A small part of Oregon’s new statewide recycling system is on hold after a judge pushed pause in response to a lawsuit filed by product distributors.
The Plastic Pollution and Recycling Modernization Act aims to set statewide recycling standards and expand recycling service to more communities. It’s funded by fees on companies with over $5 million in annual revenue that sell packaged products in Oregon.
The National Association of Wholesaler-Distributors sued the Oregon Department of Environmental Quality last year, criticizing both the law and the state’s choice to have a third-party nonprofit administer the fee system.
The lawsuit is proceeding as Oregon lawmakers consider a bill that would exempt sellers of packaged berries, meat, poultry, fish and seafood from these packaging fees. Multiple industry groups voiced their support of the bill during a public hearing on Tuesday. They called on the state to pause the recycling system for all producers, not just the distributors affected by the judge’s recent decision.
Cardboard packaging sits in a stack on top of a recycling bin outside a garage in Portland. Local and out-of-state businesses that sell packaged products in Oregon are required to pay fees into the state's new recycling system.
Eli Imadali / OPB
In court documents, the distributors group calls the recycling system a “labyrinthine scheme, shrouded in secrecy,” that imposes fees on businesses that have little control over the rates they pay.
A handful of other states have passed similar laws, but Oregon is the first to officially launch its recycling system and begin charging producers fees. These producers — companies like General Mills, Ikea, Keurig and Dr Pepper — got their first invoices last July. The distributors group filed its lawsuit a few weeks later.
Producer fees, which are based on how much paper and other packaging a company produces, are intended to pay for new recycling services the law requires. Money might help a local hauling company purchase new trucks and recycling bins, for example, and some funds will help local governments administer the program and educate people about how to recycle.
Distributors have to pay for any new packaging they add to the system. So a distributor that delivers canned soda to grocery stores wouldn’t be charged for the cans the soda comes in, but it could be charged for pallets it uses to deliver canned soda and then disposed of afterwards.
In 2025, distributors’ invoiced fees made up less than 5% of all producer fees in Oregon, according to DEQ’s court filings.
Though they’re a small part of what the state collects, those fees were more than some distributors could afford, according to Eric Hoplan, chief executive officer of the National Association of Wholesaler-Distributors.
“We operate in very small margins, so when a new fee is introduced, suddenly that impacts the profitability of moving things through Oregon,” Hoplan said, adding that the fees are “making it cost prohibitive to do business in the state of Oregon.”
The trade association requested a district court judge pause enforcement of the new system in November, at least for its members. The judge granted the preliminary injunction on Friday, meaning members of the National Association of Wholesaler-Distributors won’t face penalties if they don’t pay producer fees before the lawsuit is resolved.
“Serious questions go to the merits of Plaintiff’s claims, there is a likelihood of irreparable injury, and the balance of hardships tips sharply in favor of Plaintiff,” U.S. District Judge Michael Simon wrote.
The distributors group is also challenging DEQ’s decision to delegate both fee collection and spending choices to Circular Action Alliance, a nonprofit founded by large corporations, including Amazon, The Coca-Cola Company and McDonald’s.
DEQ oversees and regulates the statewide recycling program, and approves the fee schedule that Circular Action Alliance sets.
Rates are calculated based on the overall recycling system’s cost, then those costs are divvied up among producers based on the types and weights of their product packaging.
The National Association of Wholesaler-Distributors says this system is unconstitutional. The trade association argued in court filings that DEQ has delegated “essential regulatory authority” and “sweeping regulatory power” to a private, third-party organization.
Cardboard packaging from Amazon sits in a stack on top of a recycling bin outside a garage in Portland. Amazon is among corporations that have to pay fees for the product packaging they contribute to Oregon's recycling system.
Eli Imadali / OPB
DEQ officials say the state agency is adequately overseeing the Circular Action Alliance and its members.
“They set the fees, but we review and approve the methodology that they use to set the fees, and we make sure that that methodology meets statutory requirements,” said Nicole Portley, who’s leading part of DEQ’s recycling program.
The distributors association also wants a clearer accounting of how producers were charged in 2025.
Circular Action Alliance didn’t publish the detailed formula it used to set those charges; it only published ranges and estimates. In its 2025 program plans, the nonprofit called the formula a trade secret, though it shared the formula with DEQ.
Larine Urbina, a spokesperson for Circular Action Alliance, said the nonprofit initially kept its rate formula secret to prevent competitors from stealing it, although the nonprofit did publish a detailed formula for 2026 rates.
“It’s really ensuring that the work that we’re doing on behalf of producers, that others aren’t able to take advantage of that investment of time and resources to then further their own program,” Urbina said.
The distributors group says this fluctuating fee structure makes it impossible for businesses to budget.
