10 / Schnitzer Steel Industries, Inc. Form 10-K 2021 These environmental laws regulate, among other things, the release and discharge of hazardous materials into the air, water, and ground; exposure to hazardous materials; and the identification, storage, treatment, handling and disposal of hazardous materials. Concern over climate change, including the impact of global warming, has led to significant U.S. and international regulatory and legislative initiatives to limit greenhouse gas (“GHG”) emissions. In 2007, the U.S. Supreme Court ruled that the United States Environmental Protection Agency (“EPA”) was authorized to regulate carbon dioxide under the U.S. Clean Air Act. The EPA subsequently initiated a series of regulatory efforts aimed at addressing GHGs as pollutants, including finding that GHG emissions endanger public health, implementing mandatory GHG emission reporting requirements, and setting carbon emission standards for lightduty vehicles. Environmental legislation and regulations have changed rapidly in recent years, and it is likely that we will be subject to even more stringent environmental standards in the future. Legislation has been proposed in the U.S. Congress to address GHG emissions and global climate change, including “cap and trade” programs, and some form of federal climate change legislation or additional federal regulation is possible. A number of states, including states in which we have operations and facilities, have considered, are considering, or have already enacted legislation or executive action to develop information or address climate change and GHG emissions, including state-level “cap and trade” programs. Currently, we are required to annually report GHG emissions from our steel mill to the State of Oregon Department of Environmental Quality (“ODEQ”) and the EPA, and in March 2020, the Governor of Oregon issued an executive order directing state agencies to take certain actions to reduce and regulate GHG emissions. Pursuant to this executive order, ODEQ issued a notice of proposed rulemaking in August 2021 that would establish a new Climate Protection Program to limit GHG emissions in the state including from large stationary sources such as our steel mill. In addition, the ODEQ Cleaner Air Oregon (“CAO”) program regulates toxic air emissions from manufacturing facilities located in Oregon. The ODEQ has published a prioritization list of the facilities within the state subject to the CAO program based on emissions inventories that facilities submitted to the ODEQ. The prioritization list established four tiers of risk groups. Our steel mill has been assigned to the first-tier risk group and was selected into the CAO program in 2020. To comply with the CAO program rules, including as they may be revised in the future, facilities may incur expenses to evaluate the risk to the public and may be required to incur additional operating or capital expenditures to mitigate any significant identified risks. Federal, state, and local regulators have increased their focus on metals recycling and auto dismantling facilities that has or could lead to new or expanding regulatory requirements. In July 2021, the EPA issued an enforcement alert reflecting a national enforcement initiative in conjunction with state regulators focused on Clean Air Act compliance at metal recycling facilities that operate auto and scrap metal shredders. While we believe we are an industry leader in emission controls and have been working with state and local regulators on compliance and permitting matters, we have in the past and may in the future be subject to enforcement actions or litigation by regulators or private parties that could result in additional penalties, compliance requirements, or capital investments. See “Legal Proceedings” in Part I, Item 3 of this report. In addition, on October 15, 2021, the California State Department of Toxic Substance Control (DTSC) submitted proposed emergency regulations to the Office of Administrative Law (OAL) that would require metal shredding facilities in California, including our Oakland facility, to operate under state hazardous waste facility permits. OAL has 10 calendar days within which to review and make a decision on the proposed emergency rulemaking. If the emergency regulations are approved, metal shredding facilities in California would have 30 days to file to obtain “interim status” that, according to DTSC, is necessary for facilities to continue operating through the permit application process, which could take as long as five years. The California metal recycling industry is working with DTSC to identify an alternative regulatory framework and permitting regime under existing law that could accommodate the unique aspects of metal shredding facility operations. Operating under DTSC’s hazardous waste permitting requirements, including under interim status regulations, or under an alternative permitting structure could require substantial additional capital expenditures, impose financial assurance obligations, subject us to increased compliance and penalty risks, severely limit operational flexibility and increase operating costs, or adversely impact our ability to acquire or sell materials at our California facilities. The Biden Administration and state and local regulators are also emphasizing efforts to strengthen environmental compliance and enforcement, including with respect to clean-up actions under superfund and hazardous waste laws, in overburdened communities that may be disproportionately impacted by adverse health and environmental effects. On September 10, 2021, U.S. EPA Region 9 and the California Environmental Protection Agency announced a joint effort to expand environmental enforcement in overburdened California communities. These initiatives could result in increased enforcement, compliance, and clean-up costs, including increased capital expenditures, at our facilities located at or near such communities.
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