BILL ANALYSIS Ó AB 1239 Page 1 Date of Hearing: August 29, 2016 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Das Williams, Chair AB 1239 (Gordon) - As Amended August 16, 2016 SUBJECT: Tire recycling: California tire regulatory fee and waste tire program SUMMARY: Establishes the Tire Recycling Incentive Program (TRIP) Act to provide incentives for tire recycling activities in California. Establishes a new tire regulatory fee, set by the Department of Resources Recycling and Recovery (CalRecycle), to cover regulatory costs associated with waste and used tire management. 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. 2)Establishes the California Tire Recycling Act (Act), 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 AB 1239 Page 2 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; 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; and, 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 TRIP 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 to include a tiered incentive payment structure in the TRIP to maximize the amount of recycling. 3) 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 AB 1239 Page 3 sufficient to generate revenue equivalent to the reasonable costs incurred by CalRecycle 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) 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; and, d) Requires CalRecycle to identify specific programs that the California tire regulatory fee would fund. 4) 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. 5) 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. 6) 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. 7) Excludes specified products from "incentive-eligible tire products." 8) 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 AB 1239 Page 4 transported. 9) Repeals the Rubberized Pavement Market Development Act. 10)If the 75% policy goal is met for 3 consecutive years, requires CalRecycle to review existing tire recycling programs and make recommendations, as specified. 11)Sunsets the provisions of this bill on January 1, 2024. FISCAL EFFECT: According to the Senate Appropriations Committee, this bill has the following fiscal impacts: 1)$880,000 annually (California Tire Management Fund) to CalRecycle for the first 3 years, some of which would be offset by fees. 2)After the third year, ongoing costs of approximately $642,000 annually (California Tire Management Fund) to CalRecycle, some of which would be offset by fees. COMMENTS: According to CalRecycle, approximately 40 million waste tires are generated in California every year. CalRecycle's diversion goal is 90%; 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 AB 1239 Page 5 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. 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. CalRecycle's analysis of past grants indicates that about 25% of the total sales of California-produced tire-derived products were supported by grants, while about 12.5% of California crumb rubber sold to paving applications was supported by CalRecycle paving grants. In order to achieve CalRecycle's long-term goals for tire recycling, it is in the process of redirecting approximately half of its budget for the Tire Derived Product Grant Program to a new Tire Incentive Program that will focus on promoting new tire-derived product development and shift established product manufacturers to use of ground rubber from other feedstock. CalRecycle is also replacing the Tire-Derived Product Business Assistance Program, which offered a wide variety of assistance to manufacturers, with a new Tire Outreach and Market Analysis (TOMA) program. TOMA will focus exclusively on outreach and education to promote tire-derived products. AB 1239 Page 6 This bill is consistent with the direction and recommendations of CalRecycle's 2015 Five Year Plan. 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 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. The law also allows, but does not require, that data to be submitted electronically to CalRecycle. This bill updates the tire manifest system and requires that electronic reporting. REGISTERED SUPPORT / OPPOSITION: Support Alameda Waste Management Authority and Recycling Board (Stop Waste) AB 1239 Page 7 BAS Recycling Californians Against Waste California Association of Local Conservation Corps California League of Conservation Voters California State Association of Counties CRM Company Don't Waste LA Los Angeles Alliance for a New Economy Marin County Hazardous and Solid Waste Management JPA Mojave Desert and Mountain Recycling Napa Recycling and Waste Services Rural County Representatives of California Sonoma County, AB 939 Local Task Force WILDCOAST Zanker Recycling Opposition California Tire Dealers Association Howard Jarvis Taxpayers Association AB 1239 Page 8 Rubber Manufacturers Association Analysis Prepared by:Elizabeth MacMillan / NAT. RES. / (916) 319-2092