Statement of Senator John H. Chafee
Chairman, Committee on Environment and Public Works
Hearing On Flow Control and Interstate Transportation of Municipal Solid Waste
March 18, 1997

We are here this morning to once again focus on two important public policy issues related to the management of municipal solid waste. Both issues touch on one of the most important powers that our Constitution delegates to the Congress---the power to regulate commerce among the States. I welcome all of our witnesses today, and especially Senators Coats, Levin and Specter; and two House Members from New Jersey, Representatives Franks and Pascrell.

The two public policy issues before us today are flow control of municipal solid waste ("MSW") and regulation of interstate transportation of MSW. Flow control legislation would allow a political entity to require disposal of MSW at a designated MSW management facility. This creates a revenue stream to pay off the bonds which financed the facility. The goal of interstate waste legislation is to regulate the flow of MSW between exporting states and importing states.

Flow control and interstate waste are the two different sides of the same coin---restrictions on the free flow of MSW. The Supreme Court has consistently held, in a line of cases stretching back to the famous Philadelphia v. New Jersey case in 1978, that MSW is an article of commerce. This means that any State or local law that regulates the movement of MSW must be evaluated in light of Commerce Clause jurisprudence.

Before hearing from the other Members of the Committee and our witnesses, I would like to make a few points. I will start with interstate waste. Senator Coats has made the issue of controlling the interstate movement of MSW one of his highest priorities since he first entered the Senate eight years ago. I sympathize with the plight of the importing States. I know that the concerns of importing States are heightened due to the planned closure of New York City's Fresh Kills landfill in 2001. This facility currently accepts 13,000 tons per day of trash, or about 4 million tons per year.

Once again in this Congress, as in the last Congress, I have made the passage of interstate waste legislation one of my highest priorities. I once again will work with Senator Coats and other Senators from both importing States and exporting States to try to reach an accommodation between the respective needs of both groups.

Though I have not introduced a bill on this issue, I believe that last year's bill remains a very viable compromise on interstate waste. That bill, S.534, passed out of this Committee unanimously in 1995 and passed the Senate in May, 1995, on a vote of 94-6. Language identical to S.534 again passed the Senate by unanimous consent in July, 1996 as an amendment to the FY 1997 Energy and Water Appropriations bill. As we all know, that provision was dropped in the conference on that bill.

As we start anew on resolving the interstate waste issue, I would strongly caution anyone who seeks to "better the deal" from what we passed twice in the last Congress on interstate waste. I will oppose legislation that tilts the scales too heavily in favor of the importing States at the expense of exporting States, like my own State of Rhode Island.

One of the most problematic provisions to "strengthen" the bill, from the importing States' perspective, is the so-called "presumptive ban." This would create a statutory presumption against the lawful shipment of MSW across State lines. Let me be clear on this issue: a presumptive ban is unacceptable and goes too far to restrict the free movement of commerce among the States.

The Commerce Clause of the Constitution came about because of the need to check local jealousies in matters of protecting home markets. I believe that when we legislate to restrict free movement of commerce in a national market, we should tread very lightly. The creation of a "presumption" against commerce is probably the most severe restraint on free movement we could impose short of an outright ban. This means the "default" position is closed borders and no movement.

I believe this is precisely backwards--any "default" position should allow free movement unless the importing State acts. A presumptive ban is far more than is needed by importing States to address the problems they now face due to unpredictable waste imports. More importantly, it is far too great a limitation to place on free movement of commerce. I agree the States should have the right to say "no" to imports but a presumptive ban goes too far.

The resolution of the flow control problem also directly implicates the commerce power. Federal legislation granting States or local governments the power to impose flow control would grant State or local governments the power to create local waste monopolies. Flow control proponents argue that the Supreme Court decision in the 1994 Carbone case places at risk their facilities, solid waste management programs, and credit.

In the Carbone opinion, Justice Kennedy, writing for the majority, reminds us that "The central rationale for the rule against discrimination is to prohibit State or municipal laws whose object is local economic protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent." Justice O'Connor, in her concurring opinion, reminds us that the Constitution leaves it within Congress' power to impose legislation that alters the preference for free movement of articles in commerce.

In the last Congress, our bill, S.534, contained a title on flow control. The original philosophy on flow control was twofold. First, we sought to protect State and local officials who, prior to Carbone, assumed their flow control laws were constitutional and issued bonds based on that erroneous assumption. Second, we imposed a sunset provision that eliminated flow control when the bonds were paid off or at the end of a facilities useful life, but in any case not longer than 30 years after passage.

We deviated from this fairly clear-cut starting point as Members sought to protect facilities or systems in their States that fell outside the definitions. From our starting point, we layered on protection for additional facilities or systems in markup, between markup and floor consideration, and finally during floor consideration. There were still Senators with unsatisfied needs at final passage who would have sought further expansion in conference. At the end of that process, the original narrow intent of S.534 was all but lost to well-intentioned efforts to protect local economic interests.

Two more years have passed since we approved S.534's flow control provisions. We are now three years removed from the Carbone decision. I believe it is timely to reexamine the issue of flow control in light of the experience of the last three years to determine if the legislation is still needed and what the proper scope of any legislation should be.

The flow control panel today will reveal that there are two compelling and competing local interests at stake, in addition to the national interest on regulating interstate commerce. State and local flow control laws were widely used until Carbone as a tool to guarantee that projected amounts of waste and revenues would be received at a waste management facility. The revenue is used to pay off the bonds that financed construction of the facility. Revenues are also used for other related purposes like funding recycling programs or household hazardous waste collection programs. In some cases, the bonds were issued on an assumption that flow control was constitutional, even though that assumption turned out to be wrong.

The competing local interest is that waste disposal is cheaper under a competitive system than it is under a government-created monopoly. Reimposition of flow control, in the view of these parties, amounts to a hidden tax on those that are forced to dispose at a facility charging above-market rates.

Since the Carbone decision, CRS reports that 18 MSW bond issues have been downgraded. Fifteen of these downgrades occurred in the first twelve months after the Carbone decision, and relatively few have occurred in the two years since we last took testimony on this subject. Testimony received from Standard & Poor's, which rates approximately 40% of the MSW bond issues, states that:

The downgrades that have occurred are a result of increased competitive pressure which has led to an overall decline in credit quality. These ratings are not solely based on the absence of federal flow control. However, in all four cases [of ratings downgrades], the high fixed costs associated with waste-to-energy facilities have limited financial flexibility and resulted in high tipping fees which are above those of alternative disposal facilities.

If we are going to take the dramatic step of granting federal permission for the creation of local trash monopolies that burden interstate commerce, I want to be sure that we are fixing an acute current problem. I also want to be sure that the cure is not worse than the problem we seek to solve.

Justice Kennedy wrote in Carbone: "The Commerce Clause presumes a national market free from local legislation that discriminates in favor of local interests." I agree. I said two years ago in my opening statement that "I will tread cautiously with respect to interfering in the waste market." This is still my view.