Corporate Lobbyists Turned Oregon’s Iconic Bottle Bill Into a Sweet Payday For Their Clients

On April 1, the deposit for returnable cans and bottles in Oregon will increase for the first time in history.

Now, when you buy a bottle of Black Butte Porter or a can of LaCroix, you'll pay a dime instead of a nickel.

That's because of a bill the Oregon Legislature passed six years ago.

In 2011, lawmakers, mostly Democrats, expanded Oregon's pioneering Bottle Bill. (In 1971, Oregon became the first state in the nation to add a 5-cent charge to every container of beer or soda, which consumers get back only if they return the can or bottle for recycling.) Lawmakers broadened the kind of drinks covered and made other changes, hoping to increase the rate at which people redeem their empty containers.

Since 2011, however, the bottle and can redemption rate has dropped nearly 10 percent. That decline triggered a clause in the bill that will now raise the deposit to a dime.

Lawmakers and recycling advocates hope more cans and bottles will be returned when the bounty on them is a dime.

It's unclear if the additional incentive will increase the redemption rate and thus help the environment.

What is highly likely, however, is that the increase will create a big payday for the companies that distribute beer and soda.

Those firms, including Maletis Beverage and Columbia Distributing, get to keep all the deposits on cans and bottles that aren't redeemed (see sidebar below).

It turns out a lot of bottles and cans are not redeemed. According to records and estimates obtained from the Oregon Liquor Control Commision (which only released the data after WW appealed to the Oregon Department of Justice), the increase in the deposit is likely to be worth $30 million a year. That's on top of the $30 million distributors were already keeping.

That $30 million of new money is a rounding error compared to a state budget that totals $10.3 billion a year. But as a new legislative session opens Feb. 1, the bottle-deposit increase offers a view into how in Salem, special interests leverage good intentions into cash.

"It's one of the biggest rip-offs I've seen come out of the Legislature in my 34 years there," says Mark Nelson, who lobbied against the deposit increase on behalf of Anheuser-Busch. "That money goes straight into the pockets of the distributors."

Oregonians have a romantic vision of the Bottle Bill.

"The Bottle Bill is part of the heart and soul of Oregon," state Sen. Mark Hass (D-Beaverton) said in a floor speech May 25, 2011. "When our children live with this kind of ethic, it makes them better people. It's a symbol of what it means to be an Oregonian."

That vision meets gritty reality in the bottle and can return room at the Safeway at Southwest 10th Avenue and Jefferson Street.

There, in one of the city's busiest bottle return locations, the yeasty smell of stale beer and the dregs of soda hover like a fog.

The floor is stained and sticky, and if you linger, you'll get nudged out of the way by street entrepreneurs whom beverage-industry people call "gleaners."

In one sense, the feeding of empty containers into reverse-vending machines is just what Richard Chambers, a Salem activist, and then-Gov. Tom McCall envisioned when they crafted the Bottle Bill in 1971.

The men, both Republicans, wanted to rid Oregon of litter and require industry, rather than government, to operate the container-deposit system.

Even before the bill passed, McCall said he hoped it would be a national model, expressing his "commitment to put a price on the head of every beer can and pop bottle in the United States."

Nine other states and most Canadian provinces followed Oregon's lead, although only Oregon's system is run privately.

But by 2011, Oregon's Bottle Bill was tired. Comparing the bill to a flag, then-Rep. Jules Bailey (D-Portland) said, "Its stitching has frayed and it has faded."

By 2011, Oregon had expanded recycling to include everything from construction debris to paint, and buoyed by curbside pickup, its overall recycling rate was among the nation's highest.

But the rates of redemption for empty drink containers were sluggish. Redemption rates, reportedly more than 90 percent in the 1990s, were far lower.

The nickel deposit had lost most of its value to consumers.

Grocers hated the dirty, expensive task of taking back empty drink containers at their stores. And consumers found simply tossing the containers in curbside recycling bins was easier.

"If you make $100,000 a year and you have $3 worth of bottles, do you really want to go and mix it up in the bottle room?" asks John Andersen, president of the Oregon Beverage Recycling Cooperative, a private company run by distributors. OBRC is a big operation, with 275 employees and an annual budget of $34 million. (Andersen recently hired former Rep. Bailey to be OBRC's chief stewardship officer.)

But experts say curbside recycling isn't nearly as efficient as bottle return for helping the environment (see sidebar below).

Democrats came to Salem in 2011 prepared to reverse the Bottle Bill's decline.

They were led by House Energy, Environment and Water Committee co-chair Ben Cannon (D-Portland), a lanky Rhodes Scholar who, alone in the Legislature, refused to take money from political action committees.

In the Senate, Sen. Jackie Dingfelder (D-Portland), an environmental consultant, had long pushed to expand the Bottle Bill. And the Legislature's most powerful figure, Senate President Peter Courtney (D-Salem), regarded the Bottle Bill with religious fervor.

"It's not a Democrat thing. It's not a Republican thing," Courtney said at the 2011 bill's first public hearing. "It's not rural or urban—it's a masterpiece, a legislative masterpiece."

With the House evenly split at 30 Democrats and 30 Republicans, Courtney wanted a bipartisan victory. Democrats found several GOP allies, most notably the daughter of Bottle Bill champion Richard Chambers, state Rep. Vicki Berger (R-Salem), who joined Hass as one of four chief sponsors.

Berger had made expanding the Bottle Bill a personal crusade.

"I had a single goal when I went into that session," Berger says today of the Bottle Bill expansion. "To achieve it, I had to make some compromises that weren't so good."

Berger made those concessions because corporate lobbyists had ideas of their own.

For more than 30 years, Paul Romain has lobbied for Oregon's beverage distributors.

His formidable skills are a major reason the state's beer taxes are among the nation's lowest; and why the OLCC, rather than private companies, controls booze in this state. (Romain says private control of liquor sales would put retailers in charge, to the economic detriment of distributors.)
Romain, 69, has other clients—oil distributors and pawnbrokers—but his authority in the regulation of liquids in closed containers is almost absolute.

"We just try to find a solution where everybody benefits," Romain says. "That's always the goal of legislation."

Prior to the 2011 Legislative session, Romain and Joe Gilliam, president of the powerful Northwest Grocery Association, joined forces.

Distributors and grocers were no fans of the Bottle Bill, and they'd historically opposed efforts to expand it. But Romain realized pro-Bottle Bill forces would eventually win, prompting him to exercise some masterful legislative judo.

"We didn't see it," Gilliam says. "Paul got ahead of it."

Romain and Gilliam, whose clients typically favor Republicans, lined up with Democrats and jointly arrived at a compromise. The Bottle Bill would be expanded to include all drink containers except wine, hard alcohol and milk (but not until 2018), and move returns out of large grocery stores to off-site redemption centers (see sidebar, below).

In addition, the bill said if the redemption rate sank below 80 percent and stayed there for two years, bottle deposits would double from 5 to 10 cents.

Critics lasered in on the deposit increase.

Big brewers said it would act like a price increase, hurting sales.

Fiscal conservatives saw the increase as a form of taxation that would penalize low-income Oregonians.

"We have a state-sponsored monopoly running this program, and that monopoly is asking for more money," state Sen. Jeff Kruse (R-Roseburg) testified. "The unintended consequences are going to come back and haunt us."

Kruse's concern was this: A percentage of bottles and cans are never redeemed and either end up in the waste stream or recycled curbside. While the latter option is environmentally benign, the result is that consumers are paying a deposit they never get back (see charts at the bottom of this story).

And the beneficiaries? Beverage distributors who control the OBRC. They keep every nickel consumers don't claim by redeeming containers.

Gilliam and Romain dismissed such objections, claiming a 5-cent increase wouldn't happen.

"The dime won't be needed," Gilliam testified.

His brother, a popular GOP lawmaker, backed him up.

"If the people who process the bottles say we'll never get there, you ought to respect that," state Rep. Vic Gilliam (R-Silverton) testified. Vic Gilliam and Berger's support for the bill was crucial to making it a bipartisan effort.

Romain repeatedly promised the increase in deposit would never be triggered.

"We feel extremely confident we will never see a 10-cent deposit," he testified in a Senate hearing May 7, 2011. "We believe very strongly the 10 cents will never occur."

Last July, however, the OLCC announced that redemption rates had fallen below 80 percent for the previous two years. That was the trigger that Romain and Joe Gilliam said would never happen. And so on April 1, deposits go up.

Romain admits his vow that the redemption rate would stay above 80 percent was badly off the mark. He and Gilliam blame the decline on the slow rollout of off-site BottleDrop redemption centers.

"I've promised a lot of things," Romain says today. "We really thought if you built out the redemption centers fast enough, you could increase the [redemption] rates."

People who raised objections to the increased deposit aren't sure what to make of Romain's promise now.

"Whether Paul believed that, I don't know," says Nelson, the beer lobbyist. "But it was enough to give them the votes to push the bill through."

Even before the April 1 increase, distributors have been pocketing the nickels that consumers pay for deposit but fail to redeem. But just how many nickels distributors keep has been a closely guarded secret.

On July 22, 2016, the OLCC announced the deposit increase to a dime—because the redemption rate had fallen below 80 percent and stayed there for two years.

In August, WW filed a public records request with the OLCC for the statistics that would show how many bottles and cans weren't redeemed.

The OLCC refused to release the data.

"We are forbidden from releasing any numbers other than a percentage," wrote OLCC spokeswoman Christie Scott on Aug. 24, 2016.

Nelson, the beer lobbyist who opposed the expansion of the Bottle Bill, says he's not surprised.

"The distributors have always opposed any kind of discovery as to how much it is they are keeping," he says.

Romain says distributors wanted individual companies' numbers kept private but says they did not object to aggregate numbers being made public.

WW appealed to the Oregon Department of Justice, which in September ruled the numbers are a matter of public record and ordered their release.

The data show that distributors, on an annual basis, were keeping deposits for 600 million unredeemed bottles and cans, or about $30 million.

It's as if consumers bought $30 million worth of gift cards at Starbucks but never redeemed them.

The number of unredeemed nickels the beverage industry keeps was a revelation even to Peter Spendelow, the Oregon Department of Environmental Quality's top recycling expert.

"I've never had data like this," he says.

If the redemption rate stays steady, the industry will collect $60 million in the next year, though recycling advocates and the beverage industry claim the higher deposit rate will increase redemptions.

"We think the rate's going to go way up, so there won't be a windfall," Romain says. "If there's a huge windfall, everybody's going to be clamoring for some of that money."

Other states also experience the challenge of unredeemed bottles and cans. But in at least five other states that have bottle bills—including California, New York and Michigan—the government collects unclaimed deposits.

Dingfelder, the former state senator, tried to pass legislation that would allow Oregon to do that.

"We've thrown people off the Oregon Health Plan and cut school budgets while the distributors have been keeping the deposits," Dingfelder says. (Even if the money remains in private hands, she says, there should be greater transparency.)

Romain says that, far from enjoying a windfall, his clients put the unredeemed deposits into recycling and building new BottleDrop centers.

"The beauty of the Bottle Bill is it relies on the people who don't participate to fund it," Romain says. "We use that money to create the best environmental program in the country."

It's true that the industry will pay for the new BottleDrops, which Romain says each cost $1.5 million to build. But using those figures, the beverage distributors could construct five new facilities a year and still be way ahead.

The most applicable study of financial results of a state bottle bill was conducted in Iowa in 2012. It showed that Iowa's law, which is similar to Oregon's, was highly profitable for distributors.

Today, Romain is still working the hallways of the Capitol. But the lawmakers who led the 2011 expansion of the Bottle Bill have moved on.

Dingfelder left the Senate in 2013 to work for Portland Mayor Charlie Hales and is completing her Ph.D. at Portland State University. Berger, now retired, is working on her golf game in Arizona. Cannon now directs the Oregon Higher Education Coordinating Commission.

All three say that even with the potential windfall for distributors, they'd pass the same bill again.

"Focusing on the outcomes was most important—increased recycling and redemption and reducing litter." Cannon says. "We were willing to tolerate a little bit of mystery around the finances in order to achieve that."

Many Happy Returns

Oregon's Bottle Bill, the first in the nation, gives consumers a small incentive to recycle their drink containers.

It also gives a hefty reward to beverage distribution companies: $30 million a year. The industry uses that money and the revenue from selling recyclables to pay for the Bottle Bill.

Beverage distributors benefit from the Bottle Bill in the same way Apple makes money from iTunes gift cards: The consumer pays the full price up front, and many cards are never used or only partly used. So it's free money for Apple.
In Oregon, the same rule applies to each six-pack of Corona you pick up at your local Fred Meyer. Here's how the system works. NIGEL JAQUISS.

A distributor drops off drinks at a store. The retailer pays for the drinks, including the deposit.

(Gary Bates)

A consumer buys a six-pack of beer from the retailer. The consumer pays the retailer for the beer and a 5-cent deposit for each container.

If the consumer redeems the empty container either at a retailer or a BottleDrop return center, the consumer gets the deposit back.

If the consumer redeems the empty container either at a retailer or a BottleDrop return center, the consumer gets the deposit back.

If the consumer tosses the empty container in a curbside recycling bin or the trash, the distributor gets to keep the deposit. That happens with 35 percent of all containers sold—more than 600 million in 2015.

Old Habits

Does curbside recycling make the Bottle Bill irrelevant?

Oregon has one of the highest overall rates of recycling in the country, recycling nearly half of the solid waste we generate.

With the growth of other recycling streams, cans and bottles now make up only about 5 percent by weight of all the materials Oregonians recycle.

Some people say the success of curbside recycling—now available to more than eight out of 10 homes in the state—has made the Bottle Bill redundant.

"Curbside is a lot more convenient," says Joe Gilliam, president of the Northwest Grocery Association.

The Department of Environmental Quality's top recycling expert, Peter Spendelow, disagrees. Spendelow says the Bottle Bill provides a more efficient and cleaner waste stream than curbside.

"A lot that goes into curbside recycling gets lost," he says. That means a higher number of items end up in the garbage.

At bottle return centers, by contrast, glass and aluminum are kept separate from any other materials, and are therefore easier to recycle.

Currently, the Oregon Beverage Recycling Cooperative collects cans from all over the state, crushes them and ships them by rail to Alabama where they are melted. Glass bottles go to a plant on North Columbia Boulevard, where they are washed and sorted by color. Plastic bottles get perforated, washed and shredded in a St. Helens plant, ending up as fleece jackets, packing material and other products.

Spendelow says the Bottle Bill benefits the environment by ensuring that fewer resources are used to make new containers, and less energy is used in manufacturing and transporting them.

"The importance of the Bottle Bill," Spendelow says, "is it efficiently reduces the need to harvest raw materials."

Bottling the Future

Oregon is praying to BottleDrop centers for redemption.

Between Lowe's Indoor Lumber Yard and Mattress World in the big-box jungle of North Portland's Hayden Meadow lies an example of the innovation optimists hope will increase Oregon's container redemptions.

There, at one of the Oregon Beverage Recycling Cooperative's BottleDrop centers, 13 reverse-vending machines inhale empties, and a concierge service allows people to drop off returns in bar-coded bags.

Grocers love BottleDrop centers because they move an unpleasant, expensive task out of their stores—stores within a two-mile radius of a BottleDrop are no longer required by law to redeem empties. The OBRC likes them because consolidation means fewer pickups and greater concentration of recyclables.

But the OBRC has built redemption centers more slowly than it planned in 2011. Real estate got expensive. NIMBYism also played a role.

"The biggest challenge is siting the redemption centers," says Paul Romain, a lobbyist for beverage distributors.

In 2014, for instance, neighbors in Northwest Portland and Goose Hollow warded off a BottleDrop site proposed at West Burnside Street and Southwest 17th Avenue, across the street from Marathon Taverna.

There are now 19 BottleDrops, fewer than half the 45 the industry pledged to build in 2011. So far, OBRC president John Andersen says, they are a success, redeeming far more containers than the grocery stores they replaced.

Lawmakers believed in the promise of BottleDrop sites and in their own abilities to recapture the magic of Tom McCall's era.

But former Sen. Doug Whitsett (R-Klamath Falls), one of the biggest critics of the 2011 expansion, says his colleagues got taken for a ride on BottleDrops. He's skeptical the new centers will increase the overall return rate long-term.
"I think the deposit increase [to 10 cents] was orchestrated to improve the financial position of the distributors," Whitsett says today, "and that's what happened."