Senate approves infrastructure bill with excise taxes on petrochemicals

Aug. 16, 2021

The Senate passed a $1 trillion infrastructure bill Aug. 10 that would revive Superfund excise taxes on 10 of the most common petrochemicals while spending large sums of money on roads, ports, public transit, passenger rails, airports, electric grids, and internet access.

The bill, H.R. 3684, passed on a vote of 69-30. Given the bipartisan support, it stands a strong chance of winning approval in the House, and it already has been endorsed by President Biden, who had a hand in shaping it.

The bill was sold in part as a “no new taxes” bill. Superfund excises taxes, created by the Comprehensive Environmental Response, Compensation, and Liability Act in the 1980s, are not new, but they lapsed in federal fiscal year 1996 (which started in 1995).

The revived taxes, to terminate Dec. 31, 2031, would apply to all US production and imports of methane, butane, benzene, toluene, xylene, ethylene, propylene, butadiene, butylene, and acetylene. The rates would be $9.74/ton for all except methane, whose rate would be $6.88/ton.

Chemical sector impact feared

The $9.74 rate would be double the previous rate. The American Chemistry Council in a July report warned of harmful economic effects.

“Reinstating the Superfund chemical excise taxes at these new levels would impose a $1.211 billion per year cost on American chemistry,” the report said. “For specific chemicals and specific plant operations, the added costs from the taxes could exceed profit margins.”

That could lead to some plant shutdowns, the report warned. “The costs would be entirely borne by industrial chemical companies because cost pass-through are unlikely in a globally competitive environment,” the report said.

The listed chemicals are among the most common in the petrochemical sector, the building blocks for a range of plastics and other synthetics. The bill also would revive taxes for many other common chemicals, such as chlorine, ammonia, phosphorus, hydrogen fluoride, and sulfuric acid.

Other provisions

The bill would authorize funds via federal grants to states for the plugging and remediation of orphaned oil and gas wells. The grants will come from Treasury general funds, not a special tax.

The bill would provide grants and technical assistance for studies and attempts to foster an Appalachian regional energy hub based on natural gas and gas liquids from the Marcellus and Utica shales.

The Appalachian energy hub has been a favorite hope of Sen. Joe Manchin (D-W.Va.). It would especially involve ethane storage, which could support regional petrochemical manufacturing.

Much of the infrastructure bill would fund improvements in conventional transportation systems, but the bill also would provide support for carbon capture, utilization, and storage. And the bill would channel grant money to electric vehicle recharging stations and efforts to develop hydrogen fuel.