Date of Hearing: September 13, 2019

ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS

Bill Quirk, Chair

ABPCA Bill Id:AB 181 (

Author:Maienschein) – As Amended Ver:September 4, 2019

FOR CONCURRENCE

SUBJECT: Hazardous waste: cost reimbursement

SUMMARY: Exempts a hazardous waste facility owned by a federal agency from the requirement that the facility provide at least 25 percent of the hazardous waste facility permit cost to the Department of Toxic Substances Control (DTSC) in advance of DTSC processing the permit application.

EXISTING LAW:

1) Authorizes DTSC to issue permits for the use and operation of one or more hazardous waste management units at a facility that meets the standards adopted pursuant to the Hazardous Waste Control Law (HWCL). (Health and Safety Code (HSC) § 25200 (a))

2) Requires DTSC to impose conditions on each permit specifying the types of hazardous wastes that may be accepted for transfer, storage, treatment, or disposal. (HSC § 25200 (a))

3) Requires a permit issued by DTSC to be for a fixed term, not to exceed ten years. (HSC § 25200 (c) (1)(A))

4) Requires an owner or operator of a hazardous waste facility who intends to extend the term of the permit, before the fixed term expires, to submit a complete Part A application. (HSC § 25200 (c) (1)(B))

5) States that when a complete Part A renewal application has been submitted before the end of the permit’s fixed term, the permit is deemed extended until the renewal application is approved or denied and the owner or operator has exhausted all applicable rights of appeal. (HSC § 25200 (c)(1)(B))

6) Requires an owner or operator of a permitted hazardous waste facility to submit an application for permit renewal at least 180 days before the expiration date of the permit. (22 California Code of Regulations (CCR) § 66270.10)

FISCAL EFFECT: This bill passed out of the Senate Appropriations Committee pursuant to Senate Rule 28.8, meaning that the chair of the Committee determined that any additional state costs are not significant and do not and will not require the appropriation of additional state funds, and that the bill will cause no significant reduction in revenues.

COMMENTS:

Need for the bill: According to the author, "AB 181 is a clean-up bill that reconciles conflicts between federal and state law by clarifying that, while military hazardous waste facilities in the state are authorized to pay full reasonable service charges for their hazardous waste facility permit applications, they are not required to pay advanced fees for permit applications to DTSC. Federal facilities will still be required to pay all reasonable service charges associated with a permit renewal application, and all other charges approved by a specific appropriation or federal law."

California Hazardous Waste Control Law (HWCL): The HWCL is the state's program that implements and enforces federal hazardous waste law in California and directs DTSC to oversee and implement the state's HWCL. Any person who stores, treats, or disposes of hazardous waste must obtain a permit from DTSC. The HWCL covers the entire management of hazardous waste, from the point the hazardous waste is generated, to management, transportation, and ultimately disposal into a state or federal authorized facility.

DTSC Independent Review Panel (IRP): In 2015, the Legislature passed and the Governor signed SB 83 (Chapter 24, Statutes of 2015), which established within DTSC a three-member IRP to review and make recommendations regarding improvements to DTSC's permitting, enforcement, public outreach, and fiscal management. The statute stipulates that IRP membership shall be comprised of a community representative, a person with scientific experience related to toxic materials, and a local government management expert. Pursuant to SB 83, the IRP was authorized until January 1, 2018. Over the course of its term, the IRP conducted 24 public meetings and released 11 progress and annual reports. On January 8, 2018, the IRP released its final report and recommendations concluding: "The Department has implemented, or is working on, most of the IRP’s recommendations and has achieved, or partially achieved, many of the IRP’s suggested performance metrics. However, there is more work to be done."

DTSC’s hazardous waste management permitting program: DTSC is responsible for administering the hazardous waste facility permitting program established under the California HWCL and the federal Resource Conservation and Recovery Act (RCRA). The core activities of the permitting program include: review of RCRA and non-RCRA hazardous waste permit applications to ensure safe design and operation; issuance and denial of operating permits; issuance of post-closure permits; approval and denial of permit modifications; issuance and denial of emergency permits; review and approval of closure plans; oversight of approved closure plans; and, providing public involvement on issues related to permitted facilities. In general, DTSC issues permits for complex and large facilities, such as Class I landfills, large treatment facilities, and facilities managing RCRA hazardous waste.

A hazardous waste facility permit granted by DTSC authorizes a facility to transfer, treat, store, or dispose of hazardous waste. Presently, there are 119 permitted hazardous waste facilities in California. In order for a facility to gain authorization to treat, store, transfer, or dispose of hazardous waste, its permit application must include a detailed description of the facility’s activities, units, equipment, operation plans, recordkeeping system, procedures for response to accidental release of toxic substances or other emergencies, and training. The application will also contain engineering and structural specifications, closure plans, closure cost estimates, and the mechanism for financial assurance in the event of closure. Ultimately, the applicant must demonstrate the ability to manage the waste in a protective manner. DTSC permit applications must also address requirements beyond hazardous waste laws and regulations. For example, the permit process must adhere to the California Environmental Quality Act (CEQA) requirements, which involves a comprehensive review of impacts of the facility on public health and the environment.

At any point in the permit application review process, if DTSC finds that the facility does not meet applicable standards, it can deny the permit application. Either an approval or denial by DTSC is considered a permit decision. Federal and state law allow facilities with expired permits to continue to operate if the facility has submitted an application for renewal that is administratively complete in advance of the permit expiration date. These types of permits (i.e., expired permits for a facility that has submitted an administratively complete application for a permit renewal) are referred to as "continued permits."

Over the past decade or so, DTSC had received complaints from the public about its permitting program and held meetings with the public, the regulated community, and stakeholders to identify and understand concerns about its permitting program.

In 2012, DTSC commissioned CPS HR Consulting, a non‐profit corporation established under the California Joint Powers Authority, to conduct an external review of the permitting program. The review found that permitting decisions were not timely, taking upwards of four years to complete on average and that the permitting program restructuring from Fiscal Year (FY) 2008‐2009 had resulted in a lack of management structure. The review found that the lack of management structure was a factor in the poor performance of the program; lacked consistent processes for making permitting decisions; resulted in deficient training of staff; lead to a lack of clarity around when to deny or revoke a permit; and, resulted in a lack of performance metrics.

In early 2014, DTSC developed a Permitting Enhancement Work Plan (Work Plan) to significantly upgrade and strengthen DTSC’s permitting program and to ensure that the problems of the past would not resurface in the future. The Work Plan serves as a comprehensive roadmap to guide DTSC’s efforts to improve the permitting program’s ability to issue protective, timely, and enforceable permits using more transparent standards and consistent procedures. In addition, DTSC mapped, for the first time, the entire permitting process and memorialized it in the form of a baseline flow chart that staff can work from and incorporate future improvements.

Beginning in FY 2015‐2016, DTSC’s permitting program established a performance management approach similar to that used by the DTSC cleanup program. One of the essential elements to the implementation of this performance management approach is the development of an annual work plan. The annual work plan specifies due dates for major milestones in the permitting process on permitting projects, tracks completion of permitting activities, increases communication between staff and management on permit progress, and measures planned versus completed milestones as a performance measure of the permitting program.

Permit processing time: Ensuring that hazardous waste facilities are managed safely begins with proper and timely permitting by DTSC. These facilities handle dangerous substances and involve complex processes, making the review of permit applications challenging, yet extremely important. Before DTSC embarked upon improving the permitting program, the average time it took to process an application was 4.4 years, with some applications continuing 10-20 years past the expiration of their permit. Given the dangerous nature of substances at these facilities, it is very important that the public be kept informed about these facilities, including the siting, permit process, and enforcement actions taken at these facilities.

Currently, the only time the public is involved in the permit process is when there is a draft permit decision released by DTSC. If a permit application takes 10 years to review, that means it could have been 20 years since the public has been provided information about the hazardous waste facility in their community. DTSC’s permit improvements have a stated goal of being able to process 90% of the permit applications within two years; however, under current law, this means that even if DTSC achieves this goal, all of these permits will exceed their expiration by a year and a half.

Fees support DTSC's hazardous waste regulatory program: DTSC's hazardous waste regulatory program is funded by fees assessed to businesses in California that generate, store, transport, treat, or dispose of hazardous waste. These fees include the:

1) Generator Fee: Paid by generators that produce five or more tons of hazardous waste per calendar year;

2) Disposal Fee: Paid by persons who dispose of hazardous waste to land in California;

3) Facility Fee: Annual fee paid by hazardous waste facilities operating under a Full Permit;

4) Standardized Permit, Post Closure Permit, or Transportable Treatment Unit Permit;

5) EPA ID Verification Fee: Assessed to businesses that require an EPA ID number;

6) Manifest User Fee & Manifest Processing Fee: Paid by users of manifests; and,

7) Activity Fee: Paid by persons applying for hazardous waste facility permits, permit modifications, or permit renewals. (Note: this fee was removed in 2016 and replaced by a "fee for service")

DTSC removes the permitting activity fee: In 2016, DTSC proposed removing the "Activity Fee" and replacing it with a reimbursement for a "fee for service" option. The proposal was adopted by the Legislature and incorporated into the 2016/2017 Budget Act. When DTSC proposed this change, it stated that it did not receive enough fees from the "Activity Fee" in order to cover its permitting costs. As part of the proposal to remove the "Activity Fee", the proposal also required permit applicants to provide at least 25 percent of the cost of the permit in advance to DTSC.

Permitting fee change impacts United States (U.S.) military facilities: The U.S. military has seven permitted hazardous waste facilities at military bases in Kern, Santa Barbara, San Diego, and Solano counties. These military facilities have historically paid DTSC the full cost of the permit; however, the military is prohibited under federal law from providing the 25 percent advance payment. The federal prohibition against making advanced payments is contained within federal law (31 U.S. Code § 3324), "an advance of public money may be made only if it is authorized by a specific appropriation or other law…" There is no authorization for these military facilities to make an advanced payment for their hazardous waste facility permit. Therefore, AB 181 exempts federally-owned hazardous waste facilities from the requirement to provide the permit costs to DTSC in advance of DTSC processing the permit application. Without the change to statute proposed in AB 181, DTSC will be unable to process the permit applications for these military hazardous waste facilities.

Arguments in support: According to the Department of the Navy, "On behalf of the Military Services in California, we request your support of AB 181 (Maienschein). Having a permit denied because of the absence of an advanced fee is an untenable situation for the military in CA, whose hazardous waste facilities are integral to military operations and to broader public health and safety."

Related legislation:

1) AB 995 (C. Garcia). Creates a policy setting and permit appeals board over DTSC; creates a fee task force to review all of the statutory mandates and regulatory fees that fund DTSC; requires a hazardous waste management plan to be adopted by January 2021; updates statutes regarding financial assurance for corrective action; and, adds transparency in the permitting of hazardous waste facilities. This bill is pending in the Senate Rules Committee.

2) AB 2345 (Reyes, 2018). Would have made statutory changes to improve the permitting process for the permitting of hazardous waste facilities. This bill was amended to deal with a completely different policy.

3) AB 2606 (Fong, 2018). Would have required DTSC to process a hazardous waste facility renewal permit in an expedited manner if DTSC determines certain conditions apply. This bill was held on the suspense file in the Senate Appropriations Committee.

4) AB 248 (Reyes, 2017). Would have required an applicant for a hazardous waste facilities permit to submit their application two years before their permit expires. This bill was vetoed by the Governor.

5) SB 774 (Leyva, 2017). Would have created the California Toxic Substances Board within DTSC to provide effective, reliable, transparent, and accountable oversight of California's hazardous waste management and of the remediation of contaminated sites. This bill was amended to deal with a completely different policy.

6) SB 812 (De León). Would have revised DTSC's permitting process for hazardous waste facilities, including deeming permit applications denied if they were not acted on by DTSC within three years after permit expiration. This bill was vetoed by the Governor.

REGISTERED SUPPORT / OPPOSITION:

Support

Department of Navy-Military Services in California

Opposition

None on file.

Analysis Prepared by: Josh Tooker / E.S. & T.M. /

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 181

Author:(Maienschein)

As Amended Ver:September 4, 2019

Majority vote

SUMMARY:

Exempts a hazardous waste facility owned by a federal agency from the requirement that the facility provides at least 25% of the hazardous waste facility permit cost to the Department of Toxic Substances Control (DTSC) in advance of DTSC processing the permit application.

The Senate Amendments:

Delete the contents of the bill, as adopted by the Assembly, and insert the exemption for a federally owned hazardous waste facility from the requirement of providing at least 25% of the permit cost to DTSC in advance of DTSC processing the permit application.

COMMENTS:

Department of Toxic Substances Control's (DTSC's) hazardous waste management permitting program: DTSC is responsible for administering the hazardous waste facility permitting program established under the California Hazardous Waste Control Law and the federal Resource Conservation and Recovery Act (RCRA). The core activities of the permitting program include: review of RCRA and non-RCRA hazardous waste permit applications to ensure safe design and operation; issuance and denial of operating permits; issuance of post-closure permits; approval and denial of permit modifications; issuance and denial of emergency permits; review and approval of closure plans; oversight of approved closure plans; and, providing public involvement on issues related to permitted facilities. In general, DTSC issues permits for complex and large facilities, such as Class I landfills, large treatment facilities, and facilities managing RCRA hazardous waste.

A hazardous waste facility permit granted by DTSC authorizes a facility to transfer, treat, store, or dispose of hazardous waste. Presently, there are 119 permitted hazardous waste facilities in California. In order for a facility to gain authorization to treat, store, transfer, or dispose of hazardous waste, its permit application must include a detailed description of the facility's activities, units, equipment, operation plans, recordkeeping system, procedures for response to accidental release of toxic substances or other emergencies, and training. The application will also contain engineering and structural specifications, closure plans, closure cost estimates, and the mechanism for financial assurance in the event of closure. Ultimately, the applicant must demonstrate the ability to manage the waste in a protective manner. DTSC permit applications must also address requirements beyond hazardous waste laws and regulations. For example, the permit process must adhere to the California Environmental Quality Act (CEQA) requirements, which involves a comprehensive review of impacts of the facility on public health and the environment.

Fees support DTSC's hazardous waste regulatory program: DTSC's hazardous waste regulatory program consists of the regulation of the generation, treatment, storage, transportation, and disposal of state-only and federal hazardous waste; permitting and inspection of hazardous waste facilities; and, enforcement of hazardous waste control laws and regulations. DTSC's hazardous waste program is funded by fees assessed to businesses in California that generate, store, transport, treat, or dispose of hazardous waste.

DTSC removes the permitting activity fee: In 2016, DTSC proposed removing the "Activity Fee" and replacing it with a reimbursement for a "fee for service" option. The proposal was adopted by the Legislature and incorporated into the 2016/2017 Budget Act. When DTSC proposed this change, it stated that it did not receive enough fees from the "Activity Fee" in order to cover its permitting costs. As part of the proposal to remove the "Activity Fee", the proposal also required permit applicants to provide at least 25% of the cost of the permit in advance to DTSC.

Permitting fee change impacts United States (U.S.) military facilities: The U.S. military has seven permitted hazardous waste facilities at military bases in Kern, Santa Barbara, San Diego, and Solano counties. These military facilities have historically paid DTSC the full cost of the permit; however, the military is prohibited under federal law from providing the 25% advance payment. The federal prohibition against making advanced payments is contained within federal law (31 U.S. Code Section 3324), "an advance of public money may be made only if it is authorized by a specific appropriation or other law…" There is no authorization for these military facilities to make an advanced payment for their hazardous waste facility permit. Therefore, AB 181 exempts federally-owned hazardous waste facilities from the requirement to provide the permit costs to DTSC in advance of DTSC processing the permit application. Without the change to statute proposed in AB 181, DTSC will be unable to process the permit applications for these military hazardous waste facilities.

According to the Author:

"AB 181 is a clean-up bill that reconciles conflicts between federal and state law by clarifying that, while military hazardous waste facilities in the state are authorized to pay full reasonable service charges for their hazardous waste facility permit applications, they are not required to pay advanced fees for permit applications to DTSC. Federal facilities will still be required to pay all reasonable service charges associated with a permit renewal application, and all other charges approved by a specific appropriation or federal law."

Arguments in Support:

According to the Department of the Navy, "On behalf of the Military Services in California, we request your support of AB 181 (Maienschein). Having a permit denied because of the absence of an advanced fee is an untenable situation for the military in CA, whose hazardous waste facilities are integral to military operations and to broader public health and safety.

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

This bill passed out of the Senate Appropriations Committee pursuant to Senate Rule 28.8, meaning that the chair of the Committee determined that any additional state costs are not significant and do not and will not require the appropriation of additional state funds, and that the bill will cause no significant reduction in revenues.

VOTES:

ASM PUBLIC EMPLOYMENT AND RETIREMENT: 7-0-0

YES: Rodriguez, Voepel, Cervantes, Cooley, Cooper, Fong, O'Donnell

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

ASSEMBLY FLOOR: 74-0-6

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Petrie-Norris, Quirk, Quirk‑Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Cooley, Eduardo Garcia, Gray, Kiley, Patterson, Ting

ASM ENVIRONMENTAL SAFETY AND TOXIC MATERIALS: 9-0-0

YES: Quirk, Melendez, Arambula, Bauer-Kahan, Cristina Garcia, Holden, Mathis, Muratsuchi, Obernolte

UPDATED:

VERSION: September 4, 2019

CONSULTANT: Josh Tooker / E.S. & T.M. / (916) 319-3965 FN: 0002466

 THIRD READING  

Bill No: AB 181

Author: Maienschein (D)

Amended: 9/4/19 in Senate

Vote: 21

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 6-0, 9/10/19

AYES: Allen, Bates, Hill, Skinner, Stern, Wieckowski

NO VOTE RECORDED: Dahle

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: Not relevant

SUBJECT: Hazardous waste: cost reimbursement

SOURCE: Department of the Navy, Navy Region Southwest

DIGEST: This bill reconciles conflicts between federal and state law by allowing the Department of Toxic Substances Control (DTSC) to accept and process the military’s hazardous waste permits without requiring an advanced processing fee.

ANALYSIS:

Existing law:

1. Authorizes the military, under federal law, to pay “reasonable service charges” under the Resource Conservation and Recovery Act (RCRA) (42 USC §6961(a)).
   
2. Requires, as part of the hazardous waste control laws, a facility handling hazardous waste to apply for and obtain a hazardous waste facilities permit from the DTSC (Health and Safety Code (HSC) § 25200-25205).
   
3. Requires a person who applies for, or requests, among other things, a hazardous waste facilities permit or a renewal of an existing hazardous waste facilities permit, to enter into a written agreement with DTSC to reimburse the department for the costs incurred in processing the application or responding to the request, as provided (HSC § 25205.7).
   
4. Requires that agreement to provide for at least 25 percent of the reimbursement to be made in advance of the processing of the application or the response to the request (HSC § 25205.7).

This bill:

1. Exempts a facility owned by a federal agency from the requirement to provide at least 25 percent reimbursement in advance for processing a hazardous waste facility permit or a renewal of an existing hazardous waste facilities permit.
   
2. Deletes outdated provisions in the code.

Background

1. Hazardous Waste Facility Permitting. DTSC is responsible for administering the hazardous waste facility permitting program established under the California Hazardous Waste Control Law and the RCRA. In general, DTSC issues permits for complex and large facilities, such as Class I landfills, large treatment facilities, and for facilities managing RCRA hazardous waste. Presently there are 119 permitted hazardous waste facilities in California.
   
2. Fee-for-service. For decades, DTSC’s hazardous waste permit fees were established as a flat fee, by type of permit, with a published schedule.  In 2016, SB 839 (Committee on Budget and Fiscal Review), a Budget Trailer Bill, authorized DTSC to seek reimbursement of actual fees associated with processing hazardous waste permit applications, renewals, variances, or modifications.  This was significant for DTSC because they were operating in a deficit and were seeking the ability and the authority to be reimbursed for the operating costs of their hazardous waste permitting program.  Additionally, this law required that applicants pay an advance fee equal to 25 percent of DTSC’s total estimated costs of processing the permit request.  DTSC issued policies and procedures implementing this change in 2017, putting all permit applicants on notice of these changes.  This policy states, “DTSC will not begin or continue to process the application or request until after DTSC receives the full advance payment.”
   
3. Federal Hazardous Waste Facilities in California. The military has seven hazardous waste facilities across California at military bases in Kern, Santa Barbara, San Diego and Solano Counties. The permits associated with these facilities are renewed every 10-years. The Navy’s permit at Naval Base Coronado in San Diego County is currently up for renewal.

Under federal law, the military is authorized to pay “reasonable service charges.” Federal attorneys must review invoices which detail how federal money is spent under the “reasonable service charge” standard and authorize payment to DTSC when it is within the waiver of sovereign immunity. Under federal fiscal law, the military is prohibited from paying this new 25 percent fee in advance of DTSC staff actually performing work associated with reimbursable costs. The general federal prohibition against making advanced payments is contained within 31 USC §3324, "an advance of public money may be made only if it is authorized by a specific appropriation or other law..." There is no such specific authorization for advance payment under federal law for state or local hazardous permit services. According to the sponsor, this discrepancy has led to complications in the approval of the military’s hazardous waste permits and has resulted in a scenario where DTSC has no choice but to find that the military permit application is incomplete due to non-payment in advance.

According to the sponsor, throughout 2018, the military engaged with DTSC in the context of Naval Base Coronado and Travis Air Force Base’s permit renewal process, on the federal legal conflict with this new state advance fee mandate. DTSC Counsel’s position is that state law requires this advance fee and that the agency cannot administratively waive the fee.

AB 181 reconciles conflicts between federal and state law by allowing DTSC to accept and process the military’s hazardous waste permits without requiring an advanced processing fee. Federal facilities would still be required to pay for DTSC’s costs of processing the permit as those services are provided.

Comments

1. Purpose of Bill. According to the author, “The military owns 7 mission-critical Hazardous Waste (HW) facilities across California at military bases in Kern, Santa Barbara, San Diego and Solano Counties in support of the military’s national security mission and to protect public health and safety. The permits associated with these facilities are renewed every 10-years, and the Navy’s permit at Naval Base Coronado in San Diego County is currently up for renewal. While the military has historically paid DTSC the full cost of the permit application, the military is prohibited under federal fiscal law from paying the new 25% fee in advance of DTSC staff actually performing work associated with renewing the permit. This change in state law was brought about by a 2016 Trailer Bill. This discrepancy has led to DTSC’s inability to process the military’s HW permit applications, and has resulted in a scenario where DTSC has no choice but to find that the military permit application is incomplete due to non-payment in advance.

“AB 181 is a clean-up bill that reconciles conflicts between federal and state law by clarifying that, while military hazardous waste facilities in the state are authorized to pay full reasonable service charges for their hazardous waste facility permit applications, they are not required to pay advanced fees for permit applications to the California Department of Toxic Substances Control. Federal facilities will still be required to pay all reasonable service charges associated with a permit renewal application, and all other charges approved by a specific appropriation or federal law.”

Related/Prior Legislation

SB 839 (Committee on Budget and Fiscal Review, Chapter 340, Statutes of 2016) required a person who applies for a hazardous waste facilities permit or a renewal of an existing hazardous waste facilities permit to pay at least 25 percent of the agreed-upon reimbursement in advance, based on the DTSC’s total estimated costs of processing the application.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 9/12/19)

Department of the Navy, Navy Region Southwest (source)

OPPOSITION:

(Verified 9/12/19)

None received

ARGUMENTS IN SUPPORT:

According to the Department of the Navy, Navy Region Southwest, “under federal law, an advanced payment prior to services rendered is prohibited. This discrepancy could result in the inability of the military to obtain HW permits necessary to support the national security mission. An attempt to secure an administrative fix was unsuccessful and a legislative fix is needed to allow DTSC to accept and process the military’s HW permits. Having a permit denied because of the absence of an advanced fee is an untenable situation for the military in CA, whose HW facilities are integral to military operations and to broader public health and safety.”

Prepared by: Gabrielle Meindl / E.Q. / (916) 651-4108

9/12/19 12:48:37

**** END ****

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Allen, Chair

2019 - 2020 Regular

Bill No: AB 181

SUBJECT: Hazardous waste: cost reimbursement

DIGEST: This bill reconciles conflicts between federal and state law by allowing the Department of Toxic Substances Control (DTSC) to accept and process the military’s hazardous waste permits without requiring an advanced processing fee.

ANALYSIS:

Existing law:

1. Under federal law, the military is authorized to pay “reasonable service charges” under the Resource Conservation and Recovery Act (RCRA) (42 USC §6961(a)).
   
2. As part of the hazardous waste control laws, requires a facility handling hazardous waste to apply for and obtain a hazardous waste facilities permit from the DTSC (Health and Safety Code (HSC) § 25200-25205).
   
3. Requires a person who applies for, or requests, among other things, a hazardous waste facilities permit or a renewal of an existing hazardous waste facilities permit, to enter into a written agreement with DTSC to reimburse the department for the costs incurred in processing the application or responding to the request, as provided (HSC § 25205.7).
   
4. Requires that agreement to provide for at least 25 percent of the reimbursement to be made in advance of the processing of the application or the response to the request (HSC § 25205.7).

This bill:

1. Exempts a facility owned by a federal agency from the requirement to provide at least 25 percent reimbursement in advance for processing a hazardous waste facility permit or a renewal of an existing hazardous waste facilities permit.
   
2. Deletes outdated provisions in the code.

Background

1. Hazardous Waste Facility Permitting. DTSC is responsible for administering the hazardous waste facility permitting program established under the California Hazardous Waste Control Law and the federal Resource Conservation and Recovery Act (RCRA). In general, DTSC issues permits for complex and large facilities, such as Class I landfills, large treatment facilities, and for facilities managing RCRA hazardous waste. Presently there are 119 permitted hazardous waste facilities in California.
   
2. Fee-for-service. For decades, DTSC’s hazardous waste permit fees were established as a flat fee, by type of permit, with a published schedule.  In 2016, SB 839 (Committee on Budget and Fiscal Review), a budget trailer bill, authorized DTSC to seek reimbursement of actual fees associated with processing hazardous waste permit applications, renewals, variances, or modifications.  This was significant for DTSC because they were operating in a deficit and were seeking the ability and the authority to be reimbursed for the operating costs of their hazardous waste permitting program.  Additionally, this law required that applicants pay an advance fee equal to 25 percent of DTSC’s total estimated costs of processing the permit request.  DTSC issued policies and procedures implementing this change in 2017, putting all permit applicants on notice of these changes.  This policy states, “DTSC will not begin or continue to process the application or request until after DTSC receives the full advance payment.”
   
3. Federal Hazardous Waste Facilities in California. The military has seven hazardous waste facilities across California at military bases in Kern, Santa Barbara, San Diego and Solano Counties. The permits associated with these facilities are renewed every 10-years. The Navy’s permit at Naval Base Coronado in San Diego County is currently up for renewal.

Under federal law, the military is authorized to pay “reasonable service charges.” Federal attorneys must review invoices which detail how federal money is spent under the “reasonable service charge” standard and authorize payment to DTSC when it is within the waiver of sovereign immunity. Under federal fiscal law, the military is prohibited from paying this new 25 percent fee in advance of DTSC staff actually performing work associated with reimbursable costs. The general federal prohibition against making advanced payments is contained within 31 USC §3324, "an advance of public money may be made only if it is authorized by a specific appropriation or other law..." There is no such specific authorization for advance payment under federal law for state or local hazardous permit services. According to the sponsor, this discrepancy has led to complications in the approval of the military’s hazardous waste permits and has resulted in a scenario where DTSC has no choice but to find that the military permit application is incomplete due to non-payment in advance.

According to the sponsor, throughout 2018, the military engaged with DTSC in the context of Naval Base Coronado and Travis Air Force Base’s permit renewal process, on the federal legal conflict with this new state advance fee mandate. DTSC Counsel’s position is that state law requires this advance fee and that the agency cannot administratively waive the fee.

AB 181 reconciles conflicts between federal and state law by allowing DTSC to accept and process the military’s hazardous waste permits without requiring an advanced processing fee. Federal facilities would still be required to pay for DTSC’s costs of processing the permit as those services are provided.

Comments

1. Purpose of Bill. According to the author, “The military owns 7 mission-critical Hazardous Waste (HW) facilities across California at military bases in Kern, Santa Barbara, San Diego and Solano Counties in support of the military’s national security mission and to protect public health and safety. The permits associated with these facilities are renewed every 10-years, and the Navy’s permit at Naval Base Coronado in San Diego County is currently up for renewal. While the military has historically paid DTSC the full cost of the permit application, the military is prohibited under federal fiscal law from paying the new 25% fee in advance of DTSC staff actually performing work associated with renewing the permit. This change in state law was brought about by a 2016 Trailer Bill. This discrepancy has led to DTSC’s inability to process the military’s HW permit applications, and has resulted in a scenario where DTSC has no choice but to find that the military permit application is incomplete due to non-payment in advance.

“AB 181 is a clean-up bill that reconciles conflicts between federal and state law by clarifying that, while military hazardous waste facilities in the state are authorized to pay full reasonable service charges for their hazardous waste facility permit applications, they are not required to pay advanced fees for permit applications to the California Department of Toxic Substances Control. Federal facilities will still be required to pay all reasonable service charges associated with a permit renewal application, and all other charges approved by a specific appropriation or federal law.”

Related/Prior Legislation

SB 839 (Committee on Budget and Fiscal Review, Chapter 340, Statutes of 2016) requires a person who applies for a hazardous waste facilities permit or a renewal of an existing hazardous waste facilities permit to pay at least 25 percent of the agreed-upon reimbursement in advance, based on the DTSC’s total estimated costs of processing the application.

SOURCE:

Navy Region Southwest

SUPPORT:

Navy Region Southwest (sponsor)

OPPOSITION:

None received

ARGUMENTS IN SUPPORT:

According to the Department of the Navy, “under federal law, an advanced payment prior to services rendered is prohibited. This discrepancy could result in the inability of the military to obtain HW permits necessary to support the national security mission. An attempt to secure an administrative fix was unsuccessful and a legislative fix is needed to allow DTSC to accept and process the military’s HW permits. Having a permit denied because of the absence of an advanced fee is an untenable situation for the military in CA, whose HW facilities are integral to military operations and to broader public health and safety.”

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 181

Author:(Rodriguez)

As Amended Ver:March 25, 2019

Majority vote

SUMMARY:

Requires the Boards of Administration of the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) to each provide an annual report to the Legislature on the use of emerging managers.

Major Provisions

1. Requires, beginning March 1, 2021, and annually thereafter, CalPERS and CalSTRS each to submit a report to the Legislature on the status of achieving appropriate objectives and initiatives regarding participation of emerging managers responsible for asset management within their respective portfolios of investments.

The report must identify and include all of the following:

1. The name of each emerging manager providing investment portfolio or asset management services, at the end of the prior fiscal year, including, but not limited to, fund of fund contracts, for all applicable asset classes.
2. The amount managed by each emerging manager by asset class at the end of the prior fiscal year.
3. Provides that the reporting requirements apply to new contracts with emerging managers entered into by CalPERS and CalSTRS, respectively, on January 1, 2020, and based on information from the prior fiscal year.
4. Provides that CalPERS and CalSTRS must define the term "emerging manager" for these purposes.
5. Provides that CalPERS and CalSTRS are not required to take action unless their respective boards determine in good faith that the action, as provided, is consistent with their fiduciary duties as described in the California Constitution.
6. Provides that CalPERS and CalSTRS are not required to disclose information that is excepted from disclosure, as provided for under existing law.

COMMENTS:

CalPERS' and CalSTRS' Emerging Manager Programs

For numerous years, CalPERS and CalSTRS each have utilized emerging managers to assist not only in the diversity of investment firms for purposes of asset management, but also in the diversity of their respective investment portfolios. The emerging manager programs serve as incubators for these firms towards gaining valuable experience in managing investment assets of the pension funds.

The term "emerging manager" is left to the respective Boards of CalPERS and CalSTRS to define. Generally, this term typically relates to start-up, relatively new, and minority and women-owned investment firms.

According to the Author:

According to the author, "[p]reviously, CalPERS and CalSTRS were required to provide a five-year strategic plan for emerging manager participation across all asset classes of their investments, and to submit an annual report to the Legislature regarding the progress of their strategic plans.

Although CalPERS and CalSTRS submitted reports to the Legislature last year, that law sunset on January 1, 2018. Assembly Bill 181 simply places back into law, required annual reports to the Legislature from CalPERS and CalSTRS regarding their use of emerging managers for purposes of investment and asset management."

Arguments in Support:

According to CalPERS, this bill "provides reassurance that the Legislature and CalPERS are committed to an investment strategy that includes emerging managers." CalSTRS states that this bill will "help CalSTRS maintain relationships with emerging managers and encourage further participation in the portfolio."

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, this bill would result in a moderate fiscal impact, less than $150,000 annually, for CalPERS and CalSTRS to produce the report each year. However, because AB 181’s primary purpose is to develop a report, this bill is eligible for the committee's Suspense File, per committee rules.

VOTES:

ASM PUBLIC EMPLOYMENT AND RETIREMENT: 7-0-0

YES: Rodriguez, Voepel, Cervantes, Cooley, Cooper, Fong, O'Donnell

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

UPDATED:

VERSION: March 25, 2019

CONSULTANT: Michael Bolden / P.E. & R. / (916) 319-3957 FN: 0000474

Date of Hearing: April 10, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 181

Author:(Rodriguez) – As Amended Ver:March 25, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires, each year beginning on March 1, 2021, the Boards of Administration of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to each provide an annual report to the Legislature on the use of emerging managers.

FISCAL EFFECT:

Moderate fiscal impact, less than $150,000 annually, for CalPERS and CalSTRS to produce the report each year. However, because AB 181’s primary purpose is to develop a report, this bill is eligible for the committee's Suspense File, per committee rules.

COMMENTS:

Background and purpose. “Emerging managers” are newly formed investment managers with a small asset base. A policy that encourages working with emerging mangers is considered one important strategy to increase diversity of the industry and to expand work with minority and women-owned investment firms. Prior to 2011, both CalPERS and CalSTRS had emerging manager programs. SB 294 (Price), Chapter 701, Statutes of 2011, codified that work by requiring CalPERS and CalSTRS to provide a five-year strategic plan for emerging manager participation across asset classes and to submit an annual report to the Legislature regarding the progress of that plan. While that statutory requirements have expired, both CalPERS and CalSTRS still submit this report voluntarily.

According to the author, AB 181 will place back into law the required reports from CalPERS and CalSTRS regarding their use of emerging managers. This bill is supported by CalSTRS.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 3, 2019

ASSEMBLY COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT

Freddie Rodriguez, Chair

ABPCA Bill Id:AB 181 (

Author:Rodriguez) – As Amended Ver:March 25, 2019

SUBJECT: Asset management: emerging managers

SUMMARY: Requires the Boards of Administration of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to each provide an annual report to the Legislature on the use of emerging managers, as specified. Specifically, this bill:

1. Requires, beginning March 1, 2021, and annually thereafter, CalPERS and CalSTRS each to submit a report to the Legislature on the status of achieving appropriate objectives and initiatives regarding participation of emerging managers responsible for asset management within their respective portfolios of investments.

The report must identify and include all of the following:

1. The name of each emerging manager providing investment portfolio or asset management services, at the end of the prior fiscal year, including, but not limited to, fund of fund contracts, for all applicable asset classes.
2. The amount managed by each emerging manager by asset class at the end of the prior fiscal year.
3. Provides that the reporting requirements apply to new contracts with emerging managers entered into by CalPERS and CalSTRS, respectively, on January 1, 2020, and based on information from the prior fiscal year.
4. Provides that CalPERS and CalSTRS must define the term “emerging manager” for these purposes.
5. Provides that CalPERS and CalSTRS are not required to take action unless their respective boards determine in good faith that the action, as provided, is consistent with their fiduciary duties as described in the California Constitution.
6. Provides that CalPERS and CalSTRS are not required to disclose information that is excepted from disclosure, as provided for under existing law.

EXISTING LAW:

1. As provided in Article XVI of Section 17 of the California Constitution, the boards of California's public retirement systems have "plenary authority and fiduciary responsibility for investment of monies and administration of the system." In addition, "[t]he members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system."
2. Pursuant to Chapter 701, Statutes of 2011 (Senate Bill 294, Price), required CalPERS and CalSTRS to provide a five-year strategic plan for emerging manager participation across all asset classes, and to submit an annual report to the Legislature regarding the progress of the strategic plan.

This law was automatically repealed on January 1, 2018, due to a sunset clause which was not repealed nor extended.

FISCAL EFFECT: Unknown. This bill is flagged as fiscal by Legislative Counsel.

COMMENTS: According to the author, “[p]reviously, CalPERS and CalSTRS were required to provide a five-year strategic plan for emerging manager participation across all asset classes of their investments, and to submit an annual report to the Legislature regarding the progress of their strategic plans.

‘Although CalPERS and CalSTRS submitted reports to the Legislature last year, that law sunset on January 1, 2018. Assembly Bill 181 simply places back into law, required annual reports to the Legislature from CalPERS and CalSTRS regarding their use of emerging managers for purposes of investment and asset management.”

CalPERS’ and CalSTRS’ Emerging Manager Programs

For numerous years, CalPERS and CalSTRS each have utilized emerging managers to assist not only in the diversity of investment firms for purposes of asset management, but also in the diversity of their respective investment portfolios. The emerging manager programs serve as incubators for these firms towards gaining valuable experience in managing investment assets of the pension funds.

The term “emerging manager” is left to the respective Boards of CalPERS and CalSTRS to define. Generally, this term typically relates to start-up, relatively new, and minority and women-owned investment firms.

REGISTERED SUPPORT / OPPOSITION:

Support

California State Teachers’ Retirement System

Opposition

None on file

Analysis Prepared by: Michael Bolden / P.E. & R. / (916) 319-3957