BILL ANALYSIS SB 1574 SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator S. Joseph Simitian, Chairman 2007-2008 Regular Session BILL NO: SB 1574 AUTHOR: Florez AMENDED: August 22, 2008 FISCAL: Yes HEARING DATE: August 29, 2008 URGENCY: Yes CONSULTANT: Caroll Mortensen SUBJECT : STORAGE OF BIODIESEL IN UNDERGROUND STORAGE TANKS SUMMARY : Existing law : 1)Requires the primary containment of underground storage tanks (USTs) to be product-tight and compatible with the substance stored. Requires the secondary containment of USTs to be constructed, operated, and maintained in a manner to prevent structural weakening and also to be capable of storing the hazardous substances for the maximum anticipated period of time necessary for the recovery of any released hazardous substance. 2)Establishes additional requirements for USTs, including requiring continuous monitoring systems; interstitial space; equipment to prevent spills and overfills; and automatic line leak detector, among others. 3)Requires, in regulation, the design and construction of USTs and piping to be approved by an independent testing organization in accordance with industry codes, voluntary consensus standards or engineering standards. For USTs and piping, this requirement is typically met through obtaining approval from Underwriters Laboratory. 4)Establishes, in the Barry Keene Underground Storage Tank Cleanup Fund Act of 1989, guidelines and programs to store fuel in USTs. SB 1574 Page 2 5)Under federal law, Subchapter IX of Chapter 82 of Title 42 of the United States Code allows USTs to be regulated pursuant to an authorized state program. California has such authorization. This bill : 1) Includes Legislative intent language that states: a) Until the adoption of third-party certification standards for USTs containing biodiesel blends, it is the intent to provide interim standards for owners and operators of USTs containing biodiesel fuels that contain 20% or less by volume of biodiesel. b) It is not the intent of the Legislature, in enacting this measure, to deem in compliance with any subsequently adopted standards, an UST system that contains a biodiesel blend that is deemed in compliance with the provisions of this measure. 2) Defines "Biodiesel" to mean a fuel comprised of mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats, designated B100, that meets the requirements of the American Society for Testing and Materials (ASTM) Standard Specification D-6751, and the registration requirements of the United States Environmental Protection Agency as a fuel and as a fuel additive under the Clean Air Act (42 U.S.C. Sec. 7401 et seq.). 3) Defines "Biodiesel blend" to mean a fuel that contains one percent to 99.9 percent biodiesel blended with diesel fuel, as defined in Section 13401 of the Business and Professions Code. For purposes of this section, where a biodiesel blend is designated BX, X represents the percentage of the fuel, by volume, that is biodiesel. 4) Requires, for storage of a biodiesel blend of 5% or less (B5) in an UST, that the UST must be compliant with Health and Safety Code 25291 (double- walled systems with leak detection mechanisms) in the same manner as an UST SB 1574 Page 3 containing diesel. 5) Requires, for storage of biodiesel blends of more than 5% (B5) and up to and including 20% (B20), that the UST must be in compliance in the same manner as an UST containing diesel AND a determination must be made by the local agency that the owner or operator of the UST employs best management practices that include at least one of the following: a) The use of an UST in compliance with Health and Safety Code 25290.1 (the 2004 standard double-walled USTs with continuous monitoring systems or "gold standard" USTs), and/or; b) The owner or operator of the UST provides evidence, supplied by the manufacturer, of material compatibility of the UST system, and a warranty by the manufacturer that the system is appropriate for the blend of biodiesel to be stored, and obtains a level of financial responsibility that is twice the amount that she or he would otherwise be required to obtain. 6) Authorizes a local agency to take enforcement action if it determines that an UST, otherwise in compliance with the provisions of the bill, poses a risk to water quality. 7) Allows an owner or operator of an UST that contains a biodiesel blend up to and including 20% (B20) to transfer that blend into a more protective UST that complies with the requirements established pursuant to this measure. 8) Applies only to those USTs that contained biodiesel blends on or before July 1, 2008. 9) The added section shall become inoperative when the UL establishes a certification standard for USTs that contain biodiesel blends or by January 1, 2011, which ever is sooner. 10)Requires the State Water Resources Control Board (SWRCB) to develop information on its website, to inform operators and owners of USTs that contain biodiesel blend, as defined in SB 1574 Page 4 paragraph (2) of subdivision (a) of Section 25292.6, of the current requirements for storing those fuels and shall include a statement about storing a biodiesel blend in an underground storage tank that is not certified by the Underwriters Laboratories. 11)Includes an urgency clause stating " . . that is necessary to have this bill go into immediate effect to ensure that underground storage tanks that contain biodiesel blend are regulated by the state, which requires, in a memorandum of agreement issued by the California Environmental Protection Agency, that underground storage tanks meet standards established by a third party, and to encourage the continued existence of the state's growing biodiesel industry by establishing interim standards that protect public health and safety and the environment as soon as possible". COMMENTS : 1)Purpose of Bill . This bill attempts to establish interim standards for two years, or until standards are developed, for the storage of biodiesel blends up to 20% (B20) in USTs. Existing law and regulations prohibit the storage of any material in an UST without compatibility testing to ensure that the material will not cause a UST or its related components to fail. This process has not been completed for biodiesel or its blends. According to the author, "A letter was issued from the State Water Resources Control Board to UST regulatory agencies in February 2008 clarifying regulations applying to biodiesel stored in USTs. The letter states that all biodiesel is a hazardous substance and tanks storing this fuel must comply with current regulations. The issue is there is certification for underground storage equipment and the State Water Resources Control Board has no authority to provide waivers until a certification standard is approved. The result of this clarification is that local agencies will be required to shut down entities with underground storage tanks storing biodiesel that do not comply with existing standards. The cities of Stockton and Santa Monica have already received such communication because of the use of SB 1574 Page 5 biodiesel in their city fleets." What is Biodiesel ? According to the California Biodiesel Alliance, "California's biodiesel industry, which produces the majority of its fuel from recycled sources, offers a model of safety and sustainability for this truly green fuel. Among its many benefits, the use of biodiesel is key to reducing a host of damaging health effects-especially to children-of diesel vehicle pollution. And as a low carbon fuel, with the potential to reduce CO2 by 78% or more, biodiesel is a crucial part of California's leadership, through AB 32 and the Low Carbon Fuel Standard, in reducing California's dependence on foreign oil and the greenhouse gases responsible for global warming". According to the US EPA, to make biodiesel, base oil (which can be animal fats, raw vegetable oils or recycled cooking greases) is put through a process called "esterificiation." This refining method uses an industrial alcohol (ethanol or methanol) and a catalyst (substance that enables a chemical reaction) to convert the oil into a fatty-acid methyl-ester fuel (biodiesel). Biodiesel in its pure form is known as "neat biodiesel" or B100, but it can also be blended with conventional (petroleum-based) diesel, most commonly as B5 (5 percent biodiesel and 95 percent diesel) and B20 (20 percent biodiesel and 80 percent diesel). Biodiesel is registered with the US EPA and is legal for use at any blend level in both highway and non-road diesel vehicles. 2)Use of Biodiesel as a Fuel . According to the National Biodiesel Board, The American Society of Testing and Materials (ASTM) has approved a standard for pure biodiesel when used in blends at 20% by volume (B20) or lower. ASTM D6751is a consensus standard, developed in cooperation with vehicle, engine, and fuel injection equipment companies; petrodiesel and biodiesel producers and distributors; and state and federal regulators and third parties through the ASTM standard development process. Due to concerns of the US engine and fuel injection equipment manufacturers regarding influence of biodiesel SB 1574 Page 6 fuels on cold flow properties, material compatibility, maintenance intervals, fuel stability, biological growth, energy content, and emissions influence with higher concentration blends, the ASTM standard has only been approved for blends of biodiesel of B20 and lower. D6751 states the following: Most auto, engine, and fuel injection equipment companies doing business in the US strongly discourage the use of blends over B20 due to the impacts of higher blends on equipment and fuel systems which have not been thoroughly tested with these high blends, and the higher likelihood of known problems or issues with high blends that are not present or are of lesser importance when using B20 or lower blends. Blends higher than B20 can not be considered a direct replacement for petroleum diesel fuel and may require significant additional precautions, handling, and maintenance considerations as well as potential fuel system and engine modification. Problems specifically caused by any fuel, including biodiesel or biodiesel blends, are not considered manufacturing defects and generally will not be covered by any engine or fuel injection equipment manufacturer's warranty. 3)UST Compatibility: Concerns with the storage of biodiesel . In anticipation of the increased use of biodiesel, the SWRCB issued a letter on February 28, 2008, to clarify how existing state laws and regulations apply to UST systems storing biodiesel and biodiesel blends. The letter states that: UST systems storing biodiesel or biodiesel blends are subject to regulation. Switching from petroleum diesel to a biodiesel blend is considered a change of stored substance. An owner or operator of a UST must demonstrate material compatibility prior to storing biodiesel or biodiesel blends. In the February letter, the SWRCB states, "California Health and Safety Code, Chapter 6.7, requires primary containment to be compatible with the product stored. This means that the primary containment must retain its chemical and physical properties upon contact with the stored substance for the life of the UST system under normal operating SB 1574 Page 7 conditions. California Health and Safety Code, Chapter 6.7, also requires that secondary containment be designed to prevent structural weakening as a result of contact with the stored substances. These requirements apply to any regulated UST system installed after 1984, including those storing biodiesel or biodiesel blends. The UST owner/operator is ultimately responsible for ensuring that their UST system is compatible with the stored product at all times." As discussed in #3 above, B20 biodiesel blends or less have demonstrated compatibility for fuel systems in diesel vehicles. However, it is unclear if this translates to the same compatibility with USTs and their related systems. Higher blends of biodiesel have shown to be corrosive and somewhat unstable with changes in temperature. It can also create deposits and clog filters. Thus it is reasonable to believe that these characteristics could be expected in UST's and their components, including leak detection systems. However, without specific compatibility testing, there is a level on uncertainty that can not be addressed. It is unclear as to how many UST's in California currently contain biodiesel. 1)Policy Considerations . a) UST and Leak Detection Equipment Compatibility: This bill provides interim standards in lieu of compatibility testing for USTs. Leak detection systems also require compatibility testing. Is the information related to the use of B5-B20 biodiesel blends in vehicles adequate to make the same conclusions about how these blends will react in USTs and their ancillary equipment, including leak detection equipment, designed to contain diesel fuel? b) Financial Assurance: SB 1574 would apply the existing UST requirements for financial responsibility. Does this measure provide an adequate level of compensation protection in the event of a release given the uncertainty about UST and ancillary equipment compatibility? Should SWRCB be asked to review the risk SB 1574 Page 8 and set higher requirements more commensurate with the uncertainty of UST compatibility? c) Liability: SB 1574 calls for local agencies to make a determination, for the storage of B20 in double-walled USTs (but the non-gold standard variety), that the owner/operator, with documentation furnished by the UST manufacturer, has evidence that the UST is compatible for the B20 blend. It is unlikely that a local agency would make that determination and possibly assume some liability if the UST failed. d) Number of UST's that currently contain biodiesel: SB 1574 applies only to those USTs that contained biodiesel blends on or before July 1, 2008. However, it is not known how many USTs in California currently contain biodiesel. The SWRCB should work with local agencies and distributors of biodiesel to identify USTs that currently contain biodiesel and make that information available to interested parties and the public. 2)Consequences of Dueling Environmental Mandates . Most remember from the late 1990s the issue of groundwater contamination from MTBE (methyl tertiary-butyl ether). MTBE is one of a group of chemicals commonly known as "oxygenates" that raise oxygen content of gasoline to provide air quality improvments by helping gasoline burn more efficiently. It was widely viewed as the additive that would markedly improve air quality. However, it proved to be highly corrosive and caused leaks and vapor releases from more than 60% of USTs in California. Thus, statutory and regulatory efforts in California, other states, as well as at the federal level were undertaken to prevent these types of releases in the future to protect groundwater quality. One of the results for California was increased UST requirements including improved compatibility testing for substances proposed to be stored in USTs. This scenario was a good example of the potential negative outcomes of competing enviromental mandates and emphasizes the need for coordination between regulatory agencies. The need for this bill is another example of the importance of coordination of regulatory agencies, especially those SB 1574 Page 9 with the same realm under California Environmental Protection Agency and the Resources Agency. While it is good to have agencies moving expiditiously to implement AB 32, it is not acceptable to have conflicting regualtory structures that confuse and stifle these important efforts. All aspects of public health and safety and enviromental protection must be considered when exploring potential new technologies and products to prevent unintended consequences. Drafting error : Page 4, line 14, the code section referenced should be Section 25999.10, not 2599.10. With the use of the same reference in a previous section of the bill, the intent of the citation is clear; however this error should be corrected in a measure next year. SOURCE : California Biodiesel Alliance SUPPORT : None on file OPPOSITION : None on file