INSIGHT: Superfund tax revival to impact key ‘building block’ chems, boost toxic site cleanup

Author: Janet Miranda

2021/11/09

HOUSTON (ICIS)--The passage of the $1tr bipartisan infrastructure bill includes the revival of superfund taxes on 42 chemicals that could result in a cost of $1.2bn/year for chemical companies and result in 44 plant shutdowns, according to the American Chemistry Council (ACC).

Under the plan, superfund taxes could have a great impact on basic building block chemicals such as ethylene, propylene, benzene, chlorine and xylene. These chemicals are used in a variety of applications, including in building and construction, the production of light vehicles and water delivery.

The Superfund programme was established in 1980 by Congress to clean up highly contaminated waste sites. To fund the programme, a trust fund was established that was financed primarily by a tax on crude oil and certain chemicals.

The infrastructure bill revives superfund taxes on chemicals through 31 December 2031 at double the 1995 rates, when superfund taxes were last implemented. The taxes, which should go in effect on 1 July 2022, are estimated to raise approximately $14.45bn over a 10-year period according to KPMG, a consultancy.

The funds would be aimed at restoring the country’s diminished Superfund trust fund, which the government would use to cleanup contaminated sites and bolster US Environmental Protection Agency (EPA) efforts to conduct investigations into other contaminated sites.

The superfund tax would provide action on environmental pollution, which Democrats have promised to deliver on as a central part of their climate agenda, while appeasing Republicans who wanted pay-fors included in the bill.

The following table breaks down the taxes per tonne on key chemicals as stated before the programme expired and under the bipartisan infrastructure plan.

Prior
Proposed
Chemicals: $4.87 $9.74
Benzene $4.87 $9.74
Butane $4.87 $9.74
Butylene $4.87 $9.74
Toluene $4.87 $9.74
Xylene $4.87 $9.74
Ethylene $4.87 $9.74
Propylene $4.87 $9.74
Butadiene $4.87 $9.74
Chlorine $2.70 $5.40
Sodium Hydroxide (Caustic Soda) $0.28 $0.56
Potassium Hydroxide (Caustic Potash) $0.22 $0.44
Acetylene $4.87 $9.74
Napthalene $4.87 $9.74
Ammonia $2.64 $5.28
Antimony Trioxide $3.41 $6.82
Bromine $4.45 $8.90
Hydrochloric Acid $0.29 $0.58
Hydrogen Fluoride (Hydrofluoric Acid) $4.23 $8.46
Nitric Acid $0.24 $0.48
Phosphorus $4.45 $8.90
Sulphuric Acid $0.26 $0.48
Zinc Chloride $2.22 $4.44
Zinc Sulphate $1.90 $3.80
Metals and Other: 
Antimony $4.45 $8.90
Arsenic $4.45 $8.90
Cadmium $4.45 $8.90
Chromium $4.45 $8.90
Cobalt $4.45 $8.90
Mercury $4.45 $8.90
Nickel $4.45 $8.90

Source: ACC

INDUSTRY REACTION
Superfund taxes could lead to massive additional costs for US manufacturers and increased expenses for consumers.

In a press release after the passage of the infrastructure bill in the US House, the ACC noted that while the legislation will include provisions that will spur development and use of advanced materials that rely on chemistry, it is "short-sighted to undercut such progress with new taxes on many of the critical inputs that make infrastructure modernisation possible".

In a recent study examining the costs of the Superfund tax, the ACC said it would result in shrinking of profit margins for the chemicals sector and would put the US at a disadvantage in the global chemical industry.

“Reimposing the Superfund chemical excise taxes would create an unfair advantage to foreign producers not affected by the tax and, as a result, imports would rise, US exports would fall, and production (and associated economic activity) in the US would fall as well,” the ACC said.

The 44 plants highlighted to be at risk by the ACC have a combined capacity of 4.3m tonnes.

The table below shows the chemical capacity at risk in million tonnes. The “other” label includes plants producing acetylene, ammonia, chlor-alkali, hydrogen fluoride and naphthalene.

Plant Type Number of Plants Capacity at Risk (000 MT)
Olefins 7 2,273
Aromatics 14 710
Acids 4 323
Other 19 1.085
Total 44 4,391

Source: ACC

ENVIRONMENTAL IMPACT
Out of the 1,700 cleanup sites that have been added to the National Priorities List of contaminated sites less than a quarter have been deleted since the list was created in 1980, according to a recent  superfund study by US PIRG Education fund, a non-partisan consumer protection group.

The deletion from the list is the last step after cleanup at the site has been achieved. The reason for the backlog is due to the declining federal Superfund budget which slowed down cleanup of toxic waste sites and enforcement activity.

A 2013 report from the US Government Accountability Office found that from 1999 through 2013, federal appropriations to the Superfund trust fund declined from approximately $2.3bn to $1.2bn, adjusted to 2020 dollars. That resulted in one-third of new remedial projects to be delayed during the same period due to the decline in funding.

With the Superfund programme having the money to do these cleanups it means they can address more sites efficiently, said Jillian Gordner, Campaign Associate at US PIRG and author of the superfund study. She said her comments in an interview with ICIS.

“When money is spread out very thinly across sites, there is not enough to complete the cleanup,” Gordner added.

The revival of Superfund taxes for chemical companies would just be the “cost of doing business,” Gordner said, adding that the reinstatement of these taxes would result in less than one-quarter of a percent impact on yearly revenue across the entire industry. She based her calculation on the 2019 total revenue of the US chemical industry of around $530.3bn.

PRESSURE TO PIVOT
Since the beginning, President Joe Biden’s domestic agenda has been centred on the transition from fossil fuels into green energy and on environmental justice concerns.

The taxes on 42 chemicals comes against a backdrop of several US policy pushes towards renewable energy and greenhouse gas emissions reductions.

Some of the policy proposals include tax increase for oil and gas producers and a plastic tax of up to 20 cents/lb ($421/tonne) in the $3.5tr spending package.

Many of these policies are creating uncertainty about the chemical sector’s investments in fossil fuels.

Insight article by Janet Miranda

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