COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 11.COMMITMENTS AND CONTINGENCIES

In the ordinary course of conducting business, we are involved in judicial and administrative proceedings involving federal, state, provincial or local governmental authorities, including regulatory agencies that oversee our permits and compliance with those permits. Fines or penalties may be assessed by our regulators as a result of review or inspection of our operating practices.  Actions may also be brought by individuals or groups in connection with permitting of planned facilities, alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedly released from our operated sites, as well as other litigation. We maintain insurance intended to cover property and damage claims asserted as a result of our operations. Periodically, management reviews and may establish reserves for legal and administrative matters, or fees expected to be incurred in connection therewith.

In April 2012, we received a confidential settlement communication from the United States Environment Protection Agency (“U.S. EPA”) alleging that the thermal recycling operation at our Robstown, Texas facility did not comply with certain rules and regulations of the Resource Conversation and Recovery Act of 1976 (“RCRA”).  The communication included a draft Consent Agreement and Final Order (“CAFO”) directed to the Company and the thermal recycling unit’s owner-operator.  The CAFO asserted various technical compliance and permitting violations and proposed corrective actions to resolve the matter as well as proposed monetary penalties against both the Company and the thermal recycling unit’s owner-operator. In response to the U.S. EPA’s proposal we counter-offered to settle the matter for $260,000, shared equally between the Company and the thermal recycling unit’s owner-operator.  Based on our counter-offer, we recorded a charge of $130,000 during the second quarter of 2012 in Selling, general and administrative expenses in the Consolidated Statement of Operations. In October 2012, the Company and the thermal recycling unit’s owner-operator entered into a final CAFO with the U.S. EPA. As part of the settlement, we agreed to pay a civil penalty of $166,000 and to submit an application to the State of Texas for a RCRA Subpart X permit.  The Company and the thermal recycling unit’s owner-operating also agreed to a set of interim operating conditions that allow the facility to continue providing recycling services to customers until the RCRA Subpart X permit is issued. Based on the CAFO, we recorded an additional charge of $36,000 during the third quarter of 2012 in Selling, general and administrative expenses in the Consolidated Statement of Operations.

In connection with the above matter, the U.S. EPA has also raised concerns regarding potential violations of the Clean Air Act of 1970 (“CAA”) at our Texas thermal recycling operation.  However, neither the Company nor the thermal recycling unit’s owner-operator has received a formal notice of violation from the U.S. EPA. The Company and the thermal recycling unit’s owner-operator continue to negotiate with the U.S. EPA.  We cannot presently estimate the potential additional liability, if any, related to these potential violations of the CAA and therefore no additional amounts have been recorded in our financial statements related to this matter.

Other than as disclosed above, we are not currently a party to any material pending legal proceedings and are not aware of any other claims that could have a materially adverse effect on our financial position, results of operations or cash flows.