BILL ANALYSIS
AB 226
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 226 (Ruskin) - As Introduced: February 4, 2009
As Proposed to be Amended
SUBJECT : ENFORCEMENT TOOLS: COASTAL COMMISSION
KEY ISSUE : SHOULD, AS THE LEGISLATIVE ANALYST OFFICE
RECOMMENDS, THE COASTAL COMMISSION HAVE SIMILAR DISCRETIONARY
AUTHORITY AS OTHER STATE ENVIRONMENTAL PROTECTION AGENCIES
POSSESS TO IMPOSE ADMINISTRATIVE CIVIL PENALTIES FOR COASTAL ACT
VIOLATIONS TO ENHANCE ENVIRONMENTAL PROTECTION EFFORTS?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This bill would give the Coastal Commission the same authority
as various other state environmental protection agencies possess
to impose administrative penalties on people found to be
violating the Coastal Act after a public hearing before the
Commission. Surprisingly, right now the Coastal Commission is
quite unique among many regulatory agencies in its inability to
utilize administrative penalties to improve enforcement efforts.
The author contends that administrative enforcement authority
will reduce litigation costs and enhance environmental resource
protection within the Coastal Zone. The opposition, consisting
of business, construction, manufacturing, and real estate
companies, argues that the status quo provides adequate
environmental protection and that this measure will only create
a "bounty hunter" dynamic between the Commission and violators
(notwithstanding the fact that many regulatory agencies already
possess such enforcement tools). According to the opposition,
the Commission will abuse this new authority and overzealously
pursue violators to generate revenue. This measure was recently
heard on April 14, 2009, in the Natural Resources Committee
where it passed by a vote of 6-3.
SUMMARY : Seeks to grant the Coastal Commission the same
authority various other environmental protection and other state
agencies possess to impose administrative civil penalties for
Coastal Act violations. Specifically, this bill :
AB 226
Page 2
1)Authorizes the Coastal Commission to impose administrative
civil penalties for Coastal Act violations, not less than
$5,000 and not more than $50,000, for each violation.
2)In determining the amount of civil liability, requires the
Commission to consider:
a) the nature, circumstance, extent, and gravity of the
violation;
b) whether the violation is susceptible to restoration or
other remedial measures;
c) the sensitivity of the resource affected by the
violation;
d) the cost to the state of bringing the action;
e) with respect to the violator, any voluntary restoration
or remedial measures undertaken, any prior history of
violations, the degree of culpability, economic profits, if
any, resulting from, or expected to result as a consequence
of, the violation, and such other matters as justice may
require.
3)Exempts a violator from civil monetary liability imposed by
the Commission and by a superior court for the same act or
failure to act, unless the violator fails to pay the
administrative penalty, fails to comply with an order issued
by the Commission, or if a violator decides to challenge the
Commission's action in court.
4)Authorizes the Commission to file a lien on the property of a
violator in the amount of the penalty assessed by the
Commission if the violator fails to pay the fine.
5)Deposits both administrative and court-ordered penalties into
the Coastal Act Services Fund, the monies of which, upon
appropriation by the Legislature, can be used to enforce the
Coastal Act and provide services to local government, permit
applicants, and the public.
EXISTING LAW :
1)Authorizes the Commission, after a public hearing, to issue a
cease and desist order if it determines that someone is
undertaking or threatening to undertake any activity that
requires a Coastal Development Permit or that may be
AB 226
Page 3
inconsistent with a previously issued permit. (Public
Resources Code Section 30810.)
2)Provides that a superior court can impose civil penalties of
up to $30,000 on any person or local government who violates
the provisions of the Coastal Act, of a certified Local Costal
Program or of a coastal development permit. Additional
penalties of not less than $1,000 a day, but not more than
$15,000 per day, may be imposed for violations that are
determined to be intentional and knowing. (Public Resources
Code Section 30820.)
3)Provides that any funds derived from penalties awarded by a
court are to be deposited into the Coastal Conservancy's
Violation Remediation Account and are subject to appropriation
by the Legislature. (Public Resources Code Section 30822.)
4)Provides that funds deposited into the Coastal Act Services
Fund are subject to appropriation by the Legislature to carry
out the provisions of the Coastal Act. (Public Resources Code
Section 30620.1.)
5)Authorizes the Bay Conservation and Development Commission
(BCDC) to impose administrative civil penalties not to exceed
more than two thousand dollars ($2,000), for each day in which
that violation occurs or persists, or more than thirty
thousand dollars ($30,000) for a single violation.
(Government Code Section 66641.5(e).)
6)Authorizes the State Lands Commission to impose administrative
civil penalties not to exceed more than twenty-seven thousand
five hundred dollars ($27,500) per violation. (Public
Resources Code Section 71216.)
7)Authorizes the administrator for oil spill response to impose
administrative civil liability not to exceed one hundred
thousand dollars ($100,000) for each violation, and each day
or partial day that a violation occurs is a separate
violation. (Government Code Section 8670.67.)
COMMENTS : This bill grants similar discretionary authority to
the Coastal Commission to impose civil penalties for violations
of the Coastal Act that several other state environmental
protection agencies possess.
AB 226
Page 4
In support, the author states that:
Penalties are a critical component of all environmental
statutes and are the main means used to persuade would-be
violators to comply with the law. The deterrent component
of any regulatory scheme is important, particularly for
environmental laws where restoration of violations often is
difficult or impossible. A credible threat of penalties to
prevent violations in the first place can greatly increase
the ability of an environmental agency to obtain voluntary
compliance, and greatly increase the amount of protection
of the environment.
Numerous other state and local agencies already have similar
authority to impose administrative civil penalties for
violations of applicable environmental and resource protection
laws, including but not limited to the BCDC, State Lands
Commission, California Energy Commission, State Department of
Health Services, California Air Resources Board, Regional Air
Pollution Control Districts, Oil Spill Response Administrator,
Department of Fish and Game, State Water Resources Control
Board, Regional Water Quality Control Boards, and the Integrated
Waste Management Board. This bill similarly, and supporters
contend appropriately, brings the Coastal Commission within this
enforcement tradition.
BACKDROP : Under existing law, only a court can impose penalties
for violations of the Coastal Act. Once collected, these
penalties are transferred to the Violation Remediation Account
of the Coastal Conservancy.
Since 1980, the Commission has had "order" authority to stop
violations. This "order" authority takes many forms, such as
the ability to issue restoration and cease and desist orders
after a public hearing. However, unlike many other state
environmental protection agencies, the Commission has not had
the ability to impose penalties on violators. The Commission
also uses consent orders, where defendants agree to the order
and usually agree to pay a penalty. A consent order avoids a
potentially higher fine for the defendant and the costs and
delays of litigation. However, according to the Commission,
these powers create "a perverse incentive for non-cooperation":
Parties who agree to settle pay penalties, and those who do
not settle are rarely pursued for penalties because this
AB 226
Page 5
requires litigation. A completely recalcitrant party may
often be in a better position than a settling party, if
they refuse to comply and take their chances that the state
will not pursue them for penalties. For these parties, by
and large, unless they challenge the administrative order
in court and the state files a cross complaint for
penalties and pursues it vigorously, they escape all
penalties under the Coastal Act.
In an analysis of the Commission's budget from the 2008-09
budget bill, the Legislative Analyst Office (LAO) recommended
allowing the Commission to impose civil penalties, as this
measure now proposes.
ARGUMENTS IN SUPPORT : The Coastal Commission states that its
current order authority inadequately deters violations of the
Coastal Act. Although the Commission may take violators to
court, the Commission claims that the judicial process is "a
very slow, expensive and resource-intensive means to impose
penalties, and is therefore done infrequently."
Moreover, the Commission may not represent itself in court and
relies upon the Attorney General to act on the Commission's
behalf. Since the AG's office has limited resources, the
Commission states that it is unable to bring many legitimate
enforcement cases. Since 2003, the Commission has only pursued
four cases in court (though it also pursues cross-complaints
when sued). Writing in support of this measure, the Planning
and Conservation League agrees that the Commission's reliance
upon the AG's office leads to greater inefficiency.
The opposition against this measure claims that cases such as
Ojavan v. California Coastal Commission prove the AG effectively
collects judgments on behalf of the Commission. While the court
awarded $9 million in Ojavan , the Commission explains that
neither the Attorney General nor the Commission has been able to
recover any money from that award. Thus, the Commission has not
been able to deposit anything from this judgment in the
Violation Remediation Account (VRA). Since the Commission began
tracking deposits into the VRA in 1985, the Commission reports
that the total fines and penalties collected by the state equal
$3,497,133. [The VRA is administered by the State Coastal
Conservancy.]
These relatively low penalty collections demonstrate that
AB 226
Page 6
court-imposed penalties fail to deter would-be violators who may
decide that violating the Coastal Act is worth the risk. Since
violators may not have to pay any fines and do not even
compensate the Commission for the costs of investigations,
violators have more incentive to ignore the Coastal Act. Use of
the administrative penalties process, enjoyed by many other
environmental enforcement agencies, will help address this
glaring environmental enforcement loophole.
As a result, the Commission now reports a backlog of over 1,300
enforcement cases. Significant cuts to the Commission's funding
in the 2002-03 budget have exacerbated this problem. As the
Commission's skeleton staff can no longer process permits in a
timely manner, it can no longer comment on projects at the local
level (which can lead to delays when projects move to the
Commission), and amendments to Local Coastal Plans can languish
for two years or more. According to the Commission, clearing
the backlog at current staffing levels would literally take more
than 120 years.
Additionally, the opposition fears that this measure will create
a "bounty hunter" dynamic which incentivizes the Commission to
go after violators for the sole purpose of raising revenue. In
response, the Commission makes four arguments to address its
potential conflict of interest in enforcing the Coastal Act:
First, AB 226 only authorizes administrative penalties for
a violation of no more than $50,000 against Coastal Act
violators. Large penalties against violators would
necessarily continue to be sought in court through the
Attorney General's Office, just as they are now. Second,
any administrative penalty sought and imposed against
violators by the Commission would be subject to challenge
in court, so any Commission penalty would still have to
withstand potential judicial review. A penalty sought as a
"bounty" would not withstand scrutiny. Third, other
governmental agencies have similar administrative penalty
authority, such as the San Francisco Bay Conservation and
Development Commission, the State Water Resources Control
Board, and others with no demonstrated or alleged "bounty
hunter" effects. Finally, the funding aspect of the bill
is secondary, and in response to recommendations of the
Legislative Analyst Office and repeated signals from the
Administration and the Legislature that the Commission
should seek new, non-General Fund sources of revenue.
AB 226
Page 7
In this regard, the Commission's need to find non-General Fund
revenue is important and profound. The LAO states:
The reliance on the General Fund to pay for most of the
Commission's core program needs has lead to increasing
instability in the funding of the commission. As the state
has faced budget shortfalls, General Fund support for core
permitting and enforcement activities at the commission has
been reduced. Specifically, General Fund support for
permitting and enforcement activities decreased during the
early part of this decade and increased modestly after
2004-05. The recent increase in funding, however, has been
more than offset by increasing workload, particularly in
the review of complex development proposals, such as
desalination and natural gas facilities. Accordingly,
backlogs in the commission's permitting and enforcement
activities have developed.
Permit fee and penalty revenues collected by the commission
can be used to support the commission's permitting and
enforcement activities, we also recommend the enactment of
legislation to delete the current-law requirement that
these revenues be transferred to SCC for purposes of
developing and maintaining coastal public access. As
discussed above, we think that the commission's permitting
and enforcement functions are appropriately supported by
these particular funding sources.
The Commission states that it continues to have inadequate funds
to cover operating costs and replace aging equipment.
Additionally, cost reductions by the Commission that will remain
in effect through FY 2008-2009 include the termination of all
limited-term staff, 19 layoffs (with 27 more in the upcoming six
months), a "Leave Without Pay" program in which more than 70
staff members have pledged over $218,000 (704 staff days) of
leave without pay to reduce staff layoffs, and elimination of
essentially all training (including legally required training).
The Commission has also reduced the number of staff that travels
to meetings throughout the state, and has reduced all public
hearings to a maximum of three days per month.
Due Process Concerns : The opposition against this measure also
raises the concern of the relative lack of procedural rights if
AB 226
Page 8
the Commission could unilaterally impose administrative
penalties. However, the Commission notes that all of its
actions are always subject to judicial review. According to the
Commission, this measure grants a penalty authority no more
complex than the permit and enforcement matters commonly heard
by the Commission, such as the underlying facts and law as to
whether a violation exists at all. The opposition's argument
also does not address the fact that other administrative bodies
routinely and successfully make similar penalty decisions with
much higher dollar limits.
The Commission also addresses the opposition's argument that
this measure undermines due process by prohibiting oral ex parte
communications with Commissioners on enforcement matters. The
Commission's Chief Counsel and the AG have advised the
Commission not to engage in such ex parte communications
regarding enforcement matters precisely because proceedings are
quasi-adjudicatory proceedings and ex parte communications would
jeopardize the validity of the public hearing process. In the
Commission's words, engaging in ex parte contacts would be
inappropriate "just as plaintiffs or defendants cannot lobby a
judge or juror in a court of law."
To assure proper procedural rights, the Commission would follow
notice requirements and evidentiary rules already required by
existing statutes and the regulations. Since the imposition of
administrative penalties would simply be a component of a duly
noticed public hearing, hearings deciding administrative civil
penalties would be appropriately noticed and conducted
consistent with existing law and regulations.
Opponents of this measure claim that administrative hearings
lack appropriate evidentiary rules. However, enforcement
hearings at the Commission are governed by regulations which
contain existing rules of evidence. Those rules of evidence are
substantially similar to the rules of evidence used by other
agencies. For instance, the Water Board and the Bay Area Air
Quality Management District (BAAQMD) rely on the Administrative
Procedures Act. Also similar to the Commission's regulations,
BCDC has its own regulations limiting evidence and allowing any
relevant evidence. Since the Commission has existing
regulations regarding evidence for enforcement proceedings, and
this new authority would be tied to those enforcement
proceedings, existing regulations would thus apply to this new
ACL authority.
AB 226
Page 9
Moreover, the Commission strongly disputes the opposition's
implication that abuse of administrative penalty authority would
happen. Pointing to the check provided by judicial review, the
Commission states:
If the Commission was in the habit of stripping violators
of their rights or violating due process, the courts would
swiftly intervene and overturn Commission-imposed
enforcement orders. The Letter of Opposition has not
offered any evidence that the Commission ever has or ever
would conduct the public's business in this manner. No
staff member in the Commission's employ has ever received a
sanction from the Bar or a court of law. Likewise, the
Attorney General's outstanding record of litigation on
behalf of the Commission speaks for itself in terms of
their integrity and professionalism.
Delinquent Payers : Similar to the other agencies and
administrators, the Commission argues it should also have the
ability to seek greater penalties against delinquent violators.
If a violator of the McAteer-Petris Act refuses to pay, for
example, BCDC either (1) sues to enforce the administrative
penalty, (2) sues to enforce that penalty and also seeks
additional judicially-imposed fines for violation of that
penalty order, or (3) forsakes the amount administratively
imposed, and seeks judicial penalties.
If a violator of the Water Code does not pay, the Water Board
similarly seeks a collection action, in which case they also
seek "interest, attorney's fees, costs for collection
proceedings, and a quarterly nonpayment penalty for each quarter
during which the failure to pay persists." Delinquent payers
are required to pay a quarterly nonpayment penalty in an amount
equal to 20 percent of the aggregate amount of the person's
penalty and nonpayment penalties that are unpaid as of the
beginning of the quarter.
Under the Lempert-Keene-Seastrand Oil Spill Prevention and
Response Act, the "administrator for oil spill response" may
also seek a greater penalty including the "interest at the legal
rate from the filing of the complaint" and "reasonable
attorney's fees and costs."
The Commission points to the empirically proven success of
AB 226
Page 10
administrative penalty authority. The Commission compares this
proposal to the McAteer-Petris Act, a similar coastal management
law administered by the BCDC. The Commission points out these
administrative penalty provisions in that law "have been in
place and used for a number of years with great success."
Additionally, BCDC reports that these provisions help to resolve
the vast majority of its cases without resorting to expensive
and slow litigation. The Commission states that it is "nearly
unique among regulatory agencies" in that it does not have
administrative penalty authority.
The Commission argues that administrative enforcement authority
will reduce litigation costs and create a key revenue source for
the Commission's core program work. Given the status of the
state's economy and budget, the Commission anticipates that
permit revenues will continue to decline for the foreseeable
future. Consequently, administrative penalties may
substantially improve protection of the coast and its critical
resources.
ARGUMENTS IN OPPOSITION: A coalition of business, construction,
manufacturing, and real estate companies writes in opposition to
the bill. Pointing out the Commission's numerous existing
powers. The coalition states that the updated fee schedule will
expand the Commission's fees to $2.3 million, a 53% increase
over FY 2007-08.
The opposition also claims that the status quo adequately
protects against violations of the Coastal Act. On behalf of
the Commission, the AG has, opponents contend, effectively
prosecuted violators and collected judgments exceeding millions
of dollars in fines and penalties. The opposition points to
Ojavan Investors, Inc. v. California Coastal Commission , where
the Commission allegedly collected a judgment in excess of $9
million. However, as noted above, no such substantial penalties
have in fact been collected in that case.
More significantly, the coalition asserts that the Commission
will pursue violators with the zeal of a "bounty hunter":
AB 226 creates a "bounty hunter" dynamic whereby the
Coastal Commission is incentivized to seek large penalties
and fees to support its budget. This function properly
resides with the Attorney General and the judicial branch
which has no such built-in conflict of interest.
AB 226
Page 11
According to the opposition, this "built-in conflict of
interest" reveals why monetary penalties should be strictly a
judicial function, notwithstanding the fact that most other
environmental enforcement agencies in the state already have
such authority to avoid the costs and other hurdles of
litigation and to maximize environmental enforcement.
Author's Amendments : Pursuant to agreement with the Commission,
the author has agreed to the following clarifying amendments
suggested by Committee counsel:
On page 2, line 17-21, delete the words ", unless the person
fails to pay?in a court of law." and insert the words:
. In the event that a person who is assessed a
penalty under this section fails to pay the
administrative penalty, otherwise fails to comply with
a restoration or cease and desist order issued by the
commission in connection with the penalty action, or
challenges any of these actions by the Commission in a
court of law, the Commission may maintain an action to
enforce those requirements and the court may impose
any additional civil penalties the court deems
appropriate.
Prior Related Legislation. AB 1338 (Huffman, Ch. 760) of 2007-8
added Section 30620.1 to the Coastal Act, creating the Coastal
Act Services Fund and authorizing the Commission to deposit
permit fees into this account.
REGISTERED SUPPORT / OPPOSITION :
Support
California Coastal Commission
California Coast Keeper Alliance
Environment California
Heal the Bay
Natural Resources Defense Council
Planning and Conservation League
Sierra Club California
Opposition
AB 226
Page 12
American Council of Engineering Companies of California
California Association of REALTORS
California Business Properties Association
California Building Industry Association
California Chamber of Commerce
California Manufacturers and Technology Association
Industrial Environmental Association
Analysis Prepared by : Drew Liebert and Edward Ahn / JUD. /
(916) 319-2334