BILL ANALYSIS
AB 907
Page 1
Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 907 (Chesbro) - As Amended: May 11, 2009
Policy Committee: Natural
ResourcesVote:6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill increases fees paid by motor oil manufacturers and
creates an incentive payment for rerefined motor oil.
Specifically, this bill:
1)Increases the fee paid by motor oil manufacturers from four
cents a quart to six cents a quart, exempts rerefined oil from
the fee, and authorizes the California Integrated Waste
Management Board (CIWMB) to adjust the fee for inflation,
annually.
2)Increases the used oil recycling incentive from no less than
four cents a quart to no less than 10 cents a quart, and
authorizes CIWMB to award this incentive to in-state and
out-of-state entities.
3)Prohibits commercial oil change stations from receiving the
recycling incentive payments, except to the extent that they
accept, for free, used oil brought in containers by the
public.
4)Establishes the used oil refining incentive at no less than
two cents a quart, available to in-state and out-of-state
entities.
5)Authorizes CIWMB to issue grants to, or enter into contracts
with, local government, nonprofits and private entities to
promote used oil recycling.
6)Increases the total amount of payments issued by CIWMB to
local governments for local used oil collection programs from
AB 907
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$10 million to $13 million annually.
FISCAL EFFECT
1)Minor, absorbable one-time costs to CIWMB to expand and revise
the existing used-oil program. (California Used Oil Recycling
Fund (CUORF))
2)Potentially increased annual revenues, possibly in the
millions of dollars, resulting from increased used-oil and new
rerefined oil fees. (CUORF)
3)Potential annual incentive payments to used oil rerefiners,
likely ranging from $500,000 to $1,000,000. (CUORF)
4)Increased annual payments to local governments, by as much as
$3 million, for used oil collection programs. (CUORF)
COMMENTS
1)Rationale. According to the author, this bill would increase
the amount of oil that is recycled by encouraging not just
used oil collection, but used oil rerefining as well. Such
recycling of used oil is desirable for several reasons.
First, used oil is dirty; even small amounts, improperly
disposed of, can contaminate drinking water supplies. Second,
it takes substantially less energy to rerefine used oil than
it does to refine virgin oil. Finally, today, most used oil
collected in California is transferred out of state for use,
untreated, in energy facilities where the oil is burned to
make electricity or it is reprocessed into low-grade, highly
polluting "bunker fuels," which is used in seagoing ships and
for other maritime purposes.
2)Background.
a) Used Oil Collection. The California Oil Recycling
Enhancement Act, administered by CIWMB, is designed to
discourage the illegal disposal of used oil. This law
requires oil manufacturers to pay CIWMB four cents for each
quart of lubricating oil sold in California. Registered
industrial generators, curbside collection programs, and
certified collection centers, including commercial oil
change stations, are eligible to receive four cents for
each quart of used lubricating oil recycled.
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b) Rerefined Oil Is Good Oil. According to CIWMB,
rerefining is an energy-efficient and environmentally
beneficial method of managing used oil. Rerefined oil
takes about one-third as much energy as does refining crude
oil. It only takes one gallon of used oil to make 2.5
quarts of rerefined oil. However, it takes 42 gallons of
crude oil to make 2.5 quarts of virgin oil.
c) Much Used Oil Uncollected. CIWMB commissioned Lawrence
Livermore National Laboratory to produce a report,
Improving Used Oil Recycling in California, which was
published in 2008. According to the report, in 2006,
approximately 115.8 million gallons, or 71% of all used oil
generated in the state, was collected. 45.7 million
gallons (approximately four times the amount spilled by the
Exxon Valdez) is unaccounted for.
d) Even Less Used Oil Rerefined. Of the oil collected in
California, only 10% is rerefined, even though rerefineries
in the state are operating at maximum capacity. The
remainder is used for energy generation out-of-state or is
processed into bunker fuel.
3)Supporters , including environmentalists and oil rerefiners,
argue that this bill, by exempting rerefined oil from the oil
recycling fee and establishing an incentive payment for
rerefining oil, will augment the market for rerefined oil.
The effect will be oil rerefiners who "pull" used oil towards
refineries, rather than relying on oil collection fees to
"push" used oil towards rerefinement.
4)Opponents , including some petroleum processors and industry
organizations, contend the bill unfairly burdens their
products with higher fees.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081