Lithium batteries: Emerging risks for manufacturers, handlers, and recyclers

Lithium-ion batteries power a wide range of consumer, industrial, and energy applications, from vehicles and mobile devices to data centers and grid-scale storage. As deployment has grown, so has the legal and regulatory activity surrounding the battery lifecycle.

Increasingly, that activity is driven by large-scale environmental incidents, including fires, explosions, and contamination incidents that have resulted in multi-agency responses, overlapping legal regimes, multi-year response actions, and downstream litigation.

Recent incidents, including the Moss Landing energy storage fire in California and the Fredericktown recycling facility fire in Missouri, illustrate how events at a single site may result in broader environmental impacts, regulatory scrutiny, and questions about upstream responsibility. These events may expand waste handling and contractual risks into broader environmental exposure.

Recent battery storage legislation

In April 2026, the House Committee on Energy and Commerce’s Subcommittee on Environment held a hearing that addressed the federal government’s goal of securing domestic critical mineral supply chains and regulatory frameworks that, according to industry witnesses, have driven battery recycling and manufacturing offshore. At the same time, new state legislation aligns with this trend, treating manufacturers, brand owners, dealers, retailers, data center operators, and recyclers as part of the regulatory chain rather than as isolated actors.

As a result, companies that have never owned or operated battery storage or recycling facilities now face enforcement actions, cleanup exposure, and statutory compliance obligations arising from downstream failures they did not control. For example, automotive dealerships that remove electric vehicle batteries, or retailers that manage consumer battery returns, could inadvertently trigger full hazardous waste obligations if batteries are damaged or improperly handled.

This convergence is associated with several developments, including expanding state recycling mandates, expanded hazardous waste classification, renewed use of environmental cleanup liability to reach upstream battery stakeholders, and growing congressional pressure to modernize federal environmental statutes for the battery economy.

Battery recycling mandates: A state-by-state expansion

State battery stewardship requirements are no longer confined to a handful of jurisdictions. Extended producer responsibility (EPR) programs have advanced on different timelines and under different definitions of “producer,” creating compliance challenges for companies operating nationally. Illinois became the latest state to require producers to participate in an approved battery stewardship plan, with its program taking effect on January 1, 2026.

California has one of the most developed frameworks. Two statutes, AB 2440 and SB 1215, together establish a dual framework covering many batteries and battery-embedded products sold in the state.

• AB 2440, the Responsible Battery Recycling Act of 2022, requires producers of covered batteries, including loose single-use and rechargeable batteries, to participate in a CalRecycle-approved stewardship plan by April 1, 2027. The statute defines “producer” to include manufacturers and brand owners of covered batteries sold in California and requires retailers with five or more locations to serve as permanent collection sites.
  
  
• SB 1215 expands California's Electronic Waste Recycling Act to cover battery-embedded products, such as devices with batteries that are not readily removable using common household tools. A 1.5-percent recycling fee, capped at $15, has applied at the point of sale since January 1, 2026, and manufacturers are required to label products with battery chemistry information and submit annual reports to CalRecycle beginning July 1, 2027.

Hazardous waste classification and state variation

In May 2023, the Environmental Protection Agency (EPA) issued guidance confirming that most lithium-ion batteries currently on the market are likely to be hazardous waste under the Resource Conservation and Recovery Act (RCRA), based on ignitability and reactivity characteristics. The guidance extends to electric vehicle batteries removed at auto dealerships, repair facilities, and scrap yards.

EPA recommends managing spent lithium batteries under the federal universal waste rules, which streamline labeling, accumulation time, and transportation requirements but still require that batteries be taken to a permitted hazardous waste facility or authorized recycler. Damaged, defective, or recalled batteries cannot be managed as universal waste and are subject to full RCRA hazardous waste requirements.

EPA is currently developing a proposed rule to create a distinct universal waste category for lithium batteries, separate from the existing general battery category, with enhanced safety standards to address fire risks. According to the Agency’s regulatory agenda, a proposed rule is expected in 2026, with a final rule expected in August 2027.

California’s Title 22: A preview of what may come

States operating under delegated RCRA authority may impose standards more stringent than the federal baseline. California’s Title 22 regulations are one example.

California applies stricter total threshold limit concentration (TTLC) and soluble threshold limit concentration (STLC) standards for metals commonly present in lithium ion batteries, including cobalt, nickel, and copper. As a result, batteries that may qualify as universal waste in other states may need to be managed as fully regulated hazardous waste in California.

Civil fines can reach tens of thousands of dollars per day, and knowing violations can carry criminal liability. These exposures apply not only to manufacturers but also to retailers processing returns, automotive dealerships, fleet operators, warehouses, and data centers that are replacing backup battery systems.

Environmental cleanup liability

Where downstream recycling and disposal facilities fail – including due to fires, thermal runaway events, or other incidents – the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cleanup liability may increase exposure throughout the lithium battery lifecycle. These events frequently result in the widespread release of metals and hazardous constituents, necessitate emergency response measures, and impose long-term remediation obligations, which may extend liability to upstream actors that did not own or operate the facility.

The January 2025 Moss Landing fire and the October 2024 Fredericktown facility fire are both subject to active CERCLA enforcement. The Moss Landing fire destroyed roughly 55,000 lithium-ion battery modules at Vistra Corp.’s 300-megawatt storage facility, resulting in what EPA has described as the largest lithium-ion battery cleanup in its history.

Moss Landing

In July 2025, Vistra Corp. entered into an Administrative Settlement Agreement and Order on Consent under CERCLA, agreeing to perform and fund the removal, disposal, and cleanup of batteries under EPA oversight. Workers removed the first set of batteries from the facility on September 29, 2025 following months of planning and structural review. Material that can be recycled is being diverted to EPA-approved recycling facilities, and the Agency has estimated that the full cleanup could take two years or more. Preliminary soil sampling conducted by the California Department of Toxic Substances Control detected heavy metals, including cobalt, nickel, copper, and manganese, at levels exceeding screening standards in soils directly north of the fire site.

Fredericktown

Fredericktown presents a different but related profile. The Critical Mineral Recovery facility caught fire approximately one year after opening and burned within an existing federal Superfund area. The operator has announced plans to rebuild on the same site, adding new battery operations to an area with existing legacy contamination.

Under CERCLA, liability is generally strict, joint and several, and retroactive. Potentially responsible parties include facility owners and operators, parties that arranged for disposal or recycling, and transporters that selected disposal sites. A battery manufacturer that sent a small volume of defective cells to a contaminated recycling facility may be held liable for the full cost of cleanup. Landlords leasing space to battery processing tenants face owner liability. Participants in the growing "second-life" market may assume cleanup obligations related to refurbished inventory.

Under RCRA's use and re-use exemption, second-life batteries are not considered waste while being evaluated for re-use. However, full hazardous waste regulation applies once a handler determines the batteries cannot be re-used. In practice, this means relatively small-volume contributors may face cleanup exposure where other responsible parties are insolvent or unavailable.

Other litigation considerations

Battery-related incidents have given rise to a wide range of claims, including property damage, personal injury, consumer protection actions, and environmental tort litigation. Even where no injuries are reported, the damage may include contamination, cleanup costs, and business interruption.

Product liability claims have been most prevalent, expanding beyond traditional manufacturing-defect theories to include allegations related to storage practices, transportation, warnings, and end-of-life handling. At the same time, catastrophic events have resulted in multi-party contribution and cost-recovery actions, particularly under CERCLA, as parties have sought to allocate responsibility across complex supply chains.

Beyond direct claims, battery incidents have sometimes evolved into broader commercial disputes, including insurance coverage litigation, indemnification and contractual risk-transfer disputes, and claims arising from supply chain disruption and facility shutdowns. In many cases, these indirect costs and disputes have exceeded the immediate costs of the underlying event, particularly where operations have been suspended or regulatory approvals have been delayed.

Congressional and federal reform efforts

On April 22, 2026, the House Committee on Energy and Commerce’s Subcommittee on Environment held a hearing titled “Help or Hindrance? The Impact of U.S. Environmental Laws on Critical Material Supply Chains, National Security, and Economic Growth.” The hearing examined whether EPA’s administration of RCRA and the Toxic Substances Control Act (TSCA) is impeding domestic battery recycling and critical mineral recovery at a time when the United States is seeking to reduce dependence on foreign-controlled supply chains.

Industry witnesses emphasized that EPA’s 2023 RCRA guidance, which classifies lithium-ion batteries as hazardous waste, forces domestic recyclers into a permitting process that “can take years to complete” or requires them to store batteries at a location physically separate from their processing plant, creating logistical and safety challenges. Other participants, including members of Congress, argued that environmental safeguards remain a competitive advantage of producing in the US and should not be relaxed in ways that shift risk onto communities or undermine long-term sustainability goals.

In response, lawmakers have introduced or discussed legislation to streamline permitting for critical mineral processors and recyclers and to clarify how federal environmental statutes apply to battery materials. Proposals have focused on mechanisms such as interim RCRA permits, as well as potential statutory or regulatory changes affecting how materials destined for recycling or repurposing are treated under RCRA and TSCA. Separately, industry stakeholders have advocated for a more unified federal framework governing lithium-ion battery management, including clearer pathways for recycling, re-use, and second-life applications.

While uncertain, these reforms could materially change both compliance pathways and liability exposure across the battery lifecycle, particularly for manufacturers, recyclers, and investors navigating the intersection of environmental regulation and supply chain policy.

Looking ahead

• Multi-state EPR programs are becoming more common. California has one of the most developed frameworks, but Colorado, Illinois, New Jersey, Washington, Oregon, and Vermont are advancing or have enacted their own programs. Harmonization across jurisdictions remains uncertain. Companies are encouraged to evaluate producer status across their full footprint rather than after each successive deadline.
  
  
• Federal rulemaking could change the regulatory framework for universal waste. EPA’s planned rulemaking to create a distinct universal waste category for lithium batteries could impose new safety, storage, and handling requirements that go beyond the current general battery universal waste standards. Companies currently managing lithium batteries as universal waste may wish to monitor the rulemaking closely, as the new standards could affect compliance burdens for certain operators.
  
  
• State hazardous waste programs may diverge from the federal floor. California’s Title 22 may not be the only state classification scheme to exclude certain spent lithium batteries from universal waste status.
  
  
• CERCLA exposure for upstream generators is an area to monitor. Contribution and cost-recovery litigation following Moss Landing and Fredericktown may provide further guidance on how arranger liability under CERCLA applies to battery manufacturers, dealers, and others whose materials enter the recycling chain. Vendor diligence and contractual risk allocation, including indemnification, insurance, and Superfund-specific provisions, remain key considerations.
  
  
• Second-life batteries are an area of potential regulatory focus. EPA’s current use and re-use exemption recognizes that batteries being evaluated for re-use are not yet waste. However, as second-life inventory grows, that line may be subject to further review from federal and state regulators. Companies entering the refurbishment market may consider documenting re-use evaluations carefully and assume that handlers, transporters, and end users could face hazardous waste obligations once a battery is determined non-reusable.
  
  
• Congressional reform efforts may alter the regulatory framework. The April 2026 House hearing highlights growing interest in revisiting the applications of RCRA and TSCA to battery materials. Pending legislation, including bills that would create interim RCRA permits for critical mineral processors and codify executive orders on domestic mineral supply chains, could change the regulatory requirements applicable to manufacturers, recyclers, and investors. Companies are encouraged to track these legislative efforts alongside EPA rulemaking to anticipate how liability and compliance obligations may evolve.

How DLA Piper can help

For stakeholders across the lithium battery lifecycle, these developments highlight considerations related to proactive, documented risk management across regulatory compliance; contractual risk allocation; and corporate governance functions.

DLA Piper’s Environmental, Health, and Safety practice and Environmental and Catastrophic Events task force helps businesses anticipate, manage, and respond to emerging risks driven by battery regulation, environmental enforcement, and evolving legislative priorities.

For more information, please contact the authors.