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Superfund Tax Revival Renewing ‘Polluter Pays’ Debate

June 25, 2021, 5:20 PM

One of the bipartisan infrastructure deal’s pay-fors is reviving longstanding questions over who should pay to clean up some of the nation’s most contaminated land.

The White House released a framework on Thursday for its $579 billion bipartisan infrastructure deal. Included within the pay-fors of that plan is a line item to “reinstate Superfund fees for chemicals,” a potential restoration of excise taxes that expired in the mid-nineties.

Lawmakers in favor of bringing back the “polluters pay” tax model, including Rep. Earl Blumenauer (D-Ore.), applauded the provision. But industry representatives said that with few details to go on, questions remain on whether the revenue scheme should apply more broadly so that companies aren’t financially responsible for sites that they otherwise wouldn’t be liable for under the Superfund law.

American Chemistry Council President and CEO Chris Jahn said in a statement Friday that the group opposes the “misguided” pay-for, which “will only serve to damage and stifle a bright spot in America’s economy, the U.S. business of chemistry, at a fragile time of economic recovery when our nation can least afford it.”

The Superfund law, enacted in 1980, created a federal program to clean up hazardous sites. It also created a tax on the chemical and petroleum industries and gave the government broad authority to respond directly to releases or threatened releases of hazardous substances.

Blumenauer introduced separate legislation in April to reinstate fees on petrochemical companies to clean up toxic waste sites. He said he thinks the effort will succeed this time because of the Biden administration’s backing and broad public support.

“After having pounded on this for about a dozen years, I really, really feel good,” Blumenauer, a Ways and Means Committee member, said Thursday. “It’s on the right path.”

Blumenauer said it is “indefensible” not to support reimposing the taxes, which expired in 1995, on entities that generate hazardous waste. Letting the taxes expire amounted to a “get-out-of-jail-free card” for polluters, he said.

He estimated the revenue generated from reinstating the fees would likely amount to $4 billion.

An Old Debate Renewed

Petrochemical companies, however, have been arguing for a long time that they have stepped up at sites where they have identified responsibility under the law. They have started actually paying for and performing the clean up work, said Steven Jawetz, a principal in the Washington office of Beveridge & Diamond PC whose practice focuses on Superfunds.

Imposing a “polluters pay” tax could mean that some of these taxes are being paid by people who are unconnected to the sites, he said.

“It depends on your view of what’s fair or not,” Jawetz said. “There’s no question, from a social perspective, society needs these abandoned sites addressed, but why should one segment of American industry be required to pay for that?”

Jawetz noted that the original Superfund tax scheme included several components—a general corporate tax and one on the petrochemical industry. Over the years there were several attempts made to reauthorize the tax, but they were never successful, he said.

At the crux of the debate over financing for these hazardous waste sites are the “orphan sites,” such as abandoned mines, where there are no current financially viable and potentially liable parties under the Superfund law, according to Jawetz.

“The big question is, where should that funding come from and how broad-based is that tax base going to be to make it as fair as possible, given that the benefits of those clean ups flow to everyone?” he said.

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Details Needed

Lawmakers on both sides of the aisle have said they need more details on the plan, which also includes $21 billion in funding for environmental remediation.

Rep. Paul Tonko (D-N.Y.) said Thursday he needed to study the overall pay-fors in package. Finding the right mix of funding mechanisms to pay for the $1.2 trillion infrastructure proposal is a “balancing act,” Tonko, chair of the Energy and Commerce Environment and Climate Change Subcommittee, said.

Rep. Kevin Brady (R-Texas) said lawmakers only have the plan’s “broad strokes,” and more details are needed to assess the potential effects of reinstating the tax.

“While there was a Superfund tax that had expired, this lands squarely on refiners, chemical manufacturers, others,” Brady told Bloomberg Tax Thursday. “We want to understand better the impact that will have on the energy and chemical industry.”

—With assistance from Kaustuv Basu and Sylvia Carignan.

To contact the reporters on this story: Genevieve Douglas in Washington at gdouglas@bloomberglaw.com; Kellie Lunney in Washington at klunney@bloombergindustry.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Sony Kassam at skassam1@bloombergtax.com

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