BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1005| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1005 Author: Gordon (D) and Levine (D), et al. Amended: 8/15/16 in Senate Vote: 27 SENATE ENVIRONMENTAL QUALITY COMMITTEE: 6-0, 6/8/16 AYES: Wieckowski, Gaines, Bates, Hill, Leno, Pavley NO VOTE RECORDED: Jackson SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/11/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NO VOTE RECORDED: Bates, Nielsen ASSEMBLY FLOOR: 75-1, 1/25/16 - See last page for vote SUBJECT: California Beverage Container Recycling and Litter Reduction Act: market development payments SOURCE: Californians Against Waste DIGEST: This bill extends the sunset for plastic market development payments from 2017 to 2018. ANALYSIS: Existing law, under the California Beverage Container Recycling and Litter Reduction Act (Act): 1)Requires beverage containers sold in this state to have a California redemption value (CRV) of five 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. AB 1005 Page 2 2)Requires CalRecycle to certify recycling centers and processors that participate in the program. 3)Authorizes CalRecycle to award up to $10 million annually for market development payments for empty plastic beverage containers to certified entities and product manufacturers. 4)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. 5)Authorizes CalRecycle to allocate an amount greater than $10 million after 2012, as prescribed. 6)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. 7)Sunsets the plastic market development payments on January 1, 2017. This bill extends the sunset for plastic market development payments from 2017 to 2018. Background AB 1005 Page 3 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 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 that are funded by unredeemed CRV. Higher recycling rates reduce the amount of unredeemed CRV to fund program expenses. Structural deficit. As noted in the background, higher recycling rates reduce the amount of unredeemed CRV to fund program expenses, such as the Plastic Market Development Payments (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 projects the structural deficit, over the course of 2016-17, at $54.2 million. 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, CalRecycle is required to "proportionally reduce" many of the program's expenditures evenly among program participants, with the exception of CRV redemption for consumers. AB 1005 Page 4 According to the most recent Quarterly Report from CalRecycle in July of this year, "[based] on this structural deficit, and considering the current cash balance, the Department estimates that in late Fiscal Year 2017-18, there will be insufficient funds to fully support program payments and maintain a minimal reserve for operations. Should this occur, the Department will be compelled to enter into proportional reductions to best manage remaining financial resources." 2) PMDP. 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. AB 1005 Page 5 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 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 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." 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 AB 1005 Page 6 product manufacturers for empty plastic beverage containers. AB 2467 was vetoed. FISCAL EFFECT: Appropriation: Yes Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: $10 million annual appropriation (Beverage Container Recycling Fund) to the PMDP. $173,000 per year (Beverage Container Recycling Fund) to CalRecycle for program administration. SUPPORT: (Verified8/11/16) Californians Against Waste (source) 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 National Association for PET Container Resources Northern California Recycling Association Peninsula Packaging Company Peninsula Plastics Recycling, Inc. AB 1005 Page 7 RePET Inc. rePlanet Repsco, Inc. Sonoma County Waste Management Agency Talco Plastics, Inc. Tri-CED Community Recycling UPSTREAM Verdeco Recycling, Inc. Zanker Recycling OPPOSITION: (Verified8/11/16) None received ASSEMBLY FLOOR: 75-1, 1/25/16 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NOES: Gray NO VOTE RECORDED: Dababneh, Eduardo Garcia, Grove Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108 8/15/16 20:10:02 **** END **** AB 1005 Page 8