BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            AB 1005
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          |Author:    |Gordon and Levine                                    |
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          |Version:   |1/4/2016               |Hearing      |6/8/2016        |
          |           |                       |Date:        |                |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Rebecca Newhouse                                     |
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          SUBJECT:  California Beverage Container Recycling and Litter  
          Reduction Act:  market development payments

            ANALYSIS:
          
          Existing law, under the California Beverage Container Recycling  
          and Litter Reduction Act (Act), requires beverage containers  
          sold in this state to have a California redemption value (CRV)  
          of 5 cents for containers that hold fewer than 24 ounces and 10  
          cents for containers that hold 24 ounces or more and requires a  
          distributor to pay a redemption payment to the Department of  
          Resources Recycling and Recovery (CalRecycle).  These funds are  
          continuously appropriated to CalRecycle for the payment of  
          refund values and processing fees.  The Act also:

          1) Requires CalRecycle to certify recycling centers and  
             processors that participate in the program. 

          2) Authorizes CalRecycle to award up to $10 million annually for  
             market development payments for empty plastic beverage  
             containers to certified entities and product manufacturers. 

          3) Defines "certified entity," for purposes of the plastic  
             market development payments, as a recycling center,  
             processor, or dropoff or collection program certified by the  
             department, and defines "product manufacturer" to mean a  
             person who manufactures a plastic product in the state.

          4) Authorizes CalRecycle to allocate an amount greater than $10  
             million after 2012, as prescribed. 







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          5) Specifies that CalRecycle may set different payment amounts  
             for certified entities and product manufacturers, not to  
             exceed $150 per ton, according to the following  
             considerations: 

             a)    The minimum funding level needed to encourage in-state  
                washing and processing of empty plastic beverage  
                containers collected for recycling;

             b)    The minimum funding level needed to encourage in-state  
                manufacturing that uses empty plastic beverage containers  
                collected for recycling; and

             c)    The total amount of funds projected to be available for  
                plastic market development payments and the desire to  
                maintain the minimum funding level needed throughout the  
                year. 

          6) Sunsets the plastic market development payments on January 1,  
             2017. 

          This bill extends the sunset for plastic market development  
          payments from 2017 to 2022. 

            Background
          
          1) Bottle bill. The Act is designed to provide consumers with a  
             financial incentive for recycling and to make recycling  
             convenient to consumers.  The centerpiece of the Act is the  
             California Redemption Value (CRV).  Consumers pay a deposit,  
             the CRV, on each beverage container they purchase. Retailers  
             collect the CRV from consumers when they buy beverages and  
             those CRV payments are remitted to CalRecycle. When consumers  
             return their empty beverage containers to a recycler (or  
             donate them to a curbside or other program), the deposit is  
             paid back as a refund. 

             The Fund. Deposits on covered beverage containers are  
             remitted to CalRecycle and deposited into the Beverage  
             Container Recycling Fund (BCRF). The BCRF's expenditures fit  
             into two primary categories: 1) CRV reimbursements to  
             recyclers and 2) program expenses, including administration,  
             grants and incentive programs, and education and outreach  








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             that are funded by unredeemed CRV. Higher recycling rates  
             reduce the amount of unredeemed CRV to fund program expenses.  


          2) PMDP. The Plastic Market Development Payments (PMDP) were  
             established by AB 3056 (Natural Resources Committee, Chapter  
             907, Statutes of 2006) and are one of the incentive programs  
             paid for out of the BCRF from unredeemed CRV.  The PMDP is  
             designed to encourage in-state recycling of plastic beverage  
             containers to be used as feedstock for manufacturing in  
             California. 

             AB 1149 (Gordon, Chapter 486, Statutes of 2011) extended the  
             sunset of the PMDP program to 2017.

             Incentive payments through the PMDP are provided to certified  
             entities (recycling centers and processors that are certified  
             by CalRecycle) for the washing and production of plastic  
             feedstock, such as flake, pellet, or other forms of processed  
             plastics. 

             In order to receive payments under this program, the  
             processed plastic must be derived from redeemed empty plastic  
             beverage containers. 

             Product manufacturers are also eligible for these incentives  
             for the manufacture of plastic products in the state. 

             Existing law specifies that CalRecycle may expend up to $10  
             million annually for these payments, with the ability to  
             expend an amount greater than $10 million annually if  
             CalRecycle makes specified determinations.  Current law also  
             requires that payments under the program not exceed $150 per  
             ton, and specifies that CalRecycle must consider the amount  
             of funds projected to be available and "the desire to  
             maintain the minimum funding level throughout the year" for  
             the determination of incentive payment amount.

             Payments under the program were previously set at $150 per  
             ton until the annual expenditure cap for the program was  
             reached.  In 2014, CalRecycle capped the payments at $2.5  
             million per quarter, which averaged out to $47/ton payment.

             While the number of certified entities receiving payments has  








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             remained fairly constant, the number of product manufacturers  
             has more than doubled since the beginning of the program.  In  
             2015, 10 certified entities and 33 manufacturers received the  
             PMDP.  

            Comments
          
          1) Purpose of Bill.  According to the author, "AB 1005 would  
             extend the sunset on California's successful plastic market  
             development program, which incentivizes reuse of  
             California-generated recycled beverage containers.  In my  
             first year in the Assembly, I authored the last measure on  
             this program.  In years since, there has been a significant  
             increase in the in-state reuse of California-generated  
             material.  Reusing California-generated material in  
             California is not only environmentally beneficial; it creates  
             and maintains jobs in California.  The creation and  
             continuation of those green jobs can be traced back to our  
             support for policy such as the plastic market development  
             program."

             The author also states, "when the program was last  
             reauthorized and expanded, Californians collected more than  
             250,000 tons of PET and HDPE plastic beverage containers for  
             recycling, with all but 25,000 tons exported overseas  
             (primarily to China) for processing and manufacturing.  The  
             most recent figures show that about half of the containers  
             are now processed and remanufactured in California." 

          2) Structural deficit. As noted in the background, higher  
             recycling rates reduce the amount of unredeemed CRV to fund  
             program expenses, such as the PMDP. The "break-even"  
             recycling rate where expenditures equal revenues is about  
             72%. The current recycling rate for the program is 82%  
             exceeding the statutory recycling goal of the program (80%).

             CalRecycle's most recent quarterly report identifies an  
             average structural deficit of $75 million from 2015-16 to  
             2017-18. This revenue-expenditure imbalance is primarily due  
             to historically high recycling rates, and supplemental  
             program costs including statutorily mandated program  
             payments. 

             When the Bottle Bill does not have adequate funding,  








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             CalRecycle is required to "proportionally reduce" many of the  
             program's expenditures evenly among program participants,  
             with the exception of CRV redemption for consumers. 

             According to the most recent Quarterly Report from CalRecycle  
             in January of this year, "[CalRecycle] estimates proportional  
             reductions in payments made to program participants will not  
             occur before Fiscal Year 2017-18.  Proportional reductions  
             are delayed because of an adequate, albeit dwindling, fund  
             balance." 

             Unless significant program reforms are made in the next year,  
             it is possible proportional reduction of bottle bill  
             expenditures will be required, significantly reducing, and  
             potentially eliminating, most of the non-CRV payments from  
             the fund, including the PMDP.  

          3) Technical amendment.  An amendment is needed to correct a  
             drafting error which incorrectly references paragraph (5) of  
             subdivision (a) on page 9, line 2. 

            Related/Prior Legislation

          AB 1149 (Gordon, Chapter 486, Statutes of 2011) extended the  
          sunset of the PMDP program to 2017.

          AB 2467 (Nestande, 2014) would have authorized CalRecycle to pay  
          a market development payment to both certified entities and  
          product manufacturers for empty plastic beverage containers.  AB  
          2467 was vetoed. 

            SOURCE:                    Californians Against Waste  

           SUPPORT:               

          California Nevada Beverage Association
          California Resource Recovery Association
          CarbonLITE
          Central Contra Costa Solid Waste Authority
          Clean Water Action
          Ecopet Plastics, Inc.
          Epic Plastics
          Global Plastics
          Marin Sanitary Service








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          National Association for PET Container Resources
          Peninsula Packaging Company  
           Peninsula Plastics Recycling, Inc.
          RePET Inc.
          rePlanet
          Repsco, Inc.
          Sonoma County Waste Management Agency 
          Talco Plastics, Inc.
          Tri-CED Community Recycling
          UPSTREAM
          Verdeco Recycling, Inc.
          Zanker Recycling
           
           OPPOSITION:    

          None received  


           
                                          
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