Lawmakers Adopt DTSC Haz-Waste Fee Reform In Secret Budget Deal

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State lawmakers this week approved a revised budget proposal by the toxics department to reform the agency's hazardous waste fee structure after the department, lawmakers and the governor's office hammered out an agreement behind closed doors, sources say. Some observers are blasting the way lawmakers and the department have handled negotiations on the fee reform, arguing they negotiated in private with little transparency, despite potential major economic impacts to industries.

The fee proposal was considered nearly dead late last month, but the governor's office insisted on advancing the fee reforms despite the fact that neither the Assembly nor Senate budget subcommittees approved the proposal, sources say.

Used oil recyclers continue to strongly oppose the plan, but state lawmakers this week said revised budget trailer bill language adopted by lawmakers attempted to address concerns raised by this industry sector. However, one lawmaker overseeing budget talks acknowledged publicly this week that the fee plan will "rock some boats."

At issue is the Department of Toxic Substances Control's budget proposal to reform its fees tied to the Hazardous Waste Control Account. DTSC has argued that its hazardous waste fee system currently is "complex and difficult to administer," according to a summary released earlier this year. "It has also yielded inconsistent revenues, which has resulted in expenditures exceeding revenues for a number of years, requiring program reductions and significantly reducing the available fund balance."

DTSC's budget proposal on the fees was close to being shelved late last month after both the Assembly and Senate budget committees declined to vote on the plan (Inside Cal/EPA, May 31). The department's fee reform plan has run into strong opposition from the used oil recycling industry in particular because this sector would be subject to a variety of new fees, sources say. The industry argues this could lead to more illegal disposal of used oil, according to sources. During a recent department workshop and state budget committee hearing, stakeholders voiced similar concerns about the proposal, foreshadowing a tough road for the department's plan.

But the Assembly and Senate budget conference committee June 10 approved a revised DTSC proposal on fee reform, which was specifically revised budget trailer bill language not released to the public before the vote.

Gov. Jerry Brown (D) and leading Democratic lawmakers June 11 announced they had reached a budget deal. The deadline for the governor to sign the state budget is June 15.

Before voting June 10 to adopt the DTSC budget trailer bill language that had yet to be publicly vetted, Sen. Mark Leno (D-San Francisco), chair of the budget conference committee, said lawmakers had heard from used oil recycling businesses that the previous proposal would be a "severe jolt" because they would go from paying no fees to paying substantial fees under the plan.

But under the revised trailer bill language that contains the fee reform plan approved by the panel, Leno said he thinks the impact to the used oil recycling sector has been "modified." But he did not elaborate on how it has changed. Leno also praised DTSC Director Debbie Raphael for her work on the fee reform, which is "about sustainability so the programs the department funds will be able to continue to do so, and it is also a factor of equitability and what's fair. . . . This is not necessarily an easy proposal because it is going to rock some boats. But it needs to get done."

Leno said that under the revised trailer bill language, 87 percent of businesses will pay less or the same amount of fees as currently paid, and 13 percent of businesses will pay more fees. In addition, 75 percent of large generators of hazardous waste will pay the same or lower fees. "So, it's trying to bring some equitability to the discussion and in a way that will sustain the department's activities," Leno said.

A Senate source says the DTSC budget trailer bill language was expected to be in print by the end of the week.

According to a copy of the trailer bill language obtained by Inside Cal/EPA, generators of used oil would be required to pay a rate of $27.86 per ton. A business that generates five tons or more of hazardous waste per year would pay $31.52 per ton.

The language says a generator that has received a permit from DTSC and pays an annual facility fee may deduct from the amount of hazardous waste it generates per calendar year those wastes that are only stored, bulked, and/or transferred through their permitted facility location on the way to a facility that is authorized to: manage the waste for recovery, manage it through destruction or treatment, or dispose of the waste. Relevant documents are available on (Doc ID: 2437464)

The new fee requirements would become effective Jan. 1, 2014, the language says.

A DTSC spokesman says the trailer bill language differs from the original proposal in two ways. First, it would exempt waste transfers from being subject to the generation and handling fee, which impacts hazardous wastes that are received by a permitted transfer facility and then re-manifested to a new permitted facility. The original proposal would have assessed the fee each time a waste was placed on a new manifest, the spokesman says.

Secondly, the trailer bill would raise the "per ton" rates to account for the amount of revenues attributable to the transferred wastes, the spokesman says. When asked if the proposal attempted to appease used oil recyclers, the DTSC spokesman says that lawmakers "heard their concerns and made changes. We cannot offer more at this time."

A used oil recycling industry source says a coalition of companies submitted a June 12 letter to state lawmakers and the governor's office voicing strong opposition to the proposal. In the letter, Safety-Kleen, Clean Harbors, World Oil Corp., and other companies argue that DTSC proposes to replace longstanding public policies to encourage used oil recycling with a tax on recycled used oil of about 10 cents per gallon. This would "fundamentally alter the economics of used oil recycling" and threaten its existence in California, the coalition argues.

A waste industry source notes that the trailer bill language raised the hazardous waste generator fee from about $25 per ton to $31 per ton, but the imposition of fees on waste that is manifested multiple times would be eliminated. Previously, if someone shipped a hazardous waste, including used oil, they would have to pay a "generator and handling" fee each step of the way, the source says. Now, as proposed in the trailer bill, the fee is only paid by the person who first generates the waste, the source says.

The increase in the generator fee aims to make up for the revenue that DTSC will not be receiving from subsequent shipments of the same waste on different manifests, the source says. This plan "seems like a reasonable solution," the source says.

The reform proposal is "long overdue and sorely needed," the source argues. "It places the cost of financially supporting the California hazardous waste regulatory system squarely on the shoulders of those who generated hazardous waste in proportion to the amount they generate. Seems like a good strategy to encourage the reduction of waste — the less you generate, the less you pay in fees."

But Liza Tucker of Consumer Watchdog, an advocacy group that has been highly critical of DTSC administration and enforcement in recent months, says questions remain about state officials' lack of transparency in developing and approving the plan. "There has been no serious analysis of the revenue implications for DTSC, no transparency with stakeholders, and no thought to the Law of Unintended Consequences — will more waste go out of state or be illegally dumped?" Tucker asks.

A source with the Legislative Analyst's Office says the office never received the revised fee proposal and only learned of its existence during the June 10 budget conference committee hearing.

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