Joseph R. Brendel Thorp Reed & Armstrong, LLP Pittsburgh, Penn.

While recyclers around the nation enthusiastically welcomed the new Superfund Recycling Equity Act (SREA), there are more than a few hoops to jump through before you qualify.

SREA, an amendment to the 2000 Omnibus Appropriations Bill signed by President Clinton last November, provides liability exemptions for companies recycling scrap metal, glass, paper, plastic, textiles, rubber (except whole tires) and spent lead-acid and nickel-cadmium batteries.

To qualify for coverage by the new exemptions, recycling companies must prove they have conducted due diligence on the facilities that receive their recyclable materials. This means documenting that:

Scrap recyclers also must exercise “reasonable care” in determining if consuming facilities are in compliance. This includes, but isn't limited to, the price paid in the recycling transaction; the scrap recycler's ability to detect the nature of the consuming facility's scrap handling and processing operations; and inquiries to federal, state and local environmental agencies regarding whether the facility has complied and is complying with applicable laws and regulations.

Inquiries to the federal, state or local environmental agencies concerning the facility's compliance record should be in writing, either through correspondence with the environmental agency or in contemporaneous file memoranda. Although SREA does not specify frequency, these inquiries probably should be updated approximately every 6 months to 12 months.

Prudent scrap recyclers also might require the consuming facilities to verify, in writing, their compliance with all applicable environmental laws and regulations.

Scrap metal recyclers also must demonstrate that they did not melt the material at any time prior to the transaction. (For this provision, melting of scrap metal does not include “sweating,” i.e., the thermal separation of two or more materials due to differences in their melting points).

Under the Superfund statute, scrap recyclers still will be held liable if, at the time of the recycling transaction, they had an objectively reasonable basis to believe the recyclable material would not be recycled. Liability also will occur if the recyclable material would be burned as fuel, or for energy recovery or incineration; or that the consuming facility was not in compliance with applicable environmental laws and regulations.

In addition, the liability exemption is not available if the scrap recycler had reason to believe that hazardous substances had been added to the material for purposes other than processing for recycling. Scrap recyclers who fail to exercise reasonable care in managing and handling the recyclable material also will remain liable.

Liability exemption is not automatic. Scrap recyclers must take reasonable steps to determine the consuming facilities' legal compliance — and document those steps. Scrap recycling companies also must be able to prove that they had good cause to believe their material would be recycled in an appropriate manner.

The result of all these conditions is that Congress effectively is encouraging scrap suppliers to police the recycling facilities where they send their materials.

The EPA held a public meeting on July 17, 2000, to examine whether it should issue guidance dealing with prospective (i.e., post-enactment) recycling transactions covered by SREA. To review comments posted from the meeting, visit the EPA's website at www.epa.gov\oeca\osre\recycle.html.