SREA Creates CERCLA-liability Exemption & Recycler Obligations—Part 2: Exemption Exceptions and Preservation

Part I covered how the Superfund Recycling Equity Act (SREA) creates a new exemption from liability under CERCLA for parties that have arranged for recycling of certain materials and described the standards necessary to fall within the exemption. Part 2 discusses the limits of the exemption, describing particular activities that are expressly excluded from the exemption, that will thus continue to create potential CERCLA liability.

As also discussed in Part I, the new SREA exemption covers even historical recycling activity, provided those activities fall within its scope. Future recycling activities, however, will only be covered by the exemption if the recycler complies with certain new requirements, as discussed below.

I. Activities Specifically Excluded from the Exemption
The new SREA exemption will not protect parties under circumstances where the recycler had (or has)

1. an objectively reasonable basis to believe at the time of the transaction that:
   
   • the recyclable material would not be recycled;
   • the recyclable material would be burned as fuel or for energy recovery; and
   • for transactions occurring on or after Feb. 27 (90 days after the enactment of the act), the consuming facility was not in compliance with substantive (as distinct from procedural or administrative) provisions of any environmental law.
2. reason to believe that hazardous substances had been added to the recyclable materials for purposes other than processing for recycling; or
3. failed to exercise reasonable care with respect to the management and handling of the recyclable material.

For purposes of preserving the exemption, a recycler's objectively reasonable belief will be determined based upon criteria including, but not limited to,

1. the size of the persons business,
2. customary industry practices,
3. the price paid for the materials, and
4. the ability of the recycler to detect the nature of the consuming facilities' operations concerning the handling of the recyclable material.

II. To Preserve the Exemption: Additional Future Actions by Recyclers Needed
As noted above, effective Feb. 27, the exemption applies only if the recycling facility is in compliance with substantive environmental laws. In order to preserve the exemption, recyclers must make a reasonable inquiry and investigation into the compliance status of the consuming facility. Specifically, recyclers that fail to investigate or otherwise ignore blatant violations at the consuming facility will loose the benefit of the exemption.

Also, the SREA authorizes the administrator of the U.S. EPA to promulgate new regulations for recycling activities that fall within the exemption. Recyclers should follow any regulatory actions to ensure that the exemption remains intact and, if new regulations are adopted, that they comply with any new requirements.

III. Conclusion
The SREA provides recyclers with substantial relief from existing and potential Superfund liability. Considering the affirmative burden of proof required to establish the exemption, recyclers need to maintain appropriate records. This is particularly true for recycling activity that takes place after Feb. 27, when recyclers are required to show that they undertook a reasonable investigation as to the compliance status of the consuming facility.

Considering that SREA places the burden of proof on the recycler, it may be some time before the full impact and scope of protection becomes completely clear. As mentioned in Part I, legal battles already are kindling over the means of various provisions of the SREA. Expect more battles in the future.

About the author: David G. Butterworth is a member of the firm of Butterworth & Campbell PC, in Philadelphia, PA. Formerly an environmental chemist, Butterworth specializes in environmental law, including the remediation and redevelopment of property, permitting, compliance, enforcement, Superfund, and environmental risk management in financial and business transactions. Contact: Tel:: 215-567-7644; E-mail: dgbutterworth@bclaw.org; Internet: www.bclaw.org.