BILL ANALYSIS Ó SB 900 SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator S. Joseph Simitian, Chairman 2011-2012 Regular Session BILL NO: SB 900 AUTHOR: Steinberg AMENDED: April 6, 2011 FISCAL: Yes HEARING DATE: May 2, 2011 URGENCY: No CONSULTANT: Rachel Machi Wagoner SUBJECT : California Regional Water Quality Control Boards SUMMARY : Existing federal law , under the Clean Water Act: 1) Establishes a national objective, in conjunction with numerous implementing provisions, to restore and maintain the chemical, physical, and biological integrity of the Nation's waters. 2) Authorizes the U.S. Environmental Protection Agency (US EPA) to delegate water pollution control responsibility to the states; establishes procedures for US EPA approval of a state program and the assignment of responsibilities; and establishes procedures for the withdrawal of program approval, including a failure to comply with requirements. Existing state law: 1) Under the Porter-Cologne Water Quality Act : a) Provides for: 1) the establishment of water quality policy; 2) the enforcement of water quality standards for both surface and ground water; and 3) the regulation of discharges of pollutants from point and non-point sources. b) Provides that the State Water Resources Control Board (SWRCB) and nine Regional Water Quality Control Boards (RWQCBs) as the principal state agencies with the SB 900 Page 2 responsibility for controlling water quality in California. c) Provides that the SWRCB be comprised of five full-time salaried board members who each fill a different specialized position based on expertise (representing the public, engineering expertise, water quality expertise and water supply). The members are appointed by the Governor and confirmed by the Senate. d) Provides that the nine RWQCBs are semi-autonomous and are comprised of nine part-time Board members who each fill a different specialized position representing a specific interest: ( water supply, conservation, and production; irrigated agriculture; industrial water use; municipal government; county government; recreation, fish and wildlife; public; and two water quality members). The members are appointed by the Governor and confirmed by the Senate. e) Prohibits a person from being a member of SWRCB or a RWQCB if that person receives or has received during the previous two years a significant portion of his or her income directly from a person subject to waste discharge requirements or applicants for prescribed waste discharge requirements. f) Prohibits a SWRCB or RWQCB member from participating in specified board actions that involve the member or any waste discharger with which the member is connected or in which the board member has a financial interest. 2) Under the Political Reform Act (PRA) , prohibits a public official at any level of state or local government from making, participate in making or in any way use or attempt to use his/her official position to influence a governmental decision in which he/she knows or has reason to know he/she has a disqualifying conflict of interest. A SB 900 Page 3 public official has a conflict of interest if the decision will have a reasonably foreseeable material financial effect on one or more of his/her economic interests, unless the public official can establish either: (a) that the effect is indistinguishable from the effect on the public generally, or (b) a public official's participation is legally required. This bill : 1) Deletes the provisions of the water code prohibiting a board member from participating in actions that involve the member or a waste discharger with which the member is connected, and specifies that the limitation on a board member's financial interest applies only to a disqualifying financial interest within the meaning of the Political Reform Act of 1974. 2) Provides that a person would not be disqualified from being a member of a RWQCB because that person receives, or has received during the previous two years, a significant portion of his or her income directly or indirectly from a person subject to waste discharge requirements, or an applicant for waste discharge requirements, that govern discharges not within the jurisdiction of that RWQCB. Also provides that this revised eligibility provision relating to members of a RWQCB must shall be implemented only if the USEPA determines the provision complies with the federal Clean Water Act. COMMENTS : 1) Purpose of Bill . According to the sponsor and supporters: The primary impact this would have pertains to the "public generally" exception where a board member may be a discharger, but the impact of an order on the board member is no different than the orders' impact on the "public generally." Under Porter-Cologne's conflict rules, the Board member is prohibited from voting on such an order that would affect them, even if it is a broad order that affects a whole class of dischargers, of which the board SB 900 Page 4 member is only one. The PRA recognizes that these types of decisions will be made affecting a members' economic interests, but that the impact will be no different than the impact on the public generally. The act and its implementing regulations establish a test for determining this impact. If the decision passes the test, then a board member may participate. Porter/Cologne conflict of interest requirements have caused a tremendous amount of concern to the regulated community as it is increasingly difficult to find qualified people to serve. Every RWQCB has a designated seat for a member from "irrigated agriculture." Clearly, the Legislature in creating these entities sought to ensure that farmers would be appointed to and serve as fully voting members of these boards. Yet over time, the effects of stringent application of the conflict provisions in the state water code have caused a dramatic reduction in the pool of farmers eligible to be appointed, and have forced non-participation of the few who are appointed when regulatory proposals affecting agriculture are decided. The result has been growing insulation of water regulators from this important regulated community, and a concomitant loss of confidence in, and support for, the actions of the regional water boards relative to agriculture. The simple modifications proposed in this measure would restore the full participation of agriculture on these boards as was originally intended and serve to restore the credibility of their regulatory programs and encourage greater cooperation in their implementation. Additionally, the 10 percent rule provision has likewise been problematic in finding qualified people to serve. This bill would apply the 10 percent rule provision to income from persons/entities that receive NPDES permits from the member's regional water board, and would not apply the restriction to income that is from persons/entities subject to an NPDES permit issued by the other RWQCB. It is our understanding this measure would address about 10-15 percent of the historical regional board 10 percent rule SB 900 Page 5 conflicts. 2) Arguments in Opposition . The opposition make the following arguments against SB 900: First, Sections 1 and 2 of the bill would roll back conflicts checks on industry-held Water Board seats required under the Porter-Cologne Water Quality Control Act (Stats. 1969, Ch. 482) to the weaker Political Reform Act (PRA) standard. These conflicts checks were specifically enacted in the Porter-Cologne Act together with the allocation of industry-specific Regional Water Board seats in order to hold in check any potential actions by seat holders that could be deemed a conflict of interest. SB 900 would roll back that Legislature's wise decision to set meaningful conflicts provisions without evidence to show that such provisions are no longer needed to protect waterway health. Indeed, the contrary is true for the issue most affecting the bill's sponsor - irrigated agriculture pollution controls. For example, in the past permit cycle on these controls in the Central Valley, the state Attorney General issued a stinging rebuke to the appointee in the irrigated agriculture seat, who had taken action to prevent adequate controls on polluted agricultural runoff in the region from being adopted. Currently, the Central Coast and Central Valley irrigated agriculture permits are in a protracted process of reissuance, with hundreds of stakeholders providing detailed input and comment for the Boards' consideration. The contested and critical nature of these proceedings, and the chronic, serious pollution of the surface and ground waters affected, demands continued - rather than weakened - adherence to the Legislatively selected conflict requirements. The extremely high level of input from the agricultural community on these permits (called "waivers of waste discharge requirements") also contradicts the argument that the irrigated agriculture appointee is needed to provide one more voice of industry expertise to the discussion. The authors of the Porter-Cologne Act wisely chose to protect the public's paramount interest in healthy waterways by requiring sound conflicts requirements and reliance on the public process - rather than the industry seat appointee - to provide needed input to the Board as a SB 900 Page 6 whole. Use of the PRA conflicts test is an inappropriate alternative to the current Porter-Cologne Act conflicts protections. The Legislature specifically adopted the Porter-Cologne Act conflicts requirements to reflect the fact that they were placing the regulated industry in positions of power over an essential and fundamental element of a healthy population, economy and environment. The views at the time Porter-Cologne was being adopted on this issue are reflected in a 1969 Los Angeles Times editorial, which correctly noted that allowing dischargers to represent their industries on the Boards is a "ridiculous, built-in conflict of interest," one which must be reined in with strict requirements to avoid such conflicts. This sound decision should be upheld. Section 3 of the bill also would weaken other conflict of interest requirements for no meaningful positive reason. It has been our direct experience over many years of seeking to fill Regional Water Board seats with qualified members that this task can sometimes be challenging - but for many reasons other than a potential business conflict outside of the area where the appointee lives and works, as described in SB 900. The low pay ($100/day) and conflicts with statewide permits (changes to which are unlikely to pass federal U.S. EPA legal scrutiny) are the major difficulties with filling seats, not other-region business ties. Moreover, contrary to the sponsor's assertion, it is inaccurate to state that the federal 10% conflict provisions have caused a "dramatic reduction" in the pool of farmers eligible to be appointed. In fact, because the "10% rule" only applies to Clean Water Act NPDES permit holders and the Act exempts irrigated agriculture return flows, irrigated agriculture waiver holders are not bound by this federal conflicts mandate. In addition to being unnecessary from a legal or a practical perspective in solving issues with filling Regional Water Board seats, Section 3 raises significant concerns from a policy perspective, in light of the close manner in which the Regional Water Boards interact. For example, the Regional Boards pay close attention to and SB 900 Page 7 react in numerous ways to each other's decisions, with their permits and policies evolving regional act by regional act. Also, most Regional Water Board decisions that are of any meaningful controversy are appealed to the State Board, which can then act to create statewide precedent. Accordingly, income obtained from one region can influence a Board member's actions and decisions in another. For such reasons, and in light of the fundamental importance of water to the state's population, economy and environment, we strongly urge that these proposed changes be rejected. 3) Previous Legislation . SB 1001 (Perata) of 2007: a) restructured the membership of the nine RWQCB structure by decreasing membership to 7 members, b) increased the compensation of RWQCB membership and changed the qualification criteria for appointment from specific sectors to appointment based on his or her demonstrated interest and proven ability in the field of water quality, and c) established a process at the SWRCB to better ensure RWQCBs are adequately carrying out the regulatory requirements governing water quality in their respective regions, and examined the adequacy of the SWRCB's fee-based water quality programs. SB 1001 was vetoed by Governor Schwarzenegger. 4) The Water Quality Improvement Initiative . In response to the call for reform of the SWRCB and RWQCB's organizational structure and operations, SWRCB released a Water Quality Improvement Initiative in May 2008. The initiative contained 6 key recommendations: a) decrease the membership of RWQCBs from 9 to 7; b) delegate National Pollutant Discharge Elimination System permitting decisions to the RWQCB Executive Officers; c) require RWQCBs to set performance targets for water quality improvements; d) streamline Total Maximum Daily Loads adoption process; e) conform conflict-of-interest rules; and f) make various changes to enforcement. While this initiative received wide opposition, it did incorporate some of the changes that are proposed in this bill and acknowledged a need for reform. 5) The Little Hoover Commission Report -- Clearer Structure, SB 900 Page 8 Cleaner Water: Improving Performance and Outcomes at the State Water Boards . In 2009 the Little Hoover Commission released a report finding that "the decentralized governance structure, with nine regional water quality boards operating with distinct policies and processes, hinders accountability and transparency. The result is a system that has lost the confidence of most stakeholders." The Commission's report made 4 overarching recommendations: a) change the makeup of both SWRCB and RWQCBs; b) increase the use of data and scientific research; c) increase collaboration among government agencies; d) increase economic analysis and analysis in decisionmaking. This report has not resulted in changes to the water boards to date, however, its findings also point to a need for changes to the boards' governance structure. 6) Is This the Right Approach for Reform? While there is a wide ranging recognition for the need for reform to the boards' organizational structure and operations, previous efforts and recommendations have been for comprehensive changes. By taking on just one aspect of reform, changing the conflict of interest provisions of the Porter-Cologne Water Quality Act, this bill may alter RWQCB decision-making processes in a way that favors particular interests. It may be more appropriate for the Legislature to contemplate a more comprehensive reform package. The author may wish to consider striking sections 1 and 2 and work with stakeholders to develop more comprehensive reforms. There is agreement among stakeholders that reaching a quorum for RWQCB board meetings is a challenge. Section 3 of the bill may increase the number of eligible appointees for boards. SOURCE : Western Growers SUPPORT : Alliance of Western Milk Producers American Council of Engineering Companies of California California Agricultural Irrigation Association California Association of Sanitation Agencies California Business Properties Association SB 900 Page 9 California Citrus Mutual California Cotton Ginners and Growers Associations California Chamber of Commerce California Grain and Feed Association California Grape and Tree Fruit League California Forestry Association California League of Food Processors California Manufacturers and Technology Association California Metals Coalition California Pear Growers California Rice Commission California Rice Industry Association California Seed Association California State Floral Association California Trucking Association California Warehouse Association California Wheat Growers Association Chemical Industry Council of California East San Joaquin Water Quality Coalition El Dorado Irrigation District Grower-Shipper Association of Central California Grower Shipper Association of Santa Barbara and San Luis Obispo Counties Kings River Conservation District Kings River Water Association Monterey County Farm Bureau Nisei Farmers League Northern California Water Association Pacific Egg and Poultry Association Partnership for Sound Science in Environmental Policy Paso Robles Wine Country Alliance Regional Council of Rural Counties Santa Barbara County Farm Bureau Southern San Joaquin Valley Water Quality Coalition Valley Ag Water Coalition Western Agricultural Processors Association Western Plant Health Association Wine Institute SB 900 Page 10 OPPOSITION : California Coastkeeper Alliance California Sportfishing Protection Alliance Heal the Bay Natural Resources Defense Council Sierra Club California