BILL ANALYSIS
SB 546
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 546 (Lowenthal) - As Amended: July 15, 2009
Policy Committee: Natural
ResourcesVote:7-1
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill increases fees paid by motor oil manufacturers and
creates an incentive payment for rerefined motor oil; increases
the amount paid to facilities that collect used motor oil and
eliminates certain current payments; expands testing
requirements for used oil being transported; and assigns
record-keeping and enforcement responsibilities. (Summary
continued below.)
FISCAL EFFECT
1)Increased annual revenues, possibly in the millions of
dollars, resulting from an increase used oil fees.
(California Used Oil Recycling Fund (CUORF))
2)Annual costs beginning in 2013-14, likely ranging from
$500,000 to $1million for rerefined oil incentive payments to
used oil rerefiners. (CUORF)
3)Reduced annual costs of about $1million in used oil recycling
incentive payments resulting from eliminating eligibility of
used oil generated in the course of business, despite increase
in per-quart amount of incentive payments. (CUORF)
4)Increased annual payments to local governments, of as much as
$3 million, for used oil collection programs. (CUORF)
5)Minor, absorbable one-time costs to CIWMB to expand and revise
the existing used-oil program. (CUORF)
6)Annual costs to DTSC of approximately $200,000 (Used Oil
SB 546
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Recycling Fund) to inspect used oil recyclers and
transporters, paid for by fees on the subjects of the
inspections.
SUMMARY (continued)
Specifically, this bill:
1)Increases the fee paid by motor oil manufacturers from four
cents a quart to six cents a quart, exempts rerefined oil from
the fee, and authorizes the California Integrated Waste
Management Board (CIWMB) to adjust the fee for inflation,
annually.
2)Establishes a used oil rerefining incentive of two cents per
gallon on and after 2014 and authorizes CIWMB to increase this
incentive beginning 2015.
3)Increases, from four cents per quart to 10 cents per quart,
the amount of the used oil collection incentive paid to
certified collection centers, industrial generators, and
curbside collection operators.
4)Specifies that a facility that services motor vehicles
qualifies for the used oil collection incentive, but only for
the portion of used oil that it collects from the public (not
the used oil generated in the course of business).
5)Increases the total amount of CIWMB payments to local
governments for used oil collection programs from $10 million
annually to $13 million annually.
6)Requires that used oil be tested by an accredited laboratory
for certain contaminants before it can be shipped to a
transfer facility, recycling facility or a facility located
out-of-state.
7)Creates record-keeping and reporting requirements for persons
performing used oil tests or transporting used oil out of
state and requires the Department of Toxic Substances Control
(DTSC) to collect such records and perform annual inspections,
paid for by fees on the subjects of the inspections.
8)Increases the annual allocation of funds for oversight of used
oil facilities from $250,000 to $350,000.
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COMMENTS
1)Rationale. According to the author, this bill encourages the
best re-use of used oil in California and reduces toxic air
pollution resulting from some uses of used oil. It also
updates the current law to better address used oil recycling
in California.
2)Background.
a) Used Oil Collection. The California Oil Recycling
Enhancement Act, administered by CIWMB, is designed to
discourage the illegal disposal of used oil. This law
requires oil manufacturers to pay CIWMB four cents for each
quart of motor oil sold in California. Registered
industrial generators, curbside collection programs, and
certified collection centers, including commercial oil
change stations, are eligible to receive four cents for
each quart of used lubricating oil collected.
According to the policy committee analysis, the motor oil
fee provides between $15 and $19 million per year to fund
program activities. $3 million is allowed for
administration, approximately $3.5 million is used to pay
the recycling incentives, and the remainder is used for
grants to local governments and non-profit groups. The fee
and incentive have not been adjusted since program
inception in 1991.
In 2007 lubricating oil sales totaled 150 million gallons
and 88.3 million gallons were recycled, for a recycling
rate of 59 percent.
b) Rerefined Oil Is Good Oil. According to CIWMB,
rerefining is an energy-efficient and environmentally
beneficial method of managing used oil. CIWMB, the federal
Environmental Protection Agency, and the Department of
Energy all report that it takes substantially less energy
to rerefine used oil than it does to refine crude oil.
CIWMB additionally indicates that it takes only one gallon
of used oil to make 2.5 quarts of rerefined oil, whereas it
takes 42 gallons of crude oil to make 2.5 quarts of virgin
oil.
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c) Much Used Oil Uncollected. CIWMB commissioned Lawrence
Livermore National Laboratory to produce a report,
Improving Used Oil Recycling in California, which was
published in 2008. According to the report, in 2006,
approximately 115.8 million gallons, or 71% of all used oil
generated in the state, was collected. 45.7 million
gallons (approximately four times the amount spilled by the
Exxon Valdez) is unaccounted for.
d) Even Less Used Oil Rerefined. Of the oil collected in
California, only 10% is rerefined, even though rerefineries
in the state are operating at maximum capacity. Much of
the remainder is used for energy generation out-of-state or
is processed into bunker fuel.
3)But the CIWMB No Longer Exists. As described above, this bill
requires certain actions of CIWMB. The recently enacted
budget, however, eliminates CIWMB. Absent amendments that
specify which agency is to carry out the actions described by
this bill, it is unclear how this bill would be implemented
4)Supporters , including environmentalists and oil rerefiners,
argue that this bill, by exempting rerefined oil from the oil
recycling fee and establishing an incentive payment for
rerefining oil, will augment the market for rerefined oil.
The effect will be oil rerefiners who "pull" used oil towards
refineries, rather than relying on oil collection fees to
"push" used oil towards rerefinement.
5)Opponents , including some petroleum processors and industry
organizations, contend the bill unfairly burdens their
products with higher fees and inappropriately exempts
rerefined motor oil from fees related to used motor oil
collection.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081