BILL NUMBER: SB 468 CHAPTERED 10/07/01 CHAPTER 549 FILED WITH SECRETARY OF STATE OCTOBER 7, 2001 APPROVED BY GOVERNOR OCTOBER 5, 2001 PASSED THE SENATE SEPTEMBER 14, 2001 PASSED THE ASSEMBLY SEPTEMBER 13, 2001 AMENDED IN ASSEMBLY SEPTEMBER 12, 2001 AMENDED IN ASSEMBLY SEPTEMBER 6, 2001 AMENDED IN ASSEMBLY AUGUST 28, 2001 AMENDED IN ASSEMBLY AUGUST 20, 2001 AMENDED IN ASSEMBLY JULY 12, 2001 INTRODUCED BY Senator Sher FEBRUARY 22, 2001 An act to amend Sections 25395.20 and 25395.25 of, and to add Article 8.7 (commencing with Section 25395.40) to Chapter 6.8 of Division 20 of, the Health and Safety Code, relating to environmental protection, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST SB 468, Sher. Hazardous materials response actions: brownfields: insurance. (1) Existing law requires the Department of Toxic Substances Control, with the approval of the Secretary for Environmental Protection, to establish the Investigating Site Contamination Program to provide loans to conduct preliminary endangerment assessments of brownfields and underutilized property, as defined, and the Cleanup Loans and Environmental Assistance to Neighborhoods (CLEAN) Program, to provide loans to finance the performance of actions necessary to respond to the release or threatened release of hazardous material on an eligible property. Existing law defines the terms "brownfield" and "underutilized property" as property that meets specified conditions, including being located in an urbanized area, as defined. Existing law provides procedures for the approval of, and repayment of, a loan under these programs. Under existing law, the Cleanup Loans And Environmental Assistance to Neighborhoods Account in the General Fund is continuously appropriated to the department to provide loans under those programs, except that the department and the California Environmental Protection Agency are authorized to expend funds in the account for administration only upon the appropriation of funds for that purpose. Existing law requires the department to serve as the administering agency for any site that is the subject of a loan. This bill would revise the definitions of the terms "brownfield" and "underutilized property" to instead include property that is located in an urban area, as defined, and would define other terms for purposes of the CLEAN Program. The bill would revise the definition of "eligible property" to include certain property owned or operated by a small business, as defined, a specified nonprofit corporation, or a small business incubator. The bill would additionally, continuously appropriate the money in the account to provide subsidies for environmental insurance pursuant to the FAIR Program specified in (2) below, thereby making an appropriation. The bill would also provide that the money in the account may be expended by the department, a California regional water quality control board, the State Water Resources Control Board, or the California Environmental Protection Agency for administration and implementation costs, upon appropriation by the Legislature, and for administering and implementing the FAIR Program. The bill would define the term "implementation costs" to include the costs of overseeing and reviewing preliminary endangerment assessments and response actions, and certain oversight conducted by the California regional water quality control board. The bill would also make various technical changes regarding the agreement required to be executed by the CLEAN loan recipient with the department. The bill would provide that a loan recipient is not liable for paying the department's, regional board's, or state board' s costs associated with the oversight of preliminary endangerment assessment preparation and approval or the oversight of a response action at a site, if the department determines there are sufficient funds in the account to reimburse the department, regional board, or state board for that oversight. If the department determines that the account has insufficient funds to pay for those oversight costs, the bill would require the loan recipient to pay the department the amount of those costs. (2) This bill would establish the Financial Assurance and Insurance for Redevelopment Program (FAIR), which would require the secretary to solicit proposals for a package of environmental insurance products from insurance companies through a competitive bidding process. The selected insurance company or companies would be the exclusive state-designated provider of environmental insurance under the FAIR Program for a period of 3 years. The secretary would be required to evaluate the proposals based on specified factors. The bill would require an insurance company selected by the secretary to offer a prenegotiated package of environmental insurance products to any interested recipient of a loan under the CLEAN Program and to any other person who conducts a response action in the state. The bill would require the secretary to expend the funds from the Cleanup Loans and Environmental Assistance to Neighborhoods Account that are made available in the annual Budget Act for expenditure to subsidize the cost of those environmental insurance products. The bill would require the secretary to provide from those available funds a subsidy of up to 50% of the cost of the premiums for the environmental insurance products provided under the FAIR Program and up to 80% of the self-insured retention amount of the cost overrun insurance, up to a maximum of $500,000, under specified conditions. The bill would authorize any person who is conducting a response action to an eligible property under the CLEAN Program under the oversight of the department or a regional board to apply to the secretary for a subsidy. The bill would require a recipient of a CLEAN Program loan to obtain secured creditor insurance, as defined, from the insurance company selected by the secretary pursuant to the FAIR Program, or comparable insurance, unless the secretary waives this requirement. The bill would authorize the agency to adopt emergency regulations to implement the FAIR Program. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) There are thousands of idle or underutilized urban properties in California where redevelopment has been stymied due to real or perceived hazardous materials contamination. (2) Because of the reluctance of private developers, local governments, and schools to redevelop these properties, the location of new development tends to be at the edges of urban areas because those areas are generally perceived to entail lesser potential for contamination and liability for cleanup costs. (3) This has resulted in a multitude of problems, including urban sprawl, decaying inner-city neighborhoods and schools, public health and environmental risks stemming from contaminated properties, reduced inner-city tax bases, and an increased need for major infrastructure improvements such as streets, highways, and sewer systems to service the urban fringe areas while the inner-city infrastructure deteriorates. (4) Private investors and lending institutions hesitate to fund the redevelopment of underutilized urban properties because they are concerned over the potential legal liability associated with these sites as well as the potential for unexpected site cleanup costs. Environmental insurance has proven to be a valuable tool for private developers and lending institutions in reducing concerns over environmental liability and cleanup costs. However, environmental insurance may not be readily available or affordable for smaller redevelopment projects. Affordable environmental insurance could make conventional financing more feasible for many smaller projects. (b) The Legislature hereby recognizes that it is in the best interests of the people of California that state funds be made available to make environmental insurance more affordable by negotiating standardized policies and by subsidizing premiums for certain projects. This insurance would be available to stimulate the redevelopment of brownfields and underutilized urban properties, resulting in the overall improvement of the community where the property is located and in the generation of a reasonable economic or social return on those investments. SEC. 2. Section 25395.20 of the Health and Safety Code is amended to read: 25395.20. (a) For purposes of this article, the following definitions shall apply: (1) "Account" means the Cleanup Loans and Environmental Assistance to Neighborhoods Account established pursuant to subdivision (b). (2) (A) "Brownfield" means property that meets all of the following conditions: (i) It is located in an urban area. (ii) It was previously the site of an economic activity that is no longer in operation at that location. (iii) It has been vacant or has had no occupant engaged in year-round economically productive activities for a period of not less than the 12 months previous to the date of application for a loan pursuant to this article. (B) "Brownfield" does not include any of the following: (i) Property listed, or proposed for listing, on the National Priorities List pursuant to the federal act (42 U.S.C. Sec. 9605 (a) (8)(B)). (ii) Property that is, or was, owned or operated by a department, agency, or instrumentality of the United States. (iii) Property that will be the site of a contiguous expansion or improvement of an operating industrial or commercial facility, unless the property is a brownfield described in subparagraph (C) of paragraph (6). (3) "Cleanup and abatement order" means an order issued by a regional board pursuant to Section 13304 of the Water Code. (4) "Cleanup Loans and Environmental Assistance to Neighborhoods Program" or "CLEAN" means the loan program established by the department pursuant to Section 25395.22, to finance the performance of actions necessary to respond to the release or threatened release of hazardous material on an eligible property. (5) "Economic activity" means a governmental activity, a commercial, agricultural, industrial, or not-for-profit enterprise, or other economic or business concern. (6) "Eligible property" means a site that is any of the following: (A) A brownfield. (B) An underutilized property that is any of the following: (i) A property described in clause (v) of subparagraph (D) of paragraph (16). (ii) A property located in an enterprise zone established pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), in a project area for which a redevelopment plan has been approved pursuant to Article 4 (commencing with Section 33300) of Chapter 4 of Part 1 of Division 24, or in an eligible area, as determined by the Technology, Trade, and Commerce Agency pursuant to paragraph (2) of subdivision (c) of Section 7072 of the Government Code. (iii) A property, the redevelopment of which will result in any of the following: (I) An increase in the number of full-time jobs that is at least 100 percent greater than the number of jobs provided by the economic activity located on the property before redevelopment occurred. (II) An increase in property taxes paid to the local government that is at least 100 percent greater than the property taxes paid by the property owner before redevelopment occurred. (III) Sales tax revenues to the local government that are sufficient to defray the costs of providing municipal services to the property after the redevelopment occurs. (IV) Housing for very low, low-, or moderate-income households, as defined in paragraph (2) of subdivision (h) of Section 65589.5 of the Government Code. (V) The construction of new or expanded school facilities, public day care centers, parks, or community recreational facilities. (C) A brownfield or an underutilized property described in clause (ii) of subparagraph (B) that will be the site of a contiguous expansion of an operating industrial or commercial facility owned or operated by one of the following: (i) A small business. (ii) A nonprofit corporation formed under the Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code) or the Nonprofit Religious Corporation Law (Part 4 (commencing with Section 9110) of Division 2 of Title 1 of the Corporations Code). (iii) A small business incubator that is undertaking the expansion with the assistance of a grant authorized by Section 15339.3 of the Government Code or a loan guarantee provided pursuant to Section 14090 of the Corporations Code. (7) "Eligible property" does not include any of the following: (A) Property listed or proposed for listing on the National Priorities List pursuant to the federal act (42 U.S.C. Sec. 9605 (a) (8)(B)). (B) Property that is, or was, owned or operated by a department, agency, or instrumentality of the United States. (C) Property that will be the site of a contiguous expansion or improvement of an operating industrial or commercial facility, unless the property meets the criteria specified in subparagraph (C) of paragraph (6). (8) (A) "Hazardous material" means a substance or waste that, because of its physical, chemical, or other characteristics, may pose a risk of endangering human health or safety or of degrading the environment. "Hazardous material" includes, but is not limited to, all of the following: (i) A hazardous substance, as defined in Section 25281 or 25316, including the substances specified in Section 25317. (ii) A hazardous waste, as defined in Section 25117. (iii) A waste, as defined in Section 101075, or as defined in Section 13050 of the Water Code. (B) "Hazardous material" does not include undisturbed naturally occurring hazardous material unless it will adversely affect the reasonable use of a property after response action is completed. (9) "Implementation costs," for purposes of the expenditure of any funds pursuant to this article, includes, but is not limited to, the costs of overseeing and reviewing preliminary endangerment assessments and response actions that are financed by a loan issued pursuant to this article, including oversight conducted by a regional board pursuant to Section 25395.28. (10) "Investigating site contamination program" means the loan program established by the department pursuant to Section 25395.21 to conduct a preliminary endangerment assessment of a brownfield or an underutilized urban property. (11) "Leaking underground fuel tank" has the same meaning as "tank," as defined in Section 25299.24. (12) "No longer in operation" means an economic activity that is, or previously was, located on a property that is not conducting operations on the property of the type usually associated with the economic activity. (13) "Project" means any response action, and the planned future development, included in an application for a loan pursuant to Section 25395.22. (14) "Property" means real property, as defined in Section 658 of the Civil Code. (15) "Small business" means an independently owned and operated business, that is not dominant in its field of operation, that, together with affiliates, has 100 or fewer employees, and that has average annual gross receipts of ten million dollars ($10,000,000) or less over the previous three years, or a business that is a manufacturer, as defined in Section 14837 of the Government Code, with 100 or fewer employees. (16) "Underutilized property" means property that meets all of the following conditions: (A) It is located in an urban area. (B) An economic activity is conducted on the property. (C) It is the subject of a proposal for development pursuant to this article. (D) One of the following applies: (i) The economic activity on the property is irregular or intermittent in nature and uses the property for productive purposes less than four months in any calendar year. (ii) The economic activity on the property employs less than 25 percent of the property for productive purposes. (iii) The structures, infrastructure, and other facilities on the property are antiquated, obsolete, or in such poor repair that they cannot be used for the purposes for which they were originally constructed and require replacement in order to implement the redevelopment proposal. (iv) The economic activity conducted on the property is a parking facility or an activity that offers a similar marginal economic service and the facility or activity will be replaced when the property is redeveloped. (v) The property is adjacent to one or more brownfields or underutilized properties that are the subject of a project under this article and its inclusion in the project is necessary in order to ensure that the redevelopment of the brownfield or brownfields or underutilized property or underutilized properties occurs. (E) An underutilized property does not include any of the following: (i) Property listed or proposed for listing on the National Priorities List pursuant to the federal act (42 U.S.C. Sec. 9605 (a) (8)(B)). (ii) Property that is, or was, owned or operated by a department, agency, or instrumentality of the United States. (iii) Property that will be the site of a contiguous expansion or improvement of an operating industrial or commercial facility, unless the property is an underutilized property described in subparagraph (C) of paragraph (6). (17) "Regional board" means a California regional water quality control board. (18) "State board" means the State Water Resources Control Board. (19) "Urban area" means either of the following: (A) The central portion of a city or a group of contiguous cities with a population of 50,000 or more, together with adjacent densely populated areas having a population density of at least 1,000 persons per square mile. (B) An urbanized area as defined in paragraph (2) of subdivision (b) of Section 21080.7 of the Public Resources Code. (b) The Cleanup Loans and Environmental Assistance to Neighborhoods Account is hereby established in the General Fund to provide low-interest loans to qualified applicants for the purpose of funding preliminary endangerment assessments and response actions at brownfields and underutilized properties located in the state pursuant to this article, and for for any other purpose determined by the department to stimulate the redevelopment of brownfields and underutilized properties, if the department determines that the redevelopment will result in the overall improvement of the community in which the property is located and will provide a reasonable economic or social benefit, in accordance with subdivision (c). All of the following moneys shall be deposited in the account: (1) Funds appropriated by the Legislature for the purposes of this article. (2) Notwithstanding Section 16475 of the Government Code, any interest earned upon money deposited into the account. (3) Proceeds from loan repayments. (4) Proceeds from the sale of property pursuant to this article that is the subject of foreclosure or its equivalent, as defined in subdivision (f) of Section 25548.1, and proceeds from the enforcement of any other security interest. (c) (1) Except as provided in paragraph (2), notwithstanding Section 13340 of the Government Code, the money in the account is continuously appropriated without regard to fiscal years to the department for the purpose of providing loans pursuant to Sections 25395.21 and 25395.22 and for the purpose of providing subsidies for environmental insurance pursuant to Article 8.7 (commencing with Section 25395.40), the California Financial Assurance and Insurance for Redevelopment Program. (2) The money in the account may be expended by the department, a regional board, the state board, and the agency for the implementation and administration of this article and for implementation and administration of the California Financial Assurance and Insurance for Redevelopment Program (Article 7 (commencing with Section 25395.40)), only upon appropriation by the Legislature in the annual Budget Act or in another measure. SEC. 3. Section 25395.25 of the Health and Safety Code is amended to read: 25395.25. Upon the approval of a loan pursuant to Section 25395.23, the loan recipient shall do all of the following: (a) Enter into an agreement with the department to repay the loan over a period of not more than seven years. If the loan is to a local government entity, or to a developer or prospective purchaser acting together with a local government entity pursuant to an enforceable agreement, the department may delay the beginning of the loan repayment period. (1) The agreement shall include those terms and conditions that the department deems appropriate. (2) (A) The agreement shall require that if the loan recipient recovers from a responsible party any costs incurred in taking a response action at the site that is the subject of the response action pursuant to the agreement, the loan recipient shall use the recovered money, except for reasonable costs and the fees incurred to recover that money, first to satisfy the loan. (B) Notwithstanding subparagraph (A), a loan recipient is not required to first use the money recovered to repay the loan or grant if the recipient can demonstrate, to the satisfaction of the department, that the recovered money is necessary to, and is being applied to, the total environmental remediation of the property, and that the total of the recovered money and the loan amount does not exceed the cost of remediation. (b) (1) Enter into an agreement with the department or with the regional board or state board pursuant to Section 25395.28 for the oversight and approval of the response action at the site. This agreement shall include any necessary conditions and assurances to ensure that post-completion, ongoing operation and maintenance activities, and any necessary institutional controls on future uses of the property, are complied with. This agreement shall be provided to the department before the department may release any loan funds to the loan recipient. (2) Notwithstanding any requirement of this division regarding cost recovery or reimbursement for oversight costs, a loan recipient is not liable for paying the department's costs pursuant to this article or the regional board's or state board's costs pursuant to Section 25395.28 associated with the oversight of the response action at the site subject to the agreement, if the department determines there are sufficient funds in the account to reimburse the department' s costs pursuant to this article or the regional board's or state board's costs pursuant to Section 25395.28 for that oversight. If the department determines that the account has insufficient funds to pay for the oversight costs associated with the oversight of the response action at the site subject to the agreement, the loan recipient shall pay the department's costs pursuant to this article or the regional board's or state board's costs pursuant to Section 25395.28 for the amount of those costs. (c) (1) Except as provided in paragraph (2), obtain secured creditor insurance, as defined in subdivision (k) of Section 25395.40, from the insurance company selected by the secretary pursuant to subdivision (b) of Section 25395.41, or comparable insurance from any insurance company with an A.M. Best Financial Strength Rating of A+ or better and an A.M. Best Financial Size Category of FSC X or larger that is authorized to offer environmental insurance in California. This insurance shall be obtained before the department may release any loan funds to the loan recipient. (2) The secretary may waive the requirement of paragraph (1) to obtain insurance or any specific insurance coverage if either of the following apply: (A) No money is available for the environmental insurance subsidies authorized pursuant to Section 25395.42. (B) The secretary determines that the scope of the response action is limited and the cost of the premiums of the prenegotiated package of environmental insurance products equals or exceeds the estimated response action costs, or is otherwise not commercially feasible. SEC. 4. Article 8.7 (commencing with Section 25395.40) is added to Chapter 6.8 of Division 20 of the Health and Safety Code, to read: Article 8.7. California Financial Assurance and Insurance for Redevelopment Program 25395.40. For the purposes of this article, the following definitions shall apply: (a) "CLEAN Program" means the Cleanup Loans and Environmental Assistance to Neighborhoods Program established pursuant to Section 25395.22. (b) "Cost overrun insurance" means insurance that covers some, or all of the response costs caused by a known pollution condition at a site, that exceed the estimated response action costs that have been accepted and approved by the insurer, based on information from the department and other relevant sources at the time the insurance is first obtained. (1) Cost overrun insurance shall, at a minimum, provide for all of the following: (A) The response costs in excess of the estimated response action costs that have been accepted and approved by the insurer. (B) A policy period of sufficient length to cover the duration of the response activities, not including post-completion operation and maintenance. (C) A self-insured retention amount not to exceed 25 percent of the estimated response action costs that have been accepted and approved by the insurer. (c) "Eligible property" has the same meaning as defined in paragraph (6) of subdivision (a) of Section 25395.20. (d) "Environmental insurance" means insurance intended to limit the liability associated with the discovery and cleanup of a hazardous materials release, including secured creditor insurance, pollution liability insurance, and cost overrun insurance, and any other insurance product that the secretary selects to be provided pursuant to Section 25395.41. (e) "Estimated response action costs" means the projected costs of taking a response action in implementing an approved removal action work plan or remedial action plan prepared to address a pollution condition at a site. (f) "FAIR" means the Financial Assurance and Insurance for Redevelopment Program created pursuant to this article. (g) "Hazardous material" means a substance or waste that, because of its physical, chemical, or other characteristics, may pose a risk of endangering human health or safety or of degrading the environment. "Hazardous material" includes, but is not limited to, all of the following: (1) A hazardous substance, as defined in Section 25281 or 25316, including the substances specified in Section 25317. (2) A hazardous waste, as defined in Section 25117. (3) A waste, as defined in Section 101075, or as defined in Section 13050 of the Water Code. (h) "Insurance company" means an insurance company authorized in California to offer environmental insurance and that has an A.M. Best Financial Strength Rating of A+ or better and an A.M. Best Financial Size Category of FSC X or larger. (i) "Pollution condition" means a release or threatened release of a hazardous material and any resulting impact upon the environment. (j) (1) "Pollution liability insurance" means insurance that covers damages caused by a pollution condition from, or at, a site that is preexisting and unknown, or was otherwise unknown at the time the insurance is first obtained, and, at a minimum, provides for all of the following: (A) A minimum policy period of five years after the completion of remediation activities, not including post-completion operation and maintenance. (B) A duty to defend and pay for defense costs in an amount at least up to the amount of coverage available under the policy, irrespective of whether an administrative or judicial order requires the insured to compensate any party or pay for the damages, so long as there already exists a reasonably quantifiable legal obligation to pay those damages. (2) For purposes of this subdivision, "damages" means either of the following: (A) Property damage incurred at a site as an unforeseen and unexpected result of a pollution condition. (B) Bodily injury, property damage, and response action costs sustained or incurred by a third party as a result of a pollution condition at a site. (3) For purposes of this subdivision, "damages" includes the property damage, bodily injury, and response costs specified in paragraph (2), irrespective of whether an administrative or judicial order requires the insured to compensate any party or pay for the property damage, bodily injury, or response costs, so long as there exists a reasonably quantifiable legal obligation to pay for those damages. (k) "Secured creditor insurance" means insurance made available to an insured that covers all of the following: (1) Response costs at a site incurred by the lender after a default by the borrower or foreclosure by the lender that occurs as a result of a pollution condition at the site, and the costs are reasonably necessary to remediate the site for its intended use so that it can be sold. (2) Damages or other liability for a pollution condition at a site incurred by a lender as a result of that lender exercising a foreclosure option. (3) Loss or damages incurred by a lender as a result of a borrower' s inability to satisfy a loan obligation or due to the existence of an unforeseen and unexpected pollution condition. (4) A duty to defend and pay for defense costs in an amount at least up to the amount of coverage available under the policy, irrespective of whether an administrative or judicial order requires the insured to compensate any party or pay for the loss, damages, or liability, so long as there exists a reasonably quantifiable legal obligation to pay damages. (l) "Self-insured retention amount" means response action costs in excess of the estimated response action costs that have been accepted and approved by the insurer that the insured is obligated to pay before being eligible to make a claim of an insurer under a cost overrun insurance policy. (m) "Unforeseen and unexpected response action costs" means those costs that exceed the estimated response action costs. 25395.41. (a) The secretary shall solicit proposals for a package of environmental insurance products from insurance companies through a competitive bidding process. The request for proposal prepared by the secretary shall identify the objectives of this article and the specific types and coverage limits of the insurance products desired, including endorsements and exclusions. The request for proposal shall require that the proposal allow a purchaser the opportunity to pay for additional coverage without losing the lower transaction costs structure of the prenegotiated policy. The secretary shall hold at least one public workshop in both the northern and the southern part of the state to present and solicit comments on the request for proposal prior to receiving any proposals. (b) (1) The secretary shall evaluate the extent to which each proposal submitted pursuant to subdivision (a) meets the objectives of the request for proposal and shall also evaluate each proposal and interested party using all of the following factors: (A) Product pricing. (B) Claims history. (C) Underwriting history. (D) Company financial strength and size. (E) Scope of policy coverages, including endorsements and exclusions. (F) Marketing and distribution of the insurance products. (G) Any other factor that the secretary determines will affect the ability of the selected insurance company to meet the requirements of this article and provide the environmental insurance products in the most effective and efficient manner and at the least cost to the state and to persons seeking that insurance. (2) The secretary shall select one or more insurance companies that have submitted a proposal pursuant to subdivision (a) to be the exclusive state-designated provider of environmental insurance under this article for a period of three years from the date of selection. The secretary shall select a company that, in his or her determination, has submitted a proposal that best meets the requirements of this article and the objectives stated in the request for proposal at the best possible price. Every three years, the secretary shall repeat the competitive bidding process specified in this section. (c) The request for proposal prepared pursuant to subdivision (a) shall specify whether the secretary intends to select only one insurance company or more than one insurance company. (d) An insurance company selected to provide prenegotiated environmental insurance products pursuant to subdivision (b) shall offer this prenegotiated package of insurance products to any interested recipient of a loan under the CLEAN Program. The insurance company shall also offer the environmental insurance products made available under this article to any other person who conducts a response action in the state. (e) The secretary shall implement this section in consultation with representatives of other appropriate state agencies, including the Technology, Trade, and Commerce Agency, the Business, Transportation and Housing Agency, the Office of Planning and Research, the Pollution Control Financing Authority, the Department of Insurance, the state board, the department, and with other interested parties, including developers, lenders, insurers, and representatives from environmental organizations. The secretary shall implement this section in a manner that is consistent with the requirements for state procurement of services set forth in Article 4 (commencing with Section 10335) of Chapter 2 of Part 2 of Division 2 of the Public Contract Code. 25395.42. (a) The secretary shall expend the funds from the Cleanup Loans and Environmental Assistance to Neighborhoods Account established pursuant to Section 25395.20 that are made available in the annual Budget Act for expenditure to subsidize the cost of the environmental insurance products offered by the insurance company selected pursuant to subdivision (b) of Section 25395.41, in accordance with subdivision (b). (b) The secretary shall provide the following subsidies, in accordance with the application process specified in Section 25395.43, from the funds made available pursuant to subdivision (a): (1) Up to 50 percent of the cost of the premiums for the environmental insurance products provided pursuant to subdivision (c) of Section 25395.41. (2) (A) Up to 80 percent of the self-insured retention amount of the cost overrun insurance provided pursuant to subdivision (c) of Section 25395.41, up to a maximum of five hundred thousand dollars ($500,000). (B) The secretary may expend the funds available to pay a portion of the self-insured retention amount of the cost overrun insurance provided pursuant to subdivision (b) of Section 25395.41 only under all of the following conditions: (i) The insured demonstrates that it exercised reasonably prudent business judgment in insuring the cost overrun, consistent with an attempt to minimize the incurred costs, and incurred the costs through no fault of its own. (ii) The insured pays, at a minimum, the first 20 percent of the self-insured retention amount. (iii) The secretary determines that the amount of the payment is in the best interests of the state, taking into account the environmental and economic benefits of the specified project, as compared to the benefit of conserving funds for assistance at other sites. 25395.43. (a) Any person who is conducting a response action at an eligible property under the oversight of the department or a regional board and who purchases the prenegotiated environmental insurance products from the insurance company selected pursuant to subdivision (b) of Section 25395.41 may apply to the secretary for the subsidies that are made available pursuant to Section 25395.42. To the extent that the funds that are made available in the annual Budget Act for expenditure to subsidize the cost of the environmental insurance products provided pursuant to this article are available, an applicant is eligible for a subsidy in the order in which the applicant's application is received. (b) An applicant for a subsidy made available pursuant to Section 25395.42 shall provide the secretary with all information necessary to demonstrate to the secretary that the applicant is eligible to receive a subsidy. (c) The state and the Cleanup Loans and Environmental Assistance to Neighborhoods Account do not have any obligation to provide funds to any person that applies for a subsidy pursuant to this article. The secretary shall provide an applicant with a subsidy only to the extent that money in the Cleanup Loans and Environmental Assistance to Neighborhoods Account established pursuant to Section 25395.20 has been reserved in the annual Budget Act for the purpose of providing environmental insurance and the money that has been reserved for this purpose is available. 25395.44. If the insurance company selected to provide prenegotiated environmental insurance products pursuant to subdivision (b) of Section 25395.41 terminates its contract with the secretary or otherwise becomes unable to honor policies written pursuant to this article, nothing in this article shall be construed to obligate the state to honor those policies or to pay any claims made on those policies. 25395.45. The agency may adopt regulations to implement this article pursuant to this section. The regulations adopted to implement this article shall be deemed to be emergency regulations for purposes of Section 11346.1 of the Government Code. Notwithstanding the 120-day limit specified in subdivision (e) of Section 11346.1 of the Government Code, those emergency regulations may remain in effect for up to 180 days.