BILL ANALYSIS
AB 1906
Page 1
Date of Hearing: April 14, 2004
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
AB 1906 (Lowenthal) - As Introduced: February 9, 2004
Policy Committee: Environmental
Safety & Toxic Materials Vote: 7-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill increases, from 1.2 cents per gallon to 1.3 cents per
gallon starting January 1, 2005, and to 1.4 cents per gallon
starting January 1, 2006, the fee imposed on owners of
underground storage tanks (USTs) containing petroleum products,
the revenue from which supports the State Water Resources
Control Board's (SWRCB's) program to help UST owners and
operators satisfy federal and state financial responsibility
requirements connected to the cleanup of contaminated soil and
groundwater caused by leaking USTs.
FISCAL EFFECT
1)Significant fee revenue increase, about $8.3 million in FY
2004-05, $25 million in FY 2005-06, and $33.3 million in FY
2006-07 and annually thereafter until the fee sunsets on
January 1, 2011. (UST Cleanup Fund.)
2)Equivalent increase in financial assistance provided to UST
owners who must clean up contamination by the SWRCB through
its UST Cleanup Fund program. (UST Cleanup Fund.)
COMMENTS
1)Rationale . The author argues that UST petroleum storage fees
need to be increased because the current 1.2 cent/gallon fee
has not increased since January 1997. The average cost of an
UST cleanup has increased, and it is uncertain whether the
existing fee level is adequate to generate enough revenue to
provide financial assistance to all UST Cleanup program
claimants, particularly those with lower priority cleanups,
AB 1906
Page 2
before the program is scheduled to sunset in 2011.
2)Background . Federal and state laws require petroleum UST
owners and operators to maintain financial responsibility to
pay for damages arising from their UST operations. The UST
Cleanup Fund was created in 1989 to help these
owners/operators meet federal and state requirements and to
pay for the cleanup of contaminated soil and groundwater
resulting from a leaking UST.
The UST Cleanup Fund is administered by the SWRCB. Money in the
fund, primarily generated by the UST maintenance fee this bill
seeks to increase, is available to pay the claims of UST
owners/operators who have incurred cleanup costs related to a
leaking tank and the claims of third parties who have been
awarded damages due to a leak. The maximum claim payment for
a particular occurrence is $1.5 million after an initial
deductible is paid by the claimant.
3)UST Petroleum Storage Fees . The UST maintenance fee was
established in 1991 at the rate of 0.6 cents/gallon of
petroleum product stored in an UST. The fee was increased to
0.7 cents for 1995, 0.9 cents for 1996, and the current 1.2
cents starting in 1997. At its current rate, the UST
maintenance fee annually generates about $200 million to
support the UST Cleanup Fund program.
4)Priority Classifications . The UST Cleanup Fund program
provides financial assistance via a claim priority system
based on claimant characteristics. The highest priority,
Class A, is given to residential UST owners. The second
priority, Class B, is given to small businesses, government
agencies and nonprofit organizations. Class C is comprised of
businesses, government agencies and nonprofits with fewer than
500 employees, and Class D is comprised of all other
claimants, including large businesses. The author is
specifically concerned that, without the additional fee
increases proposed by this bill, there will not be sufficient
money in the UST Cleanup Fund to provide comprehensive
financial assistance to Class D claimants.
5)Claims Volume Declining . The annual volume of claims received
by the SWRCB for financial assistance from the UST Cleanup
Fund has been declining since FY 1998-99 when 1,239 claims
were received. In FY 1999-2000, 1,230 claims were received;
AB 1906
Page 3
for FY 2000-01, 944; for FY 2001-02, 653; for FY 2001-02, 453,
and, as of the end of January 2004, only 219 claims have been
received in the current fiscal year. There are currently
4,608 claims on the UST Cleanup Fund priority list, with 4,449
of them received from Class D claimants. Since its inception,
the UST Cleanup Fund program has made almost $1.5 billion in
payments on over 39,000 claims.
Analysis Prepared by : Steve Archibald / APPR. / (916)
319-2081