The extraction of environmental resources is problematic when it shifts the cost of externality mitigation to parties that are not engaged in the activity. This was the central concern in the recent Fifth Circuit case Trafigura Trading LLC v. United States. Trafigura raised the constitutionality of an excise charge on oil exports used to remediate environmental damage from oil spills. The Fifth Circuit ruled that the excise charge was a tax in violation of the Export Clause of the Constitution and therefore could not be levied against oil exports, thus stymying funding for the federal program. The Fifth Circuit’s reasoning has broad significance because it restricts the use of excise charges to remediate environmental dangers at home if the good in question is used abroad. Additionally, the Fifth Circuit addressed only the superficial characteristics of an export tax but did not discuss the necessary relation between the export activity and how the excised funds are used. An answer to this second question will have significant ramifications for U.S. oil spill remediation as well as broader environmental policy.
This In Brief proceeds as follows: first, it recounts Trafigura and the issues raised in the case; second, it provides a brief history of the Export Clause and its interpretation; third, it discusses the conceptual underpinnings of user fees in the Export Clause context; fourth, it synthesizes current and past rulings and raises novel issues that are implied in Trafigura and recent case history; and finally, it concludes with recommendations for potential solutions.
