BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                               Senator Wieckowski, Chair
                                 2015 - 2016  Regular 
           
          Bill No:            AB 1239
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          |Author:    |Gordon and Atkins                                    |
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          |-----------+-----------------------+-------------+----------------|
          |Version:   |2016                   |Hearing      |June 29, 2016   |
          |           |                       |Date:        |                |
          |-----------+-----------------------+-------------+----------------|
          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Joanne Roy                                           |
          |           |                                                     |
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          SUBJECT:  Tire recycling:  California tire regulatory fee and waste  
          tire program.

            ANALYSIS:
          
          Existing law:  
          
          1) Pursuant to the California Integrated Waste Management Act of  
             1989, establishes a state policy goal that 75% of solid waste  
             generated be diverted from landfill disposal by 2020.  (Public  
             Resources Code (PRC) §40000 et seq.)

          2) Establishes the California Tire Recycling Act (Act) (PRC §42860  
             et seq.), which: 

             a)    Requires a person who purchases a new tire to pay a  
                California tire fee of $1.75 for each new tire purchased in  
                the state.  One dollar of which is deposited into the Tire  
                Recycling Fund for oversight, enforcement, and market  
                development grants relating to waste tire management and  
                recycling.   The remaining $0.75 is deposited into the Air  
                Pollution Control Fund for programs and projects that  
                mitigate or remediate air pollution caused by tires.  

             b)    Reduces the fee on January 1, 2024 to $0.75 per tire, to  
                be deposited into the Tire Recycling Fund.  

             c)    Authorizes CalRecycle to award grants, loans, subsidies,  
                and rebates and pay incentives for various purposes related  
                to reducing landfill disposal of waste tires.







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             d)    Requires CalRecycle to adopt a Five-Year Plan, which must  
                be updated every two years, that establishes goals and  
                priorities for the waste tire program.

             e)    Defines "waste tire generator" as any person whose act or  
                process produces any amount of waste or used tires, or causes  
                a waste or used tire hauler to transport those waste or used  
                tires, or otherwise causes waste or used tires to become  
                subject to regulation.  

          This bill:  

          1) Establishes the Tire Recycling Incentive Program Act and a  
             policy goal of source reducing or recycling 75% of solid waste  
             tires in the state by 2020.

          2) Requires CalRecycle to establish a tire recycling incentive  
             program and develop a plan for the program to include a tiered  
             incentive payment structure in order to maximize the amount of  
             California generated waste tire material recycled.

          3) Between July 1, 2018, and January 1, 2024, requires CalRecycle  
             to annually allocate at least $20 million for the tire recycling  
             incentive program; and beginning January 1, 2024, authorizes  
             CalRecycle to allocate funding for the program based on  
             available funding.

          4) Establishes the "California tire regulatory fee". 

             a)    Authorizes CalRecycle to establish the fee in an amount,  
                not to exceed $1 per new tire sold, that is sufficient to  
                generate revenue equivalent to the reasonable costs incurred  
                by the department related for regulatory activities regarding  
                waste tires.  

             b)    Requires CalRecycle to adopt regulations to implement the  
                initial fee and authorizes CalRecycle to adjust the fee based  
                on specified factors.

             c)    Authorizes a retail seller to retain 1.5% of the  
                California tire regulatory fee as reimbursement for costs  
                associated with the administration and remittance of the fee.  










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             d)    Requires a waste tire generator to pay a California tire  
                regulatory fee and remit the fee to the state for deposit in  
                the California Tire Recycling Management Fund.

             e)    Requires CalRecycle to identify specific programs that the  
                California tire regulatory fee would fund.

          5) Makes an entity eligible to receive an incentive payment upon  
             demonstrating to CalRecycle that the entity purchased  
             California-generated waste tire material processed in the state  
             and sold an incentive-eligible tire product incorporating that  
             material to an end user.

          6) Specifies that an "eligible entity" to receive incentive  
             payments includes, but is not limited to, a manufacturer that  
             produces a product using California generated waste tires for  
             purchase by an end user.

          7) Includes examples of "incentive-eligible tire products" such as  
             pavement-related products (e.g. rubberized asphalt), walkways  
             and pathways, poured in place and tile playground mats, and  
             landscape nuggets and mulch.

          8) Excludes specified products from "incentive-eligible tire  
             products."

          9) Requires a waste and used tire hauler, on and after January 1,  
             2018, to submit an electronic manifest, instead of a paper  
             manifest, to CalRecycle within seven days of the date of the  
             pickup or delivery for each load of waste or used tires  
             transported.

          10)Repeals the Rubberized Pavement Market Development Act.

          11)If the 75% policy goal is met for three consecutive years,  
             requires CalRecycle to review existing tire recycling programs  
             and make recommendations, as specified.

          12)Sunsets the provisions of this bill on January 1, 2024.

            Background
          
          1) Diversion of waste tires in California.  According to  
             CalRecycle, approximately 40 million waste tires are generated  
             in California every year.  CalRecycle's diversion goal is 90%;  








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             according to the California Waste Tire Market Report: 2013,  
             California has achieved an overall diversion rate of 87.3%.  Of  
             the 40.8 million tires generated: 12.3 million were exported  
             (for fuel or reuse); 7.9 million were recycled as ground rubber;  
             0.5 million were used in civil engineering projects; 6.6 million  
             were reused (either sold as used tires or retreaded); 8.2  
             million were used as tire-derived fuel in cement kilns or at  
             co-generation facilities; 1.2 million were used as cover at  
             landfills; and, 5.3 million were disposed in landfills. 

          CalRecycle's "affiliated goals" to achieve its 90% diversion rate  
             for tires are: 
          1) develop long-term, sustainable, and diversified market demand  
             for California tire-derived products; 2) ensure the protection  
             of public health, safety, and the environment while developing a  
             safe and high-quality supply infrastructure to meet that demand;  
             and, 3) foster information flow and technology and product  
             development so that environmental protection and diversion goals  
             are achieved with supply and demand in balance.

          2) Waste tire management.  CalRecycle's tire management program is  
             divided into two functional areas:  1) permitting and  
             enforcement activities; and, 2) tire recycling and marketing  
             development activities.  The tire permitting and enforcement  
             activities ensure that reusable and waste tires are stored and  
             transported safely.  CalRecycle coordinates with local and  
             regional agencies to mitigate unsafe situations at existing  
             abandoned tire pile sites and provide technical assistance.   
             Tire recycling activities include offering financial assistance,  
             engaging in recycling and marketing research, and technical  
             assistance. 

          Waste tire management activities that CalRecycle has developed and  
             funded to stimulate diversion of reusable and waste tires from  
             landfill disposal include:

                     Business development assistance to California  
                 enterprises.
                     Research to expand the use and recyclability of tires.
                     Assistance to local governments to manage waste tires.
                     Regulation of waste tire facilities and waste tire  
                 haulers, to help ensure the protection of public health,  
                 safety, and the environment.
                     Public education.









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            Currently, the recycling markets in California do not consume all  
            of the waste tires generated.  Waste tires need to be stored  
            safely until sufficient markets are in place to increase the  
            consumption of waste tires.  CalRecycle provides the proper waste  
            tire management framework by enforcing waste tire facility and  
            waste tire hauler regulations.  As the use of tires as feedstock  
            material in commercial applications increases, illegal  
            stockpiling and the need for permitted storage will decrease or  
            cease to exist.

          1) Tire incentive program.  According to CalRecycle's report,  
             "Evaluation of Tire Incentive and Extended Producer  
             Responsibility Policies" (June 2, 2012), incentives offer a  
             range of potential benefits, including increased diversion,  
             strengthened in-state infrastructure and some relief against  
             export-induced disruptions.  CalRecycle is in the process of  
             adjusting its waste tire market development programs, in  
             accordance with its Five-Year Plan, to more effectively focus  
             CalRecycle resources on diversifying and expanding markets.   
             CalRecycle has also indicated a long-term vision of increasing  
             tire recycling, rather than just diversion.  Specifically,  
             CalRecycle has begun crafting a new incentive program that would  
             differentiate incentive payments, with higher payments going to  
             "preferred end users" that recycle waste tires into new products  
             such as rubberized asphalt concrete, moderate payments for end  
             uses such as tire-derived aggregate, and lower payments for  
             less-preferred non-disposal management such as energy  
             generation.  

          2) Waste/used tire manifest program.  According to CalRecycle, PRC  
             §42961.5 requires CalRecycle to develop a "California Uniform  
             Waste and Used Tire Manifest." The intent is to "close the loop"  
             on accountability by requiring copies of each manifest or  
             comprehensive trip log to be submitted to CalRecycle for  
             monitoring tire movement within the state.  The law also allows  
             for data to be submitted electronically to CalRecycle.

          The Waste Tire Manifest System is a tracking mechanism used by  
             CalRecycle to monitor the generation, transportation, and  
             ultimate disposal of used/waste tires in California.  The goal  
             of the system is to help eliminate the illegal storage or  
             disposal of used/waste tires by allowing CalRecycle to focus  
             enforcement efforts on worst offenders.  The waste tire manifest  
             system program applies to all persons, businesses, nonprofits,  
             and government agencies that generate, transport, or receive  








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             waste or used tires.  CalRecycle and tire enforcement agency  
             staff members inspect and investigate waste and used tire  
             generators, end-use facilities, and haulers to ensure that  
             manifests are properly completed, handled, and submitted to  
             CalRecycle.
            
          Comments
          
          1)Purpose of Bill.  According to the author, "Californians generate  
            42 million passenger tires every single year, and the management  
            of these tires has proven difficult - illegally dumped tires pose  
            a significant cost to local governments and the state, large  
            abandoned tire piles have resulted in weeks-long fires, and the  
            overall recycling rate has remained largely stagnant.  In order  
            to drastically increase tire recycling, in addition to the  
            intrinsic environmental and economic benefits of recovering this  
            material, CalRecycle recently recommended that the Legislature  
            'implement an expanded incentive program that provides payments  
            for desired end-uses of tires.'  AB 1239 will help expand the  
            state's tire recycling infrastructure to reduce greenhouse gases,  
            create jobs, and cut the statewide and local costs associated  
            with tire pile cleanup."

          2)1.5% retailer cost reimbursement.  AB 1239 authorizes a retail  
            seller to retain 1.5% of the California tire regulatory fee as  
            reimbursement for costs associated with the administration and  
            remittance of the fee.  

          This fee imposes the regulatory fee directly onto the retailer as  
            opposed to the consumer. The retailer can choose to treat the fee  
            as a cost-of-goods-sold.  In such a case, the retailer can  
            increase the tire's purchase price rather than show a separate  
            line item cost on a consumer's receipt of purchase.  

          Other fee programs (approximately 34 of them in the state), such as  
            the current tire fee, the e-waste fee, and the lumber products  
            fee, all impose fees on consumers and allow the collector of the  
            fees (e.g. the retailer) to retain a percentage of the fees  
            collected as reimbursement for the collector's compliance costs.

          However, AB 1239 would allow the fee payer, in this case the tire  
            retailer, to also keep 1.5% of the fee.  If the tire retailer is  
            not acting as the middle man that may be reimbursed for its  
            compliance costs as the go-between for a consumer (as fee payer)  
            and the state, why is the tire retailer essentially provided an  








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            automatic discount on a fee it is required to pay?  It does not  
            seem to make logical sense to authorize the retailer to retain a  
            portion of a fee that is directly imposed on it.  Such a cost  
            reimbursement would set a dubious precedent for fee programs.

          Because the retailer is a direct fee payer, the Committee may wish  
            to consider deleting the provision authorizing a retail seller to  
            retain 1.5% of the California tire regulatory fee as  
            reimbursement for costs associated with the administration and  
            remittance of the fee.  

            Related/Prior Legislation

          SB 47 (Hill, 2015), as heard in Senate Environmental Quality  
          Committee, would have required the Office of Environmental Health  
          Hazard Assessment to conduct a study by July 1, 2017, analyzing  
          potential adverse health impacts from synthetic turf made from  
          waste tires and would have prohibited the awarding of grants or  
          other funding assistance for the manufacturing or installation of  
          synthetic turf made from waste tires.  SB 47 was returned to  
          Secretary of Senate pursuant to Joint Rule 62(a).

          AB 513 (Frazier, Chapter 499, Statutes of 2013), established the  
          Rubberized Asphalt Concrete (RAC) Market Development Act, which  
          codified the CalRecycle RAC grant program for local public works  
          projects.  

          AB 2658 (Bocanegra, 2014), would have clarified that "parklets" and  
          "greenways" were eligible for grants for public works projects that  
          use tire-derived products and would have required CalRecycle, when  
          awarding grants for parklets and greenways, to give priority to  
          projects located in disadvantaged communities.  Senate  
          Transportation & Housing Committee (failed 4-3).

            SOURCE:                    Californians Against Waste  

           SUPPORT:               

          None received
           
           OPPOSITION:    

          None received
                                       -- END --
          








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