BILL ANALYSIS
AB 1906
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Byron D. Sher, Chairman
2003-2004 Regular Session
BILL NO: AB 1906
AUTHOR: Lowenthal
AMENDED: As Introduced
FISCAL: Yes HEARING DATE: June 28, 2004
URGENCY: No CONSULTANT: Jami Janowiak
SUBJECT : UNDERGROUND STORAGE TANK CLEANUP: FEE
INCREASE
SUMMARY :
Existing law , under the Barry Keene Underground Storage Tank
Cleanup Act of 1989:
1) Establishes the Underground Storage Tank Cleanup Fund for
the deposit of fees collected pursuant to Section 25299.43.
(Section 25299.50 Health and Safety Code.)
2) Authorizes expenditures from the Fund for purposes
consistent with the chapter, specifically the clean up of
unauthorized releases from underground storage tanks.
3) Establishes a fee of 1.2 mils per gallon of motor vehicle
fuel that the owner of an underground storage tank must pay
for each gallon of petroleum that is stored in an
underground tank.
4) Directs the Water Board to adopt a ranking system to
prioritize the payment of claims made against the Fund as
follows:
a) A Class A claim is a residential tank owner.
b) A Class B claim is a small business as defined in
Section 14837(d) of the Government Code or a
governmental agency or a nonprofit organization that
receives total annual revenues of not more than $7
million.
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c) A Class C claim is a business that employs fewer than
500 employees, that is independently owned and operated
and is not dominant in its field of operation, or a
governmental agency or a nonprofit organization that
employs 500 employees.
d) A Class D claim is any other eligible claimant (e.g.
large oil company or other corporate entity, local
government etc.).
5) Requires that claims are paid according to the priority
assigned to each class and not according to when it was
filed. Class A claims are paid first and a newer Class A
claim is paid before a claim in any other class even though
it might have been filed first.
6) "Sunsets" the program in the year 2010.
This bill :
1) Increases the storage fee for a gallon of petroleum stored
in an underground storage tank $.001 (one mil) effective
January 1, 2005 and an additional $.001 (one mil) effective
January 1, 2006.
2) Makes findings that:
a) If the storage fee is not increased the Fund would
not be sufficient to pay all the eligible claimants
under the Program before it sunsets in 2010.
b) Class D claimants would be disproportionately
effected if the fee were not increased and would loose
the opportunity to have claims.
COMMENTS :
1) Purpose of Bill . According to the author's office:
According to the sponsor, Southland Corporation (7-Eleven
Stores), a projection of the current storage fee until the
sunset date balanced against the number and cost of
outstanding Class D claims suggests that the Fund will not
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be able to pay all of the pending claims. Class D claims
are the most expensive and complex with an average cost of
$200,254, and as of February of 2004, there are 4,447 Class
D claims outstanding. The sponsor further suggests that
having paid into the Fund, as all of the other classes
have, the fee should be increased to ensure Class D
claimants have the same opportunity to have valid claims
paid that claimants in other classes have had.
2) Background On Keene Petroleum Tank Cleanup Program . In
response to concern that a significant number of
underground storage tanks in California were leaking, the
Legislature enacted the Barry Keene Underground Storage
Tank Cleanup Trust Fund Act of 1989 [Act]. The Act
authorizes the charge of a fee for each gallon of petroleum
stored in an underground storage tank and requires this fee
to be deposited in the Underground Storage Tank Cleanup
Fund [Fund]. The Fund was created to pay for necessary
corrective action and cleanup where other resources were
not available because it is in the best interest of both
public health and the water supply to stop the unauthorized
release of petroleum from underground storage tanks.
The Act directs the Water Board to adopt a priority system to
rank the claims and to determine the order in which claims
are paid. Under the current priority system a residential
tank owner has the highest priority and such claims are
funded immediately. (See #3 of Existing Law for the
complete prioritization system.) This priority system
reflects the policy choice that the owner of a tank who has
less resources is a greater priority for assistance because
he has less of an ability to internalize the often
unanticipated cost of cleanup and corrective action for a
leaking tank.
3) Current Fee Is Insufficient To Pay Large Corporate and
Local Government Claims . According to data provided to the
LAO from Water Board Program Staff, the Fund is not solvent
to pay all of the current active claims, claims on the
priority list, and anticipated new claims. In fact, the
estimated unfunded balance is approximately $659 million.
Because the fee increase is staggered, the sponsor
estimates the average, annual revenue increase is
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approximately $32 million. Projected over the remaining
six years of the fund, the increase in fee will deposit an
additional $192 million in the fund. Therefore, despite
the fee increase in this bill, the Fund will maintain an
estimated unfunded balance of $467 million.
A question that arises over the current version of the bill is
whether the proposed fee increase in this bill is
sufficient to accomplish the stated objectives.
4) Should Increase In Underground Storage Tank Fee Be
Undertaken for the Sole Purpose Of Reimbursing Major Oil
Companies, Large Corporations, and Others for the Cleanup
Costs? As presently drafted, this measure raises an
important policy question for the committee and the
Legislature: at a time of extreme budget cuts and scarce
resources for environmental and public health protection,
should the Legislature enact a fee increase that primarily
benefits large corporations and others? As noted in the
comments above, Category (D) Claimants consist of parties
other than businesses and local governments with 500
employees or less and other than so-called "mom and pops"
who were the parties the Legislature was originally
concerned about when the Keene Program was created.
Currently, there are major legislative debates underway over
how to cleanup brownfields, how to ensure adequate funding
for programs supported by industry and environmental groups
alike to promote clean air, and other programs to protect
air and water. At the same time, the budget currently
under consideration by the Legislature has undergone
significant cuts in the areas of air and water quality due
to scarce financial resources.
A case can be made that larger local governments should still
be able to access this money, since these costs will be
borne by taxpayers in any event.
However, in light of the shortness of public dollars for air
and water quality and brownfields cleanup, and the record
profits currently being banked by many of the corporations
who stand to benefit from this fee increase, the author and
committee may wish to consider whether this fee should be
increased to assist in funding programs that are important
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to the protection of public health and the environment, and
not simply reimbursing well-capitalized private entities
for their cleanup costs.
Given that this debate over how to fund various air and water
programs will continue until the end of session, one option
for the committee would be to strike the contents of this
bill and move it to the floor where it can be kept as a
vehicle to increase the fee provided funding for these
other programs is worked out.
SOURCE : Southland Corporation (7-Eleven Stores)
SUPPORT : California Grocers Association, California
Retailers Association, California State
Association of Counties,
League of California Cities, Western States
Petroleum Association
OPPOSITION : None on file