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Reinstatement of Superfund Tax Proposed in Congress, Presumed in President Obama’s Budget

By Meline MacCurdy
April 22, 2009

After a nearly fifteen-year hiatus, petroleum, chemical, and other companies may again be required to finance the Superfund program through a “Superfund Tax.” Until 1996, a collection of three excise taxes levied on petroleum and chemical companies and a special income tax on corporate profits provided the primary source of revenue for EPA’s Superfund branch to clean up so-called “orphan sites.” Congress last reauthorized the Superfund Tax in 1990, it expired at the end of 1995, and, as a result, the Super “fund” dwindled to essentially nothing by 2003. The Obama Administration has proposed a budget item that, starting in fiscal year 2011, would reinstate the Superfund Tax. Two bills to reauthorize the Tax were recently introduced in the House of Representatives, and a companion bill in the Senate is likely to follow.

EPA is looking to reauthorization of the tax – combined with a $600 million allocation to the Superfund program in President Obama’s stimulus package[1]– to revive a program that has been criticized from all sides.

Background to the Superfund Tax

At least 30% of all Superfund sites are orphan sites, where PRPs cannot be located or do not have the financial resources to fund the cleanups.[2] CERCLA, as originally passed in 1980, created a trust fund – which became known as the Superfund – to finance cleanups at orphan sites. Revenue sources for the Superfund have always included appropriations from the U.S. General Treasury, cost recoveries from PRPs, interest on the fund, and penalties. Until 1996, the Superfund Tax provided a significant source of revenue for the Superfund program.

The Superfund Tax included excise taxes levied against three categories of industry that, at least in theory, created or in some way benefited from products that are involved in contaminated sites, and a special income tax targeted at relatively profitable companies. First, the largest revenue source came from a tax on petroleum companies.[3] This $0.097 per barrel tax was imposed on domestic refineries, based on the amount of crude oil they purchased, on importers, based on the amount of refined petroleum products they imported into the United States for consumption, storage, or use, and on domestic crude oil used or exported before it was received at a refinery. Second, the “chemical feedstock tax” was an excise tax on 42 listed chemicals (subject to numerous exceptions), including inorganic chemicals, metals, and petrochemicals that were deemed inherently dangerous, potentially used as inputs into the production of hazardous products, or potentially generated hazardous wastes when used. The tax, which ranged between $0.22 per ton to $4.87 per ton depending on the type of chemical, was imposed on the sale of a listed chemical by the manufacturer, producer, or importer. Third, an “imported chemical derivative tax,” created in SARA as a complement to the “chemical feedstock tax,” imposed an excise tax on imported chemicals that contained or used any of the 42 listed chemicals. Finally, an “environmental corporate alternative minimum tax,” also created in SARA, imposed a special minimum environmental tax at a rate of 0.12% on taxable corporate profits in excess of $2 million. Together, these sources provided approximately $1.5 billion annually for the Superfund.[4]

Congress reauthorized – and added to – the Superfund Tax in 1986, under President Reagan, and in 1990, under President George H.W. Bush. Despite President Clinton’s call to reauthorize and supplement the Tax, Congress allowed it to expire at the end of 1995.[5] Although several bills to reauthorize the Tax have been introduced in Congress since this time, President Bush did not support reauthorization of the Tax during his eight years in office, and Congress did not act to reinstate it.

Since 1995, increased contributions from the general fund of the U.S. Treasury have been necessary to compensate for the loss of tax revenue. Despite annual appropriations of over $1.3 billion, the Superfund was essentially depleted by fiscal year 2003.[6] EPA contends that the Superfund deficit has significantly hindered its ability to act at many sites.[7] Although the Superfund budget has operated in the black since fiscal year 2006, estimates suggest that it will be difficult for appropriations from the U.S. Treasury to meet the needs of the Superfund program, particularly in light of the current economic climate.[8]

Superfund Tax Presumed in President Obama’s Budget, Proposed in Congress

President Obama’s proposed 2010 budget supports reinstating the Superfund Tax, and presumes that it will generate $17.2 billion in revenue from fiscal year 2011 through 2019.[9] The White House proposal states that “[t]he 2010 Budget proposes to reinstate excise taxes that expired in 1995 and will collect over $1 billion to clean up the Nation’s most toxic, contaminated sites within the Superfund program.”[10] As for timing, the budget proposal states that “[t]he reinstated taxes will not begin until 2011 after the economy recovers.”[11]

In the House, Rep. Blumenauer (D-Ore) introduced H.R. 564, the “Superfund Reinvestment Act of 2009,” and Rep. Pallone (D-NJ), senior member of the House Energy and Commerce Committee, introduced H.R. 832, the “Superfund Polluter Pays Act.” Both bills would reauthorize the Superfund Tax, with minor changes, through 2017 or 2018. In the Senate, Sen. Lautenberg (D-NJ), the chairman of the Superfund, Toxics, and Environmental Health Committee, is said to be preparing to introduce a similar bill this summer.[12] Senator Lautenberg, along with then-Senator Obama, co-sponsored a bill to reinstate the Superfund Tax last fall, which did not make it out of committee.

Reactions

The Superfund Tax has long been a controversial issue within an already controversial environmental program. Supporters of the Superfund Tax argue that it follows the “polluter pays” principle, where the entities that are responsible for contamination – even if removed from the actual contaminated sites – shoulder the burden for orphan sites instead of individual taxpayers. For example, a recent report issued by the Center for Environmental Health and Justice argues that unfunded cleanups are likely to increase as a result of effects from climate change, and that the Superfund Tax is necessary to respond to these sites: “Without corporate fees to replenish Superfund, there is simply not enough money to do the critical job of cleaning up hundreds of toxic waste sites. Given the poor economic climate, it is unfair to expect the American taxpayers to pay for 100% of the annual costs of this program. Corporate polluters must once again contribute to the costs of cleaning up these contaminated sites.”[13] Representative Pallone, one of the bill sponsors, commended President Obama’s budget, stating that it “ensures that polluters, not taxpayers, are paying to clean up our nation’s worst toxic waste sites,” and that “a steady source of funding” for the Superfund program is necessary to ensure that “sites around New Jersey and the nation no longer have to wait years to be cleaned up.”[14]

Opponents argue that CERCLA already ensures that the actual “polluters” pay to clean up contaminated sites, in addition to a host of parties who fall within CERCLA’s wide net of liability, and that a tax unfairly and indiscriminately burdens companies that comply with environmental laws and have no connections to the individual sites.[15] Former EPA Administrator Stephen Johnson opposed reinstating the Superfund Tax and forcing taxpayers to fund additional cleanups, where improvements to the program could be gained through “additional efficiency” and by “keep[ing] the focus on responsible parties.”[16]

For more information on the Superfund, including proposed legislative changes, please contact Meline MacCurdy.

[1] See Svend Brandt-Erichsen, To Get Stimulus Money, Know Who Decides and How the Money Will Be Awarded, Marten Law Group Environmental News (Feb. 18, 2009).

[2] Jonathan L. Ramseur & Mark Reisch, Superfund: Overview and Selected Issues, CRS Report for Congress, 12 (May 17, 2006).

[3] See id. at 10-15.

[4] Id. at 14-15.

[5] See Salvatore Lazzari, Taxes to Finance Superfund, CRS Report for Congress (Sept. 13, 1996).

[6] Ramseur & Reisch, supra note 2 at 14-15. After recalculating the Superfund balance, based in part on cost recoveries, it was not until fiscal years 2004 and 2005 that the Superfund had been depleted. Jonathan L. Ramseur, et al, Superfund Taxes or General Revenues: Future Funding Issues for the Superfund Program, Congressional Research Service Report to Congress, 4-5 (Updated February 4, 2008).

[7] Ramseur & Reisch, supra note 2 at 14.

[8] See Ramseur, et al, supra note 6 at 4-5, 9-10.

[9] OMB, A New Era of Responsibility: Renewing America’s Promise, 101 (Feb. 26, 2009); see Citizens for Tax Justice, Tax Proposals in President Obama’s First Budget, 12 (revised Mar. 18, 2009).

[10] OMB, A New Era of Responsibility: Renewing America’s Promise, 101 (Feb. 26, 2009).

[11] Id.

[12] See Raju Chebium, Obama proposes to reinstate Superfund tax to collect for polluted N.J. sites (Mar. 1, 2009); Advocates Call for Reinstatement of Tax, Say Hazards Are Worsening at Waste Sites, BNA Environmental Reporter (Mar. 27, 2009) [subscription required].

[13] Stephen Lester & Anne Rabe, Center for Health, Environment, and Justice, Superfund: In the Eye of the Storm, 4 (March 2009).

[14] See Chebium, supra note 12.

[15] See Angela Logomasini, EPA Uses Superfund Tax to Target the Innocent, Competitive Enterprise Institute (Sept. 5, 2003).

[16] Ramseur, et al, supra note 6 at 10.

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