Superfund Liability - It's Back on the Radar!!!

In This Section:

Policy & Regulations

Have Questions?

Shelley Backstrom
Administrative Assistant to General Counsel & V.P. Government Affairs
(202) 662-8508

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SREA stands for the Superfund Recycling Equity Act, which ISRI fought to get enacted into law in 1999 to provide an exemption for scrap recyclers from Superfund liability.

SREA applies to ALL “Recyclable Material” Commodities

What Is Superfund?

Superfund – more formally known as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) – was enacted in 1980 to help clean up releases of hazardous substances into the environment in situations where the initial polluter is bankrupt or otherwise unable to pay for the entire cleanup. Furthermore, the federal government was authorized to demand and collect cleanup costs from all companies that are deemed to have contributed to the hazardous situation.

Prior to enactment of the Superfund Recycling Equity Act (SREA), a misinterpretation of Superfund’s liability provisions did great harm to recycling. Many federal courts previously ruled that Superfund imposed potential liability on persons who sold secondary materials that had been diverted from the waste stream for recycling. These rulings were the result of an overly broad interpretation of the law’s provision, which imposed liability on those who “arrange for disposal” of waste containing hazardous substances. Unfortunately, these courts ruled that arranging for recycling was a waste disposal transaction.

Recycling, however, is distinct from, and in practice the opposite of, disposal. Recycling involves the processing of material for the manufacture of a new product. This is in direct contest to disposal activities which terminate the life cycle of a material. This unintended consequence of Superfund created a market distortion preferring virgin feedstocks over recycled feedstock. At a site contaminated by a third party through the use of both virgin and recycled materials, the suppliers of the recycled material were held liable for cleanup costs. This was because the sale of virgin material was not considered to be waste disposal and not subject to Superfund liability.

SREA made it clear that sale of material for recycling is not equivalent to disposal. Enactment of SREA was imperative for the future of the industry.

Requirements of SREA

The Superfund Recycling Equity Act protects scrap processors from liability if their consumers' facilities become a Superfund site. However, SREA requires recyclers to take certain affirmative actions—one is conducting due diligence on the environmental compliance of your consumers' facilities.

To get the SREA exemption, you must show, among other things, that you have inquired as to whether your customer is in compliance with applicable environmental laws. Taking reasonable care will help protect your business from Superfund liability.

Getting Started

The first thing you need to do is evaluate your record-keeping practices unless you retain all sales agreements and purchase orders. You may want to consider keeping a representative sample of sales agreements/purchase orders to show that your material was “arranging for recycling.” Also, you may want to consider documenting how you took “reasonable care” to determine the environmental compliance status of the consuming facility. The ISRI SREA Reasonable Care Compliance Program, described below, is designed to simplify this process for you.

SREA Facts

There are three basic conditions that you must meet to benefit from the protections of SREA. While the specifics may vary depending on when the transaction took place and the recyclable material involved, the basic questions you must ask yourself to determine applicability are:
  1. Does the material meet the definition of a “recyclable material”?
  2. Does the transaction meet the conditions for “Arranging for Recycling”?
  3. For transactions after February 27, 2000, did you take reasonable care to determine the environmental compliance status, as it applies to the recyclable material, of the facility to which the recyclable material was sent?

If the answer to all of these questions is yes, then you are on your way to obtaining Superfund relief!

ISRI SREA Guidance Manual

ISRI has an in-depth manual organized around these questions to help you demonstrate that your transactions are covered under the new law. The guidance document provides a common-sense review of the new law and describes in plain English the conditions that you must meet to take advantage of the liability relief afforded by the new law.

These manuals were distributed to all ISRI members following enactment of the law. While the bound version of the original manual itself are out-of-stock, a photocopied version of the manual may be ordered at a reduced rate of $35.00 to ISRI members through the ISRI's General Counsel.

ISRI SREA Reasonable Care Compliance Program

ISRI’s SREA Reasonable Care Compliance Program helps members with their due diligence efforts by doing the majority of the “leg work” and paper trail chasing for them.

ISRI utilizes the environmental expertise of URS Corporation and one of the largest regulatory environmental databases in the nation to provide members with information that includes:  
  • Publicly available, comprehensive environmental compliance information compiled from more than 1200 federal, state and local databases, FOIA requests, and facility questionnaires.
  • Supporting back-up data on information presented in the report.

“At our company, we feel it is extremely important to protect our future. By completing the SREA due diligence, we are doing our best to avoid a costly mistake down the road,” said Matt Kripke of Kripke Enterprises. “Requesting the reports from ISRI allows us to take advantage of economies of scales and pay only a fraction of what it would cost us to order the data on our own. We thank ISRI for offering this valuable service at a very reasonable investment,” concluded Kripke.

SREA reports provide documentation so members can show they checked to make sure their customers are in compliance with applicable environmental laws. The SREA ISRI-member benefit is your protective shield!