BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 275| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 275 Author: Committee on Environmental Safety and Toxic Materials AmendedAmended:8/19/15 in Senate Vote: 21 SENATE ENVIRONMENTAL QUALITY COMMITTEE: 6-1, 6/17/15 AYES: Wieckowski, Bates, Hill, Jackson, Leno, Pavley NOES: Gaines SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 63-5, 4/20/15 - See last page for vote SUBJECT: Hazardous substances: liability recovery actions SOURCE: Author DIGEST: This bill revises the Department of Toxic Substances Control's (DTSC) statute of limitations on cost recovery. Senate Floor Amendments of 8/19/15 clarify the intent of the legislation and make technical and grammatical corrections. ANALYSIS: Existing law: 1)Imposes, under the Carpenter-Presley-Tanner Hazardous Substance Account Act (Act), liability for hazardous substances removal or remedial actions and requires the Attorney General to recover from the liable person, as defined, certain costs incurred by the DTSC or a California regional water quality control board (regional board), upon the request of the DTSC or regional board. AB 275 Page 2 2)Authorizes, except as specified, a party found liable for any costs or expenditures recoverable under the Act for those actions to establish, as specified, that only a portion of those costs or expenditures are attributable to the party, and requires the party to pay only for that portion. If each party does not establish its liability, the Act requires a court to apportion those costs or expenditures, as specified, among the defendants and the remaining portion of the judgment is required to be paid from the Toxic Substances Control Account (TSCA). 3)Authorizes the money deposited in the TSCA in the General Fund to be appropriated to the DTSC for specified purposes, including the payment of the costs incurred by the state for those actions. This bill: 1)Revises the state's statute of limitations on the recovery of the costs of removal or remedial actions to allow the DTSC to recover costs within three years after the completion of all removal or remedial action has been certified by the DTSC. 2)Requires that if operation and maintenance is required as part of the corrective action, the cost recovery action shall be commenced by the DTSC or regional water quality control board within three years of certification of operation and maintenance. 3)Deletes the requirement that the TSCA shall pay any portion of the judgment in excess of the aggregate amount of costs or expenditures apportioned to responsible parties. 4)Deletes reference to Health and Safety Code Section 25356.6, which was repealed by SB 1018 (Budget and Fiscal Review Committee, Chapter 39, Statutes of 2012). Background 1)State Audit report. On August 7, 2014, the Bureau of State Audits (BSA) released a report on DTSC's cost recovery. The AB 275 Page 3 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. The 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. The 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 the 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." 2)Orphan funding. According to the DTSC, "Both US EPA [United States Environmental Protection Agency] 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. "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. AB 275 Page 4 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." Comments Purpose of bill. According to the author, "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 author states that "the requirement that taxpayer dollars support cleanup costs is inconsistent with federal law. Under the Comprehensive Environmental Response, Compensation, and Liability Act (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. 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." The author further states that "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." AB 275 Page 5 Related Legislation In addition to this bill, the Assembly Committee on Environmental Safety and Toxic Materials (ESTM) has introduced the following bills to address the shortcomings found in the BSA report: 1)AB 273 (ESTM, 2015) modifies provisions relating to DTSC's authority to require corrective actions under hazardous waste control laws. 2)AB 274 (ESTM, 2015) allows DTSC to not expend resources to pursue an uncollectible account, as defined. 3)AB 276 (ESTM, 2015) allows DTSC to request financial information from specified entities who claim inability to pay. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified8/20/15) California League of Conservation Voters Environment California Environmental Working Group Natural Resources Defense Council OPPOSITION: (Verified8/20/15) None received ASSEMBLY FLOOR: 63-5, 4/20/15 AYES: Alejo, Travis Allen, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Beth Gaines, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, AB 275 Page 6 Lackey, Levine, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Atkins NOES: Baker, Brough, Chávez, Harper, Wagner NO VOTE RECORDED: Achadjian, Bigelow, Chang, Dahle, Gallagher, Grove, Kim, Linder, Mayes, Melendez, Patterson, Steinorth Prepared by:Rachel Machi Wagoner / E.Q. / (916) 651-4108 8/21/15 11:38:39 **** END ****