This statement is submitted to accompany the testimony of Mr. Red Cavaney, President of the American Petroleum Institute, before the Committee on Environment and Public Works, United States Senate, May 25, 1999, regarding S. 1090, the Superfund Program Completion Act of 1999. API represents approximately 400 companies involved in all aspects of the oil and gas industry, including exploration, production, transportation, refining, and marketing.
API supports the provisions of the Chafee-Smith bill and applauds the sponsors for moving the Superfund debate a giant step forward. The legislation addresses the difficult and complex issue of liability reform - one of the central problems that has plagued the program; it moves the program toward completion by capping the number of sites to be added to the National Priority List and increasing the responsibility of the states for administering cleanup activity; it addresses the emerging issue of Brownfields rehabilitation; and, it appropriately recognizes that the Superfund program should be funded with general revenues.
To be sure, the Superfund program needs additional repairs which we will address later in this testimony. However, as the sponsors of S.1090 so correctly note, the Congress and this Administration have been unable to find acceptable compromises on those issues. The lack of agreement on those issues should not prevent Congress from making the important changes embodied in the Chafee-Smith bill.
General Revenue Funding
API wholeheartedly supports the intention of the sponsors of the Chafee-Smith bill to authorize general revenue funding of the Superfund program. As we have previously stated before this Committee and others, the petroleum industry has a unique perspective with regard to Superfund. Petroleum-related businesses are estimated by EPA to be responsible for less than 10 percent of the contamination at Superfund sites; yet these businesses have historically paid over 50 percent of the taxes that were imposed to support the Trust Fund. This inequity has been of paramount concern to our members and must be rectified. The attached charts illustrate the unfair tax burden that has been imposed on our industry.
Between 1982 and 1996, 74 percent of the Superfund program's funding came from specific Superfund taxes on industry (the petroleum tax, the chemical tax, and the corporate environmental income tax). During those years, the petroleum industry's share of annual taxes paid to Superfund ranged from 53% to 63%, averaging 57% over the entire period.
EPA officials have claimed that using general revenues to pay for Superfund would be deserting the "polluter pays" principle and would be "letting polluters off the hook." That is simply not true and does not reflect the reality of the Superfund program.
The Superfund program was created to pay for the cleanup of "orphan" waste disposal sites - those whose owners no longer exist (corporate owners) or who have died (individuals), or whose owners are bankrupt. Under the joint and several liability scheme of Superfund, once responsible parties are identified, the Fund itself is not looked to as the primary source of cleanup funding - unless those parties are insolvent. In fact, by the mid-1990s, the Superfund program had identified at least one potentially responsible party at 93 percent of nonfederal sites on the National Priority List. In other words, by that time only 7 percent of nonfederal sites on the NPL remained "orphan" sites requiring cleanup by EPA.
In addition to covering the cleanup costs of "orphan sites," EPA has been using the Superfund - funded with dedicated taxes - to pay administrative costs and for other purposes. In fact, EPA's use of Superfund monies for other purposes has increased to such a degree that the General Accounting Office (GAO) reported that in 1998 only 46 percent of the expended funds covered direct cleanup costs. Fifty-four percent paid the salaries of EPA officials, program administration, and other extraneous costs. The Committee is well aware of other GAO findings -- EPA's failure to recover all allowable costs from responsible parties, continued high program costs related to contractors, and EPA's failure to deobligate and recover unspent funds from completed Superfund contracts, to name just a few.
EPA has reported recently that cleanup projects at 90% of the nonfederal Superfund sites are either completed or under construction, and responsible parties are performing 70% of all new remedial work. The funding needs of the program are declining and will continue to decline. It makes sense for Congress to use general revenues to pay for orphan shares and administrative costs in the remaining years of the program, just as the Chafee-Smith bill contemplates.
No Restrictions on Use of General Revenues
Despite claims by some to the contrary, both GAO and the Congressional Budget Office have stated there is no legal or Budget Act restriction on the use of general revenues to fund the Superfund program. An explanation of the relationship and operation of the Superfund Trust Fund and appropriations for the Superfund program may be helpful.
Historically the Superfund Trust Fund has received revenues from two main sources: dedicated taxes and general revenues. The dedicated taxes have included a chemical feedstock tax, a crude oil tax, and a general corporate environmental income tax. Those taxes expired at the end of 1995.
The general revenue funding is transferred from the General Fund to the Trust Fund in the annual VA, HUD, and Independent Agencies appropriations bill, and that same bill appropriates money from the Superfund Trust Fund for annual Superfund program spending. The Superfund Trust Fund also collects revenues from interest on the monies in the Fund, fines and penalties imposed under the Superfund program, deferred tax collections, receipts from deobligated funds, and cost recoveries from responsible parties.
Under the Congressional Budget Act, the Superfund Trust Fund is considered to be "on-budget" for purposes of the unified budget. Any taxes dedicated to the Trust Fund are treated as revenues for purposes of the overall federal budget, and any spending from the Trust Fund is included in the total spending for the Federal Budget. However, transfers between the General Fund and the Trust Fund (such as for interest or direct transfers of general revenues) do not have any budgetary impact.
Superfund is a discretionary domestic program subject to the same budget rules that apply to all discretionary spending. The Trust Fund balance does not affect the amount that can be appropriated for the Superfund program. In other words, the discretionary spending caps, rather than the Trust Fund balance, control the Superfund program's spending level.
To summarize the foregoing explanation, appropriations for the Superfund program are not connected to, and do not depend on, any dedicated taxes. Thus, concerns that without reinstatement of the taxes the Superfund program would grind to a halt are completely unfounded.
Brownfields
The Chafee-Smith bill addresses the issue of brownfields rehabilitation by establishing grants for site investigation and remediation, and providing liability relief for innocent landowners and prospective purchasers of contaminated properties. API has supported brownfields reform as part of a comprehensive Superfund reauthorization. In addition, we have been concerned that the funding for this program not come from the Superfund Trust Fund and the Chafee-Smith bill funds the program through general revenues. API members have identified the following elements as essential in development of a brownfields program:
The remedy selection process for brownfields sites should be site-specific and risk-based - as it should be for all Superfund sites.
Reasonably anticipated future land and water uses must be considered in selecting the appropriate remedy.
Liability protection should be given to owners and sellers of property, as well as to purchasers.
A brownfields program should be broadly applied. The location of the site and redevelopment potential should determine brownfields applicability, not statutory jurisdiction. API believes that sites on the NPL and those proposed for listing, along with sites subject to corrective action or a planned removal under the Resource Conservation and Recovery Act (RCRA) should be eligible for brownfields programs.
Money to fund brownfields programs should come from general revenues and should include EPA as well as HUD appropriations.
Comprehensive Reform
API's position has been, and remains, that the current Superfund program should undergo comprehensive legislative reform, should sunset at the completion of cleanups of the CERCLA sites currently on the NPL, and should be paid for with general revenues. In addition to the liability scheme, other issues that the reform legislation should address are: remedy selection, natural resource damage assessments, no carve outs for any special interest s that have contributed waste to a site, and the possible transfer of the administration of cleanup programs to the states.
Remedy Selection Reform.
API members continue to support remediation standards that are site-specific and risk-based. We support provisions that would establish requirements for facility-specific risk evaluations to determine the need for remedial actions and to evaluate the protectiveness of remedial actions. The remediation process should provide protection of human health and the environment through methods that are practical and achievable in a cost-effective fashion. API has eleven recommendations for reform.
They include:
Remedy selection must be based on site evaluation and scientific risk assessment combined with site-specific risk management decisions and remedy selection criteria.
Risks must be prioritized so that limited resources are used efficiently.
Benefit/cost analysis must be used to assess remedial alternatives.
Realistic land and water use assessment must be explicitly considered in remedy selection.
Groundwater remedy selection should be based on future use and exposure.
The preference for treatment and permanent solutions should be eliminated.
Provisions for use of Applicable or Relevant and Appropriate Requirements (ARARs) should be amended.
Technological feasibility must receive greater consideration in assessing alternative remedial actions.
The public should have input and receive information as part of the decision-making process.
Voluntary cleanup should be encouraged.
Pre-enforcement judicial review should be allowed.
Natural Resource Damage Provisions
There are a number of revisions to the statute that would improve the NRD program under CERCLA and OPA. The following principles for NRD reform should be the core elements of such revisions:
Refocus the program on restoring, replacing or acquiring the equivalent of injured natural resources in order to re-establish the services provided to the public by the measurable and ecologically significant functions of the affected resources, and prohibit surplus recoveries based on speculative lost-use and non-use values.
Ensure that actions to restore or replace resources are cost-effective and cost-reasonable.
Clarify the existing limitations on NRD liabilities.
Require NRD trustees to prove claims in court like any other plaintiff.
Require consistency between Superfund cleanup and NRD programs.
API has commented extensively on these and other aspects of the Superfund program needing restructuring. We will continue to do so in the appropriate forums and to work for comprehensive reform. In the meantime, we believe that at this time the Chafee-Smith bill represents the best chance for legislative improvement and continued funding of the program through general revenues.
In conclusion, API appreciates the opportunity to testify in support of the Chafee-Smith reform proposal, and we commend the sponsors for their diligent efforts dedicated to improving the Superfund program.