NEWS OF THE WEEK
RENEWAL OF SUPERFUND Liability rule repeal may not save much ust in time to influence what is ex pected to be heated congressional debate over Superfund renewal, two Washington, D.C., think tanks have released an economic analysis of the controversial program. The 1980 law was designed to clean up the nation's most dangerous hazard ous waste sites, but its taxing provisions expire at the end of the year. The new Republican leadership in Congress is in tent on reforming the program to make it more efficient and less costly. Last week, GOP lawmakers chairing key panels responsible for drafting Su perfund legislation announced they will sack the compromise bill offered last year, which never reached the House and Senate floors for approval. Instead, they will start from ground zero. Everything is on the table, say Sen. Robert C. Smith (R-N.H.), chairman of the Senate Environment & Public Works Subcommittee on Superfund, Waste Control & Risk Assessment, and Rep. Michael G. Oxley (R-Ohio), chair man of the House Commerce Subcom mittee on Commerce, Trade & Hazard ous Materials. But at the top of the GOP reform list is repeal of retroactive liability, which makes polluters finan cially responsible for cleanup of wastes they disposed of. However, cautions an economic anal ysis issued by the Brookings Institution and Resources for the Future, to truly reform Superfund, legislators must consider the economic impacts of both its liability provisions and its taxes. The study, "Footing the Bill for Superfund Cleanups: Who Pays and How?" is the first to extensively examine taxing im plications. "It brings tax policy 101 to the Superfund debate," notes author Katherine Ν. Probst, a Resources for the Future senior fellow. The analysis reaches some unexpect ed conclusions. For example, it finds very little difference in annual costs— less than 4% from most to least expen sive—for five possible funding alterna-
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Bliley: eliminate retroactive liability tives that were analyzed. The most costly option is the current program, at $3.92 billion annually (counting only Environmental Protection Agency costs and excluding Defense and Energy De partment spending). The least costly is repeal of retroactive liability for wastes disposed of before 1987, at $3.78 billion a year. Paul R. Portney, another study author and vice president of Resources for the Future, tells C&EN that abolishing ret roactive liability has the "potential for decreasing transaction costs [litigation costs] significantly but may not decrease the overall cost of the program as much as expected." He explains that repealing liability would cut litigation, but more of the 1,134 listed Superfund sites would be cleaned up by the government, not the private sector. "The cost of each cleanup would be more expensive be cause government is less efficient." Probst adds, "If we are trying to in crease the efficiency of how to fund cleanups, we are going to have to look at the tax side as well as the liability
side. We can reform liability and still make things worse." A third author, Don Fullerton, an econ omist at the University of Texas, Austin, stresses that using three separate taxes as revenue sources—as the current program does—is inefficient, "costly, unnecessary, and pointless." Affected companies pass on the Superfund taxes on chemical feedstocks and petroleum and the cor porate environmental income tax. Fullerton cautions Congress to think twice before it considers tacking on yet another tax, as it did in last year's Superfund renewal debates. Compliance and administration costs could exceed the revenue generated, as they do for the en vironmental income tax. Instead, he sug gests substituting a 0.1% increase in the general income tax in place of the three taxes now in the law. Portney notes that "the economywide impacts of the Superfund program are pretty small," although impacts on spe cific companies and industries can be significant. In a $6 trillion economy, Su perfund expenditures by all federal gov ernment agencies and the private sector total about $6 billion a year. Complying with all environmental laws and regula tions costs the U.S. about $140 billion a year. But Morton L. Mullins, Chemical Manufacturers Association vice presi dent for regulatory affairs, says, "Ifs the micro impacts of Superfund that are kill ing us. If s the waste and the fact that the program is not working that have it very near the top of the legislative agenda." Rep. Thomas J. Bliley Jr. (R-Va.), chair man of the House Commerce Commit tee, which has prime jurisdiction over Superfund renewal, notes that there is "a strong bipartisan group that would like to remove retroactivity, and so would I." However, he prefers to re peal retroactive liability only for non federal Superfund sites on the National Priorities List. Smith and Oxley echo Blile/s call for eliminating retroactive liability. They
also list a number of other possible reforms, including an increased role for the states—raising the specter of unfunded mandates—and overhaul of cleanup standards. They say increased taxes are not likely to be considered. However, Probst emphasizes, "The only way they can gut liability and not raise taxes is to drastically cut cleanup standards/' There is some indication that a few environmental groups may consider repeal of liability. But few, if any, are likely to yield on softening cleanup standards.
Dow Chemical led the way with a jump of 341% in earnings (to $363 million) from the fourth quarter in 1993, excluding one-time charges and extraordinary items. Sales hit almost $5.5 billion, up 22% from 1993. Union Carbide's earnings soared 234% to $147 million. And growth in its sales—reaching $1.3 billion—matched Dow's increase of 22%. "Carbide's earnings improvement in the fourth quarter resulted from substantial price increases for polyethylene and ethylene glycol, strong seasonal volumes, and sustained controls on costs/' says Chairman Robert D. Kennedy. Eastman Chemical ended its first full year as an independent company with a leap of 174% in fourth-quarter earnings, to $104 million. Sales reached nearly $1.2 billion, up 19% from fourthquarter 1993. "Earnings increased substantially . . . largely due to strong demand [and] volume and price increases as global economies improved," the company explains. Geon, based in Independence, Ohio, posted the greatest sales gain of the 15 companies, up 41% to $351 million. Earnings for the quarter reached $18.1 million, compared with a $4.5 million loss in 1993. Geon President and Chief Executive Officer William F. Patient stresses that business continued strongly through the end of 1994. "Although feedstock costs
Lois Ember
Chemical earnings rack upfartherbig gains U.S. chemical industry earnings in the fourth quarter of 1994 maintained the robust increases of recent quarters. The industry benefited from enduring strength in the U.S. economy, continuing recovery in European economies, and further inroads into developing Pacific Rim and South American economies. Out of a sample of 15 companies reporting results by press time, 14 raised sales 10% or more. Three posted tripledigit gains in earnings, and 10 had double-digit growth in earnings. The profit margin for 14 companies averaged 8%, up 32% from fourth-quarter 1993.
Sales and earnings show strong growth in fourth quarter FOURTH-QUARTER 1994 Sales
Earnings9
($ millions) 0
Air Products Arco Chemical Dow Chemical DuPont Eastman Chemical
Change from 1993 Sales
Earnings
Profit margin" 1993
1994
9.4% 8.7 6.6 6.4 8.9
920.8 947.0 5,494.0 10,137.0 1,169.0
$ 86.7 82.0 363.3 644.0 104.0
FMC Geon Great Lakes Chemical Hercules Monsanto
1,039.2 350.5 576.2 754.1 2,090.0
25.3 18.1 71.7 91.1 76.0
10 41 30 6 11
22 nm 3 56 17
2.2 def 15.7 8.2 3.5
2.4 5.2 12.4 12.1 3.6
Morton International" PPG Industries Praxair Rohm and Haas Union Carbide
830.9 1,659.7 722.0 860.0 1,310.0
72.7 151.0 55.0 47.0 147.0
20 20 18 13 22
35 54 38 81 234
7.8 7.1 6.5 3.4 4.1
8.7 9.1 7.6 5.5 11.2
$
11% 13 22 10 19
19% 21 341 96 174
8.8% 8.1 1.8 3.6 3.9
a After-tax earnings from continuing operations, excluding significant nonrecurring and extraordinary items, b After-tax earnings as a percentage of sales, c Results for fiscal 1995 first quarter, d Results for fiscal 1995 second quarter. nm = not meaningful, def = deficit.
increased during the quarter, the business climate enabled us to offset these costs with higher prices. Additionally, our employees' exceptional efforts continued to create higher earnings through improvements in productivity, quality, and distribution costs." Rohm and Haas also reported much higher earnings in the fourth quarter despite higher feedstock costs. Earnings rose 81% to $47 million and sales jumped 13% to $860 million. The company notes that higher selling prices in fourth-quarter 1994 did not fully offset raw material costs that were 19% higher than in fourth-quarter 1993. But, "Productivity improvements under way in offices, laboratories, and plants around the world contributed to savings in selling, administrative, research, and plant operating costs." George Peaff
Turn national labs into corporation, urges panel The Department of Energy's 10 national labs should be as "close to 'corporatized' as is imaginable," says a task force report to DOE. Indeed, stresses panel chairman Robert W. Galvin, "something really substantial has to be done soon, or the vitality of the laboratories will founder." The task force of outside experts was created a year ago by DOE Secretary Hazel R. O'Leary to examine alternative futures for the labs. It presented its report last week at a meeting of the secretary of energy's advisory board in Washington, D.C. The panel recommends conversion of the labs to a not-for-profit R&D corporation or corporations, governed by a board of trustees consisting of distinguished scientists and engineers and experienced senior executives from U.S. corporations. The federal government would remain the prime customer for the labs' work in their traditional mission areas—national security, energy, and environmental science and technology, as well as the fundamental science that underpins those missions. The government would pay for the labs' operations at their current $6 billion level with line-item appropriations for at least five years. But other than that, Congress and DOE management would pretty much keep hands off. FEBRUARY 6,1995 C&EN
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