June 14, 1979
Page 14815
INDUSTRIAL COST RECOVERY
The Senate proceeded to consider the bill (S. 901) to amend section 204 of the Clean Water Act to repeal certain grant conditions, and for other purposes, which had been reported from the Committee on Environment and Public Works with an amendment to strike all after the enacting clause and insert the following:
That (a) section 70(b) of the Clean Water Act of 1977 (91 Stat. 1610) is hereby amended by striking out "the last day of the eighteenth month which begins after the date of enactment of this section" and inserting in lieu thereof "June 30, 1980".
(b) Section 75(d) of the Clean Water Act of 1977 (91 Stat. 1610) is hereby amended by striking out "eighteen-month" each time these words appear and inserting in lieu thereof each time the words "thirty-month".
Mr. MUSKIE. Mr. President, S. 901 would amend the Clean Water Act to continue the existing moratorium on industrial cost recovery payments to the Treasury until June 30, 1980.
In the 1972 Federal Water Pollution Control Act Amendments, Congress included the industrial cost recovery provision to assure that industrial participants in municipal treatment plans repaid the share of the Federal construction cost attributable to the treatment of their industrial wastes. In this way, the Federal Government would not be subsidizing capital construction costs for industrial waste treatment through the water pollution control program.
In the 1977 Clean Water Act Amendments, the Congress believed that it was necessary to mandate a moratorium on industrial cost recovery payments to the Treasury, so that the Environmental Protection Agency could conduct a study of the efficiency of and need for such a provision. The Congress required that the study include an analysis of the impact of industrial cost recovery on rural communities and on industries in economically distressed areas or areas of high unemployment.
Industrial cost recovery payments to the Treasury will resume at the end of the 18-month moratorium, if the Congress does not change the law. The moratorium expires on June 30, 1979.
To fulfill the requirements of the 1977 amendments, the Environmental Protection Agency contracted with Coopers and Lybrand, a Washington, D.C., consulting firm, to examine issues associated with the industrial cost recovery provision. The report was submitted to the Congress by Douglas Costle, the Administrator of the Environmental Protection Agency, January 25, 1979.
While the report raises many questions, it cannot yet serve as the basis for final legislation. In light of the concerns raised by that report, and the fact that the moratorium deadline is near, it is necessary to extend the moratorium. This will give the Congress time to fully assess the study, the impact of industrial cost recovery, and develop further information necessary to make a decision on the efficacy of the provision.
Many unanswered questions follow from the statements made in the report. Some of these lead to questions about the validity of some of the findings in the report. The Senate Public Works Committee estimated in 1972 that half of the then authorized $18 billion in construction grants would be for industrial waste treatment. The Coopers-Lybrand study more or less confirmed that 50 percent estimate. The report claims that 55 percent of waste water revenues come from the nonresidential sector.
If this is accurate, then it would be logical to expect that a high proportion of the nearly $45 billion currently authorized Federal investment in pollution control facilities would be recovered under the industrial cost recovery provision. Yet the study estimates that only $1.8 billion will be collected, of which less than $1 billion will be returned to the Federal Treasury. There is inadequate explanation of the gap between these figures. How much of this non-recovery of capital costs is due to failure to comply with the law in the grant approval process?
The Environmental Protection Agency has provided a lower estimate of the percentage of industrial use of municipal systems, based on its 1978 needs survey. The question of whether such different views on a fundamental issue undermine other conclusions reached in the report needs a thorough investigation.
The report predicts that many industries in the future are likely to choose to build their own treatment systems rather than join a municipal system. The principal reason given is the economic effect of tax code changes that have occurred. Yet, it would appear that there are many industries that would have difficulty in raising the capital to build a separate treatment system, or might not have profits large enough to take advantage of the new tax provisions, or might be limited by the physical location of the plant.
Because the findings of the report rest in a significant way on estimates of future behavior based on projections on very limited data, it is important to provide adequate answers to questions that flow from this initial report.
Thus, further information will prove helpful to the committee in evaluating industrial cost recovery and possible alternatives. This is in recognition of the fact that the legislative purposes stated in 1972 are good objectives.
The most absurd aspect of the Coopers and Lybrand study is the comments indicating that recovering the Federal subsidy to industry was somehow not important or worth the effort. I cannot imagine that recovering approximately $10 billion could not be important to the Federal Treasury. Or that an additional $10 billion recovered by local governments would not be important to them. We are in a period when the Federal budget is very tight. Pressures are strong to balance the budget. Billions of dollars, even if they are scattered over a number of years, are an important contribution to the Federal Treasury. There is no real evidence that this industrial cost recovery program cannot work — only evidence that so far, few people have tried to make it work.
The Environmental Protection Agency is instructed to further examine the industrial cost recovery provision and issues related to its implementation. Such analysis should take into account the desirability of industries joining municipal treatment works. The Agency should be ready to come forward with legislative recommendations regarding industrial cost recovery by October 1, 1979.
The Agency should be ready to present those views in a hearing later this year. The study to be conducted by the Environmental Protection Agency should be undertaken with close consultation with the committee. Any further action deemed necessary would be taken at this time.
The Agency, all grantees, and all industries involved must clearly understand that actions must be taken to be capable of fully implementing the industrial cost recovery requirements on July 1, 1980. The extension of the current moratorium in no way indicates that the law will necessarily be altered.