BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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,  








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               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  








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               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.  













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          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  








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          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  








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          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.









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          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  |








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          |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     |         |         |         |








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          |          |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,  








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          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 








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          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 








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          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









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