Legislative Update 2016 Suzanne R. Varco (619) 231-5858 www.envirolawyer.com svarco@envirolawyer.com

UST Cleanup Fund Update FY2014/2015 Highlights: USTCF closed 544 claims Reimbursed over $41M Reduced some payment backlog; however a $28M payment backlog still exists. Active number of claims: 2,631 Opper & Varco LLP

UST Cleanup Fund Update Priority Claims Total Claims Deemed Eligible Claims Closed Before FY 14-15 Active Number of Claims Claims Awaiting LOC Claims Closed in FY 14-15 Reimburse- ments in FY 14-15 Payments Backlog as of June 30, 2015 A  499 451 48 4 14 $198,386 $240,236 B  5,183 3,905 1,278 262 $20,125,580 $17,728,234 C  4,105 3,299 806 13 187 $19,076,429 $8,911,273 D  1,887 1,388 4,038 81 $2,081,856 $1,335,873 TOTAL 11,674 9,043 2,631 4,069 544 $41,482,251 $28,215,616 Total expenditures: Reimbursements and Clean up: $3,804,263,585 (84%) Oversight: $366,169,367 (8%) Fund Administration: $324,753,006 (7%) Other costs: $37,348,041 (1%) http://www.waterboards.ca.gov/about_us/performance_report_1415/fund/51122_ust_fund_claims.shtml Opper & Varco LLP

UST Cleanup Fund SB 445 (2014) Highlights: Extended USTCF Sunset date to 1/1/2026 Increased petroleum storage fee from $0.014 to $0.02/gallon Required all single-walled USTs to be closed by 12/31/2025 Limits USTCF reimbursement to $1M per claim Increases Regulatory Technical Assistance cap to $5,000 Increased RUST grant amounts Requires an Expedited Cleanup Pilot Project Dedicates funding for the Site Cleanup Subaccount Expands eligibility to OSCF Increased fee ($0.006) will generate an estimated $80M/year Opper & Varco LLP

UST Cleanup Fund SB 445 Limits reimbursement to $1M per claim: This limit applies to new applications submitted after 12/31/14– it is NOT retroactive to existing claims. This limit applies to ALL programs – USTCF, OSCF, EAR, Comingled Plume Account. Regulatory Technical Assistance Cap (RTAC) increased from $3,000 to $5,000: Costs incurred for electronic uploads of USTCF related documents are NOT subject to the RTAC cap. Opper & Varco LLP

Permanent Closure of USTs H&SC 25292.05 (SB445) Any UST designed and constructed before January 1, 1984, or in some cases January 1, 1997, must be permanently closed by December 31, 2025, unless it meets requirements of H&SC. Includes piping H&SC requirements: Both tank and piping have primary and secondary containment. Tank must have continuous leak detection system. A double-walled tank with single walled piping is considered a single-walled UST. H&SC requirements: Both tank and piping have primary and secondary containment. Tank must have continuous leak detection system. A double-walled tank with single walled piping is considered a single-walled UST. EXEMPT – if installed BEFORE July 1, 2003: Vent lines tank riser piping vapor lines suction piping No components of a UST are exempt if installed after July 1, 2003. Penalty: $500 to more than $5,000 per day. Letters have been sent out by the SWQCB to affected owners and operators Opper & Varco LLP

Permanent Closure of USTs RUST (Replacing, Removing or Upgrading USTs) grants and loans are available Available to small business owners and operators. Can provide financing up to 100% of the removal/replacement costs (including corrective action). Loans: Low interest loans ($10k-$750k); 10-20 year terms; 2% loan fee Grants: $3k-$70k Loan Eligibility: small business employing fewer than 500 employees Tanks in compliance with regs Demonstrated financial ability to repay the loan Grant Eligibility: Small business employing fewer than 20 employees Facility is legally retailing gasoline after 1/1/99 All tanks are in compliance with regs Facility has sold, at retail, less than 900,000 gallons annually for each of the prior 2 years. Current permits to operate Not eligible for a RUST loan Opper & Varco LLP

Site Cleanup Subaccount Program H&SC (SB445) Grant program for remediation of existing surface or ground water contamination. $19.5 M appropriated for this program. Applications accepted annually: 1st round application review: Dec 2015-Jan 2016 1st round grant agreements: 2016. Grants to public entities and private parties. Currently no ranking criteria. Eligibility: Remediation of surface water or groundwater Regulatory agency has issued directive Responsible party lacks financial resources Priority: Significant threat Disadvantaged or small community impact Benefit of the project Lack of alternate funding sources Opper & Varco LLP

Expedited Claim Account Program SB 445 Funding: Transfers $100 million currently in the UST Cleanup Fund to the new Expedited Claim Account. Purpose: Investigate potential methods for reducing the overall cost for site cleanup and the time to reach closure. Increase collaboration among Fund staff, regulatory staff, claimants and their consultants. Opper & Varco LLP

Expedited Claim Account Program Selection Criteria: 1. Claims taken from all priority ranks (participants to be representative of the proportion of claim priorities in the Fund): LOC Claims: 1,302 (A=1%, B=55%, C=33%, D=11%) All Claims: 1,921 (A=1%, B=38%, C=23%, D=39%) Opper & Varco LLP

Expedited Claim Account Program Selection Criteria 2. Cases must pose a significant threat to human health, safety or environment: Cases with impacted drinking water wells = 56 cases Cases with significant vapor intrusion = 682 cases Opper & Varco LLP

Expedited Claim Account Program Selection Criteria 3. Cases showing little cleanup progress: Cases showing the same status code in GeoTracker for 5+ years: 1,077 cases (694 LOC cases) Cases without substantive regulator action for more than 1 year: 20% Status Codes: Site investigation Interim Remedial Action CAP/Remedial Action Monitoring Opper & Varco LLP

Expedited Claim Account Program Selection Criteria 4. Claims expending more $ than average, likely to exceed cap: Cases with claims reimbursed over $750k – 524 Cases with claims reimbursed over $1M = 311 5. Cases where corrective action progress is limited by inadequate site budget: FY 13/14 BCRs not approved = 164 Opper & Varco LLP

Expedited Claim Account Program Selection Criteria: 6. Test concept that case closure criteria can be met within 5 years for less than $500k. LOC Claims with regulatory cases open less than 3 years: 20 cases LOC claims with regulatory cases open less than 5 years: 41 cases Opper & Varco LLP

Expedited Claim Account Program Priorities: 1st Priority: Cases that may have affected supply wells 2nd Priority: Cases that may have vapor intrusion risk 3rd Priority: Cases reimbursed > $1M 4th Priority: Cases reimbursed $750K - $1M 5th Priority: Cases >5 years in work phase 6th Priority: Cases 3-4 years in work phase 7th Priority: Cases with BCR not entirely approved Website has excel sheet showing priority criteria for all claims, but it does not appear that any specific claims have been selected yet. Opper & Varco LLP

Expedited Claim Account Program Study Period: No set start date – start date depends on: Formalizing the implementation plan for the ECAP Identifying participating claimants and staffing Training participants Study period ends July 1, 2017 Results must be posted by January 1, 2018 Evaluation Metrics: Metrics calculated automatically by MS Project include: % over/under budget % ahead/behind schedule Additional metrics: Time to move to next work phase or to close case Time for claim closure $ reimbursed to close case Others as appropriate Comparison with non-ECAP cases Opper & Varco LLP

Orphan Site Cleanup Fund SB 445 Expands eligibility to OSCF Eligibility Requirements: Grant Program - $1.5m per site; now limited to $1M per site Petroleum must be primary source of contamination – from a UST. Financially responsible party has not been identified (or site has been issued an NFA following tank closure). Site must be in an urban area. Discuss current challenges with OSCF Old rule limited grants to sites defined as “brownfields” per HSC 25395.20: Site had previously supported economic activity; and Site had no economic activity for a period of 12 months. Eligible sites no longer need to meet the definition of “brownfield” – thus no vacancy requirement required. Only requirements for eligibility are: Petroleum is principal source of contamination; Source of contamination is an UST; Financially responsible party has not been identified. Opper & Varco LLP

Aboveground Storage Tanks H&SC 25270.2 (SB 612) Modifies definition of Aboveground Storage Tank Clarifies that a storage tank that is in an underground area in a structure (such as a vault or basement) can be regulated as an aboveground storage tank. A “tank in an underground area” is exempt from the definition of a UST if: Tank stores petroleum; It is located on or above the surface of the floor in a structure at least 10% below ground surface; The structure provides secondary containment; The structure allows for direct viewing of the exterior of the tank. Full definition of “tank in an underground area” does not go into effect until the Office of State Fire Marshall adopts regulations and those regulations become effective. Post 1/1/16: only includes tank systems storing petroleum to be used or previously used as a lubricant or coolant in a motor engine, transmission, or oil‐filled operational/manufacturing equipment (i.e. oil change facilities) Post OSFM regs: definition will expand to include tank systems storing petroleum and petroleum hazardous waste after the regulations that apply to “tanks in underground areas,” adopted by OSFM, become effective. Opper & Varco LLP

Questions? Suzanne Varco Opper & Varco, LLP (619) 231-5858 svarco@envirolawyer.com Opper & Varco LLP