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.









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           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  









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              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  









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              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  









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             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  









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             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  









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             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  









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                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  









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             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