STATE OF CALIFORNIA Budget Change Proposal - Cover Sheet DF-46 (REV 10/20)

Fiscal Year Business Unit Department Priority No. 2021-22 3960 Department of Toxic Substances Control Click or tap here to enter text. Budget Request Name Program Subprogram 3960-013-BCP-2021-GB 3620 Site Mitigation and 3620011 Other Site Mitigation Restoration Program Activities Budget Request Description National Priorities List and State Orphan Sites

Budget Request Summary The Department of Toxic Substances Control requests a transfer of $19.55 million from the Toxic Substances Control Account to the Site Remediation Account to fund the state’s National Priorities List obligations and state orphan sites with Priorities 1A, 1B, and 2.

Requires Legislation Code Section(s) to be Added/Amended/Repealed ☐ Yes ☒ No Click or tap here to enter text.

Does this BCP contain information technology Department CIO Date (IT) components? ☐ Yes ☐ No Click or tap here to enter text. Click or tap to enter a date. If yes, departmental Chief Information Officer must sign.

For IT requests, specify the project number, the most recent project approval document (FSR, SPR, S1BA, S2AA, S3SD, S4PRA), and the approval date. Project No.Click or tap here to enter text. Project Approval Document: Click or tap here to enter text. Approval Date: Click or tap to enter a date.

If proposal affects another department, does other department concur with proposal? ☐ Yes ☐ No Attach comments of affected department, signed and dated by the department director or designee.

Prepared By Date Reviewed By Date Charlie Ridenour 1/7/2021 Alice Jeung 1/7/2021 Department Director Date Agency Secretary Date Meredith Williams 1/7/2021 Jared Blumenfeld 1/7/2021 Department of Finance Use Only

Additional Review: ☐ Capital Outlay ☐ ITCU ☐ FSCU ☐ OSAE ☐ Dept. of Technology

APBM Date submitted to the Legislature Teresa Calvert 1/8/2021

Analysis of Problem

A. Budget Request Summary

The Department of Toxic Substances Control (DTSC) requests a transfer of $19.55 million from the Toxic Substances Control Account (TSCA) to the Site Remediation Account (SRA) to fund the state's National Priorities List (NPL) obligations and state orphan sites with Priorities 1A, 1B, and 2. Health and Safety Code (HSC) section 25173.7 states the Legislature’s intent that the annual Budget Act appropriates an amount sufficient to pay for the estimated costs identified by the department in the annual Site Remediation Account Report to the SRA for direct site remediation costs. The transfer will fund the 2021 SRA total estimated costs of $18.45 million in 2021-22, and adjust for a fiscal year 2020-21transfer shortfall of $1.1 million.

B. Background/History Nearly one in three people in California live within one mile of a site where DTSC is investigating or cleaning up contamination. Of these sites, 46 percent are in environmental justice communities disproportionately burdened by multiple sources of pollution. In addition to the tremendous health benefits that cleanups provide, reusing cleaned up hazardous waste sites is an investment into community and economic growth. Many prior hazardous waste sites are now redeveloped parks, shopping centers, and office buildings. There are numerous studies by government, universities, and nonprofits that identify the economic benefits of brownfields restoration.

As of October 1, 2019, the United States Environmental Protection Agency (U.S. EPA) reports the following federal accomplishments and benefits resulting from leveraging resources to revitalize communities:  1,851 properties assessed  196 properties cleaned up  13,476 jobs resulting from cleanups  910 properties made ready for reuse  10,831 acres made ready for anticipated use

U.S. EPA also reports a 2017 study that concludes cleaning up brownfield properties increased residential property values between 5 to 11.5 percent, resulting in additional tax revenue being generated for local governments.

A U.S. EPA Region 9 paper published in 2016, Superfund Sites Work for Communities: How Superfund Redevelopment in EPA Region 9 Is Making a Difference in Communities, reports that businesses operating on 39 California Superfund sites produce $6.5 billion in annual sales with 22,987 people employed, resulting in $2.5 billion in annual employee income.

NPL Sites

In 1980, the federal government created the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly referred to as the "Superfund" law, to help address cleanup needs at the nation's most heavily contaminated toxic waste sites. CERCLA provides broad response authorities for the United States Environmental Protection Agency (U.S. EPA) to protect people and the environment from the risks posed by releases of hazardous substances, pollutants, and contaminants. Under CERCLA, the Superfund program identifies, investigates, and cleans up America’s most contaminated hazardous waste sites, known as National Priority List (NPL) sites.

Congress amended CERCLA with the Superfund Amendments and Reauthorization Act (SARA) in 1985. Among other things, these amendments required Superfund cleanups to consider state standards and requirements, increased state involvement in every phase of a Superfund 1

cleanup and provided new enforcement authorities and settlement tools. In 2002, Congress amended CERCLA again by passing the Small Business Liability Relief and Brownfields Revitalization Act. This law created a federal program to aid state brownfield cleanup programs, clarified and modified liability issues at CERCLA sites to help reduce litigation and speed cleanups, and increased states' authority to impact whether the U.S. EPA lists a site for cleanup under the NPL, among other changes to the law.

The U.S. EPA identifies and lists sites on the NPL following criteria in CERCLA. There are 1,335 sites nationwide on the NPL. Of those, there are 97 active sites in California. The U.S. EPA adds approximately one site in California per year to the NPL. Currently, responsible parties fund cleanup costs for 75 of the active California sites. DTSC oversees the cleanup of one site located on tribal lands but has no financial obligations to fund the cleanup costs or operations and maintenance expenses. The remaining 22 active sites listed are considered fund-lead NPL sites, which means the U.S. EPA has determined that there are no viable responsible parties to fund the cleanup, and, therefore, the U.S. EPA is partially funding the cleanup with federal Superfund funding. The listing of an NPL site that uses federal funds to pay for the cleanup is a regulatory action that obligates the state to pay 10 percent of the cost of constructing the cleanup remedy, and 100 percent of the cost of operating and maintaining the remedy after it is built (42 U.S.C., § 9604(c)). CERCLA requires the state to assure all future maintenance of a remedial action provided for the expected life of such action. CERCLA further defines when the U.S. EPA remedial action ends and the state operation and maintenance (O&M) begins.

Once a site remedy becomes operational and functional, the U.S. EPA and the state enter into a Site Transfer Agreement to affect an orderly transfer of O&M activities and funding responsibilities. “Operational and functional” is either one year after remedy construction is complete, or when it is determined, concurrently by the U.S. EPA and the state, to be functioning properly and is performing as designed, whichever is earlier. Remedies considered “restoration” are operated by the U.S. EPA for 10 years prior to transitioning to state O&M1.

NPL sites are highly contaminated and pose substantial threats to public health and the environment. They are often in densely populated urban areas with a legacy of earlier industrial use. The remediation of these sites returns blighted land to beneficial and productive use.

Each year, the U.S. EPA provides DTSC with its best estimate of the state’s upcoming funding obligations for NPL sites. The listing of new sites, coupled with the transition of older sites from construction to O&M, is increasing the state’s funding obligations.

In 1981, California enacted the Carpenter-Presley-Tanner Hazardous Substances Act (State Superfund Act) (Health and Safety Code Chapter 6.8) to, among other things, establish a program to provide response authority for releases of hazardous substances, including spills and hazardous substances illegally disposed that pose a threat to public health or the environment at non•federal sites. The State Superfund Act requires any response action taken or approved to meet certain requirements regarding specified state and federal regulations and to include the preparation of a health or ecological risk assessment. The State Superfund Act also requires the exposure assessment of that risk assessment to meet specified requirements, including the development of reasonable maximum estimates of exposure for both current land use conditions and reasonably foreseeable future land use conditions at the site.

State orphan site cleanup includes the investigation and cleanup of properties where no responsible party has been identified who has the means to pay for the response actions needed. There are estimated to be between 150,000 to over 200,000 contaminated sites in California. Of these, DTSC has identified approximately 9,800 contaminated sites statewide that may impact or threaten groundwater designated for crops or drinking water. These sites may also expose adults and children to toxic metals or vapors where they live, work, study, and play. DTSC uses Site Remediation Account (SRA) funds to investigate these releases and

1 Restoration is the cleanup and removal of hazardous substances from a site as opposed to other remedies such as land-use restrictions or sealing the surface of a hazardous site.

issue enforcement orders where responsible parties can be identified. Sites without viable responsible parties depend on the state to bear the cleanup costs.

Site Remediation Account (SRA)

Under the authority of Chapter 6.8 of the Health and Safety Code, DTSC investigates hazardous substance releases and constructs and operates remedies at NPL and state orphan sites where there exists an imminent or substantial endangerment, and either the responsible party fails to comply with an order or there are no viable responsible parties.

The SRA funds are to be used for direct remediation of sites contaminated or suspected of contamination by hazardous materials. Allowed expenditures include payments to contractors for investigations, characterizations, removal, remediation, or long-term operation and maintenance of sites contaminated or suspected of contamination by hazardous materials. Funds may also be used to provide interim supplies of bottled water and the construction, operation, and maintenance of protective systems, such as indoor air treatment systems, systems to treat contaminated groundwater used for drinking water, removal of soil contamination by excavation or by soil vapor extraction systems, alternative drinking water supplies such as providing activated carbon on supply wells, consolidating and capping wastes, and imposing land use controls. The SRA can only be used for contracted costs and cannot be used for DTSC staff costs.

Funding History

Prior to 2016, funding for the SRA was based on a formula which adjusted the 1998 baseline annually by the Consumer Price Index (CPI), providing around $10 million annually. This formula could not keep pace with project needs and projected costs.

Chapter 704, Statutes of 2016 (AB 2891)

In 2016, Chapter 704, Statutes of 2016 (AB 2891), amended HSC section 25173.7 to state the intent of the Legislature to annually appropriate sufficient SRA funds to pay for the estimated costs for direct site remediation at both federal Superfund sites and state orphan sites. AB 2891 also established a base of not less than $10,750,000, with annual CPI adjustments, to the SRA for direct site remediation costs. For 2020-21, the minimum transfer amount would be $12.1 million (current economic conditions resulted in a lesser amount being transferred in the 2020 Budget Act) based on the CPI adjusted base. However, DTSC’s total estimated costs for funding NPL and orphan site obligations in 2021-22 is $20.29 million, which exceeds the minimum by $8.19 million.

Since the passage of AB 2891, DTSC annually requests funding for estimated direct site remediation costs for investigation and cleanup work on NPL and state orphan sites at sites where the contamination is already known to be above safe standards. However, in recent years, the appropriations have not met the full need. In 2019-20, DTSC estimated $21.3 million in total need for NPL and state orphan sites, while $18.8 million was appropriated (Priority 3 sites were not funded). Additionally, there are no funds to support discovery and enforcement investigation of the 150,000 to over 200,000 sites with unknown extent of contamination.

For 2020-21, DTSC estimated $19.5 million in costs for NPL and state orphan sites. However, due to economic uncertainties related to the COVID-19 Pandemic, the 2020 Budget Act appropriated $13 million SRA. This appropriation allows DTSC to continue work at the NPL sites and to fund operations and maintenance of Priority 1A state orphan sites, and approximately half of the Priority 1B state orphan sites and Priority 2 existing orphan sites. In light of the need to support the state’s response to the COVID-19 Pandemic, the 2020-21 Budget Act did not include funding for investigation, remedy selection, and construction funding at state orphan sites. DTSC currently has 18 Priority 1B orphan sites, 12 Priority 2 sites, and 9 Priority 3 sites. Of these sites, approximately 59 percent are located in environmental justice communities, and all have ongoing investigation activities, interim mitigation measures, or are ready for remedy construction. Limited funding has resulted in delaying, deferring, or shutting down of remedies. These delays can have a significant impact on people in the surrounding communities and environment.

This request is for funding for site remediation at NPL and state orphan sites with Priorities 1A, 1B, and 2. The tables below display the NPL and orphan site resource history and workload.

Resource History (Dollars in thousands) Program Budget 2015-16 2016-17 2017-18 1/2/ 2018-19 1/2/ 2019-20 1/2/ 2020-21 1/2/

Authorized $10,622 $9,626 $9,626 $14,173 $18,777 $13,026 Expenditures

Actual $10,094 $9,626 $9,626 $14,173 $18,777 $11,926 Expenditures 1/ Estimated expenditures upon appropriation reversion. 2/ SRA funds have a four-year encumbrance period.

Workload History Workload Measure 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Orders & Agreements 3 4 0 3 2 1

Characterization Workplans and 13 20 19 24 35 35 Technical Reports

Remedy Selection 4 1 7 5 3 3

Remedy 1 1 1 5 2 0 Implementation

Operation & 43 49 43 60 63 60 Maintenance

Sites Completed 5 0 0 3 0 1

C. State Level Consideration The California Health and Safety Code provides DTSC with funding and authority to investigate and respond to imminent or substantial threats to the public and the environment from hazardous substances. With this authority, DTSC periodically acts on referrals from local governments and from regional water boards for investigation and response.

This proposal aligns with DTSC’s mission to protect the people, communities, and environment of California from harmful chemicals by cleaning up contaminated sites, enforcing hazardous waste laws, and compelling the development of safer products. It also aligns with DTCS’ draft 2020-2024 Strategic Plan Goal 2—To prevent harm while working to protect and restore California’s most vulnerable and environmentally burdened communities; and Goal 5—Fiscal Stewardship: To implement our Mission using cost-efficient and transparent fiscal practices. DTSC can maximize the 90 percent federal share of NPL cleanup costs by providing adequate funding to cover the state’s mandated 10 percent share.

AB 2891 codified the Legislature’s intent that funds deposited into the TSCA and transferred to the SRA be appropriated through the annual Budget Act in an amount sufficient to pay for the estimated costs for direct site remediation work. TSCA is structurally imbalanced, which will

make funding this critical work more challenging in the future, as TSCA will be unable to sustain this level of expenditure without fiscal reform.

D. Justification In partnership with the U.S. EPA, DTSC acts on behalf of the state of California to remediate sites listed on the NPL. NPL sites are among the most heavily contaminated and difficult to remediate toxic waste sites in the nation. When no viable responsible party can pay for the work at these sites, the federal CERCLA authorizes investigation of the site to be paid for with federal funds and for response actions to be paid for with a mix of federal and state funds.

The U.S. EPA has emphasized to DTSC the state’s obligation under federal law as well as the U.S. EPA’s legal authority to enforce those financial obligations. Under CERCLA, at NPL sites where no viable potentially responsible party exists, DTSC, acting on behalf of the state, is legally obligated to pay a 10 percent state-match for federal response activity costs while federal funds pay for the remaining 90 percent.

CERCLA also legally obligates DTSC to pay for 100 percent of operations and maintenance (O&M) costs at these NPL sites and prohibits the U.S. EPA from funding the operation and maintenance of constructed response actions at NPL sites.

DTSC meets its NPL obligations by allocating SRA funds to a site based on several factors. Federal NPL and state orphan sites are scored and prioritized on a quantitative weighting of exposure (meaning the number and proximity of humans or resources such as drinking water) and threat (meaning risk of damage or harm when exposed) to public health and the environmental impact.

The following provides high-level definitions of each priority:

Priority 1A: Immediate and acute conditions requiring a “time critical” response. Priority 1B: Ongoing O&M of a state or federally funded site remediation treatment system necessary to prevent exposure to human or environmental receptors. Priority 1B includes state- match NPL. Priority 2: Actual human exposure or natural resource impacts under current conditions. Priority 3: Potential exposure under current conditions; and could allow the contamination to spread, impacting additional people and resources and increasing future costs. DTSC assigns the highest funding priority to those sites with federally mandated costs, those that have immediate acute health threats, and those that have existing systems that require ongoing contracted costs to operate and maintain the remedy. DTSC anticipates incurring costs of approximately $18.45 million in 2021-22 for NPL and Priority 1A, 1B, and 2 state orphan sites. The impacts from not receiving sufficient funding for these priorities would delay investigations of hazardous sites and construction remedies that would protect human health and the environment.

E. Outcomes and Accountability DTSC carefully accounts for and tracks NPL and state orphan site expenditures. Major milestones based on project phase are tracked in DTSC’s project management database. This includes a DTSC work plan for 2020-21 and the subsequent two fiscal years. Unforeseeable factors may result in DTSC modifying this plan. For example, if a project is delayed, funding is shifted to the next highest priority on the list contingent on project readiness.

Projected Outcomes Workload Measure 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 Orders & Agreements 1 0 0 N/A N/A N/A Characterization Workplans and Technical 35 35 30 N/A N/A N/A Reports Remedy Selection 3 5 4 N/A N/A N/A Remedy Implementation 1 2 0 N/A N/A N/A Operation & 60 62 62 N/A N/A N/A Maintenance Sites Completed 1 0 0 N/A N/A N/A

F. Analysis of All Feasible Alternatives Alternative 1: Approve a one-time transfer of $19.55 million from TSCA to SRA to fund the state’s NPL and state orphan site obligations at Priority 1A, 1B, and 2 sites, and adjust for a fiscal year 2020-21 transfer shortfall.

Pros:  Allows the state to maintain compliance with CERCLA.  Helps the state to maintain compliance with state Superfund contracts.  Allows the state to continue to operate existing remedies to maintain their protectiveness and maintain compliance with permits.  Provides funding for the state to construct shovel-ready remedies to remove or contain significant impacts to human health and the environment.  Allows funding to eliminate the backlog of remedy construction projects and allows for investigation at additional sites.  Eliminates or reduces human exposure to hazardous substance releases at priority sites.  Builds DTSC’s public trust and image by complying with state and federal laws and protecting public health and the environment.

Cons: • Requires an increase in the General Fund backfill for TSCA to support the transfer to the SRA. • Priority 3 sites will not be funded.

Alternative 2: Approve the transfer of $17.1 million from TSCA to SRA to fund the 2021-22 estimated NPL/Orphan obligations for sites designated at Priority 1A or 1B; eliminate funding for Priority 2 and 3 sites and Land Use Restriction Monitoring.

Pros:  Allows the state to maintain compliance with CERCLA.  Helps the state to maintain compliance with state Superfund contracts.  Allows the state to continue to operate existing remedies to maintain their protectiveness and maintain compliance with permits.  Provides funding for the state to construct shovel-ready remedies to remove or contain significant impacts to human health and the environment.  Removes or eliminates human exposure to hazardous substance releases at priority sites.  Builds DTSC’s public trust and image by complying with state and federal laws and protecting public health and the environment.  Less impact on the General Fund.

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Cons:  Requires an increase in the transfer from General Fund backfill to TSCA to support the SRA transfer, but less than Alternative 1.  Priority 2 orphan sites will not be funded, resulting in the deferring remedies at sites with known releases and known exposures to harmful chemicals in addition to stopping all enforcement and cost recovery activities funded by the SRA.  Priority 3 sites will not be funded.  Monitoring of Land Use Restrictions required to protect future exposure to known contaminants will not be funded.

Alternative 3: Approve the transfer of $4.9 million TSCA to SRA to fund the state’s obligations at NPL sites. Do not fund work on state orphan sites.

Pros:  Does not require a General Fund backfill for TSCA to support the SRA transfer.  Allows the state to maintain compliance with CERCLA.

Cons:  Priority 1A orphan sites will not be funded, where there is ongoing exposure to hazardous substances, resulting in continued exposure to cancer causing chemicals by California residents.  Priority 1B orphan sites will not be funded, resulting in the shutdown of some water and soil treatment facilities that provide clean drinking water to California residents.  Priority 2 orphan sites will not be funded, resulting in maintenance to be deferred on protective caps that limit exposure to potentially harmful chemicals in addition to stopping all enforcement activities funded by the SRA. Priority 3 sites will not be funded.

G. Implementation Plan July 2021 – Prepare a statewide annual Site Expenditure Plan to allocate funding for the NPL and state orphan sites. July 2021 to June 2022 – Develop and amend contracts for each NPL and state orphan site. September 2021 to June 2022 – Begin issuing start work orders based on the additional funding allocated for each site. Monitor and oversee contractors. Review workplans and reports. September 2021 - Coordinate with the U.S. EPA to develop cost estimates for direct site remediation at NPL sites to determine the funding needs for 2022-23, 2023-24, and 2024-25. January 2022 – Submit the annual report to the Legislature that incorporates the funding needs for the next three fiscal years. This report also provides a status of the SRA and outlines expenditures by site, as well as the remediation status of each NPL site.

H. Supplemental Information N/A

I. Recommendation DTSC recommends approval of Alternative 1. Approve a one-time transfer of $19.55 million from TSCA to SRA and $18.45 million in expenditure authority from SRA to fund the state’s NPL and state orphan site obligations in order to protect the public and the environment from the risks posed by releases of hazardous substances, pollutants, and contaminants.

BCP Fiscal Detail Sheet BCP Title: National Priorities List and State Orphan Sites BR Name: 3960-013-BCP-2021-GB Budget Request Summary Operating Expenses and Equipment Operating Expenses and Equipment FY20 FY21 FY22 FY23 FY24 FY25 Current Budget BY+1 BY+2 BY+3 BY+4 Year Year 5340 - Consulting and Professional Services - External 0 18,455 0 0 0 0 Total Operating Expenses and Equipment $0 $18,455 $0 $0 $0 $0 Total Budget Request Total Budget Request FY20 FY21 FY22 FY23 FY24 FY25 Current Budget BY+1 BY+2 BY+3 BY+4 Year Year Total Budget Request $0 $18,455 $0 $0 $0 $0 Fund Summary Fund Source Fund Source FY20 FY21 FY22 FY23 FY24 FY25 Current Budget BY+1 BY+2 BY+3 BY+4 Year Year State Operations - 0018 - Site Remediation Account 0 18,455 0 0 0 0 Total State Operations Expenditures $0 $18,455 $0 $0 $0 $0 Total All Funds $0 $18,455 $0 $0 $0 $0 Program Summary Program Funding Program Funding FY20 FY21 FY22 FY23 FY24 FY25 Current Budget BY+1 BY+2 BY+3 BY+4 Year Year 3620011 - Other Site Mitigation Activities 0 18,455 0 0 0 0 Total All Programs $0 $18,455 $0 $0 $0 $0

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