BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 445
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          Date of Hearing:   June 17, 2014

           ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS
                                  Luis Alejo, Chair
                      SB 445 (Hill) - As Amended:  June 10, 2014

           SENATE VOTE  :   Not relevant.
           
          SUBJECT  :   Underground storage tanks:  petroleum.

           SUMMARY  :   Extends the current State Water Resources Control  
          Board (State Water Board) program for the clean-up of  
          Underground Storage Tanks (USTs) from 2016 to 2020.   
          Specifically,  this bill  :   

          1)Authorizes a two-cent per gallon fee on petroleum products  
            until 2020 to the extent the current State Water Board program  
            for the clean-up of USTs pursuant to the Barry Keene  
            Underground Storage Tank Cleanup Act (Act) of 1989.  

          2)Requires owners and operators of single-walled USTs to  
            permanently close their single-wall tanks by December 31,  
            2020.  Single-wall tanks near public drinking water wells must  
            be closed by December 31, 2018.

          3)Provides that before December 31, 2018, the owner or operator  
            of an UST must demonstrate that they will meet the financial  
            responsibility requirements of state and federal laws with an  
            alternative to the existing Underground Storage Tank Cleanup  
            Fund (Fund).  Beginning on January 1, 2019, UST owners or  
            operators must meet existing federal and state financial  
            assurance requirements without relying on the Fund.

          4)Authorizes the State Water Board to impose administrative  
            civil liability on persons who make fraudulent claims and  
            misrepresentations to the Fund.

          5)Bars claimants and consultants convicted of fraud against the  
            Fund from further participation in the Fund. 

          6)Authorizes the State Water Board to recover the costs  
            associated with investigating and prosecuting fraud cases  
            against the Fund from persons who were proven to have engaged  
            in fraud. 









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          7)Increases the maximum amount for replacing, removing, or  
            upgrading USTs program grants from $50,000 to $70,000.

          8)Establishes a new Site Cleanup Subaccount in the Fund which  
            can be used to pay for the costs of investigating and  
            remediating sites with surface or groundwater contamination.  

          9)Dedicates $0.003 (3 mils) of the assessment for the State  
            Water Board to use for the following purposes: 

             a)   Loans and grants to assist small business UST owners and  
               operators to come into compliance with UST regulatory  
               requirements by removing, replacing, or upgrading USTs,  
               including complying with the phase out of single-wall  
               tanks; 

             b)   Deposit into the Site Cleanup Subaccount for the  
               investigation and remediation of contaminated sites with no  
               viable responsible party; and,

             c)   Provides additional funding, as needed, to the School  
               District Account to reimburse school districts for their  
               costs associated with cleaning up leaking USTs.

           EXISTING LAW  :

          Pursuant to the Barry Keene Underground Storage Tank Cleanup Act  
          (Act) of 1989:

          1)Establishes the Fund for the deposit of fees collected  
            pursuant to the Act.

          2)Establishes a base storage fee of $0.014 (14 mils) for each  
            gallon of petroleum placed in an UST.

          3)Established, until January 1, 2014, an additional storage fee  
            of $0.006 (6 mils) for each gallon of petroleum placed in an  
            UST for a total of $0.02 per gallon.

          4)Authorizes the State Water Board to expend the moneys in the  
            Fund, upon appropriation by the Legislature, for various  
            purposes, including the payment of claims to aid owners and  
            operators of petroleum USTs who take corrective action to  
            clean up unauthorized releases from those tanks, corrective  
            actions undertaken by specified agencies, the clean-up and  








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            oversight of unauthorized releases at abandoned tank sites,  
            and grants to small businesses to retrofit certain hazardous  
            substance USTs.

          5)Requires, pursuant to United States Environmental Protection  
            Agency (US EPA) regulations (section 280.90, subpart  
            H-Financial Responsibility, part 280, 40 CFR) published on  
            October 26, 1988, owners and/or operators of USTs to  
            demonstrate through insurance coverage or other acceptable  
            mechanisms that they can pay for clean-up and third-party  
            damages resulting from leaks that may occur from their USTs.

           FISCAL EFFECT :    

          1)This bill would result in increased revenues into the Cleanup  
            Fund of approximately $79 million between January 1, 2015, to  
            January 1, 2016 (by increasing the current assessment by $.006  
            (6 mils), and would continue to generate approximately $260  
            million annually thereafter until January 1, 2020.  

          2)Approximately $40 million annually would be available to the  
            State Water Board  for the following purposes: 

             a)   Replacing, removing, or upgrading underground storage  
               tanks (RUST) loans and grants to assist small business UST  
               owners and operators to come into compliance with UST  
               regulatory requirements by removing, replacing, or  
               upgrading USTs, including complying with the phase out of  
               single-wall tanks; 

             b)   For deposit into the Site Cleanup Subaccount for the  
               investigation and remediation of contaminated sites with no  
               viable responsible party; 

             c)   Provide additional funding, as needed, to the School  
               District Account to reimburse school districts for their  
               costs associated with cleaning up leaking USTs (LUSTs); and  


             d)   The remaining amount would be available to reimburse UST  
               owners and operators for their costs of cleaning up leaking  
               USTs and Cleanup Fund and Regulatory Oversight  
               administrative costs.

           COMMENTS  :  








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           Need for the bill  :  According to the author, "Leaks from  
          underground storage tanks represent an ongoing threat to  
          California groundwater and land resources.  Even a small amount  
          of petroleum released from a leaking tank can contaminate  
          groundwater.  SB 445 will continue the important work that the  
          state has done to address the threat from underground tanks and  
          allow businesses, local agencies, and schools to clean up the  
          legacy of past practices that poses a threat to public health  
          and the environment.  This bill provides new direction for the  
          state to tackle the legacy issue of single-walled tanks still in  
          use and begin to address groundwater contamination from a wider  
          range of toxic chemicals."

           UST Program Background  :  The Barry Keene Underground Storage  
          Tank Cleanup Fund Act of 1989 was created by the California  
          Legislature, and is administered by the State Water Board, to  
          provide a means for petroleum UST owners and operators to meet  
          the federal and state requirements.  The Fund also assists a  
          large number of small businesses and individuals by providing  
          reimbursement for unexpected and catastrophic expenses  
          associated with the clean-up of leaking petroleum USTs.

          Currently, the UST program is supported by a 1.6 cent per gallon  
          fee collected quarterly from petroleum UST owner or operators by  
          the State Board of Equalization.  The fee currently generates  
          about $270 million per year for claims reimbursement and  
          disbursement to other authorized accounts including:  the  
          Emergency, Abandoned, and Recalcitrant (EAR) Account; the  
          Commingled Plume (CP) Account; the RUST program; and, the  
          Drinking Water Treatment and Research Fund (DWTRF).  With the  
          exception of the DWTRF, which is administered by the Department  
          of Public Health, these accounts are all managed by the State  
          Water Board.

          Claims are paid in priority order based on criteria established  
          in statute:  "A" or first priority is given to homeowners; "B"  
          or second priority is for small business, non-profit, or small  
          local government agencies with revenue below a specified level;  
          "C" or third priority is given to parties with fewer than 500  
          employees; and, "D" or lowest priority is given to all other  
          claimants, including major corporations and larger local  
          governmental agencies.

          In recent years, program expenditures have exceeded revenues,  








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          in part due to poor program oversight by State Water Board,  
          and in part due to unforeseen cost increases to clean up  
          contaminated sites.  Based on the results of a recent program  
          audit, State Water Board has made several changes to the  
          program to better manage available funding and to speed up the  
          process for completing cleanup projects.  Additionally, the  
          statute changes made over the last several years and the  
          increased revenues from AB 291 (Wieckowski), Chapter 579,  
          Statutes of 2011, offset a large portion of the program  
          deficiency.  SWRCB believes that recent program improvements  
          should also reduce demand for future funding.  

           Single-walled USTs brief  :  This bill would require owners and  
          operators of single-walled USTs to permanently close their  
          single-wall tanks by December 31, 2020, except single-wall tanks  
          near public drinking water wells must be closed by December 31,  
          2018.
          
          Antiquated single-walled USTs and components present a high risk  
          of leaking gasoline, diesel fuels, fuel additives, and other  
          hazardous substances into the soil and groundwater, posing a  
          threat to human health and the environment.  Single-walled tank  
          systems have a higher propensity for leaking than newer tanks  
          and without secondary containment, pollutants leak directly into  
          the soil and groundwater. This risk is heightened in areas where  
          USTs are located near drinking wells, with leaks resulting in  
          serious consequences to drinking water sources. 

          Recent studies indicate that newly emerging fuels - such as  
          biodiesel and ethanol - may cause degradation of UST systems,  
          thus increasing the possibility that these systems will fail.   
          This is of particular concern with older systems and  
          single-walled USTs because these systems have a higher  
          propensity to leak than newer tanks, and without secondary  
          containment, the fuels leak directly into the soil and  
          groundwater.   Even when a release from a single-walled tank  
          occurs, UST owners are only required to replace the tank with  
          double-walled components if the entire system is replaced.  The  
          State Water Board has no authority under current law to require  
          the replacement of single-walled USTs with more reliable  
          double-walled tanks designed to prevent releases from entering  
          the environment.  Currently there are approximately 2,000  
          operating UST facilities (12 percent of the total) that have  
          single-walled USTs, or pipes, or both.









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           Fraud prevention and recovery brief  :  This bill would provide  
          the State Water Board with authority to help prevent fraud in  
          the Fund and help recover monetary losses to the Fund due to  
          fraud and misrepresentation.  The bill would accomplish this by:  
           1) authorizing the State Water Board to impose administrative  
          civil liability on persons who make fraudulent claims and  
          misrepresentations to the Fund; 2) barring claimants and  
          consultants convicted of fraud against the Fund from further  
          participation in the Fund; and, 3) authorizing the State Water  
          Board to recover the costs associated with investigating and  
          prosecuting fraud cases against the Fund from persons who were  
          proven to have engaged in fraud. 

          Current law does not provide the State Water Board with the  
          necessary enforcement tools to effectively prevent fraud in the  
          Fund program or to recover funds in a timely, cost-effective  
          manner from those who defraud the State.  This lack of authority  
          appears to have resulted in numerous cases of fraudulent claims  
          being submitted to the Fund by UST owners and operators. Every  
          dollar fraudulently obtained from the Fund is one dollar less  
          that is available for legitimate and necessary clean-up of the  
          environment contaminated by UST leaks.

           Current Funding - Comparison of LUSTs and Site Cleanup Programs  :  
            LUST cases have benefited from the Cleanup Fund, which has  
          greatly contributed to moving LUST cases through closure.  The  
          Cleanup Fund provides a means for petroleum UST owners and  
          operators to meet the federal and state requirements of  
          maintaining financial responsibility to pay for any damages  
          arising from unauthorized releases of petroleum from their UST  
          systems.  Since implementation of the Cleanup Fund in 1989, the  
          Cleanup Fund has disbursed over $3.2 billion to eligible  
          claimants for LUST clean up.  Additionally, the UST Program has  
          overseen the clean-up of over 35,000 LUST cases since 1984.   
          Clean up for many of these cases, which are small businesses and  
          individuals that could not normally afford cleanup in its  
          entirety, were funded partially or fully with Cleanup Fund  
          revenues up to $1.5 million each.  In contrast, the Site Cleanup  
          Program (SCP) has very little revenues to assist small business  
          owners and individuals with clean up. The Water Boards' Cleanup  
          and Abatement Account typically disburses between $1 million to  
          $5.5 million per year for as few as four to six SCP cases for  
          small business owners or individuals.  For the vast majority of  
          SCP cases, the responsible party is required to finance the  
          clean-up of their site in its entirety and pay for agency  








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          oversight under the Water Boards' Cost Recovery Program.  Of the  
          5,667 open SCP cases, only 2,366 (42%) are in the Cost Recovery  
          Program.  For oversight and administration of the program, the  
          Water Boards receive approximately $15 million of funding per  
          year from the Cost Recovery Program for these 2,366 cases.  For  
          oversight of the remaining 3,301 cases that are not in the Cost  
          Recovery Program, the Water Boards receive approximately $2  
          million per year from the State General Fund.  

           Related Legislation  :
          
          AB 282 (Wieckowski) would extend the sunset date of the  
          Underground Storage Tank (UST) Cleanup Program from 2016 until  
          2018, and extend the sunset of a $0.006 surcharge on petroleum  
          stored in an UST from 2014 until 2016.  Held in the Senate  
          Appropriations Committee.

           Prior related Legislation  :

          AB 120 (Committee on Environmental Safety and Toxic Materials,  
          Chapter 635, Statutes of 2013).   This bill requires the State  
          Water Board to waive a provision in existing law that requires a  
          school district to have continuously maintained a permit for  
          their underground storage tanks in order to qualify for funding  
          from the Underground Storage Tank Cleanup Fund School District  
          Account (School District Account), if the school district meets  
          certain conditions.  The School District Account is used to  
          reimburse school districts for their costs associated with  
          cleaning up LUSTs.

          AB 291 (Wieckowski, Chapter 569, Statutes of 2011).  This bill  
          extends for two years a temporary fee paid per gallon on motor  
          vehicle fuel that the owner of an underground storage tank  
          must pay from 1.4 mils to 2 mils per gallon through January 1,  
          2014.  The State Water Board indicates that projected revenues  
          from the extension of the supplemental tax will be about $180  
          million over two years.

          AB 358 (Smyth, Chapter 571, Statutes of 2011).  This bill  
          streamlines the State Water Board process for completing the  
          clean-up of USTs by establishing authority for the State Water  
          Board to close sites overseen by local government as part of the  
          State Water Board existing five-year review process.  

           REGISTERED SUPPORT / OPPOSITION  :








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           Support  :  
           
          California League of Conservation Voters
          Consultants, Owners, Regulators and Enviro-Vendors (CORE), Inc.

           
            

          Opposition  :  
           
          California Independent Oil Marketers Association 

           Analysis Prepared by  :  Bob Fredenburg / E.S. & T.M. / (916)  
          319-3965