BILL ANALYSIS �
SB 445
Page 1
Date of Hearing: June 17, 2014
ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS
Luis Alejo, Chair
SB 445 (Hill) - As Amended: June 10, 2014
SENATE VOTE : Not relevant.
SUBJECT : Underground storage tanks: petroleum.
SUMMARY : Extends the current State Water Resources Control
Board (State Water Board) program for the clean-up of
Underground Storage Tanks (USTs) from 2016 to 2020.
Specifically, this bill :
1)Authorizes a two-cent per gallon fee on petroleum products
until 2020 to the extent the current State Water Board program
for the clean-up of USTs pursuant to the Barry Keene
Underground Storage Tank Cleanup Act (Act) of 1989.
2)Requires owners and operators of single-walled USTs to
permanently close their single-wall tanks by December 31,
2020. Single-wall tanks near public drinking water wells must
be closed by December 31, 2018.
3)Provides that before December 31, 2018, the owner or operator
of an UST must demonstrate that they will meet the financial
responsibility requirements of state and federal laws with an
alternative to the existing Underground Storage Tank Cleanup
Fund (Fund). Beginning on January 1, 2019, UST owners or
operators must meet existing federal and state financial
assurance requirements without relying on the Fund.
4)Authorizes the State Water Board to impose administrative
civil liability on persons who make fraudulent claims and
misrepresentations to the Fund.
5)Bars claimants and consultants convicted of fraud against the
Fund from further participation in the Fund.
6)Authorizes the State Water Board to recover the costs
associated with investigating and prosecuting fraud cases
against the Fund from persons who were proven to have engaged
in fraud.
SB 445
Page 2
7)Increases the maximum amount for replacing, removing, or
upgrading USTs program grants from $50,000 to $70,000.
8)Establishes a new Site Cleanup Subaccount in the Fund which
can be used to pay for the costs of investigating and
remediating sites with surface or groundwater contamination.
9)Dedicates $0.003 (3 mils) of the assessment for the State
Water Board to use for the following purposes:
a) Loans and grants to assist small business UST owners and
operators to come into compliance with UST regulatory
requirements by removing, replacing, or upgrading USTs,
including complying with the phase out of single-wall
tanks;
b) Deposit into the Site Cleanup Subaccount for the
investigation and remediation of contaminated sites with no
viable responsible party; and,
c) Provides additional funding, as needed, to the School
District Account to reimburse school districts for their
costs associated with cleaning up leaking USTs.
EXISTING LAW :
Pursuant to the Barry Keene Underground Storage Tank Cleanup Act
(Act) of 1989:
1)Establishes the Fund for the deposit of fees collected
pursuant to the Act.
2)Establishes a base storage fee of $0.014 (14 mils) for each
gallon of petroleum placed in an UST.
3)Established, until January 1, 2014, an additional storage fee
of $0.006 (6 mils) for each gallon of petroleum placed in an
UST for a total of $0.02 per gallon.
4)Authorizes the State Water Board to expend the moneys in the
Fund, upon appropriation by the Legislature, for various
purposes, including the payment of claims to aid owners and
operators of petroleum USTs who take corrective action to
clean up unauthorized releases from those tanks, corrective
actions undertaken by specified agencies, the clean-up and
SB 445
Page 3
oversight of unauthorized releases at abandoned tank sites,
and grants to small businesses to retrofit certain hazardous
substance USTs.
5)Requires, pursuant to United States Environmental Protection
Agency (US EPA) regulations (section 280.90, subpart
H-Financial Responsibility, part 280, 40 CFR) published on
October 26, 1988, owners and/or operators of USTs to
demonstrate through insurance coverage or other acceptable
mechanisms that they can pay for clean-up and third-party
damages resulting from leaks that may occur from their USTs.
FISCAL EFFECT :
1)This bill would result in increased revenues into the Cleanup
Fund of approximately $79 million between January 1, 2015, to
January 1, 2016 (by increasing the current assessment by $.006
(6 mils), and would continue to generate approximately $260
million annually thereafter until January 1, 2020.
2)Approximately $40 million annually would be available to the
State Water Board for the following purposes:
a) Replacing, removing, or upgrading underground storage
tanks (RUST) loans and grants to assist small business UST
owners and operators to come into compliance with UST
regulatory requirements by removing, replacing, or
upgrading USTs, including complying with the phase out of
single-wall tanks;
b) For deposit into the Site Cleanup Subaccount for the
investigation and remediation of contaminated sites with no
viable responsible party;
c) Provide additional funding, as needed, to the School
District Account to reimburse school districts for their
costs associated with cleaning up leaking USTs (LUSTs); and
d) The remaining amount would be available to reimburse UST
owners and operators for their costs of cleaning up leaking
USTs and Cleanup Fund and Regulatory Oversight
administrative costs.
COMMENTS :
SB 445
Page 4
Need for the bill : According to the author, "Leaks from
underground storage tanks represent an ongoing threat to
California groundwater and land resources. Even a small amount
of petroleum released from a leaking tank can contaminate
groundwater. SB 445 will continue the important work that the
state has done to address the threat from underground tanks and
allow businesses, local agencies, and schools to clean up the
legacy of past practices that poses a threat to public health
and the environment. This bill provides new direction for the
state to tackle the legacy issue of single-walled tanks still in
use and begin to address groundwater contamination from a wider
range of toxic chemicals."
UST Program Background : The Barry Keene Underground Storage
Tank Cleanup Fund Act of 1989 was created by the California
Legislature, and is administered by the State Water Board, to
provide a means for petroleum UST owners and operators to meet
the federal and state requirements. The Fund also assists a
large number of small businesses and individuals by providing
reimbursement for unexpected and catastrophic expenses
associated with the clean-up of leaking petroleum USTs.
Currently, the UST program is supported by a 1.6 cent per gallon
fee collected quarterly from petroleum UST owner or operators by
the State Board of Equalization. The fee currently generates
about $270 million per year for claims reimbursement and
disbursement to other authorized accounts including: the
Emergency, Abandoned, and Recalcitrant (EAR) Account; the
Commingled Plume (CP) Account; the RUST program; and, the
Drinking Water Treatment and Research Fund (DWTRF). With the
exception of the DWTRF, which is administered by the Department
of Public Health, these accounts are all managed by the State
Water Board.
Claims are paid in priority order based on criteria established
in statute: "A" or first priority is given to homeowners; "B"
or second priority is for small business, non-profit, or small
local government agencies with revenue below a specified level;
"C" or third priority is given to parties with fewer than 500
employees; and, "D" or lowest priority is given to all other
claimants, including major corporations and larger local
governmental agencies.
In recent years, program expenditures have exceeded revenues,
SB 445
Page 5
in part due to poor program oversight by State Water Board,
and in part due to unforeseen cost increases to clean up
contaminated sites. Based on the results of a recent program
audit, State Water Board has made several changes to the
program to better manage available funding and to speed up the
process for completing cleanup projects. Additionally, the
statute changes made over the last several years and the
increased revenues from AB 291 (Wieckowski), Chapter 579,
Statutes of 2011, offset a large portion of the program
deficiency. SWRCB believes that recent program improvements
should also reduce demand for future funding.
Single-walled USTs brief : This bill would require owners and
operators of single-walled USTs to permanently close their
single-wall tanks by December 31, 2020, except single-wall tanks
near public drinking water wells must be closed by December 31,
2018.
Antiquated single-walled USTs and components present a high risk
of leaking gasoline, diesel fuels, fuel additives, and other
hazardous substances into the soil and groundwater, posing a
threat to human health and the environment. Single-walled tank
systems have a higher propensity for leaking than newer tanks
and without secondary containment, pollutants leak directly into
the soil and groundwater. This risk is heightened in areas where
USTs are located near drinking wells, with leaks resulting in
serious consequences to drinking water sources.
Recent studies indicate that newly emerging fuels - such as
biodiesel and ethanol - may cause degradation of UST systems,
thus increasing the possibility that these systems will fail.
This is of particular concern with older systems and
single-walled USTs because these systems have a higher
propensity to leak than newer tanks, and without secondary
containment, the fuels leak directly into the soil and
groundwater. Even when a release from a single-walled tank
occurs, UST owners are only required to replace the tank with
double-walled components if the entire system is replaced. The
State Water Board has no authority under current law to require
the replacement of single-walled USTs with more reliable
double-walled tanks designed to prevent releases from entering
the environment. Currently there are approximately 2,000
operating UST facilities (12 percent of the total) that have
single-walled USTs, or pipes, or both.
SB 445
Page 6
Fraud prevention and recovery brief : This bill would provide
the State Water Board with authority to help prevent fraud in
the Fund and help recover monetary losses to the Fund due to
fraud and misrepresentation. The bill would accomplish this by:
1) authorizing the State Water Board to impose administrative
civil liability on persons who make fraudulent claims and
misrepresentations to the Fund; 2) barring claimants and
consultants convicted of fraud against the Fund from further
participation in the Fund; and, 3) authorizing the State Water
Board to recover the costs associated with investigating and
prosecuting fraud cases against the Fund from persons who were
proven to have engaged in fraud.
Current law does not provide the State Water Board with the
necessary enforcement tools to effectively prevent fraud in the
Fund program or to recover funds in a timely, cost-effective
manner from those who defraud the State. This lack of authority
appears to have resulted in numerous cases of fraudulent claims
being submitted to the Fund by UST owners and operators. Every
dollar fraudulently obtained from the Fund is one dollar less
that is available for legitimate and necessary clean-up of the
environment contaminated by UST leaks.
Current Funding - Comparison of LUSTs and Site Cleanup Programs :
LUST cases have benefited from the Cleanup Fund, which has
greatly contributed to moving LUST cases through closure. The
Cleanup Fund provides a means for petroleum UST owners and
operators to meet the federal and state requirements of
maintaining financial responsibility to pay for any damages
arising from unauthorized releases of petroleum from their UST
systems. Since implementation of the Cleanup Fund in 1989, the
Cleanup Fund has disbursed over $3.2 billion to eligible
claimants for LUST clean up. Additionally, the UST Program has
overseen the clean-up of over 35,000 LUST cases since 1984.
Clean up for many of these cases, which are small businesses and
individuals that could not normally afford cleanup in its
entirety, were funded partially or fully with Cleanup Fund
revenues up to $1.5 million each. In contrast, the Site Cleanup
Program (SCP) has very little revenues to assist small business
owners and individuals with clean up. The Water Boards' Cleanup
and Abatement Account typically disburses between $1 million to
$5.5 million per year for as few as four to six SCP cases for
small business owners or individuals. For the vast majority of
SCP cases, the responsible party is required to finance the
clean-up of their site in its entirety and pay for agency
SB 445
Page 7
oversight under the Water Boards' Cost Recovery Program. Of the
5,667 open SCP cases, only 2,366 (42%) are in the Cost Recovery
Program. For oversight and administration of the program, the
Water Boards receive approximately $15 million of funding per
year from the Cost Recovery Program for these 2,366 cases. For
oversight of the remaining 3,301 cases that are not in the Cost
Recovery Program, the Water Boards receive approximately $2
million per year from the State General Fund.
Related Legislation :
AB 282 (Wieckowski) would extend the sunset date of the
Underground Storage Tank (UST) Cleanup Program from 2016 until
2018, and extend the sunset of a $0.006 surcharge on petroleum
stored in an UST from 2014 until 2016. Held in the Senate
Appropriations Committee.
Prior related Legislation :
AB 120 (Committee on Environmental Safety and Toxic Materials,
Chapter 635, Statutes of 2013). This bill requires the State
Water Board to waive a provision in existing law that requires a
school district to have continuously maintained a permit for
their underground storage tanks in order to qualify for funding
from the Underground Storage Tank Cleanup Fund School District
Account (School District Account), if the school district meets
certain conditions. The School District Account is used to
reimburse school districts for their costs associated with
cleaning up LUSTs.
AB 291 (Wieckowski, Chapter 569, Statutes of 2011). This bill
extends for two years a temporary fee paid per gallon on motor
vehicle fuel that the owner of an underground storage tank
must pay from 1.4 mils to 2 mils per gallon through January 1,
2014. The State Water Board indicates that projected revenues
from the extension of the supplemental tax will be about $180
million over two years.
AB 358 (Smyth, Chapter 571, Statutes of 2011). This bill
streamlines the State Water Board process for completing the
clean-up of USTs by establishing authority for the State Water
Board to close sites overseen by local government as part of the
State Water Board existing five-year review process.
REGISTERED SUPPORT / OPPOSITION :
SB 445
Page 8
Support :
California League of Conservation Voters
Consultants, Owners, Regulators and Enviro-Vendors (CORE), Inc.
Opposition :
California Independent Oil Marketers Association
Analysis Prepared by : Bob Fredenburg / E.S. & T.M. / (916)
319-3965