"The law of unintended consequences is the only real law of history," said British American author and historian Niall Ferguson. That may be exceptionally true with the potential outcomes of a bill currently making its way through the state legislature – California Senate Bill 404 (SB 404) – Hazardous materials: metal shredding facilities.
The bill was introduced by State Senator Anna Caballero, who has a reputation as a champion for small businesses and has expressed concern for the companies that might be affected by this bill. The bill, which morphed from SB 1234 (2024) – Hazardous Material: Metal Shredding Facilities, states at the outset that it “would establish a comprehensive scheme for the regulation of metal shredding facilities that would be administered by the Department of Toxic Substances Control (DTSC) pursuant to authority separate from laws governing the control of hazardous waste. The bill would prohibit an owner or operator from operating a metal shredding facility, as defined, in the state unless they have a permit from the DTSC or are deemed to have a permit.”
Unfortunately, this overly-broad brush stroke puts the small scrap-metal recycling companies in an extremely difficult situation. They are lumped in with the massive “mega-shredder” companies that treat waste chemically, while the smaller companies do not. It also gives the DTSC unprecedented overreach of companies that should not be under its authority.
California Business Journal sat down with leaders from two of the smaller scrap-metal recycling companies in California – Robert Hall, president and CEO of Pacific Auto Recycling in Lancaster and Steven Slater, Environmental Health and Safety Manager for Universal Service Recycling, based in Stockton, with multiple locations in California and one in Nevada. The goal was to get their perspective on the situation and what they hope can be resolved with the bill.
“SB 1234 and now SB 404 is a very large permitting program that's a lot more on par with a hazardous waste treatment or disposal type facility, even though our companies are manufacturing and recycling type facilities,” says Hall. “The intention is to manage hazardous waste, but the scope has gotten too big, and that's where it's creating a lot of problems for our folks.”
The broader implications of SB 404 extend beyond the recycling industry. By potentially driving small recyclers out of business, the bill could inadvertently consolidate the market in the hands of the larger players, reducing competition and consumer choice. Additionally, the loss of local recycling options may lead to increased illegal dumping and environmental degradation, counteracting the environmental goals that often underpin recycling legislation. Many individuals support their families by collecting and recycling scrap metal, and they, in turn, keep dumped appliances and other materials out of our environment. If only large companies existed and were in another part of the state, municipalities could quickly become overrun with these materials.
“SB 404 clearly states it is an attempt to settle ongoing legal issues in the industry,” says Slater. “There are three big mega-shredding companies, which own and control 98% of the entire scrap metal market,” says Slater. “But the current language of the law is looking for a one-size-fits-all solution. The smaller shredders, which represent the other 2% of the market, are mostly family-owned, multi-generational businesses that do not chemically treat waste.”
“I think Senator Caballero’s office has really good intentions, and their intention is to regulate an area of recycling, but the problem is the scope,” says Hall. “This bill applies rules that govern dealing with chemicals and hazardous waste, to basic business operations. It's apples and oranges.”
Both men expressed optimism that an equitable solution will be found, but it requires a “scalpel and not a sledgehammer.” The smaller players in the industry are advocating for language changes to the bill that would protect their ability to stay in business. Previous media coverage reported that Caballero’s office is open to continuing discussion as the bill works its way through the legislative process.
“I think that there's a perception that there's a lack of regulation within the recycling community, which is not true,” says Hall.
Slater agrees. “I have half a dozen permits that regulate me from polluting the environment. I have local, district, and state Air Resources Board permits. I have local, district, and state Stormwater Management permits. We’re fully permitted and fully granted authority to do what we do, and we are under scrutiny by all kinds of other regulatory agencies. The problem is DTSC's authority is the management of hazardous waste. So, all of this is being promoted to take a commodity – scrap metal – and then treat that commodity as if it is a waste so that DTSC can have authority.”
Slater says it would cost companies like his and Hall’s $14 million to even start the permitting process that has the same onerous elements as if they were a hazardous waste treatment facility, which they are not.
“We've never chemically treated our waste, we never will chemically treat our waste, we don't want to chemically treat our waste,” says Hall. “Why would we be thrown in with these large facilities? They are publicly traded, often multinational companies that are doing this; they have their own process that involve chemicals, that is not our process. Why should we be included with them in any legislation when we don’t do the same things they do?”
In light of these concerns, there is a growing call for amendments to SB 404 that would make it more equitable and effective. Industry leaders are urging lawmakers to engage in meaningful dialogue with recyclers so that this overbroad approach does not hurt local communities and small business.
SB 404's story does illustrate the complexities of policymaking in a diverse and dynamic economy. It underscores the importance of stakeholder engagement, the need for regulatory flexibility, and the value of empirical evidence in crafting laws that achieve their intended outcomes without causing undue harm.
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