Ebb and Flow

When is a waste actually waste and who owns that waste? The U.S. recycling market has been vexed with complicated local regulations. Federal, state and local regulations promote complicated and greater variations of solid waste management systems that limit predicting the future for free-market recycling enterprises. The regulatory history explains how we got here, but the larger question, “Who owns the waste?” remains unanswered.

Court decisions on two recent legal battles over “flow control” in Texas and South Carolina exemplify these complexities of waste management, recycling and reuse and allude to the underlying problems. These decisions show the varied answers at the local level to the question of waste ownership. In addition, these decisions provide very little clarity compared with past decisions, leaving local communities and businesses with ongoing uncertainty when planning long-term waste management strategies and related public and private commercial recycling and reuse ventures.

Flow control is a legal tactic used by local community governments to ensure a controlled amount of locally generated waste (and the related tipping fees) go to a local waste management system. The tactic has been used to encourage waste to remain inside the community and, on rare occasions, to prevent outside communities from bringing in waste.

The tactic has changed during the past 40 years in response to the evolution of solid waste regulation and lots of litigation. The Resource Conservation and Recovery Act (RCRA) of 1976 was the death nail of small “mom-and-pop” waste disposal operations and spurred municipalities to develop long-term high-capital investment projects for a modern solid waste management system. However, RCRA largely left the states the power to solve their solid waste management problems.

These management systems were needed to meet new stringent federal regulations along with increasing power demands (in the form of new waste-to-energy plants) and growing volumes of solid waste. These large investments can be a serious financial burden for even the largest municipality, requiring long-term bonding or other investiture that can strap a community.

In response, numerous communities across the country continue to implement various measures (typically via waste hauler contracts or ordinances) to control the flow of waste to these large operations, ensuring the demands of funding long-term financial investments are met in a predictable manner with the goal to assure the financial stability of the system–hence, the growth of waste flow control to restrict and control the flow of waste.

However, the control of waste flow can have a negative impact on the free flow of waste and impede commerce that would otherwise allow a broader range of waste material disposal options and recycling/reuse options to develop through the free market. Nevertheless, communities presumably focused on the common good have implemented large scale waste management systems and become compelled to implement “flow control” ordinances

Controversy regarding flow control arises when the waste haulers and the waste disposers are not the same entities and have different financial goals. For example, if a private waste hauler is contracted and paid to pick up waste and dispose or recycle the waste at its own cost, the waste hauler will find the lowest cost option. The hauler will look high and low and, certainly, far and wide, to find the cheapest option.

Legal History
The legal history has taken hair-pin curves since the first major fight in the U.S. Supreme Court case of C & A Carbone Inc. versus the town of Clarkstown, N.Y., in 1994. A private waste hauler, Carbone, wanted to haul waste outside of the town to a location of its choosing despite the town’s requirement that the waste be transferred to a private company’s transfer station. The U.S. Supreme Court had ruled in C&A Carbone Inc. v. Town of Clarkstown, 511 U.S. 383 (1994) that this form of flow control violates the “Dormant Commerce Clause” of the U.S. Constitution. Effectively, waste is a commodity, and the waste haulers are owners of the waste subject to the rights of commerce law.

However, a slightly narrowing stance came about in the later ruling, United Haulers Association Inc. v. Oneida-Herkimer Solid Waste Management Authority, 550 U.S. 330 (2007). Though similar in nature, a couple of elements essentially brought about a varying result. In the case of C & A Carbone Inc. v. Town of Clarkstown, the flow control ordinance required haulers to deposit their waste with a private processing facility. As previously discussed, this ordinance was deemed to violate the Dormant Commerce Clause and discriminated against interstate commerce. However, with the United Haulers Association case, the solid waste and recyclables were required to be deposited at a facility owned by the counties’ solid waste management authority. In this stance, it was the court’s opinion that if law favors government in areas that have traditionally been government activities (such as waste disposal), as long as all in-state and out-of-state private businesses are treated equally, then discrimination against interstate commerce has not occurred.

In summary, today the lower courts have steered away from the U.S. Supreme Court decision in 1994 to side with local authorities that are trying to protect the community in the name of common good. The lower courts, on a case-by-case basis, have allowed these “exceptions” to the 1994 Carbone case by applying a subjective test called the Pike Balancing test. This test is used to justify these “exception” decisions that claim flow control laws are “per se” valid, such as in the case of the recent South Carolina court decision.

Recent Decisions
In Horry County, S.C., the county imposed flow control in 2009. This control limited the amount of waste shipped to a private C&D landfill and recycler just outside of the county. The hauler and landfill owner sued against the flow control ordinance, but, in January of this year, the flow control ordinance withstood a challenge that went to the South Carolina Supreme Court. The battle now moves to a U.S. District Court.

The free commerce of solid waste in the county is limited by flow control—for the presumed common good of the community. The county administrator claims, “Horry County’s effort to protect not only the public safety, but also the pocketbooks of our county’s citizens and businesses, apparently has crossed one more hurdle successfully.”

By contrast, the city of Dallas passed a flow control law in September 2011 directing city waste to its McCommas Bluff landfill. Several parties filed a suit to stop the law, saying it was anti free enterprise and would discourage recycling. In January, the court issued a preliminary injunction against the law.

At the onset of the Dallas case, the city’s local authorities clearly stated that recycling would provide financial income to the city and claimed recycling to be subject to flow control. The haulers found the actions not to be for the common good but saw them as representing a revenue source for Dallas.

After the legal actions, a U.S. District Court decision issued a permanent injunction on Dallas to prevent its efforts to install waste flow control. The ruling stated that the city’s actions violated the Contract Clause of the U.S. Constitution as well as Texas state law and the Dallas city charter. The court determined that the city enacted the law for economic gain “at the expense of the franchisees’ rights, and that was an unreasonable exercise of its police powers.”

Tom Brown, chair of the National Solid Wastes Management Association’s (NSWMA) Texas Chapter and senior vice president and COO at IESI/Progressive Waste Solutions, says, “We expect this decision to not only be upheld if an appeal is filed, but also to deter other local governments from unlawfully implementing flow control law,” says.

Advocates of flow control rightly argue that control by local communities assures recycling goals are met. Under a free-market system, the recycling rate could either plummet or skyrocket depending on the volatility of the pricing of recycling markets. On the other hand, the aforementioned cases show flow control can deter recycling.

Ongoing flow control that is not under litigation shows the negative impact on recycling. For example, Miami implements flow control under the premise of assuring that the Miami-Dade County Resource Recovery Facility remains solvent. That waste-to–energy (WTE) facility, which started up in 1982, today provides up to 77 megawatts of base load electricity to the grid. The project began with long-term capital investment funded through long-term municipal bonds.

In the 1990s, cheaper disposal options arose in surrounding southern Florida counties, and Miami-Dade waste was shipped by private haulers outside of the county. Suddenly, Miami-Dade realized that the Miami-Dade WTE may not survive and the county would be unable to pay its long-term bonds. In response, Miami-Dade passed county ordinances to impose flow control restrictions on haulers within the county as to where waste from the county could be disposed. Today, Miami-Dade County continues to implement flow control, after 30 years of WTE plant operation, to assure adequate waste and financing to operate the WTE and the county landfills.

To assure adequate tipping fees, the county has issued ordinances redefining recycling compared with state law and limits recycling operations to assure only limited amounts of recycled materials escape, providing tipping fees to the county coffers. In recent actions, the county is limiting the use of waste-derived fuels to cement plants, unlike the rest of the state of Florida, on the basis that use of waste-derived fuel violates its flow control ordinances. The county has pushed to prevent cement companies from even bringing in tires (an alternative source of raw material and fuel) across county lines on the basis that the tires should only come from the Miami-Dade County Resource Recovery Facility.

Another example is in Orlando, Fla., where waste grease recyclers set up private contracts with restaurants to collect their grease to be used as biodiesel feedstock. But the local authorities halted this arrangement because restaurant grease disposal had been a previous source of tipping fees to the waste management system.

Further Implications
The complexity of ownership and the definition of waste can affect even unsuspected materials. What if a power plant that once disposed of its coal ash at a local landfill then decides to reuse the ash by selling the ash as a raw material? Does the local authority have the right to prevent that sale of waste ash through flow control? Can the power plant counter-argue environmental benefits of ash reuse versus landfill disposal as a greater common good of the community than flow control? Clearly, the complexity of potential disputes over flow control is vast.

The reasons for why a community uses flow control can become complex depending on specifics of the situation and the current state of flow control litigation. The status of litigation has certainly driven the application of flow control, and recent court decisions continue to drive how, when and where flow control is enforced.

At the heart of the question, “Who owns the waste?” lies a fundamental legal argument regarding the limits a community can impose on waste flow without affecting free commerce under the U.S. Constitution’s Commerce Clause. Recycling gets whipped around by these legal actions, dampening free enterprise.

It’s a high stakes game for the private companies managing the waste and the communities that must manage their waste.

The author is president of Koogler and Associates Inc. (www.kooglerassociates.com), Gainesville, Fla.