provide for a combined fee of $6/ton on production and importation of primary lead metal, and provide broad discretion to EPA to impose the fees on additional heavy metals. As you know, lead is an internationally traded commodity, and historically the U.S. has relied on lead imports to satisfy 10-15 percent of consumption. Imposing a fee on lead metal imports, as provided in both bills, will help ensure that U.S. lead producers can maintain their competitive position vis-a-vis their foreign competitors. We would urge that your Committee retain a compatible fee on imports, as for domestic products.

But that is only part of the problem. The metals industry is cyclical. Again using lead as an example, in the last nine months the lead market has greatly weakened with U.S. lead prices having dropped by over 40 percent, shipments have fallen precipitously and lead stocks at U.S. plants have risen to levels three times higher than in 1977. If demand for lead products continues to decline, as most forecasters predict, there will be even greater pressure to lower prices. The point is that a $6/ ton fee on lead metal may appear insignificant in periods of strong demand and rising prices, but in a weak market, such as exists now, the impact could be significant as selling prices approach production costs. The mere fact that imports would also be assessed the fee will make little difference if U.S. producers are unable to sell their lead at a price which would ensure an adequate return. Given the international nature of most metals' markets, U.S. producers have little, if any, control over prices and are often unable to pass through increased costs to

consumers.

Although the bills include "imports" in the list of those substances to be taxed, we are concerned that under Section 3052(b)(4)(B) of H.R. 7020 the tax would only apply to the importation of primary metals and not recycled secondary metals. As you know, primary and recycled metals are identical and could not be distinguished on import. Therefore, most, if not all, imported metals could avoid imposition of the fee under the guise of being derived from recycled material. This would result in a significant competitive advanatge for foreign metal producers.

An even more vivid example is zinc metal. The zinc industry is in serious trouble because of world oversupply and declining consumption. U.S. producers are currently quoting 37.5 cents/lb. In 1975-a recession year-prices were 39 cents/lb. In 1977, the entire U.S. zinc industry showed a loss, and last year this country's largest zinc smelter was closed at a cost of 1,500 jobs. Had the proposed superfund fee been in effect and imposed on zinc metal, the losses would have been even greater. Other examples could be cited, for instance, the U.S. copper industry experienced a similar slump a few years ago, and there is no safeguard to prevent this from occurring again, because of the cyclical nature of the nonferrous industry.

Summing up, the imposition of a superfund fee on nonferrous industry products and imports may lead to problems which will ultimately have to be addressed by Congress on a commodity-by-commodity basis. We would therefore urge your Committee to assess the impact of the fee on the nonferrous metals industry in view of international competition and the cyclical nature of the industry.

3. Both bills contain a provision which would authorize the Administrator of EPA to list additional inorganic substances and heavy metals upon which the fee would be levied. Such delegation would subvert Congressional constitutional taxing authorities and could result in direct adverse economic impact on the nonferrous metals industry. Therefore, additional EPA discretion to impose new fees should be deleted as a minimum, EPA shoud be required to go back to Congress for permission to list additional substances, if new documented evidence appears sufficiently compelling to justify additions.

4. Both bills would impose a fee on the production of sulfuric acid. This is particularly ironic in the case of the metals industry where sulfuric acid is produced as a result of pollution controls mandated by the Federal Clean Air Act. The copper, lead, and zinc industries have spent millions of dollars to control sulfur oxide emissions by installing so-called acid plants. The end result of these plants is the production of large volumes of sulfuric acid, which would not have been produced were it not for mandated federal pollution controls. There is a glut of sulfuric acid on the market, and metal producers rarely recover their costs from acid sales. Imposition of a fee on sulfuric acid will simply make a bad economic situation worse. We urge your Committee to exempt from the fee all sulfuric acid which is produced as a result of federal air pollution control.

5. Currently, H.R. 85 and H.R. 7020 do not impose a fee on copper or zinc primary metals products but would impose a fee on lead. We urge that the exemption for copper and zinc continue as these products are not hazardous substances. Lead metal should also be exempted since it is not hazardous, and during production there are very stringent regulations under other existing federal statutes (such as

the Clean Air Act, Occupational Safety and Health Act, and others) to preclude adverse environmental effects.

As you are aware, superfund legislation is being developed in the Senate which addresses a much broader range of problems and which provides compensation for a more expansive range of damages than H.R. 85 and H.R. 7020. The taxes to be levied to support the fund in the potential Senate bill will be much more onerous. The report of the Ways and Means Committee on H.R. 85 and H.R. 7020 ultimately may be part of the record which Congress will consider in acting on much more expensive proposals. We urge your Committee to oppose legislation beyond the current scope of H.R. 85 and H.R. 7020.

The AMC realizes that difficulties involved in legislating an equitable program which will acomplish the objectives of hazardous waste cleanup. The mining and minerals industry supports a fair and reasonable bill to adequately deal with a real public need. However, due to the observations we have made above, we feel strongly that neither bill as presently drafted is as fair as it could be in the areas of the substances covered and how the superfund is to be funded.

Since much is yet to be learned about the nature and extent of the potential for harm from the improper disposal or spills of toxic wastes, present fears may be exaggerated. On the other hand, there may, in fact, be hazards of which we remain unaware. We would therefore encourage that any legislative initiative should provide a means of gathering and assessing additional information, and establishing rational priorities while guarding against the sort of premature overreactions that have at times occurred in pursuit of environmental goals.

Thank you, Mr. Chairman, for the opportunity to express our views on this legislation. If the AMC can be of assistance in providiing further data in support of these points, please feel free to contact me.

Sincerely,

J. ALLEN OVERTON, Jr.,

President.

STATEMENT OF THE AMERICAN PETROLEUM INSTITUTE

I. GENERAL POSITION

The American Petroleum Institute (API) appreciates this opportunity to make known its views on H.R. 85 and H.R. 7020, now under consideration by the Committee on Ways and Means. By way of background, API has placed on the public record its belief that legislation may be needed to deal with the serious problems-including questions of funding, compensation, and liability—arising from oil spills, hazardous substance spills, and abandonded waste disposal sites. Each of these three situations, however, has many unique characteristics, and each presents its own problems resulting from separate and distinct events. API therefore does not believe that partial or complete combining of oil spills, hazardous substance spills, and abandoned waste disposal sites into a "single-fund" approach is either the most efficient or equitable way to resolve these diverse problems.

In general, API has recommended that the following alternatives receive consideration:

1. Deal with the compensation and liability issues of oil spills into navigable waterways along the lines of the original H.R. 85. The original bill established a separate fund based on fees on crude oils processed in the U.S. and on products imported into the U.S. The principles embodied in the original bill-including the three cents a barrel fee to develop a $200 million clean-up fund, reasonable liability limits, and coverage of third-party damages-at one time were widely accepted by environmental groups, the Administration, and the oil industry.

2. Deal with the compensation and liability issues of hazardous substance spills through separate legislation, if indicated by the study discussed immediately below. Hazardous substance spills raise a wide diversity of issues. For example, they primarily are of small volume and vary greatly in degree of seriousness, and in most cases the spiller is readily identifiable. Accordingly, legislation on this subject should await completion of EPA's mandated study of hazardous spills. A 1978 amendment to the Clean Water Act directed EPA to conduct this study and report to Congress on "methods, mechanisms, and procedures to create incentives to achieve a higher standard of care in all aspects of the management and movement of hazardous substances. . . . This study also must consider limits on liability, liability for third-party damage, penalties and fees, spill prevention plans, and current practices in the banking and insurance industries. Clearly, Congress intended to use the results of the study as a basis for legislation.

65-215 0-80--17

3. Deal with the problems of abandoned waste disposal sites through an amendment to the Resource Conservation and Recovery Act. Problems posed by some existing sites are serious and require prompt action. At the time these sites were created, the state of the art was relatively primitive, and many diverse groups were involved in the disposal of hazardous wastes, including hospitals, municipalities, government agencies, and the armed services. With the passage of time, we have gained an understanding of the hazards incident to the disposal of chemical wastes, and today we know that disposal practices commonly accepted yestereday may in some cases have been insufficient. The benefits of the products and processes which produced the wastes disposed of at these abandoned sites were realized by the consumers of yesterday, and the cost of dealing with the problems which have arisen recently from these sites should be spread equitably. In short, the problems associated with abandoned sites are indeed societal problems. Consequently, API believes that funding for their handling should come from general government revenues. H.R. 7020, to its credit, partially embraces this concept in requiring that the fund be supported by such revenues, as well as by fees on industry.

API continues to believe that these three approaches would well serve not just the affected industries, but also society and its government representatives charged with passing and implementing laws. Proposes legislation in these three areas, however, has now progressed to that point where industry, including the petroleum industry, must consider new legislative initiatives toward making them as sound, workable, and equitable as possible. Accordingly, API offers the following comments on the two bills now before the Committee on Ways and Means, H.R. 85 and H.R. 7020.

II. H.R. 85

As indicated above, API believes that Title III of H.R. 85, which addresses hazardous substance spills, is unnecessary. Section 311 of the Clean Water Act affords sufficient protection against the costs of such spills. It is a matter of appropriating the funds that Section 311 already authorizes—namely, $35 million a year.

Reliance on Section 311 of the Clean Water Act rather than on Title III of H.R. 85 would ease a number of industry's concerns, among them, the fact that Title III would create an "open-ended" fund and would delegate unusual authority on both fund size and fund use to the EPA Administrator.

Accordingly, API urges the Committee on Ways and Means to withhold permission to impose fees until such time as EPA's report is forwarded to Congress, as required by Section 311(b) of the Clean Water Act.

Should Title III remain in place, then its present fee structure and certain other provisions merit the Committee's closest consideration.

Fee structure

Issue. Title III of H.R. 85 would impose a fee on petrochemical feedstocks as a principal source of funds for the containment and cleanup of hazardous spills. The fee mechanism purports to balance two key considerations, administrative simplicity and equity, but would in fact lead to administrative complexity and inequity. For more detailed comment on the subject of fees on petrochemical feedstocks, see Attachment A.

Proposed solution.-The point at which hazardous substances are first transported is the logical place for collecting a fee for mitigating spills of such substances-that is, on the initial purchaser of a hazardous substance, based on volume and degree of hazard. There is little or no inequity in this method, as all of the 297 hazardous substances have been determined under Section 311 of the Clean Water Act to be harmful to U.S. navigable waters when spilled in pre-determined amounts.

Collecting the fee would also be a relatively simple matter, as the substances are discrete and the principle of a manufacturer's excise tax is well-known. By comparison, the extreme complexity and inequity of a fee system based on petroleum feedstocks is an illogical solution that should be abandoned.

Exclusion of discharges from hazardous waste disposal sites

Issue. It is clearly the intent of H.R. 85 to create a fund to clean up oil spills and a separate fund to clean up hazardous substance spills. The committees that have acted on H.R. 85 expressly rejected proposals to include a fund to clean up hazardous waste disposal sites. The Administrator of the EPA, however, has repeatedly asserted the right to use the fund created by Section 311(k) of the Clean Water Act to clean up hazardous waste sites, particularly if it could be asserted that such a site was leaking into navigable water. It is therefore essential that both Title I and Title III of H.R. 85 be amended to prohibit the Administrator from using the oil and hazardous substance funds for purposes not intended by Congress.

Proposed solution.-Add a provision to Section 301(a) of Title III which amends the definition of "discharge" in Section 311(a)(2) of the Clean Water Act by adding words such as the following at the end of the definition: "and (D) discharges of hazardous waste that are subject to the Solid Waste Disposal Act."

A similar amendment should be made to Title I by adding the following at the end of Section 101(n) (definition of "oil pollution"): "(4) provided, however, that 'oil pollution' shall not include discharges of oil or oily wastes that are subject to the Solid Waste Disposal Act."

In-place toxic pollutants

Issue.-Section 304 of Title III would require the nation's chemical companies to contribute $10 million a year to clean up in-place toxic pollutants. This grossly inequiteble since such pollutants have resulted from numerous causes, including past effluent discharges from factories and facilities of many kinds. Cleaning up Lake Erie and similar bodies of water is clearly a societal problem, as is made obvious by the $15 million authorized by Section 115 of the Clean Water Act. Proposed solution.-Delete Section 304 of Title III and, if necessary, increase or restore the fund previously appropriated under Section 115 of the Clean Water Act. Limiting title III to spills into navigable waters

Issue. The draftsman of Title III made a critical and unintended error in transposing the language of Title I into Title III. As now worded, Title III would amend Section 311 of the Clean Water Act so that it would seem to apply to hazardous substance spills on land.

Proposed solution.-The words "in violation of Subsection (b)(3) of this Section" should be inserted after the word "substances" in line 21 on page 52 and in line 9 on page 56 of the May 6, 1980 Committee Print. The words "in violation of Subsection (b)(3)" of similar language limiting discharges to those into navigable water appear repeatedly throughout Section 311 of the Clean Water Act. The draftsman's error results from the fact that the comparable sections of Title 1 refer to spills resulting in "oil pollution," and "oil pollution" is defined in Title I to include only discharges into water.

Fund limits

Issues.-Title III is a revolving fund wherein the $100 million could be used numerous times in a single year. This open-ended feature might not property encourage the cost-effective treatment of spills.

Proposed solution.-If Title III remains in H.R. 85, the $100 million fund should be an annual collection limitation in addition to being the maximum size of the fund.

III. H.R. 7020

This bill should not include taxes on crude oil, because of the inequity of associating crude movements with abandoned or inactive hazardous waste disposal sites. These problem sites, where there are no identifiable responsible owners to take cleanup action, are now a problem for the country at large and should be solved by means of general treasury funding. Responsible companies still operating, with good waste management practices, should not have to pay for the improper actions of other companies, many of which are no longer in business.

If total government funding is not acceptable to the Committee on Ways and Means, then the 50-percent of the fund required from industry should be based on fees/taxes placed on the generator of a hazardous waste. Complex petrochemical feedstock fees could result in multilevel taxation of the same material. (Please refer to Attachment A.) Additionally, the fee/tax size should be a function of the volume and degree of hazard of the waste.

Such fees/taxes should be formulated, collected, and held not by EPA, but by the Treasury Department. The demonstrated expertise in the Treasury Department in this area would go a long way toward ensuring the proper distribution and use of these funds. Additionally, to the extent that H.R. 7020 (or H.R. 85) creates a new fund to compensate those injured by past events, the identification of the source from which that fund is derived requires particularly careful consideration. When the responsible party is unable to pay and the fund to cover the cleanup costs is used without regard to the likelehood of the contributor having any responsibility, such actions surely raise constitutional questions.

As drafted, the bill provides no procedures that will allocate the fee evenly among the affected companies. Because of different production schedules and because fee collection may terminate when the ceiling on the fund is reached, it is essential that the fee collection system provide refunds or other mechanisms to insure fair and equitable payments.

API offers the following, amplifying comments.

Fee/tax structure

Issue.-H.R. 7020 establishes a Hazardous Waste Response Fund financed in part by taxes assessed against petrochemical feedstocks, inorganic compounds, and crude oil. This tax structure was first proposed by the Administration in its own "unltrafund" bill, which covered oil spills, hazardous material spills, and cleanup of hazard

ous waste sites.

The Administration admitted in the analysis of its bill that the fee structure was selected primarily as a matter of administrative convenience and not necessarily to reflect the contribution made by petrochemicals, inorganics, and crude oil to the perceived problems.

Application of such a fee structure to create a fund for the containment and cleanup of inactive hazardous waste sites is simply unjustifiable. There is no relationship between the problem of cleaning up abandoned waste sites and the current manufacture of petrochemical feedstocks, inorganic compounds, and petroleum products.

This structure is particularly inequitable for the oil industry. H.R. 7020 imposes a three cents per barrel fee on crude oil. Additional fes are imposed on petrochemical feedstocks, most of which are made from crude oil, thereby creating a double tax on the oil industry. Additionally, because most of the petrochemicals are converted into products, most of which never end up as hazardous wastes, the tax is misplaced. A fee, if it is approved by Congress, should be placed on the materials causing the problem-hazardous wastes.

The administrative convenience to EPA in having a simple fee structure cannot justify the glaring inequities of the fee structure proposed in H.R. 7020.

Proposed solution.-The only type of fee on industry that can be justified in order to create a fund to clean up abandoned waste sites is a fee levied on the generator of hazardous wastes. Such a fee would still unfairly tax today's industries to pay for the mistakes of their predecessors, but at least it would be levied directly on the activity that led to the problem-not on unrelated petrochemical products and crude oil.

Taxing the generation of hazardous wastes will have the salutary effect of discouraging those very acts. It will stimulate recycling, reuse, and development of techniques to avoid the creation of wastes in the first place. By contrast, there is no social benefit in taxing petrochemicals, which are used to produce hundreds of nonhazardous consumer items.

Appropriate statutory language for levying a fee on generators of hazardous waste is contained in the March 26, 1980 draft of H.R. 6931.

Alternate proposed solution.-If the proposal to base industry fees on generation of hazardous waste is rejected and the existing fee schedule in H.R. 7020 is retained, the following mechanical changes would help make the existing fee schedule operate properly:

(1) Definition of "petrochemical feedstock.”—The definition of petrochemical feedstock set forth in Section 3022(2) is ambiguous. As now worded, it cannot be determined whether petrochemical feedstock means the liquid or gaseous hydrocarbons referred to in the definition or to the specific petrochemical products listed in the definition.

The most serious defect in the definition is the colon that appears after the word "following." The colon should be removed.

In the petrochemical industry, "feedstocks" are those products specifically listed in the definition to the extent they are used to produce complex chemicals and are not used for fuel. It is therefore recommended that the definition be revised to read as follows: "Petrochemical feedstock' means the following liquid or gaseous hydrocarbons not used for fuel: ethylene, propylene, butylenes, butadiene, butanes, benzene, toluene, xylenes, naphthalene, and methane other than that used to make ammonia."

(2) Definition of “supplier.”—Many petrochemical feedstocks and inorganic compounds are used by the producer as raw material to manufacture other products. A producer should not be a "supplier" and thus subject to payment of the fee until the final end product is sold or transferred to a third party.

The difficulty can be resolved by adding the underscored words at the end of the definition of "supplier" in Section 3022(4)(B), to wit:

"(B) 'Supplier' pounds

* * *

or

*

means any person who supplies such feedstocks or com

"(ii) uses the feedstocks or elements and compounds himself at a place other than the site of production, manufactured or importation or a site adjacent thereto." The added words are taken from the definition of "supplier" in Title III of H.R.

85.