By Katzman, Martin T.
Risk Management , Vol. 36, No. 12
Scrap Metal Industry Faces Environmental Dilemma
The scrap metal industry recycles metals like steel, aluminum and lead from discarded consumer products. Although this industry serves the national interest by saving energy and reducing environmental damage, about 30 percent of its members have been held liable for cleanup under the Superfund law.
The scrap metal recycling industry provides a growing source of raw materials for the basic metals industry. In addition to reducing the environmental damage from mining, the recycling of metals saves energy. Compared to the processing of metallic ores, the recycling of steel reduces energy consumption by 50 percent and the recycling of aluminum by over 90 percent.
Scrap recycling involves three distinct stages: the collection of scrap metal from dispersed sources, a preliminary cleaning and separation into homogeneous streams and smelting or reuse. In the parlance of the industry, firms operating in the last stage are considered consumers, a group which accumulates many of the unrecyclable toxic wastes.
Through careful management, scrap recyclers can reduce the release of toxins under their control. However, by its very nature, the recycling process shifts the control of materials to other parties downstream. For example, scrap metal dealers specializing in recovering steel and aluminum from automobiles transport batteries to specialized smelters who recover the lead. Despite this shift in control and the fact that in the absence of recycling even more hazardous materials would be released into the environment, recyclers may still be held liable for environmental damages.
Under the Resource Conservation and Recovery Act, scrap recyclers can be held liable for cleaning up the sites that pose an "imminent hazard" to parties off-site. Under the Superfund statute, recyclers can be held liable for cleanup costs incurred by downstream reprocessors or disposers of the residual waste. Under the doctrine of joint and several liability, one firm may be required to pay for the damages of all. Joint and several liability under Superfund is the single most important factor accounting for the virtual disappearance of environmental impairment liability insurance.
Much of the discussion regarding the costs and consequences of Superfund has been based upon speculation supported by little hard evidence. Underwriters have estimated their liability as high as $200 billion, which presents the scrap metal industry with some serious, indirect consequences. Scrap processors are likely to raise their expenditures on loss prevention and loss protection, thereby increasing the cost of recycled metals and reducing the viability of the basic metals industry upon which it heavily depends.
The entire membership of the Institute for Scrap Recycling Industries, 1,705 organizations, was sent a pre-tested questionnaire in the spring of 1988 surveying such items as the quantity of materials handled, methods of disposal, changes in acceptability of scrap types, changes in management practices, changes in capital expenditures as a result of environmental concerns, liability experience and insurance coverage. Liability experience indicates whether or not the firm is currently involved in a cleanup. If so, the survey then probed for information regarding the contaminating substance, the costs for management, legal counsel, site investigations and cleanups at each site affected.
Responses were obtained from 503 members, approximately 30 percent of the membership. Among the respondents, larger firms were over-represented, as were firms that process nonferrous metals. Several statistical tests suggested that firms with liability problems were more likely to respond to the questionnaire than firms without such problems.
Nearly 30 percent of the firms in the sample have been informed by a governmental cleanup agency or private party that they may be liable for cleanup costs at a hazardous waste site. …