BILL ANALYSIS Ó AB 2794 Page 1 Date of Hearing: April 12, 2016 ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS Luis Alejo, Chair AB 2794 (Santiago) - As Amended April 5, 2016 SUBJECT: Hazardous waste: facilities permitting: fees SUMMARY: Increases statutorily specified flat fee options for a person applying for a new permit, a permit for post closure, a renewal of an existing permit, or a class 2 or class 3 permit modification and states that the flat fees are base rates for the 1997 calendar year. EXISTING LAW: 1) Establishes the intent of the Legislature that the Secretary for the California Environmental Protection Agency (CalEPA) shall convene a task force to review the California Department of Toxic Substances Control's (DTSC) hazardous waste fee structure and make recommendations on a new fee system by January 1, 1997. (SB 1222, Calderon, Chapter 638, Statutes of 1995) 2) Establishes an Environmental Fee on organizations including corporations, limited liability companies, limited partnerships, limited liability partnerships, AB 2794 Page 2 general partnerships, and sole proprietorships that generate, store, or conduct activities in this state related to hazardous materials. (Health & Safety Code (H&S) § 25205.6) 3) Requires any person who applies for a new hazardous waste facilities permit, a hazardous waste facilities permit for post closure, a renewal of an existing hazardous waste facilities permit, a modification of an existing hazardous waste facilities permit or grant of interim status, a variance, or a waste classification determination to reimburse DTSC for the costs incurred by DTSC for processing the application. (H&S § 25205.7(a)(1)) 4) Authorizes a person applying for a new permit, a permit for post closure, a renewal of an existing permit, or a class 2 or class 3 permit modification to choose whether to reimburse DTSC's costs with either a reimbursement agreement with DTSC, or a flat fee delineated in statute. (H&S § 25205.7(d)) 5) Requires the fees established at a base rate for the 1997 calendar year to be annually adjusted to reflect increases or decreases in the cost of living, during the prior fiscal year, as measured by the Consumer Price Index issued by the Department of Industrial Relations. (H&S § 25205.7. (d)(1)(J)(3)) 6) Establishes within DTSC an independent review panel (IRP), comprising of three members, to review and make recommendations regarding improvements to DTSC's permitting, enforcement, public outreach, and fiscal AB 2794 Page 3 management. Requires the IRP to review and make recommendations regarding improvements to DTSC's permitting, and to report to the Governor and the Legislature on permitting backlogs. (H&S § 57014(a) and (f)) FISCAL EFFECT: Unknown. COMMENTS: Need for the bill: According to the author, "The flat fee payment amounts outlined in Health and Safety Code § 25205.7(d) were last revised in 1997 by SB 660 (Sher) and have not kept pace with inflation (from 1997-2016, cumulative inflation is 47.7%). As an example, one provision in this code section provides for a flat fee of $104,187; in 2016 dollars this amounts to $153,918.28. DTSC is unable to obtain full cost recovery when hazardous waste permit applicants utilize this outdated flat fee structure. AB 2794 increases these flat fees, ensuring DTSC is better able to recover costs associated with its permit decisions." History of DTSC fee reform: An Environmental Fee was established in 1989 by Senate Bill (SB) 475 (Chapter 269, Statutes of 1989) to provide DTSC with a broad-based revenue source to supplement the fees it was already receiving from businesses that generate, store, transport or dispose of hazardous waste. AB 2794 Page 4 Prior to 1998, the Environmental Fee was used to fund both hazardous waste management and site mitigation program activities. In 1995, SB 1222 (Calderon, Chapter 638, Statutes of 1995) required the Secretary for CalEPA to convene a task force to review DTSC's hazardous waste fee structure and make recommendations on a new fee system by January 1, 1997. The Fee Reform Task Force was composed of representatives from regulated businesses, general industry, labor unions, the Legislature, and environmental organizations. The Task Force concluded that DTSC's regulatory costs should be funded from fees on regulated industries and that DTSC's site mitigation costs should be funded from the parties responsible for contaminating the sites. In 1997, SB 660 (Sher, Chapter 870, Statutes of 1997) enacted the Environmental Cleanup and Fee Reform Act of 1997 and implemented many of the recommendations made by the Fee Reform Task Force mandated by SB 1222. Effective January 1, 1998, SB 660 eliminated certain fees and restructured the Generator Fee, Disposal Fee, Facility Fee and the Environmental Fee. In addition, the fees for a preliminary endangerment assessment for site mitigation, extremely hazardous waste, border zone property assessment, waste classification, variance, and class I modifications were eliminated; variances, waste classifications, and preliminary endangerment assessments became cost reimbursement activities. Funding sources that support DTSC's hazardous waste regulatory costs include the generator fee, disposal fee, activity fee (facility permit activity), annual facility fee, Environmental Protection Agency identification fee, manifest fee, and money collected from cost recovery efforts for corrective actions. In contrast, funding for DTSC's site cleanup and pollution prevention activities comes from the Environmental Fee, fines AB 2794 Page 5 and penalties collected from actions brought by DTSC, recovery of DTSC's costs to oversee cleanup activity of contaminated sites, interest and other revenue, and, until 2001, General Fund revenue. According to DTSC's September 2000 Department of Toxic Substances Control Pollution Prevention Report and 2-Year Workplan, "[o]f perhaps more significance is the effect of SB 660. The fee structure established at that time has resulted in disposal fees that are consistently the lowest in DTSC's history. Between 1997 and 1998, disposal fees for RCRA wastes dropped nearly 30%. Disposal fees for non-RCRA wastes fell 57%." Independent Review Panel: The 2015-16 Budget Act created a three-person IRP to oversee DTSC's permitting, enforcement, and fiscal management. The IRP is tasked to report every 90-days for a defined period of time on DTSC's performance, specifically related to permitting, enforcement backlog reductions, and meeting legislative mandates. The IRP released its first report on January 28, 2016, and provided various recommendations on the aforementioned categories. Among the recommendations in that initial report include the following: "Require that the DTSC obtain full cost recovery connected with its Hazardous Waste Facility Permit decisions. The DTSC reports that the DTSC's existing Health Safety Code § 25205.7(d) fee collection for permitting statute does not ensure that it achieves full cost recovery connected with its Hazardous Waste Facility Permit actions." Under current law, a person who applies for a hazardous waste facility permit, a hazardous waste permit for postclosure, a AB 2794 Page 6 hazardous waste facility permit renewal, a modified permit, a variance or a waste classification permit must reimburse DTSC for its administrative costs incurred for reviewing the application. That same law allows a permit applicant to either pay a reimbursement fee or a flat fee as currently delineated in statute (H&S § 25205.7(d)). Unofficially, DTSC recoups about 40% of its costs when applicants use a flat fee. Therefore, payment of a flat fee can prevent DTSC from recouping the entirety of its incurred costs, thus burdening taxpayers with the costs that the applicants should be paying. AB 2794 proposes to codify an iteration of the IRP's recommendation by increasing the flat fees to adjust for inflation. Consumer Price Index (CPI): The CPI measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI is a statistical estimate constructed using a sample of representative items whose prices are collected periodically. DTSC (via the Board of Equalization (BOE)) has the authority to adjust most of its fees based on the Consumer Price Index (CPI), including those permit application fees in H&S § 25205.7. Every year, DTSC increases or decreases the fees, based on the CPI, and annually releases an "Annual Fee Summary" to conveniently summarize state law as it relates to fees charged by DTSC or collected by BOE for DTSC and what the current calendar year rate is for each fee. AB 2794 Page 7 How do the rates compare? AB 2153 proposes increasing all of the statutorily outlined fees based on today's inflation, but retaining DTSC's authority to adjust the fees against the CPI. Below are the current fee rates for the calendar year January 1, 2016 through December 31, 2016, according to the December 5, 2015, Annual Fee Summary, and the base rate fees for 2016 as proposed by AB 2794: ----------------------------------------------------------------- | | | | | | | |Permit |Type of |Applicant|1997 |2016 |AB 2794 | AB 2794 Page 8 |Applicatio|Applicant/Acti| |Base |Rates |as | |n |vity |Size/Type|Rates | |amended | | | | | | |04/05/16 | | | | | | | | |----------+--------------+---------+---------+---------+---------| |Hazardous |Land Disposal |Small |$104,187 |$166,596 |$153,915 | |Waste |Facility |Facility | | | | |Facilities| | | | | | | Permit | |Medium | | | | |Applicatio| |Facility |$222,183 |$355,272 |$328,231 | |n | | | | | | | | |Large | | | | | | |Facility | | | | | | | |$381,602 |$610,183 |$563,741 | | | | | | | | |----------+--------------+---------+---------+---------+---------| | |Incinerator |Small |$62,762 |$100,357 |$92,718 | | | |Facility | | | | | | | | | | | | | |Medium | | | | | | |Facility |$133,060 |$212,762 |$196,570 | | | | | | | | | | |Large | | | | | | |Facility | | | | | | | |$228,458 |$365,310 |$337,501 | | | | | | | | |----------+--------------+---------+---------+---------+---------| | |Storage |Small |$21,340 |$34,123 |$31,526 | | |Facility, |Facility | | | | | |Treatment | |$38,913 |$62,225 |$57,486 | | |Facility, or |Medium | | | | | |Storage and |Facility |$75,317 |$120,431 |$111,266 | | |Treatment | | | | | | |Facility |Large | | | | | | |Facility | | | | | | | | | | | |----------+--------------+---------+---------+---------+---------| | |Transportable |Small |$16,320 |$26,095 |$24,110 | | |Treatment |Unit | | | | AB 2794 Page 9 | |Unit | |$37,657 |$60,214 |$55,631 | | | |Medium | | | | | | |Unit |$75,317 |$120,431 |$111,266 | | | | | | | | | | |Large | | | | | | |Unit | | | | | | | | | | | |----------+--------------+---------+---------+---------+---------| | |Postclosure |Small |$10,040 |$16,055 |$14,832 | | |Permit |Facility | | | | | | | | | | | | | |Medium | | | | | | |Facility |$22,596 |$36,131 |$33,381 | | | | | | | | | | |Large | | | | | | |Facility | | | | | | | |$37,657 |$62,214 |$55,631 | | | | | | | | |----------+--------------+---------+---------+---------+---------| |Standardiz|Storage |Series A |$32,052 |$51,254 |$47,350 | |ed Permit |Facility | | | | | |Applicatio|Treatment |Series B |$20,011 |$31,999 |$29,562 | |n |Facility | | | | | | |Storage and |Series C |$5,332 |$8,526 |$7,877 | | |Treatment | | | | | | |Facility | | | | | | | | | | | | ----------------------------------------------------------------- The proposed 2016 base rates in AB 2794 are in fact lower than the current fees. While the bill could result in higher fees once the BOE adjusts them for the CPI, it is more likely that it will result in lower fees compared to today's rates. Once the author understands the material impact of the proposed fee increases in the bill, he may wish to consider amendments, if necessary to retain the intent of the bill. Board of Equalization (BOE): Under the current fee structure, AB 2794 Page 10 all flat fees paid pursuant to H&S § 25205.7 are remitted to the Board of Equalization (BOE). All reimbursement agreements with DTSC are paid directly to DTSC. When fees are remitted to the BOE, the BOE is allowed to retain a percentage to cover its administrative costs of managing the remittances. According to a BOE analysis of its collection of these flat fees, there has been an average of nine one-time, flat-rate application billings in the last three fiscal years, with average revenues of $333,333. REGISTERED SUPPORT / OPPOSITION: Support None on file. Opposition (to a previous version of the bill) Alhambra Chamber of Commerce Automotive Specialty Products Alliance California Business Properties Association California Cement Manufacturers Environmental Coalition AB 2794 Page 11 California Manufacturers and Technology Association California Metals Coalition Chemical Industry Council of California Clean Harbors Environmental Services, Inc. Consumer Specialty Products Association Greater Fresno Area Chamber of Commerce Industrial Environmental Association Institute of Scrap Recycling Industries Metal Finishing Association of Northern California Metal Finishing Association of Southern California North Orange County Chamber Oxnard Chamber of Commerce Palm Desert Area Chamber of Commerce AB 2794 Page 12 Rancho Cordova Chamber of Commerce Redondo Beach Chamber of Commerce & Visitors Bureau Safety-Kleen, Inc. San Diego Regional Chamber of Commerce South Bay Association of Chambers of Commerce Southwest California Legislative Council Simi Valley Chamber of Commerce Torrance Chamber of Commerce West Coast Lumber & Building Material Association Western Plant Health Association Western States Petroleum Association Analysis Prepared by:Paige Brokaw / E.S. & T.M. / (916) 319-3965 AB 2794 Page 13