Momentum for legislation governing extended producer responsibility (EPR) for plastics and packaging has been gathering steam in states with solid Democratic governing majorities. The key reason why these packaging EPR laws are popular in those states is that policymakers write the laws to pass on the costs of implementing them to plastics producers.
By mid-2026, seven states had adopted packaging EPR programs. Yet all of this came before the laws had cleared a major hurdle that had helped slow their wider adoption: they had not been tested in court. The big question hanging over all of the existing programs was whether courts would agree that they were legal.
The risk these programs pose to packaging companies and investors looking for opportunities in that industry is that they tend to contain an extractive element that forces plastics manufacturers and others to fund the programs. California’s law requires a $500 million per year contribution from 2027 to 2037 from the state’s producer responsibility organization (PRO), funded by plastics producers and other covered companies, including plastic resin manufacturers. Oregon’s program is expected to collect $190 million in fees in its first year, with funding expected to reach nearly $300 million by year three. That these programs are distributed across the states has made it difficult to determine how large the total ongoing liabilities for plastics manufacturers will be.
An early indication of how the courts will treat EPR programs arrived in July when the US District Court for the District of Oregon held a five-day trial to hear the National Association of Wholesaler-Distributors’ (NAW) challenge to Oregon’s EPR rules.
Oregon’s EPR program took effect in 2025, four years after it was enacted. NAW filed suit seeking to block the law shortly after it went into effect, and the organization secured a preliminary injunction against the state, with the court preventing the state from enforcing the law against NAW’s members. The trade group argued that Oregon’s definition of “producer” made it difficult for members to determine whether they were covered, and it also claimed the law violated the U.S. Constitution. Throughout the litigation, the court tossed several of NAW’s claims, setting up a pitched battle between the trade group and the state on the remaining batch of claims that asserted that the law violated the Dormant Commerce Clause and the Due Process Clause of the Constitution.
On August 27th the court upheld Oregon’s law, rejecting the NAW’s Constitutional claims. The court held that the law did not discriminate against interstate commerce and that Oregon did not unconstitutionally delegate its authority to a producer responsibility organization (PRO), as the non-profit groups set up by manufacturers to manage EPR programs are known.
The court’s reasoning was that Oregon’s law did not violate the crux of the Dormant Commerce Clause, which prohibits state regulatory measures from impermissibly discriminating against out-of-state competitors. The court held that both increased costs to producers or consumers was not a substantial burden on interstate commerce, and that NAW did not have standing to challenge exemptions from the law given to certain Oregon governmental bodies.
The court rejected NAW’s due process argument, finding that Oregon’s EPR law did not impermissibly delegate the state’s authority to impose fees to a private entity with the power to regulate competitors’ business without adequate public oversight. Because the Oregon Department of Environmental Quality retains decision-making authority over the Oregon PRO’s (Circular Action Alliance) fee methodology and must approve all PRO plans, the court concluded that adequate safeguards are in place.
The case has been appealed to the US Court of Appeals for the Ninth Circuit, which will provide a new avenue for NAW to raise its arguments. However, history is not in NAW’s favor. In 2024, the Ninth Circuit reversed only about 7% of district court decisions (in line with the average across all Circuits). Regardless of the Ninth Circuit’s decision, the ruling will likely be appealed to the Supreme Court. It will likely be several years before the case gets to the high court. The Court will most likely wait for additional circuit-level rulings to develop over the next few years before taking on questions surrounding EPR.
This leaves a status quo in which federal courts tacitly approve these programs. California and Colorado are facing challenges from trade groups similar to the one Oregon faced. And while the various circuit courts may produce a range of decisions, state legislators can now look to Oregon as the standard for how to develop a state EPR program that will not be struck down by federal courts.
We believe these programs are likely to expand significantly over the next five years, particularly in states where Democrats control the governor’s office and both chambers of the legislature. Several major Democratic trifecta states have yet to pass EPR programs, but may push for them with renewed vigor now that the Oregon court has weighed in. New York, Illinois, Virginia, and New Jersey are candidates to pass their own EPR programs as soon as next year.
However, while these programs are likely to proliferate in the wake of the Oregon ruling, so too will legal challenges, which over time will likely lead to an eventual Supreme Court ruling. In the meantime, plastics producers face several years of significant EPR fees while the court hears a case with the potential to upend EPR programs across the country.
As these policies spread, Capstone will continue to track their evolution, as well as how different courts view their legality, to assess the risks they pose to plastics producers.
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