By Manas Kumar*
Upon seeing a hazardous waste site, our moral impulse calls for the polluters to pay. Federal law endorses this view. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) mandates that parties responsible (“PRPs”) pay to decontaminate waste sites under the “Polluter Pays” principle.[i] While socially beneficial, supportive of personal responsibility, and alleviating taxpayer burdens, the regulation is only as strong as its funding. Known PRPs must pay for their actions, but sites with unknown or bankrupt polluters require federal trust funds pay for cleanup.[ii] These cash-strapped areas become Superfund sites whose remediation is paid for by the Superfund federal trust.[iii] Consistent under-funding has exhausted the Superfund and only eight Superfund sites remain despite a long waitlist.[iv] Without new funding, the Environmental Protection Agency (“EPA”) might be unable to adequately combat new waste sites. However, the Federal Government has several options to reinvigorate the Superfund.
The EPA and states determine which polluted sites require CERCLA supervision as Superfund sites. Using the Hazardous Ranking System, officials analyze the potential health and environmental risks arising from uncontrolled waste sites with scores ranging from 0 to 100.[v] Sties scoring 28.5 points or higher are placed on the National Priorities List (“NPL”).[vi] The NPL merely determines which sites need closer supervision because placement on the list does not immediately impose liability for damages or immediately compel PRPs to eliminate waste.[vii] After making final determinations, including assigning PRP accountability for the contamination, the EPA can pursue administrative procedures to order cleanup. This includes hearings to challenge findings, judicial orders to enforce the rulings, and processes allowing cooperative PRPs to sue uncooperative PRPs for incurring extra costs due to their resistance.[viii]
Facially, CERCLA’s “Polluter Pays Principle” makes funding a non-issue, but issues arise with “orphan shares.” Occasionally, multiple PRPs are responsible for a toxic site. When one or more shareholders are unknown or insolvent, the Superfund must cover these residual shares of remediation costs, or “orphan shares”.[ix] The EPA avoids shifting orphan share costs to known PRPs.[x] It is likely that doing so would discourage PRP cooperation with cleanup efforts and potentially make parties liable either for more pollution than they caused or more costs than they can cover without risking bankruptcy.
The Superfund’s financial health has not always been so precarious. The initial trust fund enjoyed $1.6 billion.[xi] The Superfund renewed assets using a chemical and petroleum tax, which reflected the Polluters Pay Principle by using industry taxes to pay for its own cleanups.[xii] However, the Treasury Department stopped collecting the tax in 1995, and Congress did not reauthorize the tax.[xiii] The Superfund gradually shrank until it had insufficient funds by 2003.[xiv] Since 2001, federal and state general tax revenues have financed the Superfund.[xv]
This shift in funding has weakened the EPA’s ability to clean up hazardous waste sites. Starting in 2000, Congress gradually reduced the budget allocated for the Superfund to $1.26 billion.[xvi] This decrease correlated with a decrease in Superfund site administration: 2009 saw 20 Superfund sites and 2014 saw only 8.[xvii] This decline can be partially explained with cleanup programs eliminating contamination, but the inability to fund cash-strapped sites has also contributed. Currently, the NPL has 1,337 sites with 53 proposed additions.[xviii] There is still a demand for Superfund financing, and underfunding will force many sites to delay remediation until alternative funding from states and private sector sources become available, if they ever become available. These delays could permit credible health and environmental risks to persist without adequate action, risking the welfare of nearby communities.
It is unlikely that Congress will increase the Superfund budget using general revenue funds. However, there are other options available to find alternative funding. One solution is to renew the chemical and petroleum tax. Past renewal efforts were unsuccessful, but proper framing could give another attempt better reception.[xix] Proper framing is crucial because the current Congress and Administration are presumably skeptical of introducing new taxes. The Superfund tax definitely should not be presented as a value added tax, as there has never been such a federal tax and the notion suffers historic opposition.[xx] Rather, the Superfund tax should be renewed as part of a larger tax and regulatory reform package, which would require scaling back some taxes in favor of raising others. This could reduce Congressional and Administration opposition.
Another option could be to rely more on state budgets. As mentioned, the EPA and state agencies jointly determine NPL sites. This practice signals that many listed sites represent facilities that local officials definitely want remediated. State officials could use popular interest to justify local taxes to fund remediation and sponsor programs to pick up costs.
Nonetheless, state-funding delegation runs several risks. States might not prioritize the level of remediation that CERCLA’s drafters imagined, but it would allow for direct and immediate action against the most salient environmental threats. However, states might use their funding power to justify expanding resource extraction, which would create more potential hazardous waste sites for the NPL. Also, states with limited budgets might fear that additional local taxes will discourage enterprise. Officials could be motivated to give less than accurate National Hazardous Scores. Another risk is the possibility that states might prioritize some district’s needs over others, leading to inequitable remediation efforts. A well-resourced and powerful district will have better access to support than poorer, weaker districts, which will suffer administrative neglect and persisting toxicity. Thus, state funding provides necessary support but also imposes costs.
The best option is to reintroduce the federal chemical and petroleum tax in a broader regulatory reform regimen. Packaging the tax with strategic deregulations will create environmental risks and more NPL sites, but rebuilding the trust fund will reestablish the EPA’s institutional independence from Congressional budgets. Later and more sympathetic Congresses and Executive Administrations can provide more investment to further insulate the EPA and continue remediation funding without the political branches interfering in regulatory activities. The policy would also allow for immediate relief to affected communities living near hazardous waste sites and badly needing aid.
The Superfund program suffers financial deficits, which inhibit regulators’ abilities to actively oversee and fund badly needed remediation at toxic sites. The gradual erosion of the fund and revenue sources made the program reliant on Congressional budgets and limitations. Ongoing demand signals that the Superfund is still necessary. Given the dire need for financing, it would be best to pursue reintroduction of the chemical and petroleum tax as part of a larger regulatory reform package to begin the process of insulating the EPA. This way, a stronger and more independent EPA can continue to properly administer remediation projects, regardless of the political climate.
The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.
*Manas Kumar is a Junior Editor for MJEAL. He can be reached at email@example.com.
[i] See 42 U.S.C.A. § 9607 (1980).
[ii] See 42 U.S.C.A. § 9605 (1980).
[iii] Kaley Beins and Stephen Lester, Superfund Polluters Pay So Children Can Play. 35th Anniversary Report, 5, The Center for Health, Environment and Justice (Dec. 2015), http://chej.org/wp-content/uploads/Superfund-35th-Anniversary-Report1.pdf.
[iv] Id. at 12.
[v] Mark Reisch & David M. Bearden, Superfund Fact Book: Superfund Glossary, Environment and Natural Resources Policy Division, https://www.ncseglobal.org/index.php?q=NLE%2FCRSreports%2FWaste%2Fwaste-21.cfm (last visited Feb. 25, 2017).
[vii] Superfund: National Priorities List (NPL), https://www.epa.gov/superfund/superfund-national-priorities-list-npl (last visited Feb. 25, 2017).
[viii] Reisch, supra note 5.
[ix] See 42 U.S.C.A. § 9608 (1980).
[x] Reisch, supra note 5.
[xi] Beins, supra note 3, at 10.
[xii] U.S. Government Accountability Office, GAO Report Number GAO-15-812, Superfund: Trends in Federal Funding and Cleanup of EPA’s Nonfederal National Priorities List Sites (Sept. 2015), http://www.gao.gov/assets/680/673051.pdf.
[xiii] John H. Cushman, Congress Forgoes Its Bid to Hasten Cleanup of Dumps, N.Y. Times (Oct. 6, 1994), http://www.nytimes.com/1994/10/06/us/congress-forgoes-its-bid-to-hasten-cleanup-of-dumps.html?scp=8&sq=clinton%20superfund%20bill&st=cse.
[xiv] John B. Stephenson, Superfund Program: Updated Appropriation and Expenditure Data (2004), http://www.gao.gov/new.items/d04475r.pdf.
[xv] U.S. Government Accountability Office, supra note 11, at 13.
[xvi] Beins, supra note 3, at 9.
[xvii] Id. at 12.
[xviii] Superfund: National Priorities List, supra note 7.
[xix] Stephenson, supra note 14.
[xx] James M. Bickley, Value-Added Tax: A New U.S. Revenue Source, Government and Finance Division, https://fas.org/sgp/crs/misc/RL33619.pdf (last visited Feb. 25, 2017).