Want evidence of how difficult it is to craft effective statewide laws for the rapidly evolving e-scrap landscape? Just look to New Jersey and the collection quagmire that’s unfolded there.

According to a state official and various e-scrap stakeholders in the Garden State, materials recovered under the state’s e-cycling law have piled up at some collection sites in recent months, in large part because industry consolidation and the ongoing CRT dilemma have sparked major funding deficits when it comes to moving material downstream.

Some counties in the southern part of the state have even threatened to discontinue running the collection sites that are integral to the e-cycling law’s goal of offering free and convenient e-scrap collection access to all residents.

“Towns and counties are facing large costs that should not be there, and [they] are facing the prospect of pulling out of the collection system,” said Marie Kruzan, executive director of the Association of New Jersey Recyclers.

Quotas met, material remains

The state’s e-scrap law, which was implemented in 2011 and offers free collection of computers and televisions to residents and small businesses, lays program funding responsibility at the feet of original equipment manufacturers (OEMs). Each year, the state’s Department of Environmental Protection (DEP) sets out specific collection quotas individual OEMs must meet, but due to a variety of factors, major tonnages are remaining at municipal collection sites even after manufacturers say they’ve fulfilled their requirements.

The program’s issues are in many ways exemplified by the straits that have confronted Magnum Computer Recycling, a de-manufacturing firm based in Pennsauken, New Jersey. During the initial years of the e-cycling program, Magnum covered six counties in the southern part of the state, handling and transporting scrap collected in that region.

Magnum’s owner, John Martorano, Jr., told E-Scrap News that during 2011 and 2012 the company had deals in place with MRM, an alliance of OEMs, and other corporate groups that worked to wrangle pounds on behalf of product manufacturers, and Magnum was paid 6 cents per pound for TVs and other covered material it collected and 15 cents per pound for the material it actually de-manufactured. Those sums were enough for Martorano to profitably and efficiently maintain his link in the program.

In the middle of last year, however, the OEM alliances Magnum was relying on said they could no longer pay him for pounds. According to Martorano, one of those contractors assured him more weight would be needed soon, and Martorano kept servicing his county clients, paying from his own pocket. When the contractor finally came back to him in January of this year, it offered Martorano just a penny per pound. With 600,000 pounds of TVs, monitors and other material amassed, he was forced to take the payment, even though it didn’t come close to covering expenses.

Martorano, whose firm is certified to the R2 standard, says a number of other processing firms in New Jersey have run into similar dilemmas. “Recyclers are going out of business,” he said. “It’s like we’re eating soup with a fork. We’re tasting everything, but not getting full.”

Guy Watson, chief of the Bureau of Recycling and Planning at New Jersey DEP, confirmed many of the specifics of the Magnum case.

“Magnum got in a bind,” Watson said. “My understanding is that the company has been able to again start moving the material from the collection sites, but it’s had to charge counties around 4.5 to 6 cents a pound.” It’s those charges that have begun forcing countries to consider nixing their collection efforts.

A beguiling market

So what’s behind the economic shift that led to the funding upheaval? Watson points first to the increasingly beguiling CRT glass market. Over the last year, the well-documented shortage of options for final processing of leaded glass in North America began to have serious ripple effects on the profitability of New Jersey collection firms.

“The subsidy needed by recyclers from the manufacturers for the CRTs went up,” said Watson, “because the cost went up to market it.”

But the trend in OEM financing has been moving in the opposite direction. Kruzan of ANJR says with OEMs needing to collect weight in the more than 20 e-scrap law states, they are turning to national e-scrap firms that then subcontract out work on a state-by-state basis. Brokers have entered the picture, and competition has grown fierce, meaning OEMs are able to get their weight covered at a very low per-ton price.

Furthermore, Kruzan said the increased number of brokers and national firms working in the state makes it hard to keep track of whether manufacturers are actually collecting their proper weight allotments.

“We can’t demand numbers from someone in Philadelphia or Timbuktu,” she said. “There’s no way to audit that. That is the fallacy of the law.”

OEMs, however, say the problems in the legislation run deeper than just accounting specifics. Doug Smith, corporate director of environment, safety and health at Sony, said that in New Jersey and many other states, e-scrap mandates are passed without comprehensive economic analysis. As a result, shifts in the e-scrap marketplace inevitably lead to underfunded operations even when the OEMs pay for their required tons for TVs and other devices.

“I have to use contractors that use subcontractors,” he said. “It’s a reality when dealing with so many state laws. But these are compliance laws and we take them very seriously. The counties are faced with hiccups and that has a trickle effect that goes up to us. We take the blame, but all we’re really doing is complying.”

Program updates

Watson said DEP has made adjustments to the New Jersey system for the 2014 calendar year, increasing the state’s per capita recovery target by 13 percent and boosting the forecast of CRT material that is expected to head into the system. He also said the department is now requiring OEMs to provide estimates of what they expect to garner from individual collection sites so that regulators can make sure firms working in different areas have the financial coverage they need.

But the recycling official also admitted creating a foolproof system that will satisfy all requirements of all stakeholders — and the public — is a daunting task.

“There is this tension in the [law],” he said. “On the one hand, all consumers as defined in the act must have the ability to access a free and convenient system. That means without limitation. On the other hand, the law says we have to give each one of the manufacturers an obligation in pounds, which is a finite number. “

Martorano of Magnum and Kruzan of ANJR said New Jersey recycling stakeholders have begun a push to alter specifics of the law so that the companies responsible for collecting and processing the material are guaranteed the compensation they need.

“The program fell apart,” said Martorano. “And without the legislation changing, it’s only going to get worse.”