BILL ANALYSIS                                                                                                                                                                                                    



                                                               SB 1402
                                                                       

                      SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                        Senator S. Joseph Simitian, Chairman
                              2009-2010 Regular Session
                                           
           BILL NO:    SB 1402           
           AUTHOR:     Dutton
           AMENDED:    March 23, 2010
           FISCAL:     Yes               HEARING DATE:     April 19, 2010
           URGENCY:    Yes               CONSULTANT:       Caroll  
           Mortensen
            
           SUBJECT  :    AIR POLLUTION PENALTIES

            SUMMARY  :    
           
            Existing law  :  

           1)Generally establishes processes for assessing fines and  
             penalties and specifies the deposit of fines and penalties  
             for violations of vehicular air pollution control laws into  
             the Air Pollution Control Fund or the General Fund.  (Health  
             and Safety Code 43000 et seq.).

           2)Establishes a process to assess administrative penalties in  
             lieu of civil penalties for violation of specified vehicular  
             air pollution control laws up to $100,000 and establishes a  
             threshold of $100,000 for penalty assessments that qualify a  
             person for mutual settlement agreements and requires the  
             settlements to be deposited into the General Fund.   
             (43023).

           3)Requires the California Air Resources Board (ARB) and the  
             courts to consider specified conditions when considering the  
             amount assessed for administrative or civil penalties for  
             violations of vehicular air pollution control laws such as:   
             (a) the extent of harm to public health, safety, and welfare  
             caused by the violation; (b) the nature and persistence of  
             the violation, including the magnitude of the excess  
             emissions; (c) the compliance history of the defendant,  
             including the frequency of past violations; (d) the  
             preventive efforts taken by the defendant, including the  
             record of maintenance and any program to ensure compliance;  
             (e) the innovative nature and the magnitude of the effort  









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             required to comply, and the accuracy, reproducibility, and  
             repeatability of the available test methods.  (f) the  
             efforts to attain, or provide for, compliance; and (g) the  
             cooperation of the defendant during the course of the  
             investigation and any action taken by the defendant,  
             including the nature, extent, and time of response of any  
             action taken to mitigate the violation.  (43023, 43031).

           4)Requires any person who violates any vehicular air pollution  
             control law as specified to be liable for a civil penalty  
             not to exceed $5,000 per vehicle and those penalties be  
             deposited in the Air Pollution Control Fund (APCF).   
             (41354).

           5)States that any action brought pursuant to 43154 above to  
             recover such civil penalties must take special precedence  
             over all other civil matters on the calendar of the court  
             except those matters to which equal precedence on the  
             calendar is granted by law.

           6)Requires the revenues from penalties recovered by the ARB  
             pursuant to this chapter to be deposited in the APCF and  
             must only be expended by the ARB for environmental cleanup,  
             abatement, or pollution prevention technology.  (43031.5).

           7)Prohibits the sale of any new motor vehicle in California  
             that does not meet the emission standards adopted by the  
             ARB, and any manufacturer who sells, attempts to sell, or  
             causes to be offered for sale a new motor vehicle that fails  
             to meet the applicable emission standards must be subject to  
             a civil penalty of $5,000 for each such action, with the  
             penalty to be deposited into the General Fund.  (43211).

            This bill  :

           1) Requires written or oral communications from the ARB that  
              allege an imposition of a penalty to contain specific  
              information including the manner in which the ARB used to  
              determine the amount of a penalty, how much pollution was  
              emitted, and reasoning for the use of the particular  
              provision for assessing the violation.

           2) Requires the ARB to make available to the public all final  









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              mutual settlement agreements arising from violations of  
              vehicular air pollution control laws.

           3) Requires all penalties and proceeds for mutual settlement  
              agreements to be deposited into the General Fund rather  
              than the APCF.

           4) Dismisses application of civil penalties for vehicular air  
              pollution control violations if a criminal complaint for a  
              violation under the vehicular air pollution control law is  
              brought.

           5) Raises the threshold for ARB to assess administrative  
              penalties in lieu of civil penalties for violation of  
              vehicular air pollution control laws from $100,000 to  
              $300,000 and raises the threshold for penalty assessments  
              that qualify a person for mutual settlement agreements from  
              $100,000 to $300,000.

           6) Allows a person who has alleged to have violated vehicular  
              air pollution control laws to be entitled to an  
              administrative hearing in lieu of a civil action. 

           7) Beginning in March 2011, and annually thereafter, requires  
              ARB to prepare an annual report on administrative penalties  
              imposed in lieu of civil penalties as specified in #5  
              above.

           8) For specified violations of vehicular air pollution control  
              law, limits the liability of a person from civil,  
              administrative, or criminally penalty to one violation  
              arising from the same conduct.

           9) Prohibits the ARB from assessing multiple persons for the  
              production or sale of the same vehicle or units under  
              specified vehicular air pollution control laws and requires  
              the ARB to impose the penalty only on the person the ARB  
              determines to be most responsible for the violation. 

           10)No later than March 1, 2011, requires the ARB to adopt and  
              submit to the Legislature a written penalty policy that is  
              based on specified criteria (#3 under Existing Law) and the  
              "United States Environmental Protection Agency's 2009 Clean  









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              Air Act Mobile Source Civil Penalty Policy for Vehicle and  
              Engine Certification Requirements".

           11)Expands the process for application of civil or  
              administrative penalties for violations of fuel regulations  
              to other vehicular air pollution control violations and  
              requires the penalty to be assessed according to the policy  
              in #10 above.

           12)Specific to new engine certifications, limits the civil  
              penalty to $10,000 per engine family for which the person  
              failed to obtain certification rather than per vehicle.

           13)Limits accumulation of civil penalties to $5,000 per  
              vehicle for specified violations relating to certification  
              and sale of new vehicles and engines regardless of the  
              number of violations or violators.

           14)Deletes the requirement that revenues from penalties  
              recovered by the ARB for violations of fuel regulations be  
              deposited in the APCF and be only expended by the ARB for  
              environmental cleanup, abatement, or pollution prevention  
              technology (#6 under Existing Law).

           15)Contains an urgency clause.

            COMMENTS  :

            1) Purpose of Bill  .  According to the author, "Numerous  
              affected stakeholders have repeated expressed concern over  
              the lack of information on how ARB determines and assesses  
              penalties as well as the lack of consistency from one  
              violation to the rest.  This confusion undermines ARB's  
              credibility and effectiveness in achieving its core mission  
              - protection of air quality.  This confusion also makes it  
              increasingly difficult for ARB to effectively resolve  
              settlements or for regulated entities to comply with ARB  
              regulations and to do business in California."

            2) Background  .

              a)    Fines and Penalties:  In general, not just for  
                 environmental or public health and safety violations,  









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                 fines and penalties are established for three main  
                 objectives.  The first is to ensure swift compliance  
                 with the law.  This helps to minimize the negative  
                 impact that continued violation in law could pose.   
                 Second, it is to remove any advantage the violator may  
                 have obtained by failing to comply with the law.  This  
                 strives to eliminate competitive and/or economic  
                 advantage that a non-compliant entity may gain by being  
                 out of compliance.  This helps ensure a level playing  
                 field for regulated entities.  Finally, penalties are  
                 set at levels sufficient to discourage future  
                 violations.  This should deter the violator and others  
                 from violating requirements in the future.  


              b)    General Fund vs. The APCF:  The APCF is the  
                 depository for ARB's fee revenue streams, as well as  
                 other revenue streams, such as fines, interest, and  
                 transfers.  ARB's operating budget is fully supported by  
                 the fee portion of the APCF.  The Health and Safety Code  
                 specifies that monies in this fund are only available to  
                 ARB upon legislative appropriation.   By law, ARB does  
                 not control the penalty monies deposited into APCF and,  
                 therefore, cannot use penalties for any of its program  
                 needs without appropriation by the Legislature.

                 Air quality laws protect the public health, safety and  
                 welfare.  When an air violation occurs, the environment  
                 is negatively impacted and the public is exposed to  
                 excessive air pollution emissions.  For this reason when  
                 ARB assesses penalties for violations of air quality  
                 requirements, one of the many considerations for penalty  
                 assessment is to seek mitigation related to the  
                 environmental harm the violation caused.  Depositing  
                 those penalties into APCF ensures that those penalty  
                 monies will be applied towards air pollution programs.   
                 Diverting penalties to the General Fund would decrease  
                 the likelihood of those penalties being applied to  
                 mitigate air pollution.

              c)    ARB Enforcment Policy - Ongoing Efforts.  Since late  
                 last year, the ARB has focused efforts to work on its  
                 enforcment policy in repsonse to comments from  









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                 stakeholders during open comment periods of several ARB  
                 meetings regarding transparency and consistency in its  
                 enforcement program.  The ARB held a workshop on October  
                 12, 2009 to explore ways to achieve higher levels of  
                 compliance, expedite settlements, prioritize actions,  
                 eliminate economic advantage from violations, ensure  
                 consistent enforcement results, serve environmental  
                 justice communities, encourage voluntary compliance,  
                 increase access to ARB's administrative hearing process,  
                 and communicate the goals of ARB's enforcement program.   
                 ARB staff also discussed strict liability for  
                 violations, model penalty policies and ways to increase  
                 opportunities for public access, outreach, compliance  
                 assistance and training.

                 According to ARB's website, the notice was distributed  
                 widely via the largest email broadcast in ARB's history  
                 and reached approximately 350,000 people, businesses and  
                 other organizations.  The workshop was attended by over  
                 200 attendees in person and 150 more people via the  
                 internet and 30 individuals testified in person and many  
                 more submitted written comments.

                 On January 28, 2010, staff presented an update to the  
                 ARB on progress made to address comments on its  
                 enforcement program received at the October 12, 2009  
                 workshop.  Many of the comments mirror the issues raised  
                 in this bill.  The ARB continues to work on the  
                 enforcment policy and plan to hold another workshop in  
                 the future (A comment period on the information  
                 presented by staff at the January 28th workshop closed  
                 March 30th).

                 In reviewing the various documents used for workshop  
                 discussion and reading transcripts from the workshop,  
                 there are some areas that could be considered for  
                 improvement.  While there is not consensus as how to  
                 specifically proceed on this complex issue, there are  
                 several areas that do seem to lend themselves to  
                 possible legislative attention including transparency in  
                 assessing penalties, some sort of ARB guidance for  
                 regulated entities on penalties and reports on  
                 enforcement efforts and resulting penalties. 









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            3) Support and Opposition Arguments  .

              a)    Supporters generally state that this bill will  
                 promote fairness, equity, transparency, and efficiency  
                 for air pollution law in California.  They contend that  
                 ARB often imposes overlapping and duplicative penalties  
                 for similar violations.  They also contend that  
                 regulated entities are faced with uncertainty regarding  
                 their potential exposure for non-compliance.

              b)    Opponents state that the caps on penalties proposed  
                 are a disincentive for compliance as they drop the  
                 penalties so low it is no longer a deterrent.  They are  
                 also concerned that the proposed changes to the penalty  
                 assessment processes impacts the ability of prosecuters  
                 to tailor the fine or penalty to fit the violation.

            4) Amendments Needed  .  Several amendments to this bill are  
              needed.

              a)    This bill proposes to direct fines and penalties to  
                 the General Fund rather than the APCF.  This would have  
                 a detrimental effect on air quality in California.   
                 Those references should be deleted.

              b)     This bill proposes to make significant changes to  
                 many aspects of vehicular air pollution control law  
                 dealing with expansion of existing penalties assessment  
                 mechanisms and capping penalties for violations.  The  
                 effect of some of the changes are difficult to quantify,  
                 thus at this time, they should be removed from the bill  
                 and the author should work with Committee staff,  
                 stakeholders and the ARB to investigate these options or  
                 others that will be protective of public health and  
                 safety by decreasing air pollution while increasing  
                 transparency and clarity, enhance enforcement and help  
                 ensure a level playing field for regulated entities.   
                 Specifically, strike sections 2, 3, 4, 5, 7, 9, 10, 11,  
                 and 12.

              c)    Consistent with the need for transparency and  
                 clarity:









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                 i)         Section 6 should be amended to remove the  
                      proposed changes to current law except for  
                      subdivision (l) that establishes an enforcement  
                      reporting requirement. That should be retained.

                 ii)        Section 8 should be amended to remove the  
                      proposed changes to current law except for the  
                      proposed subdivision (c) dealing with a written  
                      penalty policy. This section should be amended to  
                      delete the reference to the US EPA policy as the  
                      specific model. 

              d)    Technical amendment:  Page 3, line 5 strike "both of  
                 the".

            SOURCE  :        Californians for Enforcement Reform and  
                          Transparency (CERT)  

           SUPPORT  :       CERT Members including:
                          American Home Furnishing Alliance
                          California Chapter of the American Fence  
                          Contractors Association
                          California Dump Truck Owners Association
                          California Motorcycle Dealers Association
                          California Moving and Storage Association
                          California Retailers Association
                          Compliant Car Builders Association
                          Construction Industry Air Quality Association
                          Engineering Contractors Association
                          Flasher/Barricade Association
                          Independent Waste Oil Collectors and  
                          Transporters
                          Marine Builders Association
                          Moving and Storage Association
                          National Marine Manufacturers Association
                          Outdoor Power Equipment Institute
                          Southern California Contractors Association
                          One Individual
            
           OPPOSITION  :    American Lung Association
           Bay Area Air Quality Management District
                          Breathe California  









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