California Communities Against Toxics v. Envtl. Prot. Agency
928 F.3d 1041 (2019)
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Rule of Law:
Under the Resource Conservation and Recovery Act (RCRA), the Environmental Protection Agency (EPA) may permissibly interpret the statutory term "discarded" to exclude hazardous secondary materials transferred from a generator to a third-party reclaimer, even when payment is involved, provided that specific conditions are met to ensure the materials are legitimately recycled and not abandoned.
Facts:
- Congress enacted the Resource Conservation and Recovery Act (RCRA) to regulate 'solid waste,' which is statutorily defined as 'discarded' material, and to encourage recycling.
- Industrial facilities ('generators') produce hazardous secondary materials, such as byproducts and sludges, as part of their ongoing manufacturing processes.
- To avoid disposal, generators often transfer these hazardous secondary materials to third-party facilities ('reclaimers') for recycling.
- In many of these transactions, the generator pays the reclaimer a fee to accept and process the hazardous secondary materials.
- The Environmental Protection Agency (EPA) promulgated a 'Transfer-Based Exclusion' rule.
- Under this rule, hazardous secondary materials are not considered 'discarded' solid waste if the generator and reclaimer comply with certain 'Transfer Conditions' and 'Legitimacy Factors.'
- These conditions are designed to ensure the materials are securely transferred and legitimately recycled, rather than being disposed of as a sham.
Procedural Posture:
- In 2008, the EPA promulgated a final rule creating the 'Transfer-Based Exclusion.'
- Following legal challenges, EPA replaced this rule in 2015 with a more restrictive 'Verified Recycler Exclusion.'
- In American Petroleum Institute v. EPA (API III, 2017), the D.C. Circuit Court of Appeals vacated key provisions of the 2015 rule and reinstated the 2008 Transfer-Based Exclusion.
- In 2018, following the API III decision, the EPA issued a final rule reissuing the Transfer-Based Exclusion as modified by the court.
- Environmental petitioners, including the Sierra Club, filed a petition for review in the D.C. Circuit Court of Appeals, challenging the 2018 final rule as exceeding EPA's authority and being arbitrary and capricious.
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Issue:
Does the Environmental Protection Agency's 'Transfer-Based Exclusion' rule, which exempts certain hazardous secondary materials transferred to a reclaimer from RCRA's Subtitle C regulations, exceed the agency's statutory authority or constitute an arbitrary and capricious action, particularly when the generator pays the reclaimer to accept the materials?
Opinions:
Majority - Rogers, Circuit Judge
No. The Environmental Protection Agency's Transfer-Based Exclusion is a permissible exercise of its statutory authority and is not arbitrary and capricious. The court's analysis proceeded under the two-step Chevron framework for reviewing an agency's statutory interpretation. At Chevron step one, the court found that Congress did not directly speak to the precise question of whether hazardous secondary materials for which a generator pays a reclaimer to accept are necessarily 'discarded' under RCRA. Citing its own precedent in cases like AMC I and Safe Food & Fertilizer, the court concluded the term 'discarded' is ambiguous and does not have a plain meaning that would automatically include such transactions. At Chevron step two, the court held that the EPA's interpretation was reasonable and based on a permissible construction of the statute. EPA provided a reasoned explanation that payment from a generator does not dispositively indicate discard; rather, it could reflect market forces, the high cost of Subtitle C compliance, or compensation for the reclaimer's capital costs. The rule's 'Legitimacy Factors' appropriately consider economic realities to ensure recycling is not a sham. Furthermore, the rule was not arbitrary and capricious because EPA rationally explained why materials destined for legitimate recycling under the rule's conditions are not similarly situated to materials disposed of as waste. The 'Transfer Conditions' were reasonably designed to ensure materials remain in the stream of commerce and do not become part of the waste disposal problem RCRA's Subtitle C was designed to address.
Analysis:
This decision solidifies the EPA's significant discretion under Chevron to define the jurisdictional boundaries of RCRA, particularly the ambiguous term 'discarded.' By upholding the Transfer-Based Exclusion, the court affirmed that the economic reality of a transaction (i.e., payment from a generator to a reclaimer) is not the sole determinant of whether a material is waste. The ruling reinforces the principle that RCRA's dual goals of waste management and resource conservation allow the agency to craft flexible, condition-based exclusions to encourage legitimate recycling, shifting the legal battleground from the mere fact of payment to the adequacy of the protective conditions themselves.
