American Petroleum Institute v. EPA , 862 F.3d 50 ( 2017 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 3, 2016 Decided July 7, 2017
No. 09-1038
AMERICAN PETROLEUM INSTITUTE,
PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY,
RESPONDENT
AMERICAN CHEMISTRY COUNCIL, ET AL.,
INTERVENORS
Consolidated with 15-1083, 15-1085, 15-1088, 15-1089,
15-1094
On Petitions for Review of a Final Regulation Promulgated
by the United States Environmental Protection Agency
Jeremy C. Marwell and Thomas Sayre Llewellyn argued
the causes for Industry Petitioners. With them on the briefs
were Stacy R. Linden, Matthew A. Haynie, Aaron J. Wallisch,
Laura E. Boorman, Kevin A. Gaynor, John P. Elwood, Roger
R. Martella, Jr., Joel Visser, Linda E. Kelly, Quentin Riegel,
and Leslie A. Hulse. Wayne D=Angelo, Harry M. Ng, and
Michael R. See entered appearances.
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Kenneth M. Kastner was on the brief for amici curiae
Eastman Chemical Company and Solvay USA Inc. in support
of Industry Petitioners.
James S. Pew argued the cause for Environmental
Petitioners. With him on the briefs was Khushi K. Desai.
Daniel R. Dertke, Attorney, U.S. Department of Justice,
argued the cause for respondents. With him on the brief were
John C. Cruden, Assistant Attorney General, Douglas M.
Bushey, Attorney, U.S. Department of Justice, and Alan
Carpien, Attorney, U.S. Environmental Protection Agency.
Donald J. Patterson, Jr. argued the cause for Industry
Intervenor-Respondents. With him on the brief were Eric L.
Klein, Aaron J. Wallisch, Laura E. Boorman, John L.
Wittenborn, Wayne D=Angelo, Kevin A. Gaynor, John P.
Elwood, Jeremy C. Marwell, Leslie A. Hulse, Linda E. Kelly,
Quentin Riegel, Roger R. Martella, Jr., Joel Visser, James W.
Conrad, Jr., Thomas Sayre Llewellyn, Stacy R. Linden, and
Matthew A. Haynie. Douglas H. Green entered an appearance.
David R. Case, James S. Pew, Khushi K. Desai, and
Vincent Atriano were on the joint brief for respondent-
intervenors and movant-intervenor Gulf Chemical and
Metallurgical Corp.
Before: TATEL and KAVANAUGH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed PER CURIAM.
Opinion dissenting in part filed by Circuit Judge TATEL.
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PER CURIAM: This case arises from the Environmental
Protection Agency’s latest effort to define the term “solid
waste” under the Resource Conservation and Recovery Act. In
2015, EPA promulgated a final rule governing when certain
hazardous materials qualify as “discarded” and hence are
subject to the agency’s regulatory authority. Environmental
and Industry Petitioners have each petitioned for review of that
rule, arguing that numerous aspects of it are unlawful and
arbitrary and capricious. For the reasons explained, we grant
the Industry petition for review with respect to Factor 4 of the
legitimacy test and to the Verified Recycler Exclusion and we
dismiss the Environmental petition for review.
I. Introduction
The Resource Conservation and Recovery Act (“RCRA”),
42 U.S.C. §§ 6901-6992k, empowers EPA to manage solid and
hazardous waste. The statute defines solid waste as “garbage,
refuse, sludge . . . and other discarded material.” 42 U.S.C.
§ 6903(27). Hazardous waste is a subset of solid waste that
may pose a substantial threat to human health or the
environment when improperly managed. § 6903(5)(B). If a
material qualifies as hazardous waste, it is subject to regulation
under RCRA Subtitle C, §§ 6921-6939g, which imposes
comprehensive reporting and operating requirements. Material
that is not solid waste, and therefore not hazardous waste, is
exempt from Subtitle C.
Pursuant to its RCRA authority, EPA has promulgated a
rule defining solid waste as “discarded material” not otherwise
excluded from the agency’s regulations. 40 C.F.R.
§ 261.2(a)(1). A separate regulation lists materials that fall
outside the definition of solid waste. § 261.4. Central to the
issues before us, EPA considers certain materials that are
destined for recycling to be discarded and hence solid waste
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subject to RCRA regulation. Definition of Solid Waste, 80 Fed.
Reg. 1,694, 1,738/3 (Jan. 13, 2015) (the “Final Rule”).
For our purposes, the relevant history begins in 2007,
when EPA proposed a rule deregulating many hazardous
secondary materials. See American Petroleum Institute v.
EPA, 683 F.3d 382, 385 (D.C. Cir. 2012) (“API II”).
Secondary materials are substances generated as the remainder
of industrial processes; they include spent materials,
byproducts, and sludges. See 40 C.F.R. § 260.10. EPA’s
proposed rule—which became a final rule in October 2008—
excluded hazardous secondary materials from the definition of
solid waste in two circumstances: first, if the company that
generated the materials controlled the recycling of those
materials; and second, if the generator transferred the materials
to an off-site recycler it had audited to ensure compliance with
proper recycling practices. Revisions to the Definition of Solid
Waste, 73 Fed. Reg. 64,668, 64,669/3-70/1-2 (Oct. 30, 2008)
(the “2008 Rule”). These two exemptions were known,
respectively, as the “Generator-Controlled Exclusion” and the
“Transfer-Based Exclusion.” Id. at 64,670/1, 64,675/2
(capitalization added). To qualify for either, secondary
materials had to be recycled “legitimately,” a term EPA defined
by reference to certain “legitimacy factors.” Id. at 64,675/2-3.
EPA adopted this legitimacy requirement to distinguish “true”
recycling from “sham” recycling in which companies claim to
reuse materials they in fact discard. Id. at 64,700/2.
Several organizations challenged the 2008 Rule. One, the
American Petroleum Institute, argued that the rule unlawfully
regulated materials called spent petroleum refinery catalysts,
which are byproducts of the oil refining process. API II, 683
F.3d at 387. Another group, the Sierra Club, asserted that the
rule “was not sufficiently protective of human health and the
environment,” in violation of RCRA. Id. at 389. A third entity,
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Gulf Chemical and Metallurgical Corporation (“Gulf”), moved
to intervene to defend the rule’s treatment of spent catalysts.
Before this court heard oral argument, EPA entered a
settlement agreement with the Sierra Club. Id. Pursuant to that
agreement, the Sierra Club withdrew its petition, and EPA
agreed to propose a new solid waste rule. Id. As promised,
EPA published a notice of proposed rulemaking in July 2011.
Definition of Solid Waste, 76 Fed. Reg. 44,094 (July 22, 2011)
(the “Proposed Rule”). A year later, we held that API’s
challenge to the 2008 rule was unripe given the forthcoming
final rule. API II, 683 F.3d at 384. We deferred any action on
Gulf’s motion to intervene, which is dealt with in a separate
order published today.
EPA promulgated the Final Rule on solid waste—the one
before us now—in January 2015. 80 Fed. Reg. at 1,694/1. The
2015 Final Rule differs from the 2008 Rule in several ways,
four of which are relevant here. First, the Final Rule revises
the definition of “legitimate” recycling and expands the scope
of the legitimacy factors to cover all recycling. Id. at 1,719/3-
20/1. Second, it establishes that spent catalysts—which were
ineligible for exclusions under the 2008 Rule—could qualify
for the exemptions in the 2015 regulation. Id. at 1,738/1.
Third, the rule defers a decision on whether to add conditions
to 32 previously promulgated exclusions from the definition of
solid waste, which EPA calls the “pre-2008” exclusions. Id. at
1,741/2. Fourth and finally, the rule replaces the transfer-based
exclusion with the “Verified Recycler Exclusion,” a new
standard governing when transferred materials qualify as solid
waste. Id. at 1,695/2. We provide additional detail on each of
these provisions later in this opinion.
Multiple organizations petitioned for review of the 2015
rule. Their petitions, which are consolidated in this case,
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challenge the regulation on multiple fronts. Industry
Petitioners argue that both the legitimacy test and the Verified
Recycler Exclusion exceed EPA’s RCRA authority. Industry
Petitioners also challenge EPA’s treatment of two specific
materials: spent catalysts and off-specification commercial
chemical products. Environmental Petitioners argue that the
Verified Recycler Exclusion is too permissive and that EPA
should have added containment and notification conditions to
the 32 pre-2008 exclusions. We consider these challenges in
turn.
II. Legitimacy Factors
Industry Petitioners first attack EPA’s new legitimacy test.
Before EPA can regulate a hazardous secondary material as
hazardous waste, it must determine that the material has been
“discarded” under 42 U.S.C. § 6903(27). Items recycled
through “immediate reuse in” an “industry’s ongoing
production process,” are not discarded within the meaning of
that section and are outside EPA’s hazardous waste
regulations. See American Mining Congress v. EPA, 824 F.2d
1177, 1183-85 (D.C. Cir. 1987) (“AMC”); see also Ass’n of
Battery Recyclers, Inc. v. EPA, 208 F.3d 1047, 1052-53 (D.C.
Cir. 2000) (explaining that “immediate” in AMC means
“direct,” not instantaneous). But because EPA’s waste disposal
regulations are acknowledged to be very costly to meet, “there
is an incentive for some handlers to claim they are recycling
when, in fact, they are conducting . . . disposal.” Final Rule,
80 Fed. Reg. at 1,719/3. To prevent such evasion, EPA polices
the line “between ‘legitimate’ (i.e., true) recycling and ‘sham’
(i.e., fake) recycling.” Id. at 1,720/1.
Until recently, EPA’s policy on sham recycling existed
chiefly in uncodified guidance, notably a memo issued in 1989
by Sylvia K. Lowrance, Director, EPA Office of Solid Waste
(Apr. 26, 1989) (the “Lowrance Memo”). The memo discussed
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over a dozen factors for evaluating recycling, all aimed at
determining “whether the secondary material is ‘commodity-
like,’” i.e., is it being handled like a valuable industrial input or
like a worthless industrial byproduct. See id. at 2 &
attachment.
The Final Rule updates and codifies this effort to draw the
distinction between legitimate and sham recycling. It requires
that all recycling of hazardous secondary materials meet a
legitimacy test set forth in 40 C.F.R. § 260.43(a) or else be
labeled “sham” and subjected to full RCRA regulation. 40
C.F.R. § 261.2(g). Like the Lowrance Memo, the rule is rooted
in the assumption that legitimate recycling should involve
some “recognizable benefit,” Final Rule, 80 Fed. Reg. at
1,722/1, independent of merely “avoid[ing] the requirements
of” RCRA regulation, id. at 1,719/3.
To satisfy the legitimacy test for recycling of a particular
material, firms must prevail on all of four factors,
§ 260.43(a)(1)-(4), which are in addition to whatever elements
a specific exclusion might require, see Final Rule, 80 Fed. Reg.
at 1,720/2. First, the hazardous secondary material must
“provide[] a useful contribution to the recycling process.”
§ 260.43(a)(1). Second, “[t]he recycling process must produce
a valuable product or intermediate.” § 260.43(a)(2). Third, the
persons controlling the secondary material must “manage the
hazardous secondary material as a valuable commodity.”
§ 260.43(a)(3). Fourth, “[t]he product of the recycling process
must be comparable to a legitimate product or intermediate.”
§ 260.43(a)(4). Factors 1 and 3 address the process, Factors 2
and 4 the product.
Industry Petitioners do not attack EPA’s authority to
formulate and apply a legitimacy test, nor do they fault EPA’s
premise that legitimate recycling involves “valuable” materials
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being used for a “recognizable benefit.” Final Rule, 80 Fed.
Reg. at 1,697/3, 1,722/1. At that level of generality, EPA’s
policy seems to be a reasonable method for identifying
materials that are “part of the waste disposal problem” and thus
subject to EPA’s RCRA authority over discarded materials.
Safe Food & Fertilizer v. EPA, 350 F.3d 1263, 1268 (D.C. Cir.
2003). Industry Petitioners instead attack EPA’s planned
means to implement that policy. They complain that
mandating Factors 3 and 4 across all recycling results in EPA’s
“unlawfully regulat[ing] non-discarded materials.” Industry
Pet’rs’ Br. 16 (capitalization omitted).
A. Factor 3
We begin with Factor 3, which requires secondary
materials to be handled as “valuable commodit[ies].” 40
C.F.R. § 260.43(a)(3). Where there is an analogous raw
material, the firm can meet this standard by handling the
secondary material “in an equally protective manner.” Id. If
there is no raw analogue for comparison, EPA requires that the
secondary material be “contained.” Id. “Contained” means
“held in a unit (including a land-based unit . . .) that meets”
multiple enumerated criteria, including that the unit be “labeled
or otherwise ha[ve] a system (such as a log) to immediately
identify the hazardous secondary materials” therein. 40 C.F.R.
§ 260.10 (entry for “Contained”). “[L]and-based unit[s],” id.,
encompass, at least for some materials such as scrap metal,
simply lying on the ground, see Final Rule, 80 Fed. Reg. at
1,721/3, 1,736/2.
EPA previously claimed that any “interdiction in time”
during a secondary material’s trajectory from initial output to
recycling, e.g., for storage, could be considered discard and
thus trip the material into EPA’s RCRA authority. Battery
Recyclers, 208 F.3d at 1052 (internal quotation marks omitted).
We rejected that rule. “To say that when something is saved it
9
is thrown away is an extraordinary distortion of the English
language.” Id. at 1053. Industry Petitioners read that holding
to bar EPA from ever regulating how recycled materials are
contained. Their reading goes too far. EPA can impose a
containment requirement so long as it is such that an inference
of “sham” or illegitimacy would logically flow from a firm’s
non-compliance. And given EPA’s explanation that a material
may be “contained” if it is simply piled on the ground, Final
Rule, 80 Fed. Reg. at 1,721/3, 1,736/2, and meets specific
requirements that petitioners do not challenge as unreasonable
(with one exception, the “labelling” requirement discussed
below), the standard does not on its face appear to ask for
anything beyond what could be expected of firms engaged in
legitimate recycling.
Industry Petitioners express concern about having to label
or log unwieldy molten metals and acidic sludges to satisfy
EPA’s insistence on material being “contained.” But EPA
offers an alternative to labelling in the conventional sense—
provision of “a system (such as a log) to immediately identify
the hazardous secondary materials in the unit.” § 260.10.
Thus, in substance, the requirement is not precisely one of
labeling or logging, but only of assuring that it somehow be
possible for the material to be “immediately identif[iable].” Id.
While doubtless EPA’s language could be interpreted
unreasonably, we cannot see that the requirement itself is
unreasonable.
B. Factor 4
Factor 4 presents more difficulty. EPA explains this factor
as an effort to prevent recyclers from loading products with
hazardous secondary materials that “provide[] no recognizable
benefit to the product,” Final Rule, 80 Fed. Reg. at 1,722/1, and
are simply “along for the ride,” id. at 1,726/2. Although EPA
does not require a material’s “hazardous component[s]”
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themselves to provide a “useful contribution” to the product,
see id. at 1,723/3 (discussing Factor 1), the agency is concerned
that a purported recycler might “incorporate[] hazardous
constituents into the final product when they were not needed
to make that product effective as a way to avoid proper disposal
of that material, which would be sham recycling,” id. at
1,726/1-2.
The factor sets up two tracks, 40 C.F.R. § 260.43(a)(4)(i)-
(ii), one covering products for which there is an analogue of
undoubted legitimacy, the other addressing products with no
such analogue. EPA refers to these together as the “technical
provisions.” Final Rule, 80 Fed. Reg. at 1,729/1. But as EPA
recognizes that the criteria set forth under these two tracks
don’t draw a satisfactory line between genuine and sham, it
also offers a rather complicated exception—aimed at
preventing products from being labelled a sham when they in
fact pose no “significant human health or environmental risk.”
§ 260.43(a)(4)(iii). But Factor 4’s complex provisions fall
short of the aim. As we shall see, Factor 4 imposes tasks
tangential to disposal vel non (and thus tangential to EPA’s
authority), even when EPA has offered little reason to doubt a
product’s legitimacy.
The second track is the more reasonable of the two. When
there is no analogue, the recycled product will pass if it was
created by looping secondary materials back “to the original
process . . . from which they were generated” or if it meets
“widely recognized commodity standards and specifications.”
§ 260.43(a)(4)(ii)(A)-(B). Those standards or specifications
need not address the hazardous aspects of the product. Final
Rule, 80 Fed. Reg. at 1,728/2-3. And EPA has explained that
compliance with “customer specifications” may suffice for
“specialty” products. Id. at 1,728/1. Although that gloss on
“specifications” appears only in EPA’s discussion of the with-
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analogue track, the Final Rule offers little indication that the
same word in the no-analogue track is meant to read differently
on this matter. Compare id. at 1,727/3-28/1 (with-analogue),
with id. at 1,728/2-3 (no-analogue). Putting all this together, if
a recycled product, lacking an analogue, fails to satisfy
customer specifications, falls short of relevant commodity
standards, and is not derived from a closed-loop type process,
EPA treats it as discarded (subject to the ultimate exception).
These tests focus largely on the utility of the recycling in
question, a reasonable inquiry when deciding legitimacy. See
id. at 1,728/3 (commodity standards and specifications criteria
mean that “market forces [will] dictate” legitimacy); id. at
1,729/1 (“looping” criterion appropriate because this type of
recycling “conserves the use of raw materials” without adding
new hazards).
The other track in Factor 4’s technical provisions,
applying where the recycled product has an analogue, is more
explicitly tuned to the “along for the ride” metaphor. It requires
that the recycled product exhibit no hazardous “characteristic”
that is absent from the product’s analogue. 40 C.F.R.
§ 260.43(a)(4)(i)(A); see also Final Rule, 80 Fed. Reg. at
1,727/1 (“The characteristics are ignitability, corrosivity,
reactivity, and toxicity.”). This criterion—fenced in as it is by
the definitions of those characteristics, see 40 C.F.R.
§§ 261.21-.24—also seems reasonable: one would expect
analogous products to have similar attributes. But the track
goes on from there. Even if the recycled product and its
analogue share the same hazardous characteristics, the amount
or “levels” of hazardous constituents in the product must be
“comparable to or lower than” its analogue’s.
§ 260.43(a)(4)(i)(B). If the product fails that test, it can still be
legitimate if it “meet[s] widely-recognized commodity
standards and specifications.” Id. Unlike in the no-analogue
track, here the commodity standards and specifications must
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“specifically address [] hazardous constituents.” Id. Otherwise
EPA will regard the product as discarded (subject to the
ultimate exception).
We have left EPA some leeway in applying the idea that
genuine recyclers cannot include hazardous material just
“along for the ride” in their products. Thus in American
Petroleum Institute v. EPA, 216 F.3d 50 (D.C. Cir. 2000) (“API
I”), we rejected a challenge under “Chevron step one” to a rule
that treated “recovered oil” as discarded if it included “extra
materials . . . that provide no benefit to the industrial process.”
Id. at 58-59 (emphasis added). But we hinted that such a rule
should reasonably avoid “incidentally regulat[ing] oil
containing chemicals [whose presence in the recycled oil was]
not caused by sham recycling (and therefore not discarded).”
See id. at 59.
Judged by that perhaps opaque standard, EPA’s “along for
the ride” metaphor suffers at least one of the usual dangers of
metaphors—imprecision. The record contains examples of
hazardous secondary materials that are beneficially recycled
into valuable products (recognized as such by EPA), even
though those products contain hazardous constituents that do
not, in themselves, contribute to the value of the final product.
See, e.g., Final Rule, 80 Fed. Reg. at 1,721/1-2 (zinc-
containing secondary materials), 1,729/3 (lead-containing
secondary materials). In those cases, even if EPA could
technically say that some small excess of hazardous
constituents has been left in the final product, the mere fact of
their presence would not constitute a reasonable basis for
dubbing the product or the process a sham. After all, it can be
costly to extract tiny amounts of hazardous constituents—
potentially on the order of “parts per million,” see id. at
1,727/2-3—from secondary materials destined for recycling,
and no statute has given EPA authority to compel firms to
13
engage in such extraction where failing to do so imposes no
health or environmental risk. To rule otherwise would be to
disregard the statute’s stated “objective[]” of “encouraging . . .
properly conducted recycling.” 42 U.S.C. § 6902(a)(6).
EPA made this very point in Safe Food to defend its
exclusion for recycled zinc fertilizers even though those
fertilizers could have “considerably higher” contaminant levels
than the corresponding “virgin commercial fertilizer.” 350
F.3d at 1269. After reviewing EPA’s data on the threat posed
by the additional contaminants, we agreed that the excesses of
the contaminant levels that EPA allowed (as consistent with
legitimate recycling) over those in virgin fertilizer samples
“lose their significance when put in proper perspective—
namely, a perspective based on health and environmental
risks.” Id. at 1270.
No such perspective is allowed by the “comparable to or
lower than” standard for products with analogues. That
standard sets the bar at the contaminant level of the analogue
without regard to whether any incremental contaminants are
significant in terms of health and environmental risks. This
problem is reduced, but not eliminated, by firms’ option to
meet “widely-recognized commodity standards and
specifications,” 40 C.F.R. § 260.43(a)(4)(i)(B)—including
“customer specifications” if the product is made-to-order,
Final Rule, 80 Fed. Reg. at 1,728/1. Many products might fail
this alternative, not because they represent sham recycling, but
because the relevant commodity standards or specifications
don’t address the hazardous constituent levels of concern to
EPA. Industry Petitioners contend, and EPA does not
contradict, that such standards usually refer to minimum levels
of desired elements rather than maximum levels of specific
impurities. Doubtless this track will ensnare some sham
recycling, but it does so with a test that is not a “reasonable tool
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for distinguishing products from wastes.” See Safe Food, 350
F.3d at 1269.
EPA, having recognized some of the shortcomings in
these provisions, created an exception purporting to account for
them. See Final Rule, 80 Fed. Reg. at 1,729/1. A recycler may
avoid the sham label if it “prepare[s] documentation showing
why the recycling is, in fact, still legitimate” and notifies
regulators. 40 C.F.R. § 260.43(a)(4)(iii). The legitimacy “can
be shown” by “lack of exposure from toxics in the product, lack
of the bioavailability of toxins in the product, or other relevant
considerations which show that the recycled product does not
contain levels of hazardous constituents that pose a significant
human health or environmental risk.” Id.
In explaining this exception, EPA has indicated that the
question is whether the recycled product will be used
beneficially in a manner that reasonably protects against the
risks its residual hazardous constituents present. See Final
Rule, 80 Fed. Reg. at 1,729/1-3. Absence of these
circumstances would indicate that the true purpose of the
recycling is disposal. Hence, EPA explained in the rulemaking
that “lead contaminated foundry sand[]” would be sham
recycled when packaged as “children’s play sand” but that the
same material can be legitimately recycled for “mold making
in a facility’s sand loop.” Final Rule, 80 Fed. Reg. at 1,729/2-
3. The sand is (in a sense) equally hazardous in both cases, but
the latter use is legitimate “because . . . there is little chance of
the hazardous constituents being released into the environment
or causing damage to human health”; “there is lead throughout
the foundry’s process” (i.e., the sand isn’t introducing new
hazards); and “there is a clear value to reusing the sand” in that
industry. Id. at 1,729/3. Recyclers can also meet this exception
by analyzing the “increased risk” of their product relative to its
analogues, if any. Id. We read this as saying, in light of EPA’s
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brief, that a recycler can show its product is legitimate by
documenting that any incremental risk it presents is not
“significant” to health and the environment. See Respondent
Br. 42-43 (citing Safe Food, 350 F.3d at 1269-71).
Contrary to Industry Petitioners’ claims, the general
criteria embodied in the Factor 4 exception seem permissible,
indeed consistent with our ruling in Safe Food. Industry
Petitioners also argue that the exception affords EPA unlimited
discretion to find discard. The language of Factor 4 and its
exception is rather open-ended, so judicial review of EPA’s
subsequent interpretations would normally be highly
deferential, Auer v. Robbins, 519 U.S. 452, 461-62 (1997),
potentially leaving petitioners at the mercy of a different
reading in the future. But we note that Factor 4’s exception is
tuned specifically to “significant human health or
environmental risk[s].” 40 C.F.R. § 260.43(a)(4)(iii). And
EPA has simultaneously provided an explanation of how to
apply the exception along with an example of how a specific
material might pass or fail it. Final Rule, 80 Fed. Reg. at
1,729/2-3 (foundry sand). These aspects of the rulemaking
sufficiently constrict the range of possible interpretations: “[a]n
interpretation at odds with the agency’s expressed intent at the
time of adoption enjoys no judicial deference.” AT&T Corp. v.
FCC, 841 F.3d 1047, 1054 (D.C. Cir. 2016).
The exception nonetheless falls short of saving the rule,
due to the draconian character of the procedures it imposes on
recyclers. See Industry Pet’rs’ Br. 29, 33. To qualify for the
exception just described, a firm must contemporaneously
document how its recycling is “still legitimate,” notify
regulators of that finding, and keep the documents “on-site for
three years after the recycling operation has ceased.” 40 C.F.R.
§ 260.43(a)(4)(iii). Failing any of these steps will make a sham
16
out of what would otherwise have been a legitimate product.
See Final Rule, 80 Fed. Reg. at 1,721/1, 1,735/3-36/1.
EPA is correct that these notice and recordkeeping
mandates will create useful “oversight” and may be correct that
they constitute only a “minimal burden” on recyclers. Id. at
1,730/1, 1,732/1. But paperwork is not alchemy; a legitimate
product will not morph into waste if its producer fails to file a
form (or loses a copy two years later). EPA insists that it can
impose burden-shifting rules even in drawing the line between
what it may and may not regulate. Respondent’s Br. 58. True
enough; but the generality is applicable only if the products
subjected to the burden-shifting are such that it would normally
be reasonable to expect them to qualify as “discarded” in the
absence of affirmative evidence from the recycler. Thus in
American Chemistry Council v. EPA, 337 F.3d 1060 (D.C. Cir.
2003), we affirmed EPA’s decision to put the burden on
regulated entities to initiate a “delisting” process preemptively
to establish that a given “mixture or derivative” of hazardous
waste is not itself hazardous. Id. at 1065. Waste handlers
would evidently have to undertake this process, concededly
“cumbersome,” in advance of any EPA enforcement. Id. But
there EPA had found that “many mixtures of and derivatives
from hazardous wastes are themselves hazardous,” an
inference that those materials’ origin in hazardous waste
renders highly plausible. Id. Further, the rule included
exceptions to “prevent [EPA] from casting too wide a net over”
materials outside its jurisdiction. Id. Compare Dissent at 8.
The same might be said of the no-analogue track and the
hazardous characteristic criterion. But we cannot say the same
for the with-analogue track’s “comparable to or lower than”
test, even as qualified by the exception for products meeting
commodity standards or specifications.
17
Never in the rulemaking does EPA make out why a
product that fails those criteria is likely to be discarded in any
legitimate sense of the term. See Motor Vehicle Mfrs. Ass’n v.
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983) (agency
rules must be “justified by the rulemaking record”).
Environmental Intervenors argue that the necessary
backing for Factor 4 lies in EPA’s report, An Assessment of
Environmental Problems Associated with Recycling of
Hazardous Secondary Materials (Dec. 10, 2014) (the
“Problems Study”). See Respondent-Intv’rs’ Joint Br. 13-14,
16. By its own account, the report was “not exhaustive”; it
restricted itself to 250 “easy to find” instances of
environmental damage associated with recycling. Problems
Study at 4 (identifying sources of “potentially relevant” data
that the study did not exhaust). Compare Dissent at 11. The
study seems to support a proposition, surely indisputable, that
recycling can go awry. Further, the authors claim to have
identified various causal factors, characterized rather vaguely
and clearly overlapping, such as “Improper Disposal of
Residuals,” “Abandoned Materials,” and “Improper
Management of Hazardous Secondary Materials.” Problems
Study at 6-8. But none of these bears any obvious relation to
the “comparable to or lower than” standard of the with-
analogue track. Reading the report liberally, we see around a
dozen instances (out of the 250) involving recycled products
that possibly would have flunked the technical provisions. See
id. app’x 1 at 22-23; 26-27; 45-47; 114-15, 121-22; 128-30,
247-48, 258-59, 298-300, 304, 319-320, 339-40, 404-05, 443-
44. And some of these products could have already been
considered hazardous waste for failing other legitimacy criteria
or for being “placed on the land in a manner that constitutes
disposal,” 40 C.FR. § 261.2(c)(1)(A). See, e.g., Problems
Study app’x 1 at 299 (recycler allegedly “planned to sell []
contaminated ash as fill material to the public”).
18
Thus the study in no way purports to establish that there is
any particular probability, much less a reasonable probability,
that the recycled products exceeding the “comparable to or
lower than” standard will cause damage to health or the
environment. But the quality or relevance of the study makes
no difference in this context, as EPA did not rely on it to justify
its assumption that materials which fail the technical provisions
are “discarded.” The study appears to enter EPA’s Factor 4
discussion only implicitly via the foundry sand example, and
the most EPA inferred from that was that certain recycled
products “may or may not be legitimate, depending on the use.”
Final Rule, 80 Fed. Reg. at 1,729/2-3. That conclusion doesn’t
take us beyond EPA’s bare assertion that “high levels of
hazardous constituents . . . could indicate” discard. Id. at
1,726/1.
In API I, we were satisfied by EPA’s mere “concern[]” that
some test samples had “unexpected” levels of contaminants
(EPA had no evidence that those results were due to
adulteration). 216 F.3d at 58. We stressed, though, that “a
refiner in a specific case” could show that the product was not
adulterated and not discarded. Id. at 59. Thus, the rule
involved at most a rebuttable presumption, which we have said
can “be sustained without an evidentiary showing . . . so long
as the agency articulates a rational basis.” Sec. of Labor v.
Keystone Coal Mining Corp., 151 F.3d 1096, 1101 (D.C. Cir.
1998). But our cases show that here a “rational basis,” id.,
means a reason, grounded in common sense or logic, to
suppose the inference “so probable that it is sensible and
timesaving to assume [its] truth . . . until the adversary
disproves it,” Nat’l Mining Ass’n v. Babbitt, 172 F.3d 906, 912
(D.C. Cir. 1999) (quoting Keystone, 151 F.3d at 1100-01)
(rejecting presumption for which the agency had “not offered
any support, scientific or otherwise”).
19
EPA has not offered a sufficient “rational basis.” Because
a recycler “in a specific case” won’t be able to recover from
failing to file paperwork and failing the technical provisions,
see API I, 216 F.3d at 59, EPA must offer more than timorous
assertions such as “could indicate” and “may or may not be
legitimate,” Final Rule, 80 Fed. Reg. at 1,726/1, 1,729/2-3.
The dissent sees nothing wrong with EPA’s exception
procedure. But our colleague’s view is significantly colored by
an assumption, not made by EPA, that the “comparable to or
lower than” standard is inherently reasonable and may not even
require an exception. Compare Dissent at 3-4, 9, with Final
Rule, 80 Fed. Reg. at 1,729/1. The dissent argues that the
standard is reasonably limited to situations where constituent
levels are “significantly” higher or exceed a “small acceptable
range.” Dissent at 5 (citing Final Rule, 80 Fed. Reg. at
1,727/2). But significant as to what? Acceptable against what
measure? The rulemaking gives no answer, certainly none
linking directly to the “significant human health or
environmental risk” criterion used in the exception.
§ 260.43(a)(4)(iii). Similarly absent is any reference to utility
or market acceptance as embodied in the “commodity
standards” clauses of subparagraphs (i) and (ii). If either of
those perspectives governed the “comparable to or lower than”
standard, why would EPA devote separate provisions to them?
Not even EPA argues that the “comparable to or lower than”
standard is reasonably limited to any such circumstances; we
will not adopt a tortured interpretation to infer that it is. See
generally Final Rule, 80 Fed. Reg. at 1,727/2-3 (explaining
standard via examples of “zinc galvanizing metal” and
“solvent”). Because the “comparable to or lower than”
standard (and, by extension, the with-analogue track) is not
reasonably focused on items that are “part of the waste disposal
problem,” Safe Food, 350 F.3d at 1268, the exception process
must be adequate to offset that fault. It is not.
20
For these reasons Factor 4 is unreasonable as a
requirement applied, through 40 C.F.R. § 261.2(g), to all
hazardous secondary material recycling. (EPA has also written
the legitimacy factors into specific exclusions. See, e.g., 40
C.F.R. § 261.4(a)(23)(ii)(E). Petitioners do not challenge
Factor 4 as applied to those individual exclusions.)
C. Used Oil Recycling
Industry Petitioners also ask us to invalidate EPA’s
legitimacy factors as applied to used oil recycling. This request
misreads EPA’s rules, which exempt used oil from the
legitimacy factors along with all the other “requirements of [40
C.F.R.] parts 260 through 268.” 40 C.F.R. § 261.6(a)(4).
III. Verified Recycler Exclusion
The Final Rule also amended EPA’s stance on
“reclamation,” a type of recycling that occurs when secondary
materials are “processed to recover a usable product, or . . .
regenerated.” 40 C.F.R. § 261.1(c)(4), (7). A dead battery is
reclaimed, for example, by extracting the still-valuable lead
from it. § 261.1(c)(4). The other modes of recycling are
“use[]” and “reuse[],” which occur when “[a] material is . . .
[e]mployed as an ingredient . . . in an industrial process to make
a product” or “[e]mployed . . . as an effective substitute for a
commercial product.” § 261.1(c)(5), (7). In the 1980s, EPA
adopted a rule manifesting its belief that certain hazardous
secondary materials are so “waste-like” that reclaiming them is
equivalent to discard. Hazardous Waste Mgmt. Sys., 50 Fed.
Reg. 614, 619/1 (Jan. 4, 1985). The materials so classified are
spent materials, listed sludges, listed byproducts, and scrap
metal—although EPA has a specific exception for the latter.
See 40 C.F.R. § 261.2(c)(3) & tbl.1. “Listed” means
catalogued by EPA as hazardous in § 261.31 or § 261.32. See
Hazardous Waste Mgmt. Sys., 50 Fed. Reg. at 619/1. Because
21
processing something is hardly akin to throwing it away, we
held that this reclamation rule improperly regulated materials
that were “neither disposed of nor abandoned, but [were]
passing in a continuous stream or flow from one production
process to another.” AMC, 824 F.2d at 1190, 1193.
EPA nonetheless kept the reclamation-equals-discard rule,
apparently on the reasoning that AMC merely “granted the
petition for review” without ordering vacatur. See Revisions to
the Definition of Solid Waste, 72 Fed. Reg. 14,172, 14,176/3-
77/1 (Mar. 26, 2007). Instead EPA sought to “implement the
AMC I opinion” by adding exclusions for specific materials or
processes. See, e.g., Identification and Listing of Hazardous
Waste, 59 Fed. Reg. 38,536, 38,537/1 (July 28, 1994) (adding
exclusion for petroleum-refining secondary materials),
codified as amended at 40 C.F.R. § 261.4(a)(12). Materials-
specific and process-specific exclusions form a large part of the
pre-2008 exclusions discussed in the introduction to this
opinion. See Proposed Rule, 76 Fed. Reg. at 44,139/1-3
(listing pre-2008 exclusions). Further, EPA adopted two
general exclusions, which unlike almost all of the pre-2008
exclusions, depend on whether the recycling is performed by a
third-party. The first general exclusion, the Generator-
Controlled Exclusion, governs reclamation “under the control
of the generator,” § 261.4(a)(23), and is not challenged here.
The other addresses reclamation of materials transferred to and
reclaimed by a third-party, and has come in two successive
editions. EPA adopted the first edition, the Transfer-Based
Exclusion, as part of its 2008 Rule, 73 Fed. Reg. at 64,669/3-
70/1, previously codified at 40 C.F.R. § 261.4(a)(24)-(25)
(2014), and replaced it with the current edition, the Verified
Recycler Exclusion, in the Final Rule, 80 Fed. Reg. at 1,706/3,
codified at § 261.4(a)(24).
22
Under the Transfer-Based Exclusion, the party offloading
the materials (the “generator”) could send them to a reclaimer
that possessed a RCRA permit (or interim status). 40 C.F.R.
§ 261.4(a)(24)(v)(B) (2014). Alternatively, the generator
could send materials to a reclaimer that lacked such a permit or
status, if the generator had made “reasonable efforts to ensure
that [the chosen] reclaimer intends to properly and legitimately
reclaim the hazardous secondary material and not discard it.”
Id. The “reasonable efforts” involved investigating and
“affirmatively answer[ing]” specific questions that the
regulation posed about the reclaimer. Id.
The Verified Recycler Exclusion is quite similar to its
predecessor but makes two changes that Industry Petitioners
challenge. First, the new exclusion requires the generator to
meet special “emergency preparedness” standards in its
custody of the materials before shipment. See 40 C.F.R.
§ 261.4(a)(24)(v)(E) (referring to standards at § 261.400 et
seq.). For example, the generator’s facility must be
“maintained and operated to minimize the possibility of a fire,
explosion, or any unplanned . . . release of hazardous secondary
materials” that “could threaten human health or the
environment.” § 261.410(a). And the generator must (with
some exceptions) have certain emergency preparedness
processes and equipment in place, such as communications and
“fire control” systems. See § 261.410(b)-(f).
Second, the Verified Recycler Exclusion eliminates the
“reasonable efforts” option afforded by the Transfer-Based
Exclusion and requires that generators send their secondary
materials to reclaimers who either have a RCRA permit (or
interim status), as in the Transfer-Based Exclusion, or a RCRA
variance—in effect an EPA (or state-level) approval of a firm
to operate a third-party “reclamation facility.” See 40 C.F.R.
§ 261.4(a)(24)(v)(B); § 260.31(d) (quoted language); see also
23
§ 271.3 (authorizing states to implement RCRA if they meet
certain conditions); Final Rule, 80 Fed. Reg. at 1,695/2
(describing the new rule); id. at 1,715/1, 1,768/2-3 (describing
role of “authorized state[s]”).
The separate Generator-Controlled Exclusion carries the
same emergency preparedness requirements,
§ 261.4(a)(23)(ii)(F), but it significantly does not mandate a
permit, interim status, or variance. It instead asks generators to
maintain a “written description of how the recycling meets all
four [legitimacy] factors.” § 261.4(a)(23)(ii)(E).
Industry Petitioners insist that EPA had no reason, in its
2015 shift to a Verified Recycler Exclusion, to tighten the
conditions of its predecessor. Though EPA disagrees, it
concedes that “withdrawing the transfer-based exclusion”
entirely “would result in hazardous secondary material that is
currently being legitimately recycled and not discarded being
regulated as hazardous waste,” Final Rule, 80 Fed. Reg. at
1,708/3, in effect, regulation in excess of EPA’s authority as
defined in AMC. In this perhaps topsy-turvy universe, all spent
materials, listed byproducts, and listed sludges being reclaimed
are subject to full RCRA control unless affirmatively excluded.
Because EPA chose to retain a rule that improperly treats as
discarded materials that are “no longer useful in their original
capacity though destined for immediate reuse,” AMC, 824 F.2d
at 1185, it has obliged itself to creating sufficient exceptions to
counter that rule’s overbreadth.
Given the parties’ agreement that some general exclusion
for third-party reclamation is necessary, the question before us
is whether EPA acted reasonably in adding emergency
preparedness requirements and in supplanting the reasonable
efforts option with the variance procedure. Specifically, EPA
must show that “the new policy is permissible under the statute,
24
that there are good reasons for it, and that the agency believes it
to be better” than the old one. FCC v. Fox Television Stations,
Inc., 556 U.S. 502, 515 (2009).
Although no party challenged the Industry Petitioners’
standing on this issue, we noted EPA’s assertion in the record
that in the almost seven years under the Transfer-Based
Exclusion no entity had taken advantage of the reasonable
efforts option. See Final Rule, 80 Fed. Reg. at 1,708/1-2,
1,709/1. If in the real world the option drew no takers for seven
years, could its removal really inflict an injury? Wondering if
petitioners’ claim of injury was truly plausible, as required by
our cases, see, e.g., Food & Water Watch, Inc. v. Vilsack, 808
F.3d 905, 913 (D.C. Cir. 2015), we ordered briefing on the
issue.
In their supplemental brief, Industry Petitioners supplied
the explanation: not long after the Transfer-Based Exclusion
was promulgated, “EPA announced that it was seriously
considering repeal,” which “placed the [] exclusion under a
cloud of uncertainty.” Industry Pet’rs’ Supp. Br. 2.
Unpermitted entities chose to wait and see if the reports of the
rule’s imminent demise were true. See id. Accordingly, there
is no apparent reason to doubt that, as Industry Petitioners
insist, EPA’s retention of the reasonable efforts option would
have led some entities to make use of it.
As to Fox’s required justifications for a change in policy,
EPA is quite clear which rule, 2008 or 2015, it “believes [] to
be better.” 556 U.S. at 515. EPA bemoaned that the Transfer-
Based Exclusion allowed third-party reclaimers to operate
without as much oversight as Subtitle C regulation would
require. Final Rule, 80 Fed. Reg. at 1,707/3. This lack of
oversight, EPA believes, “could lead to the potential for an
increased likelihood of environmental” damage, thus justifying
25
the Final Rule’s changes. Id. at 1,708/1; see id. at 1,711/2
(describing 2008 Rule’s “major regulatory gap” from “lack of
oversight and public participation”).
For the remainder of the Fox analysis we address the two
challenged provisions separately.
A. Emergency Preparedness Requirements
First up are the emergency preparedness requirements and
whether their promulgation meets the requirements of showing
consistency with the statute and good reasons for the new rule.
Fox, 556 U.S. at 515. For reasons to qualify as “good” under
Fox, they must be “justified by the rulemaking record.” State
Farm, 463 U.S. at 42. Here EPA’s reasons for its changes
overlap with its statutory justification—to “identif[y]
hazardous secondary materials that are legitimately recycled
and not discarded,” Final Rule, 80 Fed. Reg. at 1,709/2—so we
analyze the two together.
With the emergency preparedness provisions, EPA’s
reasoning is mostly a retread of what we encountered with
Factor 3. As with the handling requirements, it advances the
mandated precautions as an effort to reduce the risk of discard
and to test the generator’s intent to recycle. See id. at 1,710/2.
Here, to be sure, these prophylactic duties go beyond Factor 3’s
in specificity. Compare 40 C.F.R. § 261.410 (emergency),
with § 260.10 (containment). And the inference of “discard”
from feckless preparations is less obvious than such an
inference from lack of containment (as defined by EPA).
But EPA made findings (unchallenged here) that fires and
explosions are a common cause of environmental damage and
that planning against such mischance reflects a generator’s
intent to reduce losses of hazardous secondary materials—
materials that a firm intending genuine reclamation would
26
presumably regard as valuable. See Final Rule, 80 Fed. Reg.
at 1,710/2; Problems Study at 7. EPA also found that the
secondary materials to be recycled under the Verified Recycler
Exclusion (i.e., those materials that are transferred to third
parties and that don’t qualify for other exclusions) are “often”
of negative value to generators, which “typically pay” the
reclaimer to take the materials or receive a payment inadequate
to cover the costs of transfer. See Final Rule, 80 Fed. Reg. at
1,707/2; see also A Study of Potential Effects of Market Forces
on the Management of Hazardous Secondary Materials
Intended for Recycling 3 (Nov. 21, 2006) (the “Market Study”)
(noting that commercial recyclers accept materials “usually for
a fee”). Because generators are likely to view these materials
more as albatross than asset, it is reasonable for EPA to require
additional assurances, beyond those of Factor 3, that the
generator values them as elements of a genuine recycling
effort.
Petitioners do not claim that the preparation requirements
are an unreasonable test of intent, other than to say that they are
“highly prescriptive,” Industry Pet’rs’ Br. 53-54, an epithet that
most readers of the Code of Federal Regulations would likely
apply to every paragraph. In fact the mandated preparations
seem rather basic. If an entity balks at the prospect of keeping
a “telephone” and “[p]ortable fire extinguisher[]” on site,
§ 261.410(b)(2)-(3), it may not really belong in the business of
handling toxic and inflammable secondary materials. And in
practice it may not even have to do that much: EPA stands
ready to waive these and other preparedness requirements
when they’re not necessary. See § 261.410(b), (d), (e).
As we said of the containment requirements, there is some
risk that these mandatory precautions might be read
unreasonably. For example, the obligation “to minimize the
possibility of” accidents might be taken, standing alone, to
27
require all preventive measures no matter the cost.
§ 261.410(a). But we are satisfied that such a reading would
contravene EPA’s explanation in the rulemaking, that the rule
tests whether the generator intends “to reduce potential loss of
valuable hazardous secondary materials.” See Final Rule, 80
Fed. Reg. at 1,710/2.
B. Administrative Approval Requirements and Remedy
Petitioners focus more persuasively on EPA’s abolition of
the reasonable efforts option and its replacement with a
requirement of a variance for third-party reclamation. Under
the Transfer-Based Exclusion, a generator could send materials
to any reclaimer it chose, provided that, after making a
reasonable investigation, it “affirmatively answer[ed]” five
questions about the reclaimer. 40 C.F.R. § 261.4(a)(24)(v)(B)
(2014). These asked if the reclaimer (1) was employing a
legitimate recycling process; (2) had notified regulators of its
operations and its financial stability; (3) had not been the
subject of recent enforcement actions; (4) had adequate skill
and equipment to perform the recycling safely; and (5) had
adequate processes for disposing of any residual wastes
generated during the recycling. Id. The rule required the
generator to have met this obligation “in good faith” and to
have based its analysis for each question on an “objectively
reasonable belief.” 2008 Rule, 73 Fed. Reg. at 64,700/1. A
generator that failed to meet that standard could be liable for a
RCRA violation. Id. at 64,699/3-64,700/1.
The new rule keeps the general framework for evaluating
reclaimers but broadens the inquiry and assigns it to regulators,
not the generator. If the reclaimer lacks a RCRA permit or
interim status, it must secure a regulatory variance under 40
C.F.R. § 260.31(d) from the EPA Administrator or applicable
state regulator. See Final Rule, 80 Fed. Reg. at 1,715/1. And
the questions, transmogrified into criteria for administrative
28
grant, are expanded to include a sixth, requiring the reclaimer
to “address the potential for risk to proximate populations from
unpermitted releases of the hazardous secondary material.”
§ 260.31(d)(1)-(6). EPA asserts that this “additional
oversight” is required “to ensure that [] hazardous secondary
material is legitimately recycled and not discarded.” Final
Rule, 80 Fed. Reg. at 1,709/1. Here again, EPA’s “good
reasons” and its claim for permissibility under the statute
overlap, but not as persuasively as with the emergency
preparation requirements.
Recall that EPA has a Generator-Controlled Exclusion
which is targeted at the same types of material as the Verified
Recycler Exclusion: hazardous secondary materials reclaimed
in a manner that doesn’t qualify for pre-2008 exclusions. EPA
insists that these materials generally have little value as
recycling inputs, a trait from which one can reasonably infer a
greater susceptibility to illegitimate or improper recycling. See
id. at 1,707/1-2; see also EPA, Revisions to the Definition of
Solid Waste Final Rule Response to Comments Document, at
77 (Dec. 10, 2014) (the “Comments Document”)
(acknowledging that “high value” secondary materials are less
likely to be discarded but arguing that EPA has “already
promulgated exclusions for such materials”).
But this risk of discarding low-value materials would
apply whether the reclamation occurs in-house or externally.
And yet while the Generator-Controlled Exclusion and
Verified Recycler Exclusion share some conditions, only the
latter requires an administrative approval. Industry Petitioners
charge that EPA has acted on the basis of an unreasonable
presumption that transfer carries an undue risk of discard. Such
a presumption would contradict our holding in Safe Food that
“[a]s firms have ample reasons to avoid complete vertical
29
integration, firm-to-firm transfers are hardly good indicia of a
‘discard’” under RCRA. 350 F.3d at 1268 (citation omitted).
EPA counters that its reasoning is more nuanced, that it
rests not on transfer alone, but on the confluence of low-value
materials and transfer. These factors combine to form
“perverse incentives . . . to over-accumulate [] hazardous
secondary materials” without recycling them. Final Rule, 80
Fed. Reg. at 1,708/2; see also id. at 1,716/1 (justifying separate
exclusion for transferred “spent solvents” because third-party
reclaimers have “little economic reason to accumulate” these
“higher-value” materials). EPA’s theory is certainly more
clever than Industry Petitioners give it credit for, but EPA fails
to provide sufficient linkage between theory, reality, and the
result reached. See State Farm, 463 U.S. at 43 (“[T]he agency
must examine the relevant data and articulate a satisfactory
explanation for its action including a ‘rational connection
between the facts found and the choice made.’” (quoting
Burlington Truck Lines v. United States, 371 U.S. 156, 168
(1962))).
EPA’s reasoning relies heavily on a theoretical study
predicting that when the value of a recycled product is low, or
the market for it “weak or unstable,” the “acceptance fee”
generators pay when off-loading materials “may be an
important component of the [reclaimer’s] overall revenue.”
Market Study at 18; see also id. at 3. EPA asserts that this
incentive leads “commercial third party recyclers to maximize
the amount of hazardous secondary material they can accept to
increase profits,” thus creating risks of “over-accumulat[ion]”
and “discard.” Final Rule, 80 Fed. Reg. at 1,752/1. But having
found that some types of recycling are typified by transfers of
materials low or unstable in value, see Market Study at 88-89,
and having surmised that those conditions could lead to
“market failure,” id. at 3, the study disclaims any analysis of
30
whether such failures actually occur and to what degree:
“limitations on the availability and quality of data prevented us
from conducting [] empirical tests,” id. at 43.
EPA is free to rely on theoretical or model-based
approaches, as long as that reliance is reasonable in context.
As our dissenting colleague points out, Dissent at 10-11, we
long ago recognized that “[r]easoned decisionmaking can use
an economic model to provide useful information about
economic realities, provided there is a conscientious effort to
take into account what is known as to past experience and what
is reasonably predictable about the future.” American Public
Gas Ass’n. v. FPC, 567 F.2d 1016, 1037 (D.C. Cir. 1977). And
more recently, as our colleague also points out, Dissent at 11,
we deferred to EPA’s use of particle-trajectory modeling when
the agency found it to be “particularly illuminating,” noted that
it was “more precise” in some cases than historical data, and
“took reasonable steps to account for [its] limitations,”
Mississippi Comm’n on Environmental Quality v. EPA, 790
F.3d 138, 166-71 (D.C. Cir. 2015). Thus what we seek is some
indication of a reasonable concurrence between model and
reality. Here the Market Study cautions that its hypothesized
“sources of market failure,” e.g., skewed incentives leading to
discard and environmental damage, “do not necessarily
correlate directly to observable characteristics of the firm or
market.” Market Study at 48-49. Thus, the study offers EPA
reasons (based on seemingly sensible notions of market actors’
incentives) to think that the incidence of discard might be
somewhat higher in the presence of specific characteristics
(e.g., low-value materials and third-party transfer) than in their
absence. But it offers no data to support the view that the
increased incidence actually exists nor to show how great the
increase is. That type of information (or a sufficient
explanation for its absence) is quite important in cases such as
this, where EPA is determining that an activity nominally
31
outside of its jurisdiction should be banned absent regulatory
pre-approval. Thus EPA’s reliance on the study, standing
alone, does not provide a sufficient basis for the administrative
approval provisions.
EPA claims to have the necessary support in its Problems
Study, a document whose faults we’ve already discussed. Of
the study’s 250 instances of recycling gone awry, 238 involved
third-party recycling as opposed to on-site recycling. Problems
Study at 8. Based on these “easy to find” cases, id. at 4, EPA
inferred that discard could occur under the old Transfer-Based
Exclusion unless “additional oversight” was imposed, Final
Rule, 80 Fed. Reg. at 1,708/2. But far from confirming the
Market Study’s assumptions, the Problems Study is even more
tentative in its treatment of third-party recycling. It cautions
that the greater proportion of problems at off-site recyclers
might be because “on-site recycling is simply a less common
practice.” Problems Study at 8. (The study made no effort to
explain how the proportions of on-site and off-site reclamation
in the examples reviewed matched those of the real world.)
From the study, EPA concluded that “the vast majority of
environmental damages—approximately 94%—occur at off-
site commercial recyclers.” Final Rule, 80 Fed. Reg at 1,699/2.
But by focusing only on recycling gone wrong, that statistic
tells us nothing about such episodes’ overall likelihood in any
particular setting. Compare Dissent at 11-12. The dissent
offers a helpful example: imagine that 94% of plane crashes are
associated with Airline A; can we say that this airline is less
safe than its competitors? Dissent at 12. Before we can land
at that conclusion, we’d need first to know something about the
distribution of flights among airlines. If Airline A performs
94% of the set of flights that happened to be studied, its crash-
percentage would seem decidedly average. Compare Problems
Study at 8 (noting that on-site recycling may be “less
32
common”). Or maybe Airline A flies only the most dangerous
routes. Context gives clues. The Problems Study leaves us
grasping.
After commenters attacked EPA’s interpretation of this
study, EPA responded that because most recyclers lack any
duty to notify regulators, the agency does not have access to
better data about recycling practices. Final Rule, 80 Fed. Reg.
at 1,740/3-41/1-2. Indeed, we commonly “defer to an agency’s
decision to proceed on the basis of imperfect scientific
information, rather than to invest the resources to conduct the
perfect study.” Cablevision Sys. Corp. v. FCC, 649 F.3d 695,
717 (D.C. Cir. 2011) (internal quotation marks omitted). But
limited data do not justify unlimited inferences. Agency
reliance on imperfect information makes sense only where that
information supports the agency action.
The Market Study and Problems Study at most support a
belief, carried over from the Transfer-Based Exclusion, that
third-party reclaimers present distinct risks compared to on-site
reclaimers. These risks would accordingly justify special
conditions, such as the variance criteria for which the
Generator-Controlled Exclusion has no analogue. The first
five of these criteria, which petitioners do not challenge, seem
properly focused on whether the third-party reclaimer has the
inclination and ability to recycle legitimately. See 40 C.F.R.
§ 260.31(d)(1)-(5). (We cannot readily say the same of the
sixth, discussed below.)
But the imposition of a requirement of advance
administrative approval cannot be justified merely on the
differences that EPA has identified between on-site and third-
party reclamation. EPA must explain why the risk that
purported third-party recyclers will in reality “discard” the
materials is so high that reclamation under the Verified
33
Recycler Exclusion may only proceed on the basis of prior
agency approval. On this key aspect of third-party reclamation,
EPA’s Problems and Market studies say nothing useful.
EPA invokes yet another study, An Assessment of Good
Current Practices for Recycling of Hazardous Secondary
Materials (Nov. 22, 2006). This analysis, performed before
adoption of the Transfer-Based Exclusion, discussed the extent
to which generators voluntarily audited their third-party
recyclers to ensure that “their materials are not mishandled.”
Id. at 7. The study found that “auditing is being practiced by
many responsible companies” but that “small generators do not
audit as regularly as larger customers” and that smaller
generators’ audits may not be as thorough. Id. at 20. In 2008,
EPA evidently did not find much alarm in this data; it made the
reasonable efforts option available for small and large
generators alike. By 2015, EPA was less sanguine about the
study’s results, warning that “many smaller generators would
not have the technical expertise or resources to” adequately
assess third-party reclaimers. See Final Rule, 80 Fed. Reg. at
1,711/3 & n.17. EPA is free to reasonably revise its
interpretation of that study, but even this updated reasoning
cannot support the Final Rule. EPA admits in the rulemaking
that “many large companies do conduct environmental audits
of recycling facilities.” Id. at 1,711/3. A risk that some smaller
generators would misapply the reasonable efforts option does
not explain why EPA should treat larger generators as prone to
making inadequate assessments.
Along with their challenge to the variance procedure,
Industry Petitioners also claim that the sixth variance criterion
is, in substance, vague and unreasonable. This criterion
involves something of a “cumulative” nuisance standard; it
requires third-party reclaimers to account for how any
“unpermitted releases” from their facilities might combine with
34
“other nearby potential stressors” to create “risk[s] to
proximate populations.” 40 C.F.R. § 260.31(d)(6). The more
environmental problems there already are in an area—such as
“other industrial facilities, landfills, transportation-related air
emissions, poor housing conditions (e.g., lead-based paint),
leaking underground tanks, pesticides, and incompatible land
uses”—the less appropriate it might be for the reclaimer to add
yet another stress. See Final Rule, 80 Fed. Reg. at 1,714/3-
15/1.
Thus the criterion assumes discard, i.e., behavior regulable
under RCRA, and seeks to constrain its environmental impact,
rather than testing for discard’s existence. It identifies one of
the many problems related to waste disposal, but not whether
the reclaimer is actually contributing to the waste disposal
problem. Were we dealing with materials that were lawfully
identified as hazardous waste, this test might be valid for some
purposes. But the Verified Recycler Exclusion covers
materials that might be labeled waste only because of a
reclamation-equals-discard rule that EPA has all but conceded
is overbroad. Id. at 1,708/3. This criterion therefore cannot
stand as a means of identifying discard.
As for remedy, Industry Petitioners ask that we keep the
Verified Recycler Exclusion in place while removing its
objectionable provisions. They seek this remedy because not
all of the Final Rule’s changes were to their detriment.
Whereas the Transfer-Based Exclusion disqualified spent
catalyst generators from relying on it, 40 C.F.R.
§ 261.4(a)(24)(iii) (2014) (spent catalysts referenced as K171
and K172), the Verified Recycler Exclusion removed that bar.
As at least one of petitioners’ members is a spent catalyst
generator, an unalloyed return to the Transfer-Based Exclusion
would be for it a hollow victory.
35
We will “sever[] and affirm[] [] a portion of an
administrative regulation” only when we can say without any
“‘substantial doubt’ that the agency would have adopted the
severed portion on its own.” New Jersey v. EPA, 517 F.3d 574,
584 (D.C. Cir. 2008) (internal quotation marks omitted). Thus
we have severed provisions when “they operate[d] entirely
independently of one another.” Davis Cty. Solid Waste Mgmt.
v. EPA, 108 F.3d 1454, 1459 (D.C. Cir. 1997). Here, though,
we are not sure that EPA’s regulatory and deregulatory efforts
were wholly independent. The rulemaking shows that EPA
entertained two different options for removing the spent
catalyst bar: first as part of the plan to repeal the Transfer-
Based Exclusion entirely and replace it with “alternative
Subtitle C regulat[ions]” for which “spent catalysts would be
eligible,” Proposed Rule, 76 Fed. Reg. at 44,141/3 & n.54;
second as part of the Verified Recycler Exclusion that EPA
adopted, Final Rule, 80 Fed. Reg. at 1,738/1. At no point in
the record does EPA propose keeping the Transfer-Based
Exclusion and repealing its spent catalyst disqualifier.
Would EPA have so proposed had it known the Verified
Recycler Exclusion would be vacated? There is some evidence
pointing in that direction, but doubts remain. EPA explained
that its spent catalyst decision was due in large part to changes
to the “contained” standard at 40 C.F.R. § 260.10; these
revisions addressed the risk of fire that originally led EPA to
bar spent catalysts. See Final Rule, 80 Fed. Reg. at 1,738/1.
EPA also removed the spent catalyst disqualifier from the
Generator-Controlled Exclusion, which is generally less
restrictive than the Verified Recycler Exclusion. See id. These
facts suggest that EPA might have removed the disqualifier
absent the other changes in the Verified Recycler Exclusion.
But when commenters attacked EPA’s proposal to remove the
spent catalyst bar and advocated a more stringent approach,
EPA responded that, to fulfill the goal of allowing only
36
legitimate recycling, there was no need to impose the suggested
“additional conditions.” Comments Document at 265-66.
EPA’s answer assumed that that the new Verified Recycler
Exclusion and the new containment standard were together
sufficient to regulate transferred spent catalysts. We cannot
clearly infer what EPA would have done absent that exclusion.
The only changes in the Verified Recycler Exclusion that
we can sever without any “substantial doubt” are the
emergency preparedness requirements, 40 C.F.R.
§ 261.4(a)(24)(v)(E), which are as we explained lawful, and an
expanded containment requirement, § 261.4(a)(24)(v)(A),
which was not challenged. These new provisions address some
of EPA’s perceived “regulatory gaps” in the Transfer-Based
Exclusion, Final Rule, 80 Fed. Reg. at 1,706/3, and they do not
depend on any vacated portions of the Verified Recycler
Exclusion. On remand, EPA can of course renumber its rules
as necessary to accommodate the returning Transfer-Based
Exclusion provisions.
EPA has not commented on the requested remedy,
probably because the remedy section in Industry Petitioners’
opening brief was quite confusing, and their desire to sever and
affirm was made evident only in their reply. If EPA, or any
party, wishes to disabuse us of our substantial doubt with a
petition for rehearing, we will of course reconsider as
necessary. See MD/DC/DE Broadcasters Ass’n v. FCC, 253
F.3d 732, 740 (D.C. Cir. 2001) (citing Virginia v. EPA, 116
F.3d 499, 500-01 (D.C. Cir. 1997)).
Having concluded that the Verified Recycler Exclusion is
unreasonable, we need not address Environmental Petitioners’
argument that the exclusion is too lenient.
IV. Remaining Challenges by Industry Petitioners
37
Industry Petitioners have two remaining challenges. The
first is that EPA cannot subject spent catalysts to the Verified
Recycler Exclusion. The second is that EPA cannot treat off-
specification commercial chemical products as secondary
materials. The first is rendered moot by our restoration of the
Transfer-Based Exclusion, and no more needs to be said about
it here. The second is also outside our jurisdiction, but for
reasons requiring more explanation.
During the rulemaking, a commenter asked EPA to
confirm that commercial chemical products are not “hazardous
secondary material[s]” as that class is defined in 40 C.F.R.
§ 260.10. Comments Document at 313. EPA answered, much
to Industry Petitioners’ chagrin, that “a commercial chemical
product listed in 40 CFR 261.33 could be considered a
hazardous secondary material if it is off-specification or
otherwise unable to be sold as a product.” Id. at 314; see
Industry Pet’rs’ Br. 58-65. The question and EPA’s answer
concern an issue that is antecedent to the Final Rule’s
definition of discarded hazardous waste. The rule identifies
when secondary materials become waste as a result of being
sham recycled, but that delineation necessarily builds on prior
law and regulations governing when materials are secondary.
We cannot assess EPA’s statement on that subject unless we
can find the issue within our original jurisdiction, which is
limited to actions by EPA “promulgating” regulations, etc. 42
U.S.C. § 6976(a)(1).
Tellingly, the comment and EPA’s response are
interpreting provisions in 40 C.F.R. § 260.10 and § 260.33 that
were left untouched by the Final Rule. See Comments
Document at 313-14. Because of the limits on our jurisdiction,
we cannot entertain the claim unless EPA’s statement was
more than just an interpretation of a prior rule; it must interpret
part of the Final Rule or be itself an effective “legislative rule.”
38
See Cement Kiln Recycling Coal. v. EPA, 493 F.3d 207, 226
(D.C. Cir. 2007). Industry Petitioners’ allegation, though, is
that EPA’s response abandoned a prior policy, embodied
largely in guidance materials, without properly recognizing
that change. Industry Pet’rs’ Br. 64-65. Such a challenge is
properly before the district court, not this tribunal (Industry
Petitioners make no claim of pendent jurisdiction). See 42
U.S.C. § 6976(a)(1). We express no opinion on when EPA
may consider commercial chemical products to be secondary
materials.
V. Challenges by Environmental Petitioners
Environmental Petitioners challenge EPA’s approach to
the pre-2008 exclusions. As noted above, before 2008, EPA
had promulgated 32 exclusions from the definition of solid
waste—that is, it had exempted 32 different materials,
products, or processes from Subtitle C regulation. In its
Proposed Rule, EPA proposed subjecting facilities that
qualified for these exclusions to four new requirements, three
of which are relevant here: legitimacy, containment, and
notification. 76 Fed. Reg. at 44,138/3-39/1-2. The proposed
legitimacy condition set forth the factors that facilities had to
satisfy in order to prove they are engaged in legitimate, rather
than sham, recycling. Under the proposed containment
condition, facilities had to store all hazardous secondary
materials in units that meet certain safety, quality, and labeling
criteria. Id. at 44,140/1. And the proposed notification
condition obligated regulated parties periodically to submit
information to EPA so that the agency could monitor
compliance. Id. at 44,140/1-2. EPA based these conditions on
a study of environmental damage cases involving hazardous
waste (an earlier version of the Problems Study) and EPA’s
finding that most of cases in that study were associated with
secondary materials exempted under a pre-2008 exclusion. Id.
at 44,138/1-2.
 39
In the final rule, however, EPA opted to apply only the
legitimacy condition to all pre-2008 exclusions and deferred a
decision about whether to do the same with containment and
notification. Specifically, EPA stated that it was “deferring
action on applying the contain[ment] [and notification]
standard[s] to the pre-2008 exclusions and exemptions until [it
could] more adequately address commenters’ concerns.” Final
Rule, 80 Fed. Reg. at 1,766/2-3. Commenters had raised
unanticipated objections, EPA explained, regarding the
difficulties of implementing a universal containment provision
and the burdens imposed by a notification requirement. Id.
Environmental Petitioners take issue with EPA’s decision
to defer action on containment and notification. Drawing on
language from the Proposed Rule, they argue that EPA
fundamentally changed its position without explanation:
whereas the agency originally viewed containment and
notification as “minimum requirements necessary to define
when recycled hazardous secondary materials are not
discarded,” 76 Fed. Reg. at 44,138/3-39/1, it ultimately
determined that containment and notification conditions were
expendable. This unexplained reversal, Environmental
Petitioners contend, was arbitrary and capricious.
We need not—indeed cannot—reach the merits of this
challenge. RCRA’s judicial review provision vests this court
with exclusive power to review “action[s] of the Administrator
in promulgating any regulation, or requirement under this
chapter or denying any petition for the promulgation,
amendment or repeal of any regulation under this chapter.” 42
U.S.C. § 6976(a)(1). This provision gives us jurisdiction over
only “three types of actions by EPA: promulgation of final
regulations, promulgation of requirements, and the denial of
petitions for the promulgation, amendment or repeal of RCRA
regulations.” API I, 216 F.3d at 68; see Molycorp, Inc. v. EPA,
40
197 F.3d 543, 545 (D.C. Cir. 1999) (characterizing 42 U.S.C.
§ 6976(a)(1) as “a limitation on our jurisdiction”). Critically
here, we have held that “[a] decision by an agency to defer
taking action is not a final action reviewable [under RCRA].”
API I, 216 F.3d at 68; see also American Portland Cement
Alliance v. EPA, 101 F.3d 772, 777 (D.C. Cir. 1996). Because
EPA expressly stated that it was deferring action on applying
containment and notification conditions to the pre-2008
exclusions, we lack jurisdiction to review Environmental
Petitioners’ claim.
Environmental Petitioners resist this straightforward
jurisdictional analysis. Citing Montana v. Clark, 749 F.2d 740
(D.C. Cir. 1984), and Appalachian Power Co. v. EPA, 208 F.3d
1015 (D.C. Cir. 2000), they argue that we may review EPA’s
decision to defer. But neither of these cases construes RCRA’s
judicial review provision. See Appalachian Power Co., 208
F.3d at 1020-22 (interpreting the Clean Air Act’s judicial
review provision); Clark, 749 F.2d at 744 (interpreting the
Administrative Procedure Act). And even if they did, those
cases are easily distinguished. Whether we have authority to
review an agency’s express rejection of a request to amend
longstanding regulations, Clark, 749 F.2d at 744, is irrelevant
where, as here, EPA has merely deferred—rather than
rejected—a particular action. Moreover, although “[t]he fact
that a law may be altered in the future has nothing to do with
whether it is subject to judicial review at the moment,”
Appalachian Power Co., 208 F.3d at 1022, we lack jurisdiction
to review EPA’s deferred action not because EPA could change
its mind down the road, but because it has yet to make up its
mind in the first place.
Alternatively, Environmental Petitioners contend that we
have jurisdiction over their challenge because EPA “reopened”
comment on the pre-2008 exclusions and then declined to
41
revise them. Environmental Pet’rs’ Br. 43. The reopener
doctrine “permits a plaintiff to bring an otherwise-stale
challenge . . . . when an agency has considered substantively
changing a rule but ultimately declined to do so.” Mendoza v.
Perez, 754 F.3d 1002, 1019 n.12 (D.C. Cir. 2014).
Environmental Petitioners’ reopener argument falters for a
simple reason: the doctrine has no applicability to this case
because EPA never considered changing the substance of the
pre-2008 exclusions. As it stated in the Proposed Rule, EPA
was “not reopening comment on any substantive provisions of
the regulatory exclusions or exemptions,” but rather was
proposing legitimacy, containment, and notification
requirements “as means to better enforce the regulations.” 76
Fed. Reg. at 44,138/3.
Of course, nothing in our conclusion forecloses judicial
review of EPA’s inaction once and for all. Environmental
Petitioners may petition EPA to promulgate a rule imposing
containment and notification conditions and, if their petition is
denied, seek review in this court. See 42 U.S.C. § 6976(a)(1)
(granting jurisdiction to review denials of rulemaking
petitions). We conclude only that Environmental Petitioners
are barred from obtaining review in the manner they now seek.
And because we dispose of their challenge by concluding that
we are without statutory jurisdiction, we have no reason to
address Industry Intervenors’ contention that Environmental
Petitioners lack Article III standing. See Sinochem
International Co. Ltd. v. Malaysia International Shipping
Corp., 549 U.S. 422, 431 (2007) (holding that “there is no
mandatory ‘sequencing of jurisdictional issues’” and that “a
federal court has leeway ‘to choose among threshold grounds
for denying audience to a case on the merits’” (quoting
Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584-85
(1999))).
42
VI. Conclusion
The Final Rule is upheld in part and vacated in part as
consistent with this opinion. Briefly put: Factor 3 is upheld;
Factor 4 is vacated insofar as it applies to all hazardous
secondary materials via § 261.2(g); the Verified Recycler
Exclusion is vacated except for its emergency preparedness
provisions and its expanded containment requirement; and the
Transfer-Based Exclusion is reinstated. As a consequence of
the latter, the removal of that exclusion’s bar on spent catalysts
is vacated, subject, as we noted above, to such arguments as
parties may raise supporting a different outcome.
So ordered.
TATEL, Circuit Judge, dissenting from Parts II.B and III.B: In
the mid-1970s, as industrial and technological developments
spurred the national economy, the United States faced “a rising
tide of scrap, discarded, and waste materials.” 42 U.S.C.
§ 6901(a)(2). This mounting waste caused “serious financial,
management, intergovernmental, and technical problems,” id.
§ 6901(a)(3), and posed a grave threat “to human health and
the environment,” id. § 6901(b)(5). In response, Congress
passed the Resource Conservation and Recovery Act (RCRA),
42 U.S.C. §§ 6901–6992k, a comprehensive scheme “to
regulate hazardous wastes from cradle to grave in accordance
with . . . rigorous safeguards and waste management
procedures,” Chicago v. Environmental Defense Fund, 511
U.S. 328, 331 (1994). Through RCRA, and central to this case,
Congress sought to prevent environmental harm by ensuring
that hazardous waste was “properly managed in the first
instance thereby reducing the need for corrective action at a
future date.” 42 U.S.C. § 6902(a)(5).
Congress gave the Administrator of the Environmental
Protection Agency (EPA) broad authority to effectuate this
goal. See id. § 6912. Selected by the President and confirmed
by the Senate for his or her expertise in environmental issues,
the Administrator may promulgate “such regulations as are
necessary to carry out his [or her] functions.” Id. § 6912(a)(1).
The judiciary, by contrast, has a limited role under RCRA.
When reviewing rules issued by the Administrator, the courts,
lacking environmental expertise and political accountability,
are bound by two fundamental principles of judicial restraint.
First, because RCRA provides for review “in accordance
with” the Administrative Procedure Act, id. § 6976(a), a
reviewing court’s task is to ask only whether the rule is
“arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law,” 5 U.S.C. § 706(2)(A). As the Supreme
Court has made clear, once a court is satisfied that EPA is
acting within its delegated authority, the “scope of [judicial]
2
review under the ‘arbitrary and capricious’ standard is narrow.”
Motor Vehicle Manufacturers Association of the United States
v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29,
43 (1983). Courts are “not to ask whether a regulatory decision
is the best one possible or even whether it is better than the
alternatives.” FERC v. Electric Power Supply Association, 136
S. Ct. 760, 782 (2016). This is especially true where, as here,
agency action involves “a high level of technical expertise,”
Marsh v. Oregon Natural Resources Council, 490 U.S. 360,
377 (1989) (quoting Kleppe v. Sierra Club, 427 U.S. 390, 412
(1976) (internal quotation mark omitted)), and “predictive
judgments about areas that are within the agency’s field of
discretion,” BNSF Railway Co. v. Surface Transportation
Board, 526 F.3d 770, 781 (D.C. Cir. 2008) (quoting Wisconsin
Public Power, Inc. v. FERC, 493 F.3d 239, 260 (D.C. Cir.
2007)).
Second, when reviewing facial challenges to a rule—again
as here—courts are required to assess the rule’s validity across
a broad spectrum of applications; they are not to imagine
whether the rule might be arbitrary in “uncommon particular
applications,” which, of course, can be challenged later should
they arise. EPA v. EME Homer City Generation, L.P., 134
S. Ct. 1584, 1609 (2014). As Congress well knew when it
authorized pre-enforcement facial review of RCRA rules, see
42 U.S.C. § 6976(a)(1), the fact that a petitioner—or for that
matter a judge—“can point to a hypothetical case in which the
rule might lead to an arbitrary result does not render the rule
‘arbitrary or capricious,’” American Hospital Association v.
NLRB, 499 U.S. 606, 619 (1991).
In this case, EPA promulgated a rule defining when
hazardous materials qualify as “discarded” and thus may be
subjected to RCRA’s rigorous protections. The court never
questions the Administrator’s statutory authority to issue the
3
Final Rule, but nonetheless invalidates two of its critical
features: Factor 4 of the legitimacy test, which distinguishes
genuine from sham recycling; and the verified recycler
exclusion, which ensures that companies claiming to recycle
hazardous waste in fact do so. In reaching this result, the court
displays a level of scrutiny that I believe conflicts with the
APA’s highly deferential standard of review and with the
principles governing judicial review of facial challenges to
rules. As a result, the court has deprived the public of two
safeguards that the Administrator, exercising her statutory
authority under RCRA, reasonably believed were needed to
protect “human health and the environment.” 42 U.S.C.
§ 6901(b)(5). I respectfully dissent.
I.
Factor 4 of the legitimacy test targets sham recyclers that
incorporate hazardous materials into recycled products in order
to avoid proper recycling or disposal. It does so by requiring
that the product of a recycling process “be comparable to a
legitimate product or intermediate.” 40 C.F.R. § 260.43(a)(4).
This approach makes sense: as the Administrator explained,
“high levels of hazardous constituents” in an allegedly recycled
product “could indicate that the recycler incorporated
hazardous constituents into the final product when they were
not needed to make that product effective.” 80 Fed. Reg. 1,726.
The Final Rule offers recyclers three alternative avenues for
demonstrating compliance with Factor 4.
First, subparagraph (i) addresses recycled products that
have raw analogues. Such products satisfy Factor 4 if they (A)
“do[] not exhibit a hazardous characteristic . . . that analogous
products do not exhibit” and (B) contain comparable
concentrations of hazardous constituents or hazardous-
constituent levels that meet widely used commodity standards.
40 C.F.R. § 260.43(a)(4)(i). In my view, this subparagraph
4
rationally effectuates Factor 4’s general approach. EPA
inferred that if a recycled product contains more hazardous
constituents or properties than its raw analogue, sham recycling
has occurred. 80 Fed. Reg. 1,727. Why else would those
hazardous constituents or properties be present? By way of
example, EPA pointed to paint made from recycled hazardous
materials. If such paint contains significant amounts of
cadmium (a hazardous constituent), but the same type of paint
made from raw materials contains no cadmium, such a
disparity “could indicate that the cadmium serves no useful
purpose and is being passed through the recycling process and
discarded in the product.” Id.
We validated an almost identical technical judgment by
the Administrator in Safe Food and Fertilizer v. EPA, 350 F.3d
1263 (D.C. Cir. 2003). Under the rule in that case, certain
recycled materials were deemed non-discarded when (1)
market participants treated them “more like valuable products
than like negatively-valued wastes” and (2) “the [products]
derived from the recycled [materials were] chemically
indistinguishable from analogous commercial products made
from virgin materials.” Id. at 1269. In essence, this rule
exempted materials from regulation based on their compliance
with criteria that, like Factors 3 and 4, assess whether recyclers
treat materials as valuable commodities and generate products
chemically indistinguishable from analogous products. We
held that these two factors, in conjunction, represented a
“reasonable tool for distinguishing products from wastes.” Id.
As to the “identity principle”—subparagraph (i)’s
counterpart—the court reasoned that where a recycled product
is “indistinguishable in the relevant respects” from the
analogous “virgin” product, it is “eminently reasonable” to
treat both as “products rather than wastes.” Id.
5
In spite of Safe Food, this court concludes that
subparagraph (i) is too “imprecis[e]” to be reasonable. Maj. Op.
at 12. In its view, some legitimately recycled products may
contain “some small excess of hazardous constituents,” and the
presence of those hazardous materials “would not constitute a
reasonable basis for dubbing the product or the process a
sham.” Id. But subparagraph (i) does not simply target products
with “some small excess of hazardous constituents.” Rather, it
targets products with significantly more hazardous constituents
or properties than an analogous raw product, i.e., beyond “a
small acceptable range” of difference. 80 Fed. Reg. 1,727. The
Administrator explained: “If a product produced with
hazardous secondary material exhibited a characteristic of
hazardous waste that an analogous product did not exhibit, this
would be an indication that sham recycling could be occurring
as a significant hazardous constituent or characteristic would
be in the product only as a result of the recycling of the
hazardous secondary material.” Id. (emphasis added).
Perhaps the presumption underlying subparagraph (i) does
suffer from some “imprecision.” Maj. Op. at 12. Yet because
Industry Petitioners have mounted a facial attack on the Final
Rule, this court has no authority to conjure up “hypothetical
case[s] in which the rule might lead to an arbitrary result.”
American Hospital Association, 499 U.S. at 619. Where, as
here, the Administrator’s presumption of sham recycling based
on elevated levels of hazardous constituents is reasonable
across most applications, we must uphold it. Id. If someday the
Administrator applies the rule to a recycler in an arbitrary and
capricious manner—for instance, as the court fears, by
selecting an unreasonably “small acceptable range of
difference,” see Maj. Op. at 19—that recycler “may bring a
particularized, as-applied challenge to the [rule],” EME Homer
City Generation, 134 S. Ct. at 1609.
6
The court’s analysis of subparagraph (i) suffers from a
second defect. Whether the presence of hazardous constituents
provides sufficient evidence of sham recycling is exactly the
type of technical judgment that RCRA delegates to the
Administrator. Of course, the Administrator “must examine the
relevant data and articulate a satisfactory explanation for its
action.” State Farm, 463 U.S. at 43. The court, however, never
questions the Administrator’s compliance with these two
requirements. Instead, it second guesses the Administrator’s
“predictive judgments,” BNSF Railway Co., 526 F.3d at 781,
about a matter—the precise level of hazardous constituents
needed to demonstrate sham recycling—that “requires a high
level of technical expertise” to which “we must defer,” Marsh,
490 U.S. at 377.
Subparagraph (ii), which applies when a recycled product
has no raw analogue, offers recyclers a second way to show
compliance with Factor 4. These products qualify as legitimate
if they “meet[] widely recognized commodity standards and
specifications” or if “[t]he hazardous secondary materials
being recycled are returned to the original process . . . from
which they were generated.” 40 C.F.R. § 260.43(a)(4)(ii).
The court concedes that subparagraph (ii) is reasonable,
see Maj. Op. at 10–11, and for good reason. The Final Rule
describes the agency’s efforts to address commenters’ concerns
that in many cases of legitimate recycling “there may not be an
analogous product with which a facility can compare the
product of the recycling process.” 80 Fed. Reg. 1,728. In
response to these concerns, as well as other comments
supporting an approach focused on commodity standards and
closed-loop recycling, the Administrator carved out “recycling
processes that [are] designed to use a specific hazardous
secondary material to make a useful product and processes that
7
always incorporate[] a hazardous secondary material back into
the generating process during manufacturing.” Id.
Finally, subparagraph (iii)—a catchall for recyclers unable
to comply with subparagraphs (i) or (ii)—allows recyclers to
demonstrate legitimacy by showing either a “lack of exposure
from . . . or bioavailability of . . . toxics” in the product.
40 C.F.R. § 260.43(a)(4)(iii). Even if they fail to make either
showing, moreover, recyclers can still demonstrate legitimacy
by pointing to any “other relevant considerations” showing that
the product does not “pose a significant human health or
environmental risk.” Id. To make these showings, recyclers
must “prepare documentation,” including a “certification
statement that the recycling is legitimate,” which “must be
maintained on-site for three years after the recycling operation
has ceased.” Id.
Although the court acknowledges that subparagraph
(iii) reasonably draws the line between recycling and discard
through a perspective based on health and environmental risks,
Maj. Op. at 15 (citing Safe Food, 350 F.3d at 1269–70), it
nonetheless concludes that subparagraph (iii) “falls short of
saving the rule, due to the draconian character of the
procedures it imposes on recyclers,” namely, the requirement
to prove legitimacy by preparing and maintaining
“paperwork,” id. at 15–16.
For their part, however, Industry Petitioners never argue
that the rule’s paperwork obligations are too rigorous. This is
understandable. If subparagraph (iii) qualifies as draconian,
then so too would countless other run-of-the-mill requirements
that entities file applications and keep certificates on hand: like
those for pilots, see 14 C.F.R. § 61.3; id. § 61.123, elevator
operators, see D.C. MUN. REGS. tit. 12, § 3010A–3011A, and
businesses selling alcohol, see D.C. CODE § 25-401; id. § 25-
 8
711, just to name a few. Not even the procedures for gaining
and maintaining admission to the District of Columbia Bar
would pass muster, as they require candidates to prepare a
character and fitness application and certify completion of a
mandatory course on professional conduct. See D.C. COURT OF
APPEALS R. 46; D.C. BAR BYLAWS, R. 2.
In any event, the court’s conclusion runs headlong into
precedent. In American Chemistry Council v. EPA, 337 F.3d
1060 (D.C. Cir. 2003), we considered a challenge to an EPA
rule that presumed certain mixtures and derivatives of waste
were “hazardous” and thus subject to regulation, yet permitted
regulated entities to show otherwise. Upholding this rule, we
concluded that the Administrator acted reasonably in
“[p]lacing the burden upon the regulated entity to show the lack
of a hazardous characteristic.” Id. at 1065. This burden-shifting
approach, we determined, alleviated unmanageable
administrative obligations for the agency and comported with
RCRA’s command to “err on the side of caution.” Id. at 1065–
66.
Subparagraph (iii) works just like the rule we approved in
American Chemistry Council. If a recycler is unable to satisfy
subparagraph (i) or (ii), it is a presumptive sham recycler.
Subparagraph (iii) then allows the recycler to prove otherwise
by making the requisite showings through documentation. If
anything, the rule here is more lenient than the one in American
Chemistry Council because subparagraph (iii) provides for a
“self-implementing certification process,” 80 Fed. Reg. 1,730,
rather than a “cumbersome . . . delisting process,” American
Chemistry Council, 337 F.3d at 1065.
According to the court, the Final Rule is unlike the one in
American Chemistry Council because the Administrator never
demonstrated that recyclers failing to meet subparagraph (i) are
9
presumptively discarding. Maj. Op. at 16–17. At bottom, then,
the court’s critique of subparagraph (iii) traces back to its
conclusion that subparagraph (i) (and only subparagraph (i))
does not reasonably distinguish legitimate from sham
recycling. But contrary to the court’s view, EPA cogently
explained why subparagraph (i) is reasonable across most
applications, adding subparagraph (iii) only given the
possibility that “there may still be instances where recycling is
legitimate, but is unable to meet” subparagraph (i) or (ii). 80
Fed. Reg. 1,729. Subparagraph (iii) thus serves as a catchall
provision designed to give industry even more “flex[ibility],”
id., not as a tacit acknowledgment that subparagraph (i) is
deficient, contra Maj. Op. at 14. Rather than “substitute [its]
own judgment for that of [EPA],” this court should defer to the
agency’s technical and policy decisions. Electric Power Supply
Association, 136 S. Ct. at 782.
II.
The key difference between the verified recycler exclusion
and its predecessor—the transfer-based exclusion—is that the
new rule shifts oversight of off-site recyclers from the industry
to the Administrator. 80 Fed. Reg. 1,709. Whereas before waste
generators audited off-site recyclers to ensure their legitimacy,
now the Administrator or a state authority issues a variance
confirming that a recycler’s practices are sound. Id. at 1,695.
The court never questions the Administrator’s authority to
promulgate this rule. Instead, invoking a single line from Safe
Food—“firm-to-firm transfers are hardly good indicia of a
‘discard,’” 350 F.3d at 1268—the court concludes that the
Administrator had no basis for finding that transferred
hazardous materials “carr[y] an undue risk of discard,” Maj.
Op. at 28.
10
Safe Food, however, held only that transferred materials
are not automatically discarded simply because they are sent
off-site. As we explained, although “we have never said that
RCRA compels the conclusion that material destined for
recycling in another industry is necessarily ‘discarded,’” the
statute “does not preclude application of RCRA to such
materials if they can reasonably be considered part of the waste
disposal problem.” Safe Food, 350 F.3d at 1268. The verified
recycler exclusion is consistent with Safe Food: it defines
transferred materials as discarded if—and only if—the off-site
recycler receiving the materials fails to meet certain criteria,
which carefully discern whether allegedly recycled materials
“can reasonably be considered part of the waste disposal
problem.” Id.
This approach finds ample support in the administrative
record. When designing the verified recycler exclusion, the
Administrator relied on multiple sources, including a report on
market forces in the recycling industry and a study of the
environmental problems associated with recycling hazardous
secondary materials. 80 Fed. Reg. 1,707. The first of these, the
market study, concluded that off-site commercial recyclers,
which generate revenue primarily by receiving hazardous
materials, have “economic incentives to accumulate waste
beyond their ability to deal with it.” Id. The second report, the
problems study, found that of 208 cases in which hazardous
waste recycling led to serious environmental damage, 94
percent were attributable to “off-site third-party recyclers.” Id.
In the court’s view, neither study justifies the rule.
Although not impugning the market study on its merits, the
court rejects it as lacking empirical analysis. But no rule of
administrative law bars agencies from relying on studies that
use economic models to assess market incentives. In fact, EPA
often relies on theoretical models—that is, studies without
11
corroborating “data,” Maj. Op at 30—and our court has long
held that “[r]easoned decisionmaking can use an economic
model to provide useful information about economic realities.”
American Public Gas Association v. FPC, 567 F.2d 1016, 1037
(D.C. Cir. 1977); see also Mississippi Commission on
Environmental Quality v. EPA, 790 F.3d 138, 171 (D.C. Cir.
2015) (“EPA’s application, interpretation and modification of
[predictive] modeling [to set emissions standards] plainly fall
‘within its technical expertise’ and thus we owe it ‘an extreme
degree of deference.’” (quoting ATK Launch Systems, Inc. v.
EPA, 669 F.3d 330, 338 (D.C. Cir. 2012))).
At any rate, the problems study provides plenty of
empirical support for the conclusion that off-site recycling
leads to discard. It surveyed cases since 1982 in which
recyclers contaminated the environment by discarding
hazardous waste, poisoning soil and groundwater “with
remediation costs in some instances in the tens of millions of
dollars.” 80 Fed. Reg. 1,707. To identify these cases, EPA
reviewed scores of sources, including the Superfund National
Priorities List, national and state databases, comments from at
least three different rulemakings, media reports, and
information gleaned from contacts in EPA regional offices and
state agencies. See EPA OFFICE OF RESOURCE CONSERVATION
AND RECOVERY, AN ASSESSMENT OF ENVIRONMENTAL
PROBLEMS ASSOCIATED WITH RECYCLING OF HAZARDOUS
SECONDARY MATERIALS 4 (2014). This thorough canvassing
revealed that a full 94 percent of cases involving serious
environmental damage could be attributed to off-site recycling.
The court condemns the problems study for “focus[ing]
only on recycling gone wrong.” Maj. Op. at 31. As a result, the
court reasons, the study “tells us nothing” about the relative
risks of off-site recycling or the total damage caused by off-site
recyclers. Id. But this focuses on the wrong question. As the
12
Administrator recognized, the salient question is not what
percentage of all off-site recycling damages the environment,
but rather what portion of serious damage from hazardous
waste disposal is caused by off-site recyclers. The core issue
here is whether EPA may target the very companies (off-site
recyclers) most responsible for environmental damage. Given
the agency’s statutory obligation to prevent environmental
harm from discarded hazardous waste, I see no reason why it
cannot. Accordingly, that some off-site recycling is safe or that
serious environmental damage is relatively unusual is beside
the point.
Consider this issue in a different context. If there were 208
plane crashes and 94 percent were linked to one carrier, it
would be eminently reasonable for an agency tasked with
preventing plane crashes to require that carrier to demonstrate
that its practices were safe, no matter how many flights the
carrier completed or what percentage of total flights it
performed. Contra Maj. Op. at 31–32. No one would argue that
it was unreasonable to regulate the carrier because only a small
percentage of its total flights crashed. Yet this court’s approach
would yield just that result.
In the end, the fundamental problem with the court’s
conclusion—that the Administrator needs more proof that off-
site recycling is unsafe before requiring a variance—is that the
court decides for itself a policy question Congress left to the
Administrator. RCRA envisions a careful balance of authority
between EPA and this court. Today the court upsets that
balance.