BILL ANALYSIS SB 55 SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator S. Joseph Simitian, Chairman 2009-2010 Regular Session BILL NO: SB 55 AUTHOR: Corbett AMENDED: As Introduced FISCAL: Yes HEARING DATE: April 20, 2009 URGENCY: No CONSULTANT: Caroll Mortensen SUBJECT : CALIFORNIA CONTAINER RECYCLING AND LITTER REDUCTION ACT SUMMARY : Existing law , under the California Beverage Container Recycling and Litter Reduction Act (Act) (Public Resources Code Section 14500, et al.): 1) Requires every beverage container, as defined, sold or offered for sale in this state to have a minimum refund value. 2) Requires a distributor to pay a redemption payment for every beverage container sold or offered for sale in the state to the Department of Conservation (DOC) and DOC is required to deposit those amounts in the California Beverage Container Recycling Fund (fund). The money in the fund is continuously appropriated to DOC for the payment of refund values and processing fees. 3) Defines "beverage' to include, among other things, beer and other malt beverages, wine and distilled spirit coolers, carbonated mineral and soda waters, noncarbonated fruit drinks, and vegetable juices, in liquid form that are intended for human consumption. 4) Excludes from the definition of 'beverage', among other things, vegetable drinks in beverage containers of more than 16 ounces, milk, medical food, and any product sold in a container that is not an aluminum beverage container, a glass container, a plastic beverage container, or a bimetal SB 55 Page 2 container. 5) Defines "Beverage manufacturer" as any person who bottles, cans, or otherwise fills beverage containers, or imports filled beverage containers, for sale to distributors, dealers, or consumers. 6) Defines "Processor" as any person, including a scrap dealer, certified by the department who purchases empty aluminum beverage containers, bimetal beverage containers, glass beverage containers, plastic beverage containers, or any other beverage containers, including any one or more of those beverage containers, which have a refund value established pursuant to this division, from recycling centers in this state for recycling, or, if the container is not recyclable, not for recycling, and who cancels, or who certifies to the department in a form prescribed by the department the cancellation of, the refund value of these empty beverage containers by processing empty beverage containers, in any manner which the department may prescribe. However, the department shall not take any action regulating scrap dealers or recycling centers who are processors or recycling centers unless authorized by and pursuant to the goals of Act. 7) Defines "Recycler" as a recycling center, dropoff or collection program, or curbside program. 8) Requires DOC to calculate a processing fee and a processing payment for each beverage container with a specified scrap value. The processing fee is required to be paid by beverage manufacturers for each beverage container sold or transferred to a dealer. 9) Requires DOC to establish reporting periods of six months each for redemption rates and recycling rates for beverage containers and requires them to determine the redemption rates and recycling rates for those beverage containers for each reporting period and to issue a report on those determinations. 10) Authorizes funding for specified purposes to increase beverage container recycling (see SB 55 Page 3 http://www.consrv.ca.gov/DOR/gpi/webcon.pdf or page 7 for California Beverage Container Recycling and Litter Reduction Act flow chart). This bill : 1) Redefines the term "beverage" to include vegetable, nut, grain, or soy drinks. 2) Deletes the exclusion from the term "beverage," for a product that is not sold in aluminum, glass, plastic, or bimetal container, thus including aseptic and paperboard type beverage containers that hold more than 7 fluid ounces. 3) Adds a definition of "product manufacturer". 4) Increases processing fees for container types with low recycling rates (e.g. from 45% to less than 30%). 5) Adds a provision to require DOC to establish a supplemental processing payment that would be paid to a processor that would be passed to the recycler for glass as well as PET and HDPE plastic containers. 6) Deletes the provisions that require DOC to establish reporting periods for redemption rates and that require them to determine redemption rates for specified types of beverage containers and deletes the definition of redemption rate. 7) Increases the amount available for grants for litter reduction and recycling programs to community conservation corps as described from $15 million to $17.5 million annually. 8) Increases the total amount available for payments cities and counties for litter reduction and recycling programs from $10.5 million to $15 million annually; increases the payments from $5000 to $7500 for cities and from $10,000 to $15,000 for counties. 9) Adds to the list of eligible projects under the grants to SB 55 Page 4 support market development efforts, a) Projects that upgrade or retrofit existing beverage container recycling and processing facilities b) Construction of new facilities that process or recycled beverage containers, including aseptic containers. c) Payments to California manufacturers that utilize material from the new containers proposed to be added through this bill. 10) Deletes obsolete provisions. 11) Makes conforming changes to other definitions, for purposes of the Act. 12)Makes extensive findings and declarations related to recycling. COMMENTS : 1) Purpose of Bill . According to the author, this bill would expand the Beverage Container Recycling Program to cover beverages it currently covers regardless of size or container types with few exceptions. Currently, glass, metal and plastic beverage containers are the only container types in the program. This bill will put other container types in the program, such as paper. It will also reform the market development grant program to help aseptic containers be recycled and create green jobs. In addition, the bill provides assistance to our local conservation corps, recyclers and local government recycling programs 2) New Containers: Aseptic and Paper Containers . This bill proposes to add a new packaging group to the Act commonly known as "aseptic containers". These are composite, layered containers that are mainly paper with plastic and a small amount of aluminum. The containers are light weight and have the benefit of keeping the contents fresh without the refrigeration. There are also similar paperboard containers that are layered with paper and plastic, wax or other impermeable material and have a folded or SB 55 Page 5 'gable-topped" appearance. They are used to contain a wide array of products. However, for the purposes of this bill and the Act, containers containing soy, nut, grain and vegetable beverages would be included. The bill would not include the small 'juice boxes' that are popular with children as most of those contain less than 7 ounces. It is estimated that there are approximately 225 million and 350 million aseptic containers sold in California, however this includes the small "juice boxes" that are proposed as part of the expansion in this measure. Those boxes are a large share of the market, thus a conservative estimate might be approximately 50-60 million containers that would be subject to the Act. The litter issues with these containers are not well documented, especially for the larger container sizes. These containers can pose a recycling challenge in that there are not currently many recycling opportunities. However, as with other materials types that have been added to the Act through the years, the purpose is to develop recycling technologies and markets for those materials, or switch to containers that are recyclable. 3) Processing Fees . This bill proposes increasing processing fees for containers with low recycling rates to cover costs to recycle. These are fees are paid by beverage manufacturers and are in proportion to the recycling rates for containers. The higher the rate, the less the processing fee paid. This bill would increase the fees for containers that are being recycled at a rate less than 50%. This system is designed to encourage beverage manufacturers to increase recycling rates for the containers that they use or switch to containers with high recycling rates. 4) Supplemental Processing Payment . This bill proposes an additional payment to recyclers for glass and PET (polyethylene terephthalate or #1) and HDPE (high density polyethylene or #2) plastic containers. These payments are an attempt to assist the suffering commodity markets as discussed in #6 below). 5) Redemption Rate Calculation . This bill deletes provisions SB 55 Page 6 that require DOC to calculate and report on redemption rates. DOC is required to calculate a recycling rate the commonly used ratio of materials recycled divided by materials sold, which is a true indicator of program activities. The redemption rate calculation considers postfilled food or drink containers (not included in the Act) returned for recycling, in addition to empty beverage containers (included in the Act) returned for recycling. The recycling rate calculation only considers empty beverage containers returned for recycling. In this respect, the redemption rate does not actually depict the success of the Act because it includes material that is outside of its scope. 6) The State of Recycling Markets . With the downturn in the economy, there has been a parallel drop in the market for recyclable materials, including materials from beverage containers. A rapid drop in recyclable commodity prices happened last fall. Much of what is reclaimed in California and the nation is destined for overseas markets, most notably China. The United States exported $22 billion worth of recycled materials to 152 countries in 2007. Now it is estimated the value of American recyclables has decreased by 50 to 70 percent. Many California recyclers and local governments are dealing with mounting stockpiles whose value in many cases continues to sink. It has also been reported that some importers have been demanding to renegotiate contracts drastically downward. In some cases, they are refusing to accept shipments they already have a contractual obligation to take. These market challenges effects the containers subject to the Act and the related payments and fees related to their handling, processing and recycling. It also points to the vulnerability to changes in global markets as well as the need to maintain existing and foster new recycling and recycled content product markets in the US, especially California. This bill will move toward addressing those concerns by make more funds available for market development grants, however with the uncertainty of the fund condition (see #7 below), these expansions should be viewed with caution. SB 55 Page 7 7) Policy Considerations . Prioritization of Expenditures: The Act has been in place since 1986 and has gone through many expansions with increases in the numbers and types of projects that get funded through unredeemed beverage container deposits. Currently in Section 14581 that describes the allocation of unredeemed funds, there are tens of millions of dollars outlined for recycling and litter reduction projects that could be funded. While these projects do assist with the overall goals and objectives of the Act when there is money in the fund, as has been the case for many years, it could pose a problem in years when the fund is low. With the downturn in recycling markets, even with the expansion proposed by the bill, the fund is being depleted. It might be appropriate to determine what expenditures are essential to the implementation of the Act and prioritizing the uses of the fund to ensure that core responsibilities are maintained. Further Program Expansion: With the expansion proposed by this bill the universe of beverage containers subject to the Act is becoming more inclusive. However, there are beverages such as milk, wine, and liquor that are excluded. Further expansion efforts should address those beverages. 8) Related Legislation . Senator Corbett authored SB 1625 in 2008. That proposed to expand the Act to include a wide variety of plastic containers, including non-beverage containers. That bill was held in the Assembly Rules Committee. 9) Amendment Needed . The bill adds a definition of "product manufacturer" that is not necessary, that definition should be removed. SOURCE : Californians Against Waste SUPPORT : California Refuse Removal Council California State Association of Counties City of Fremont Sierra Club California Tomra Pacific, Inc. SB 55 Page 8 OPPOSITION : California League of Food Processors California Nevada Soft Drink Association Grocery Manufacturers Association