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Cheap oil is shutting down California recycling centers

California recycles at twice the rate of the rest of the US, but hundreds of the state's recycling centers have closed as low oil prices change the economics of the business.
Imagen por Andrew Caballero-Reynolds/Getty Images.

Californians recycle bottles and cans at twice the rate of the rest of the US. But hundreds of the state's recycling centers are closing.

More than 300 of the state's 2,100 recycling centers have been shut down in the past year and a half as prices for scrap materials have plummeted, according to Mike Oldfield, CalRecycle's communications director. This past January alone, 191 centers were closed by rePLanet, the state's biggest private operator. A year of "unprecedented declines" in the price of scrap plastic and aluminum, coupled with a cut in state subsidies for recyclers, meant that those centers were "no longer sustainable," the company said.


Oil and natural gas provide the building blocks of most plastics. So as oil prices have sunk to less than half of what they were two years ago, the price of new plastic has gone down as well. When prices were high, recycling programs could be moneymakers, and local governments or the private contractors they hired covered the cost of collecting the bottles and cans by selling the scrap.

New plastic is typically cheaper than recycled — there are other benefits to using recycled plastic, such as good PR — but a dip in oil and gas prices makes it even cheaper. This in turn brings down the commodity price for recycled. Five years ago, a ton of recycled polyethylene plastic — the stuff typically used in soft-drink bottles — went for more than $500. Now it's worth about $200.

"Lower prices at the gas pump are not good for recycling," said Chris Doherty, a spokesperson for the National Waste and Recycling Association, which represents private recycling companies. "With the price of oil being down, the cost of recycled plastic as a commodity is way down as well."

That dramatic decrease has been a particular problem in California, where an ambitious state-subsidized recycling program has led to about 4 out of 5 drink bottles being recycled — double the national average, according to the California-based Container Recycling Institute. The state pays recycling centers subsidies meant to lessen the shock of falling scrap prices, and CalRecycle bases the subsidies on a 12-month average of scrap prices, according to state law.


The processing payments went down at the end of 2015, spurring rePlanet's closures, but Oldfield said the subsidies have gone back up since then and are set to rise again in July.

California shoppers pay a 5-cent deposit when they buy a typical bottle of water or soda, and a dime for bottles larger than 24 ounces. They can get that deposit back by turning in the empty bottles at recycling centers. If there isn't a recycling center nearby, supermarkets by law must accept the containers — but the stores aren't necessarily equipped to do so. They can opt out of the program, but only if they pay the government $100 a day. On July 1, the state is expected to cut payments to supermarket-based centers by 11 percent.

The closures have resulted in "an absolutely immediate hit" for consumers, particularly in rural areas, said Susan Collins, president of the Container Recycling Institute. In some Northern California communities, people have complained of waiting in long lines to turn in their recyclables.

"That's not what this system was designed to do," said Collins, whose organization is supported by manufacturers and recyclers, including rePlanet. "It was designed to be as easy to get your nickels as it was to pay them in the first place."

Beyond California, the slump in commodity prices is hitting the industry's biggest players. According to Waste Management, the largest US trash hauler, its recycling revenues fell by nearly $140 million in 2015 and another $13 million in the first quarter of 2016. Average commodity prices dipped another 12 percent in the first quarter of 2016, the company reported in April.


In Escambia County, Florida, at the western end of the Panhandle, recycling ground to a halt in October when the company that processed its waste abruptly closed down, citing low scrap prices. The 40,000 tons a year of bottles, cans, and paper that had been going to a plant in Alabama then began to get dumped into a landfill.

To continue using the landfill was going to cost the county more than $700,000 a year, said Nathalie Bowers, a spokesperson for the Emerald Coast Utilities Authority. So the agency decided instead to spend $10 million on its own recycling facility, which is expected to be up and running by September.

"It's going to be a win for us to be able to process our recyclables locally and provide a facility for about a three-county area," she said.

Other communities have had to rethink their programs as well, sometimes re-negotiating contracts with their processors to adapt to the falling prices, Doherty said.

Related: How Two Guys May Have Pulled Off the Biggest Recycling Scam in Canadian History

The dip in commodity prices are not expected to prevent consumers who recycle from continuing to do so — assuming that state and local governments can address the shortfalls. Collins said the formula that CalRecycle uses to set payments ends up underpaying recyclers, and that the state legislature has yet to agree on any changes.

"People want to recycle, it diverts items from going into landfills," Doherty said. "There's still a market for making recyclable products. It's just the economics relative to plastic and oil have significantly altered the business model."

Follow Matt Smith on Twitter: @mattsmithatl