Is EPA's definition of 'discarded' hazardous materials under RCRA, particularly its Factor 4 legitimacy test and verified recycler exclusion, a valid exercise of agency discretion?

The Environmental Protection Agency (EPA) issued a Final Rule defining when hazardous materials are considered 'discarded' and thus subject to regulation under the Resource Conservation and Recovery Act (RCRA). This rule included a four-factor legitimacy test to differentiate between genuine recycling and sham recycling, as well as a verified recycler exclusion to ensure companies claiming to recycle hazardous waste are actually doing so.

Industry Petitioners challenged two aspects of the rule: Factor 4 of the legitimacy test and the verified recycler exclusion. Separately, Environmental Petitioners challenged the EPA's decision to postpone action on applying containment and notification conditions to exclusions that existed prior to 2008. These challenges formed the basis of the legal dispute surrounding the EPA's Final Rule on hazardous waste recycling.

Industry Petitioners and Environmental Petitioners separately filed petitions for review of EPA's Final Rule in the United States Court of Appeals for the District of Columbia Circuit. The court subsequently consolidated these petitions into a single case for review. This consolidation streamlined the judicial process, allowing the court to consider related challenges to the EPA's Final Rule in a unified proceeding.

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No. EPA's definition of 'discarded' hazardous materials under RCRA, particularly its Factor 4 legitimacy test and verified recycler exclusion, exceeds the bounds of reasonable agency discretion. The stringent requirements imposed by Factor 4 and the verified recycler exclusion lack sufficient justification and are arbitrary and capricious under the Administrative Procedure Act. The legitimacy test's Factor 4, which applies to all hazardous secondary materials, imposes an overly broad standard without adequate explanation for its sweeping application. This factor fails to account for the diverse nature of industrial processes and materials, potentially classifying legitimately recycled materials as waste without proper cause. Similarly, the verified recycler exclusion imposes burdensome requirements that go beyond what is necessary to ensure environmental protection and proper recycling practices. These provisions exceed EPA's statutory authority under RCRA by effectively regulating materials that are not truly "discarded" within the meaning of the Act. The agency's approach fails to strike an appropriate balance between environmental protection and the promotion of beneficial recycling practices. By vacating these provisions, the regulatory framework is realigned with the core principles of RCRA, which aim to encourage recycling while preventing environmental harm from truly discarded materials. The reinstatement of the transfer-based exclusion provides a more measured approach to regulating hazardous secondary materials, allowing for legitimate recycling activities while maintaining necessary safeguards. This decision underscores the importance of agency adherence to statutory limits and the need for well-reasoned, proportionate regulations in environmental law.

Dissent (Tatel, J.) The majority's decision conflicts with the Administrative Procedure Act's highly deferential standard of review and principles governing judicial review of facial challenges to rules. EPA provided reasonable justification for Factor 4 and the verified recycler exclusion based on its technical expertise and studies on environmental risks associated with hazardous waste recycling. The agency's rationale deserves deference given its specialized knowledge in this complex regulatory area. Overturning EPA's carefully considered rule undermines the agency's ability to effectively manage hazardous waste recycling and protect the environment.