Tax on recycled motor oil would hurt consumers, environment

Earlier this year Governor Brown, referring to how California voters had supported his Proposition 30, said, “We just got a nice tax, I think we ought to take a deep breath and show how we are spending it in a wise way before we start looking for more money.”  Virtually every Californian would agree with the Governor on that point.

It would appear, however, that the Governor is unaware that his Department of Toxic Substances Control is attempting to push through the Legislature a brand new tax — this time on recycled motor oil.  This will place a terrific burden on the used oil recycling system in California, one of the best and most efficient in the entire country.  In large measure this is because of a modest per gallon tax on virgin petroleum lubricant products; the revenue from that tax supports CalRecycle’s admirable administration of California’s used oil recycling program.  Part of that program involves monetary incentives to used oil generators to ensure that used oil is properly recycled.  These incentives would now be offset by the proposed new tax on recycled oil.  It makes no sense for the government to provide a useful incentive for a worthwhile purpose and then grab it right back.

Moreover, the proposed tax on recycled oil is not small.  In fact, in relative terms it is immense.  At the moment, a used oil generator (such as a quick lube oil changer) may be paid about 50 cents per gallon by the used oil collector.  (This is in addition to the minimum of 16 cents per gallon paid by the CalRecycle program.)  The proposed tax would be approximately 10 cents per gallon – or 20 percent of the market value of the used oil being sent for recycling.  Huge taxes are usually intended to discourage certain behavior.  Whopping cigarette taxes are intended, in part, to discourage smoking.  So, what are we to think of a whopping tax on recycled oil?  Are the proponents of this tax trying to discourage oil recycling?

So when every California resident has his or her motor oil changed, he or she will be taxed by the Department of Toxic Substances Control.  That is just bad policy, and it violates the Governor’s promise.

The Department of Toxic Substances Control proposal would completely undo decades of work by the State to create one of the country’s best recycled oil programs.  The Department’s proposal would erase decades of thoughtful public policy developed to promote the safe and responsible collection and recycling of used oil.  And what would the Department do with revenue from this new tax?  It would not go to enhance CalRecycle’s used oil recycling program.  By all accounts, this program is running very well and is adequately funded.

If that’s not enough reason for some serious head scratching, recent legislative budget hearings did not approve the proposal. After four hearings in the Legislature, which did not approve the recycled oil tax proposal, this new tax will be included in the “budget trailer” bill without a vote by any budget committee, and without review by any policy committee.

The Director of the Department Toxic Substances Control has not responded to the numerous questions raised at the budget hearings.   Not a single response as to how the revenues from this tax will be spent.  Instead the response has been to end run an open and transparent budget process and avoid a single policy hearing.

By January 2014, CalRecycle will have completed a Used Oil Life Cycle Analysis as required by the Legislature in SB 546.  This report will provide a comprehensive analysis of how to manage the future of recycled oil in the State.  The Department’s enormous proposed tax on recycled used oil is likely to seriously disrupt the way used oil is handled in California.  Consequently, the Life Cycle Analysis study will be rendered obsolete before it is complete.

The Department’s new tax proposal, if adopted, will diminish the effectiveness of the State’s oil recycling program.  Quite simply this means that used oil, instead of being recycled will be improperly disposed of – with many adverse environmental consequences.

Hopefully, cooler heads will prevail, and instead of jamming this new tax through via a budget trailer bill, the Department of Toxic Substances Control will follow the advice of its boss, the Governor, and  “take a deep breath,” and consider whether this proposal has any merit.  It’s almost a sure bet that the analysts conducting the Life Cycle Analysis of used oil recycling will conclude it is without merit.

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Ed’s Note:  Scott D. Parker is the Executive Director of NORA, An Association of Responsible Recyclers, which represents over 350 leading companies involved in responsibly recycling used oil and related materials.