Superfund GATT Case (SFUND)
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CASE NUMBER: 126
CASE MNEMONIC: SFUND
CASE NAME: Superfund Case
A. IDENTIFICATION
1. The Issue
In 1986 the United States Congress passed the Superfund
Amendments and Reauthorization Act, to fund the cleanup of some
of the most dangerous waste dumps in the country. As part of the
effort to finance the $8.5 billion authorized for the cleanup, a
tax was levied against both foreign and domestic crude oil.
However, foreign oil was to be taxed at a higher rate the
domestic oil (11.7› per barrel compared to 8.2› per barrel). The case was
appealed to the GATT who ruled who ruled the United states can
apply such a tax but cannot discriminate against imports.
2. Description
In 1980 Congress passed a law authorizing $1.6 billion to
pay for cleaning up hazardous dump sites throughout the United States
from FY1981-FY85. In 1985 Congress began working on a sequel to
the original Superfund cleanup bill, and eventually a bill was
passed and then signed by President Reagan in October 1986 that
funded the toxic dump cleanup program at $8.5 billion from FY86-
FY91 (the process behind the passage of this legislation will be
discussed later in the paper).
The legislation called for the Environmental Protection
Agency to begin work cleaning up at least 375 of the most dangerous dump
sites across the country, at well-known places like the Love
Canal and Times Beach. The bill also required attempts at permanent
cleanup whenever possible -- detoxifying chemicals and other
hazardous materials rather than just burying them in landfills.
The problem facing Congress, and the reason for the long
delay in getting the legislation passed, was how to pay for the
enormous increase in funding for the Superfund. The following solution
was finally reached: $2.5 billion would be raised through a
broad-based business tax; $1.4 billion through a tax on raw chemicals; $1.25
billion from general revenues; $600 million from other sources;
and most importantly for our purposes, through an increased tax rate
on crude oil, which had previously been taxed at .79› per barrel.
However, the reason this tax caused so much controversy was
the fact that foreign produced petroleum was to be taxed at a
higher rate (11.7› per barrel) than domestic oil (8.2› per
barrel). The increased tax was expected to finance the final $2.5 billion
of the Superfund cost, with $1.5 billion being paid by foreign
producers and $1.25 billion by domestic producers. Ironically,
it was this controversial tax differential which allowed passage of
the bill, as it was actually thought to benefit American oil
producers.
In July 1987, a panel of the General Agreement on Tariffs
and Trade (GATT) examined the Superfund tax and found that it
violated the GATT, which prohibits the application of higher taxes on
imports than on domestic products. Consequently, the discrepancy
in the tax level on foreign and domestic oil was eliminated by
Congress in 1989, levelling the tax rate at 9.7› per barrel.
Congress initially authorized a program to fund the cleanup
of hazardous waste dumps around the country in 1980, appropriating
$1.6 billion for Fiscal Years 1981-1985. During the last year of
the original appropriation, Congress began consideration of new
legislation to extend the cleanup of these waste dump sites,
although there was resistance from the White House because of the
expected increase in funding and the fact that some sort of tax
would likely be involved in paying for the cleanup.
In fact, in an attempt to avoid a showdown with the
Congress, the Reagan administration in January, 1985 offered a $5.3 billion
reauthorization of the Superfund program. However, the Congress
was determined to fund the cleanup at a higher level than that
proposed by the administration, and in February the Superfund
Amendments and Reauthorization Act was introduced in both
chambers. Although the legislation was initially introduced in the House,
activity on the bill began in the Senate, where it moved rather
quickly and easily through the chamber to final to passage,
beginning with its referral to the Environment and Public Works
Committee.
The Senate version of the bill, which contained a $7.5
billion authorization for the Superfund from FY1987-FY91, was reported
favorably by Environment and Public Works by a vote of 14-1 and
then referred to the Finance Committee. After being reported by
the Finance Committee on May 16 by a 16-1 vote, the Superfund
cleanup bill was sent to the floor for consideration, although
floor action would not take place until after the summer recess.
On September 26, the Senate authorized $7.5 billion for the
Superfund cleanup by a vote of 88-8.
Passage in the House was not as easy as it had been in the
Senate, primarily because it is the House which must come up with
the means of paying for programs enacted by Congress. After
being passed in a voice by the House Commerce Committee's
Transportation and Tourism Subcommittee on June 25, a bitter struggle began in
full committee over the bill, which authorized $2.5 billion more
than did the Senate bill. After finally being reported favorably
by Energy and Commerce after a voice vote on August 1, the
Superfund reauthorization bill was referred to the Public Works
and Transportation Committee as well as the Ways and Means Committee.
The Ways and Means Committee was the scene one of the more
interesting struggles to take place over the legislation, with
the full committee, in a rare show of power by the rank and file
members, reporting the bill favorably on October 17 despite the
opposition of the Chairman Dan Rostenkowski (D-IL) and his vow to
fight the bill on the floor. Despite the struggle over this
piece of legislation in committee, when H.R. 2005 finally was
considered on the floor on December 10, it was passed by an overwhelming
vote of 391-33.
The most difficult stretch on the road to passage still lay
ahead of the Superfund reauthorization bill, however, as it was
sent to conference committee after Congress returned from the
Holiday recess. Conferees began meeting in February 1986, but it
was eight months before the differences between the two chambers
could be worked out. While the $2.5 billion difference between
the two bills led to some conflict in conference, it was the problem
of how to pay for cleaning up the hazardous waste sites that led to
the long delay in reaching a compromise bill, and it was the
solution to this problem that qualifies it for inclusion in this
paper.
The House and Senate agreed upon an authorization of $8.5
billion for the Environmental Protection Agency to clean up some
of the most dangerous waste dumps from FY87-FY91, and a number of
taxes were to be levied in order to offset the cost. The tax
that is of most importance for this study was the one placed on crude
petroleum products, which had previously been taxed at .79› per
barrel. However, under the compromise bill reached by Congress,
the Superfund Amendments and Reauthorization Act would tax
domestic oil at a rate of 11.7› per barrel, and domestic oil at 8.2› per
barrel. Under this plan, foreign oil producers would finance
$1.5 billion of the Superfund cleanup costs, while domestic producers
would contribute $1.25 billion.
After the Conference report was easily passed in both the
House and Senate, the Superfund Amendments and Reauthorization
Act was sent to the White House for the president₫s signature on
October 10. However, because of the numerous taxes contained in
the legislation, in addition to the oil tax there was a
broad-based business tax and a tax on raw materials, President Reagan
threatened not to take action before the adjournment of the 99th
Congress, thus killing the bill with a pocket veto.
Anticipating the administration might try to stop the
legislation through such a measure, 57 Senators signed a letter
to Majority Leader Bob Dole urging him to keep Congress in session
past the October 21 signing deadline, after which the pocket veto
would come into effect. House Speaker Tip O'Neill and Majority
Leader Jim Wright had already indicated they might take such
action if the president failed to act on the bill, and the White House
was effectively pressured into supporting the legislation. On
October 17, President Reagan signed into law the Superfund Amendments and
Reauthorization Act, effectively establishing a higher tax rate
on foreign than on domestic oil.
In July, 1987, a panel of the General Agreement on Tariffs
and Trade (GATT) examined the Superfund tax and found that it
violated the GATT, which prohibits the application of higher taxes on
imports than on domestic products. In order to avoid retaliation
by the European Community, which requested permission to do so
from the GATT in 1988, Congress took action to alleviate the
differential. On November 22, 1989, Congress passed the Steel
Trade Liberalization Program Implementation Act, which put in
place a new tax of 9.7› per barrel on both foreign and domestic oil.
3. Related Cases
US and Venezuela WTO Case
Keyword Clusters
(1): Trade Product = PETROleum
(2): Bio-geography = TEMPerate
(3): Environmental Problem = Pollution Land [POLL]
4. Draft Author: Geoff Plague
B. LEGAL Cluster
5. Discourse and Status: AGReement and INPROGress
The agreement (see MAGNUSON case)
was not reached bi- or multi-laterally but rather was imposed
unilaterally by the United States on the rest of the world.
6. Forum and Scope: USA
Although the GATT reviewed the law in 1987 and found that it
was a violation of its trading principles, no international
action was taken, as the Congress passed a law in 1989 which levelled
the tax rate on foreign and domestic oil.
7. Decision Breadth: 1 (USA)
As with the Magnuson Act, technically all countries were
subject to the law, but those most affected were the large
exporters of oil -- the thirteen members of OPEC (Iran, Iraq,
Saudi Arabia, Gabon, Qatar, Venezuela, United Arab Emirates, Nigeria,
Algeria, Kuwait, Libya, Indonesia and Ecuador) plus other oil
exporting countries such as Mexico, Egypt and the countries of
the European Community.
8. Legal Standing: LAW
After having been challenged by foreign nations before a
GATT dispute panel, the superfund law was amended to make the taxes on
foreign and domestic oil the same. This put the act in good
legal standing.
C. GEOGRAPHIC Cluster
9. Geographic Locations
a. Geographic Domain: North America [NAMER]
b. Geographic Site: Eastern North America [ENAMER]
c. Geographic Impact: USA
The conflict sites were the nearly 20,000 dangerous dumps
estimated to be in existence by the Environmental Protection
Agency. Two of the most infamous sites were at Times Beach,
Missouri and the Love Canal in New York. Other states with a
high number of hazardous dumps were Texas, Louisiana, Mississippi,
Florida, New Jersey, Pennsylvania, Washington, Oregon, Idaho and
Montana.
10. Sub-National Factors: YES
Environmental groups and citizens leaving near the hazardous
dump sites, who were fighting to get the sites cleaned up, as
well as domestic oil companies opposed to the increased fuel tax, were
the key players in this case.
11. Type of Habitat: TEMPerate
The type of habitat ranged from dump site to dump site.
However, most of the worst problems were in the eastern United
States since early industry began in that part of the country.
Other major regional problems are often demarcated by a product:
nuclear waste in the Pacific Northwest and petroleum processing
in the South around Texas.
D. TRADE Clusters
12. Type of Measure: Import Tax [IMTAX]
A higher tax was levied against foreign oil than domestic
oil.
13. Direct vs. Indirect Impacts: DIRect
14. Relation of Measure to Environmental Impact: MEDium
a. Directly Related: YES PETROleum
b. Indirectly Related: YES CHEMicals
c. Not Related: NO
d. Related to Process: YES Land Pollution [POLL]
15. Trade Product Identification: OIL
World exports of oil in 1988 were 1,238,116,000 metric tons
with an average 1988 world price of $13.79 per barrel.
16. Economic Data
17. Impact of Measure on Trade Competitiveness: LOW
All crude oil imports were covered by the legislation.
18. Industry Sector: OILGAS
19. Importers and Exporters: USA and MANY
The leading exporters and importers of oil are shown in
Tables
126-1 and 126-2 (1988 data). Saudi Arabia and the former Soviet
Union were the leading exporters, followed by Iraq and Iran. The
United States was the leading importer, followed by Japan, West
Germany, and France.
Table 126-1
Leading Exporters of Oil
Millions of Metric Tons, 1988
Country Export Volume
Saudi Arabia 177.3 MT
Soviet Union 144.0 MT
Iraq 102.7 MT
Iran 84.6 MT
UK 70.0 MT
Mexico 68.1 MT
Table 126-2
Leading Importers of Oil
Millions of Metric Tons, 1988
Country Export Volume
United States 256.1 MT
Japan 162.5 MT
W. Germany 71.4 MT
France 65.9 MT
Italy 65.1 MT
S. Korea 35.7 MT
E. ENVIRONMENTAL Cluster
20. Environmental Problem Type: Pollution Land [POLL]
21. Name, Type, and Diversity of Species
Name: Many
Type: Many
Diversity: 1,059 higher plants per 10,000 km/sq (U.S.)
22. Resource Impact and Effect: MEDium and PRODuct
23. Urgency of Problem: MEDium
24. Substitutes: Biodegradable [BIODG] products
F. OTHER Factors
25. Culture: YES
26. Trans-Boundary Issues: YES
27. Rights: YES
Although traditional human rights, such as freedom from
religious or political persecution, were not at issue in this
case, it could be argued that human rights were indeed involved, as
U.S. citizens were fighting for the right not to have to live near
waste dump sites that were creating health problems.
28. Relevant Literature:
Annual Energy Review: 1988. Washington, D.C: Department of
Energy; 1989.
Congressional Quarterly Almanac, 1986. 119.
Davis, Joseph. ₫Senate Committee Approves "Superfund Bill."
Congressional Quarterly Weekly Report. March 2, 1985.
409-412.
Davis, Joseph. "Superfund Tax Consensus Emerging in Senate."
Congressional Quarterly Weekly Report. April 27, 1985.
768-750.
Davis, Joseph. "Senate Finance Votes to Expand Superfund."
Congressional Quarterly Weekly Report. May 18, 1985.
958.
Davis, Joseph. "House Panel Tightens Process for Cleaning up
Toxic Dumps." Congressional Quarterly Weekly Report.
October 12, 1985. 2080-81.
Davis, Joseph. "House Panel Narrowly Agrees to Excise Tax for
Superfund." Congressional Quarterly Weekly Report.
October 19, 1985. 2124.
Davis, Joseph and Amy Stern. "Conferees Reach Agreement on
Superfund." Congressional Quarterly Weekly Report. August
2, 1986. 1774.
Davis, Joseph. "Senate Moves Quickly to Adopt Superfund."
Congressional Quarterly Weekly Report. October 4, 1986.
2384-85.
Davis, Joseph. "Congress Clears Superfund, Awaits President's
Decision." Congressional Quarterly Weekly Report.
October 11, 1986. 2532-41.
International Petroleum Encyclopedia, 1992. Tulsa, OK: Pennwell
Publishers, 1993.
Mackerron, Conrad B. "Bush Moves on Superfund Oil Levy."
Chemicalweek. February 8, 1989. 13.
The Middle East Today. Washington, D.C: Congressional Quarterly
Press, 1991.
United Nations. 1991 U.N. Energy Statistics Yearbook. New York:
United Nations, 1993.
United Nations. 1989 World Trade Annual, Volume 1. New York:
Walker and Company; 1993.