scrap Recycling Industries
Waterfield says ISRI hired an environmental consulting firm named Keramida that “does the legwork” for recyclers. The firm’s environmental experts review a facility’s compliance data, creating a summary chart that is color-coded based on the significance of the data, she explains. Items in red indicate significant land-use violations, while yellow items are significant violations that are not land-use related or otherwise directly associated with CERCLA. Paperwork or other administrative violations that are not substantive are coded green.
Waterfield says the reports are a “tremendous value” to ISRI members, though “neither the reports themselves nor ISRI suggest or make a decision for member companies” as to whether they should do business with a facility.
Should a recycler’s due diligence reveal violations, she advises calling the facility in question to talk with the environmental, health and safety personnel and management because the public record could be wrong. “I like to point out that the public record is not always correct,” Waterfield says. “It could be a long-since corrected violation. If the consuming facility can show they are in compliance, you can ship to them.”
The recycler must document the verification of compliance in its records, and the consumer has to submit a claim to change the public record, she explains.
However, through the SREA Reasonable Care Compliance Program, an environmental consultant from Keramida sends a questionnaire to the consuming facility that explains that a violation was found and requests comment, which is added to the report if provided by the consuming facility.
While the reports ISRI offers are not required specifically by law, recyclers must be able to show they took reasonable care to inquire into a facility’s compliance status.
She reminds recyclers that SREA requires them to make the inquiry. “A broker may say, I’ve done the inquiry for you, don’t worry about it,” Waterfield says. “You cannot rely on someone else. That is why the ISRI program is designed the way it is. ISRI is making the inquiry on behalf of the individual member upon request, and the report is specifically made for the member that made the inquiry. It cannot be transferred to anyone else.”
Using a report that was requested by and prepared for another company likely would invalidate a recycler’s protection under SREA because of the law’s very specific inquiry requirements, she says.
For recycling companies that have more than one location that is shipping to the same consuming facility, Waterfield says it will depend on the recycling company’s corporate structure whether each location would need to independently request reports for the same consuming facility. She advises recyclers to have their own lawyers weigh in on whether that is necessary.
If a recycler ends up in a Superfund challenge, if the transaction occurred before Feb. 27, 2000, the reasonable care provision does not apply. For transactions that occurred after that day, the recycler must show it performed the required due diligence, Waterfield says. “If they have no documentation to prove they met the law’s requirements, then they have lost the liability protection.”
She advises recyclers to store their environmental due diligence paperwork indefinitely. “You do not know when that liability will come back.
“SREA protection from Superfund liability is unique to recyclers and limited to legitimate recycling transactions. If you can prove these two things and that you did your proactive reasonable care due diligence, you have a ticket out.”