Specifically, Browning's pollution tax would be levied per unit of effluent discharged, with those pollutants deemed to have greater adverse effects carrying higher charges. Browning said in response to a question that highly toxic substances such as Kepone and PCBs should not be discharged under any circumstances. "Toxic substances in air or water are a class apart and have to be handled differently," he said. "You don't regulate them. You just say no." EXPENSIVE SYSTEM The present regulatory system, aside from being cumbersome and less effective than an economic solution, is very expensive, Browning contended. "We now spend between $50 and $60 billion (annually) on environmental regulations alone," he said. "If we should attempt to meet the demands of the 1970 Clean Air Amendments and the 1972 Water Pollution Control Act Amendments, by the early 1980s one conservative estimate holds that the cost would run on the order of $500 billion, or about 10 percent of the growth in per capita national income." FLEXIBILITY IS KEY Flexibility is the key to effective pollution control, Browning argued. The pollution tax, he said, "would provide flexibility both to industry, which could adjust its processes for maximum economic and budgetary advantage; and to government, which could adjust its tax schedules to impact specific pollutants as environmental needs dictated.' He cited the 1983 water pollution requirement for best available technology (BAT) as an example of regulatory inflexibility. "The 1983 requirement for BAT doesn't take into account the fact that the goal of the Water Act is 'fishable, swimmable water,' he said. "If we can achieve that goal without applying BAT, we should be encouraged to do so-not prohibited from doing So. "When you lock industry into using the best technology available at a given date, and you set environmental standards accordingly, you deprive industry of any incentive to seek its own long-term solutions, to seek constant improvement in technologies and, moreover, you foreclose on constant improvement in environmental quality," he said. "If we can reach 'fishable, swimmable water' before 1983 without BAT, let us get on with it. The flexibility required to do that doesn't now exist." PRODUCTS REFLECT TAX A pollution tax, because it is predictable and measureable, would eliminate the uncertainty which Browning contends is inherent in the regulatory process. "Today, uncertainty provides an incentive to evade the law," he said. "The ability of some to evade or delay complying with the law while others obey it creates an inequity." A pollution tax, on the other hand, would allow industries to base their marketing decisions on predictable environmental obligations, he said. Goods with the least adverse environmental impact would have a competitive advantage, Browning said. "A pollution tax would uniformly reflect the environmental cost of doing business and would share those costs clearly and directly with the consumer. A product which created a great deal of pollution would increase commensurately in cost," he said. EUROPEAN COUNTRIES CITED Browning said several European countries, including West Germany, France, the Netherlands, Czechoslovakia, and Great Britain, either have adopted or are moving toward the pollution tax concept. In the U.S., he said, the idea has been advanced by Charles Schultze, the head of President Carter's Council of Economic Advisors, who co-authored with Allen V. Kneese a stay on pollution taxes and regional control strategies (Current Developments, December 24, 1976, p. 1227) NO CONGRESSIONAL ACTION Browning noted that the idea of a pollution tax has been before the U.S. Congress before but "So far nothing has come of it." The arguments against the pollution tax approach were summarized by Senator Edmund Muskie (D-Maine), chairman of the Environmental Pollution Subcommittee, who was questioned on the subject later in the program. Muskie, who helped 33-546 O-78-5 write key environmental legislation, said the regulatory approach is working and should continue. "I've always been rather negative toward that answer," Muskie said of the pollution tax. "It does not really eliminate the complexity of an overwhelming bureaucracy. I doubt whether it would be any easier to implement than now.' But Muskie expressed some interest in testing the pollution tax on a specific pollutant to determine its effectiveness, as proposed by Senator Gary Hart (D-Colo). "I've never heard that proposed before and I'd be interested to examine it," Muskie said. Mr. KAMLET. The Environmental Protection Agency has, similarly, proposed the use of a so-called "noncompliance fee" to assist it in carrying out its pollution control responsibilities under the Federal Water Pollution Control Act. Again, if the Chair wishes, I would be pleased to submit for the record the legislative language of the EPA sponsored noncompliance fee approach, as adopted by the Senate as section 45 of S. 1952. Again, if the Chair wishes, I would submit that. Mr. BREAUX. Without objection, it will be made a matter of the record. [The following was received for the record:] "NONCOMPLIANCE FEE" APPROACH OF S. 1952, 95TH CONG., 1ST SESS., AS NONCOMPLIANCE FEE SEC. 45. Title III of the Federal Water Pollution Control Act is amended by adding a new section as follows: NONCOMPLIANCE FEE "SEC. 319. (a) A noncompliance fee established pursuant to this section shall be imposed automatically and payable to the Administrator or a State with an approved program under section 403, as appropriate, either quarterly or monthly, for any point source (other than a publicly owned treatment works) which is not in compliance on or after (1) July 1, 1979, with any effluent limitation or standard under section 301(b) (1), 306, 307, or 316 of this Act, or (2) January 1, 1984, with any effluent limitation or standard under section 301(b) (2), 302, or 307 of this Act. Any permit issued under section 402 of this Act for such source shall be amended to incorporate such fee requirements. "(b)(1) The owner or operator of any such point source for which the Administrator or a State with an approved program under section 402 intends to impose a noncompliance fee under this section shall upon request by the Administrator or the State furnish to the Administrator or the State (with a copy to the Administrator) information containing a detailed description of the control technology or system proposed to achieve compliance with such effluent limitation or standard and the estimated cost of compliance, including capital costs, debt service costs, the estimated schedule of expenditures to comply with such limitation or standard, and the estimated annual costs of operation and maintenance of any technology or system required in order to maintain such compliance, together with such information as the State (or the Administrator) may require on the economic value which a delay in compliance beyond July 1, 1979, or January 1, 1984, as the case may be, may have for the owner or operator of such source. "(2) The Administrator or the State shall issue specific notice to the owner or operator of a point source subject to this section requiring the information described in this subsection. If the owner or operator of any source subject to this section fails to submit a calculation of the fee assessment, a schedule for payment, and the information necessary for independent verification thereof, the State (or the Administrator, as the case may be) may enter into a contract with any person who has no financial interest in the owner or operator of the source (or in any person controlling, controlled by, or under common control with such source) to assist in determining the amount of the fee assessment or payment schedule with respect to such source. The cost of carrying out such contract may be added to the penalty to be assessed against the owner or operator of such source. In addition, the State or the Administrator, as appropriate, may use cost information developed under section 304(b) of this Act. "(c)(1) A notice of receipt of information pursuant to subsection (b) of this section shall be published in the newspapers in general circulation in such State, and such notice shall set forth where copies of the information are available for inspection and, for a reasonable charge, copying. “(2)A) Within thirty days following the date of publication of the notice issued under paragraph (1) of this subsection, or at any time the Administrator or a State with an approved program under section 402 proposes to establish a noncompliance fee under this section, there shall be published in the newspapers in general circulation in such State (and, as appropriate, the Federal Register or any publication required as part of any rulemaking activity in such State) the proposed noncompliance fee applicable to the source with an announcement of an opportunity for a public hearing on such action. "(B) A proposed noncompliance fee under this section, determined in accordance with guidelines published by the Administrator, shall be a monthly or quarterly payment in an amount no less than the monthly or quarterly equivalent of the economic value of noncompliance, including, but not limited to, planning costs, design costs, supply costs, capital costs and costs of capital over a normal amortization period not to exceed ten years, start-up costs, operation and maintenance costs, and such other factors deemed appropriate by the Administrator relating to the economic value which a delay in compliance beyond July 1, 1977, or January 1, 1984, as the case may be, or such other date required for compliance, or any other noncompliance, may have for the owner or operator of such source. "(C) The Administrator or the State shall take final action establishing such noncompliance fee within ninety days after the date of publication of the proposed fee under subparagraph (A) of this paragraph. "(d)(1) A noncompliance fee established by a State under this section shall apply unless the Administrator, within sixty days after the date of publication of the proposed fee under subsection (c)(2)(A) of this section, objects in writing to the amount of the fee as less than would be required to comply with guidelines established by the Administrator. "(2) If the Administrator objects under this subsection, he shall simultaneously establish a substitute noncompliance fee applicable to such source in accordance with the requirements of subsection (c) of this section. "(e)(1) In the event an owner or operator contests the noncompliance fee established under this section, the owner or operator may within thirty days seek review of such penalty in the appropriate United States district court. "(2)(A) Except as provided in subparagraph (B) of this paragraph, in no event shall any challenge or review taken under this subsection operate to stay or otherwise delay the obligation of a source to commence monthly payment of the noncompliance fee as determined by the Administrator or the State on the date established to begin such payment, pending the outcome of any such review. (B) In any challenge of the imposition of the fee based on an allegation that the failure to comply by such date was due to reasons entirely beyond the control of the owner or operator and there is a substantial likelihood that the owner or operator will prevail on the merits, the obligation to commence monthly payment of the noncompliance fee may be stayed pending the outcome of such challenge: Provided, That as a condition of such stay, the owner or operator of such source shall post a bond or other surety in an amount equal to the potential liability for such fee during the period of the stay. "(3) If an owner or operator is successful in any challenge or review proceedings under this subsection, the court may award such relief as necessary, including cancellation of the bond, rebate of any payments, or adjustment of the amount of payments required by the order. "(f) In any case where a State does not have sufficient authority to issue a noncompliance fee, the Administrator after thirty days' notice to the State shall establish, implement, and enforce such fee. "(g) Failure to make any payment required under this section or to submit information required under this section shall constitute a violation of this section and section 301 and shall, in addition to liability for such payments, subject the owner or operator of a source to all penalties under section 309 of this Act. "(h) Any payments or other requirements under this section shall be in addition to any other permits, orders, payments, sanctions, or other requirements established under this Act, and shall in no way affect any civil or criminal enforcement proceedings brought under any provision of this Act or State or local law. "(i) Upon making a determination that a source with respect to which a fee has been paid under this section is in compliance and is maintaining compliance with the applicable requirement, the State (or the Administrator as the case may be) shall review the actual expenditures made by the owner or operator of such source for the purpose of attaining and maintaining compliance, and shall within one hundred and eighty days after such source comes into compliance "(A) provide reimbursement with interest (to be paid by the State or Secretary of the Treasury, as the case may be) at appropriate prevailing rates (as determined by the Secretary of the Treasury) for any overpayment by such person, or "(B) assess and collect an additional payment with interest at appropriate prevailing rates (as determined by the Secretary of the Treasury) for any underpayment by such person.". Mr. KAMLET. In short, the penalty fee approach of H.R. 5851 has much to recommend it and has been recognized as a useful device in other contexts. If the committee would indulge me for another minute or two on this subject, we would like to recommend several changes in the bill which we feel would strengthen the penalty fee approach and facilitate its application. The bill, in proposed paragraph (C)(i), leaves it up to EPA, in determining the amount of the penalty fee to assess on a dumper, to itself estimate not only the monetary value of any harm caused by the dumping to the marine environment, but also the monetary savings to the dumper by being able to continue ocean dumping rather than having to employ a more costly land-based alternative. We would recommend that the bill be modified to place the onus of estimating the cost of alternative technologies on the dumper rather than on EPA, since this information is most directly accessible to the dumper and given EPA manpower limitations. It would also avoid the delay inherent in rulemaking to cover groups of dumpers-which is the only way EPA could assume this responsibility itself. The likelihood that a dumper would intentionally underestimate his phase-out costs in order to minimize applicable penalty fees, is somewhat offset by a polluter's natural tendency to exaggerate, rather than understate, the costs of satisfying environmental requirements. The possibility of understatement can further be reduced by providing for an after-the-fact accounting, which compares the actual cost of compliance with the original projections and requires the dumper or EPA to reimburse any discrepancy. This approach is the one proposed in the context of a noncompliance fee under the Water Act. We feel it has merit in the ocean dumping area, as well. The bill says nothing about enforcement or judicial review, and we believe the bill should make clear that the mere payment of a penalty fee does not thereby excuse a dumper from the need to comply with otherwise applicable permit conditions and regulatory requirements. Similarly, the bill should specify that the failure to make required payments or to submit required information constitutes a violation of the act, making the offender subject to all civil and criminal penalties under the act, in addition to liability for payment of the penalty fee. Furthermore, we believe the bill should provide for expedited judicial review on a dumper's challenge to a penalty fee assessment, to avoid delaying the assessment of a fee until 1981 has passed and the fee no longer has meaning. Specifically, recourse to judicial review should be limited to 30 days from the establishment of the penalty fee; a judicial stay of the operation of the penalty fee pending the outcome of review should be prohibited, except where the noncompliance is due to reasons entirely beyond the control of the dumper; and even in such cases the dumper should be required to post the amount of the penalty fee as a bond, so that if he loses in court, he will still have to forfeit the full amount of the penalty fee. Again, these recommendations are modeled after the approach of the noncompliance fee proposed under the Water Act. Perhaps a comparable approach would handle the problem raised by Mr. Low earlier, of what you do in the early years of implementation, where you are involved in design work and planning, that does not cost the full amount of what a fee would be. It might be appropriate to consider including in the bill a provision for placing these funds in an escrow account for use in later years when construction commences and the more expensive phases of implementation come into play-so the full opportunity for an offset remains available and yet the dumper does not get off scot-free in the interim. Finally, on pages 7 through 10 of our prepared statement, we recommend half a dozen minor, clarifying changes to the language of the penalty fee provisions of the bill. These changes would in no way alter the effect or intent of the present provisions. Their purpose would be solely to preserve the integrity of the overall statutory and regulatory scheme and avoid unintended inferences and misconstructions. We hope the committee will review these recommendations carefully. One of these recommendations deserves special emphasis. Proposed paragraph (5)(A)(iv), as it appears in section 2 of the bill, would condition the issuance of an interim permit by the Administrator on a finding that the dumper "has no alternative *** which can be immediately implemented and which is environmentally less harmful" than ocean dumping. While we endorse the intent of this provision, we believe it should be broadened in its reach and expanded in its coverage. Specifically, we recommend the adoption of the two-pronged approach of section 4(f) of the Department of Transportation Act, which requires not only that the project proponent fully exhaust all "feasible and prudent" alternatives, but also that the project, if it proceeds, must include "all possible planning to minimize harm." We also recommend, although this may not be apparent from our prepared statement, broadening the applicability of this requirement to give preference to land-based alternatives to encompass ocean dumping under section 103, as well as under section 102 of the ocean dumping law. The full text of section 4(f) of the DOT act appears on page 14 of our prepared statement. |