BILL ANALYSIS Ó AB 1108 Page 1 Date of Hearing: April 27, 2015 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Das Williams, Chair AB 1108 (Low) - As Amended March 26, 2015 SUBJECT: Beverage Containers: recycling SUMMARY: Prohibits certified recycling centers from accepting or paying the California Refund Value (CRV) to a consumer for more than 50 pounds of aluminum beverage containers or plastic beverage containers, or 500 pounds of glass beverage containers during a 24-hour period. EXISTING LAW, pursuant to the California Beverage Container Recycling and Litter Reduction Act (Bottle Bill): 1)Requires beverage containers sold in this state to have a CRV of 5 cents for containers that hold fewer than 24 ounces and 10 cents for containers that hold 24 ounces or more and requires a distributor to pay a redemption payment to CalRecycle. Continuously appropriates these funds to CalRecycle for the payment of refund values and processing fees. 2)Defines a number of terms, including: a) "Beverage" to include, among other things, soda, beer and other malt beverages, wine and distilled spirit AB 1108 Page 2 coolers, carbonated mineral and soda waters, noncarbonated fruit drinks, and vegetable juices in liquid form that are intended for human consumption. Excludes from the definition of 'beverage,' among other things, vegetable drinks in beverage containers of more than 16 ounces, milk, medical food, and any product sold in a container that is not an aluminum beverage container, a glass container, a plastic beverage container, or a bimetal container. b) "Convenience zone" to mean either an area within a one-half mile radius of a supermarket, or an area designated by CalRecycle at a location where there is no supermarket but there are two or more dealers located within a one-mile radius of each other, and meet certain specified criteria. c) "Certified recycling center" to mean an operation that is certified by CalRecycle and that accepts from consumers, and pays or provides the CRV for, empty beverage containers for recycling. 3)Requires CalRecycle to: a) Establish reporting periods of six months each for redemption rates and recycling rates for beverage containers and requires them to determine and report the redemption rates and recycling rates for those beverage containers for each reporting period. b) Certify recycling centers and promulgate regulations establishing a procedure for certification of recycling centers. Specifies that these regulations shall include, as a condition for certification, that if one or more certified entities have operated at the same location within the past five years, the recycling center must demonstrate to CalRecycle that its operations exhibit a pattern of compliance with the Bottle Bill and its related regulations. AB 1108 Page 3 c) Pay handling fees to supermarket sites, nonprofit convenience zone recyclers, or rural region recyclers to provide an incentive for the redemption of empty beverage containers in convenience zones, and adopt guidelines and methods specifying a procedure for the payment of these fees. d) After deducting refund values, administrative fees, and a reserve for contingencies, appropriate remaining Fund monies to designated programs, grants, and fee payments (PRC Section 14581). 4)Requires certified recycling centers to comply with the requirements of the Bottle Bill and: a) Operate during specified business hours; b) Post signage that is at least two feet by two feet, which includes the types of containers that can be redeemed and the price paid by weight or per container; c) Notify CalRecycle of any material change in the nature of the operation; d) Complete a precertification training program; e) Accept and pay CRV for all Bottle Bill containers, and not pay CRV for any container that is not included in the Bottle Bill or any container that the center knows, or should have known, is from out of state; f) Prepare and maintain specified documentation; and, g) Comply with all regulations adopted by CalRecycle. AB 1108 Page 4 FISCAL EFFECT: Unknown COMMENTS: 1)Author's statement. AB 1108 prohibits a certified recycling center from accepting or paying the CRV to a consumer for more than 50 pounds of aluminum beverage containers or plastic beverage containers, or any combination thereof, or 500 pounds of glass beverage containers, submitted by that consumer to the certified recycling center in a single 24-hour period? According to CalRecycle, lowering the limits is a significant way to reduce fraud in the program. As a result, importers of out-of-state containers, which are not eligible for CRV, and scavenger fleets illegally removing the contents of residential curbside recycling bins will find it considerably more time-consuming and risky to reap any fraudulent gains. 2)California's Bottle Bill. The Bottle Bill is designed to provide consumers with a financial incentive for recycling and to make recycling convenient to consumers. The centerpiece of the Bottle Bill is the CRV. Consumers pay a deposit, the CRV, on each beverage container they purchase. Retailers collect the CRV from consumers when they buy beverages. The dealer retains a small percentage of the deposit for administration and remits the remainder to the distributor, who also retains a small portion for administration before remitting the balance to CalRecycle. When consumers return their empty beverage containers to a recycler (or donate them to a curbside or other program), the deposit is paid back as a refund. California's Bottle Bill has achieved an overall recycling rate AB 1108 Page 5 over 80%- higher than any other bottle bill program in North America. According to Californians Against Waste, since its inception 25 years ago, the program has resulted in the recycling of over 11.9 million tons of glass; 3 million tons of aluminum; and, more than 2 million tons of plastic. In addition to the diversion from landfill disposal, this recycling has avoided an estimated 2 million metric tons of CO2 equivalent greenhouse gas emissions over the last four years. Recycling in California also results in economic benefits to the state. The Bottle Bill program has resulted in more than 10,000 jobs and over $100 million in reduced landfill disposal fees. 3)Preventing fraud. In some ways, the Bottle Bill program is a victim of its own success. According to CalRecycle, the Bottle Bill is currently operating under a structural deficit, mainly caused by historically high recycling rates and mandated program payments. The structural deficit means that program expenditures exceed program revenues under the current mandated expenditure and revenue structure. When the Bottle Bill does not have adequate funding, CalRecycle is required to "proportionally reduce" many of the program's expenditures evenly among program participants, with the exception of CRV redemption for consumers. Fraud also contributes to the structural deficit. In the summer of 2011, CalRecycle, in coordination with the California Department of Food and Agriculture (CDFA), initiated a "no-cost" pilot program to survey and document vehicles importing out-of-state beverage container material into California through all 16 CDFA Border Protection Stations. During the first 60 calendar days of the pilot program, the information gathered indicated that over 2,500 vehicles, including 378 rental trucks filled to capacity, imported out-of-state beverage container material through these stations. Based on the survey data referenced above, CalRecycle states that a conservative estimate of fraud AB 1108 Page 6 exposure to the Bottle Bill Fund is $7 million annually. In recent years, CalRecycle and the Department of Justice (DOJ) have increased Bottle Bill fraud enforcement efforts, which have resulted in several high profile prosecutions. Most recently, last November, five people were arrested in the Turlock area on charges of conspiracy, grand theft, and recycling fraud after investigators found 250,000 pounds of beverage containers (22 truckloads) unauthorized beverage containers and $125,000 cash. In 2014, DOJ arrested a Los Angeles recycling center owner for defrauding the state of more than $500,000. In 2010, DOJ and CalRecycle participated in a multi-state fraud investigation that resulted in the arrest of 31 individuals for Bottle Bill fraud rings that took in over $3.5 million. CalRecycle has made administrative changes to combat fraud. In January, 2014, CalRecycle reduced the number of containers an individual can bring to recycling centers for CRV in a single day from 500 pounds of aluminum or plastic to 100 pounds, and from 2,500 pounds of glass to 1,000 pounds and required that anyone transporting 25 pounds or more of aluminum beverage containers or 250 pounds of glass beverage containers into the state must pass through a CDFA quarantine inspection station and obtain and carry a proof of inspection. According to CalRecycle, the following table indicates the number of beverage containers per pound by material type. ------------------------------------------------- |Material Type |Containers per | | |Pound | |--------------------------------+----------------| |Aluminum | 29.1 | |--------------------------------+----------------| |Glass | 1.89 | |--------------------------------+----------------| |#1 PET (Polyethylene | 20.2 | |Terephthalate) | | |--------------------------------+----------------| AB 1108 Page 7 |#2 HDPE (High Density | 7.3 | |Polyethylene) | | |--------------------------------+----------------| |#3 PVC (Polyvinyl Chloride) | 11.2 | |--------------------------------+----------------| |#4 LDPE (Low Density | 40.6 | |Polyethylene) | | |--------------------------------+----------------| |#5 PP (Polypropylene) | 8.8 | |--------------------------------+----------------| |#6 PS (Polystyrene) | 113.8 | |--------------------------------+----------------| |# 7 Other | 3.1 | ------------------------------------------------- This bill expands on CalRecycle's ongoing efforts to eliminate fraud in the program by making it more difficult for individuals to fraudulently redeem large quantities of out-of-state beverage containers. 4)Suggested amendment. This bill prohibits certified recycling centers from accepting or paying CRV for specified amounts of beverage containers to improve fraud prevention; however, it is legal to import recycled materials, including beverage containers, into California for scrap value. The committee may wish to amend the bill to strike out "accept or" on page 3, line 35 to clarify that certified recycling centers are only prevented from paying CRV and can continue to accept and pay scrap value for recycled materials. REGISTERED SUPPORT / OPPOSITION: Support AB 1108 Page 8 None on file Opposition None on file Analysis Prepared by:Elizabeth MacMillan / NAT. RES. / (916) 319-2092