BILL ANALYSIS Ó AB 275 Page 1 Date of Hearing: March 24, 2015 ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS Alejo, Chair AB 275 (Committee on Environmental Safety and Toxic Materials) - As Introduced February 11, 2015 SUBJECT: Hazardous substances: liability recovery actions. SUMMARY: Revises the California Department of Toxic Substances Control's (DTSC) statute of limitations on cost recovery. Specifically, this bill: 1)Revises the state's statute of limitations on the recovery of the costs of removal or remedial actions to allow DTSC to recover costs within three years after the completion of a removal or remedial action has been certified by DTSC or within six years of the initiation of a removal or remedial process action, whichever date is later; 2)Deletes the requirement that the Toxic Substances Control Account (TSCA) shall pay any portion of the judgment in excess of the aggregate amount of costs or expenditures apportioned to responsible parties; and 3)Deletes reference to Health & Safety Code (H&S) § 25356.6, which was repealed by Chapter 39 of Statutes of 2012 (Senate Bill 1018). EXISTING LAW: 1)Establishes DTSC to protect California against threats to AB 275 Page 2 public health and degradation to the environment and to restore properties degraded by past environmental contamination, and requires DTSC to regulate management of hazardous wastes, clean up existing contamination, and prevent pollution by working with businesses to reduce their hazardous waste and use of toxic materials. (H&S § 25360.1, et seq.) 2)Requires DTSC to commence recovery of the costs of removal or remedial action or related administrative costs within three years after completion of the removal or remedial action has been certified by the department. (H&S § 25360.4) 3)Requires any party found liable for any costs or expenditures recoverable, who establishes by a preponderance of the evidence that only a portion of those costs or expenditures are attributable to that party's actions, shall be required to pay only for that portion. (H&S § 25363) 4)Pursuant to the Carpenter-Presley-Tanner Hazardous Substance Account Act, makes available adequate funds in order to permit the State of California to assure payment of its 10% share of the costs mandated under federal Superfund requirements, Section 104(c)(3) of the federal act (42 U.S.C. Sec. 9604(c)(3)). (H&S § 25301) 5)Establishes the TSCA (H&S Sec. 25173.6), allows the DTSC director to expend federal funds in the TSCA consistent with the requirements specified in Section 114 of the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 (42 U.S.C. Sec. 9614) (H&S § 25173.6(d)), and defines the Toxic Substances Control Account as the "State Account." (H&S § 25324) 6)Establishes the Site Remediation Account (SRA), to be funded by money transferred from the TSCA, and may be expended by DTSC for direct site remediation costs consistent with the requirements of Section 114(c) of the federal act (42 U.S.C. Sec. 9614(c)). (H&S § 25337) 7)Establishes CERCLA. (42 U.S.C. § 9601 et seq.) FISCAL EFFECT: Unknown. AB 275 Page 3 COMMENTS: State Audit Report : On August 7, 2014, the Bureau of State Audits (BSA) released a report on DTSC's cost recovery. The BSA found that long-standing shortcomings with DTSC's recovery of costs have resulted in millions of dollars in unbilled and billed but uncollected cleanup costs dating back to 1987. DTSC may not be able to recover all of its outstanding costs due to several factors, including when the federal and state statutes of limitations for cost recovery have expired on projects. DTSC's preliminary determinations indicated that the statute of limitations had expired for 76 projects with a total of $13.4 million in outstanding costs, which DTSC may not recover. According to the BSA, "under federal law, an initial action to recover costs from responsible parties must commence within three years of completing removal activities, or within six years of beginning the implementation of remedial activities. Similarly, state law requires the initiation of a cost recovery action within three years of [DTSC] certifying the completion of a cleanup activity. According to a [DTSC] attorney, for the purposes of recovering costs, [DTSC] can file an action against a responsible party under federal law, state law, or upon a provision in a contract. Therefore, she explained, if the statute of limitations has expired for one, [DTSC] may still pursue cost recovery under the other two if they have not expired." Orphan funding : According to DTSC, "Both US EPA and DTSC have identified sites which represent an immediate threat to public health and environment and/or for which no viable responsible parties have been identified to address these projects. US EPA's list is referred to as the Federal Superfund List and the DTSC's list is referred to as the State Orphan's list. AB 275 Page 4 "Annually, DTSC's budget contains a line item that covers cleanup activities for both Federal Superfund match and State Orphan sites. For FY 12/13 roughly $9.2 million was allocated. Each year the amount increases slightly. Federal regulations require that the State must provide a 10% match for the construction of final remedy and initial operation and maintenance costs. After a specific time period, then the State must assumed 100% of the costs to operate that system. This same funding allocation covers the State Orphan sites as well. "It is anticipated that within the next 2-3 years, the amount of money needed to cover our Federal Superfund match obligations and State's orphan funding needs will be more than what is currently appropriated annually." Need for the bill : Under state law, the state's TSCA is required to pay any portion of the judgment in excess of the amount of the apportioned costs to responsible parties. That means DTSC's general fund, which is used for cleanup, is then used to partially cover costs that responsible party(ies), under federal law, are compelled to pay. When cost recovery is pursued in state court, it puts the burden on TSCA to help fund the judgment, which puts taxpayers on the hook to partially fund the cleanup and creates an unnecessary cost burden on the state's already underfunded accounts for toxic waste site cleanup. The requirement that taxpayer dollars support cleanup costs is inconsistent with federal law. Under CERCLA, there is no federal taxpayer funding required or available to support the judgment. Therefore, DTSC currently pursues many, perhaps most of its cost recovery cases through federal court under CERCLA. AB 275 Page 5 Though DTSC tends to pursue cost recovery under CERCLA more often, the state's statute of limitations would be more desirable to use to pursue cost recovery if the state's responsibility to pay were eliminated. With these changes to the state's statute of limitations, DTSC will be more apt to pursue cases through state court under state law. While many cases will likely continue to be pursued under CERCLA, having more flexibility to seek cost recovery through state court will allow the department to pursue more cases more expeditiously and have a greater success rate recovering its costs before statutes of limitations expire. REGISTERED SUPPORT / OPPOSITION: Support Natural Resources Defense Council Opposition None on file. Analysis Prepared by: Paige Brokaw / E.S. & T.M. / (916) 319-3965 AB 275 Page 6