6 CCR 1007-3-8.83 - Basis and Purpose

These amendments to 6 CCR 1007-3, Part 262 and Part 100 are made pursuant to the authority granted to the Solid and Hazardous Waste Commission in §§ 25-15-302(2) and (3.5), C.R.S.

Amendments to Hazardous Waste Fees

With one exception explained near the end of this Statement of Basis and Purpose, this proposed rulemaking simply removes the temporary decreases for hazardous waste fees that have been included in the regulations for the past 3 and one-half years. When the fees were decreased, the original fee amounts were left in the regulations, but parenthetical statements were added that modified the fees downward for some defined period of time. The changes proposed herein simply remove the parenthetical statements, leaving behind the original 2009 fee amounts as the fee amounts that will be charged beginning on July 1, 2014, the effective date of the rulechange.

The Solid and Hazardous Waste Commission (the Commission) promulgated the current hazardous waste fees in 2009. Based on cost and revenue projections at that time, the 2009 fees were intended to be adequate to fund the Hazardous Waste Program within CDPHE for about two years. However, after two years, because of higher-than-expected revenue and lower-than-expected costs, the Department determined that a one-year temporary decrease of 12% in hazardous waste fees was necessary to bring the Hazardous Waste Cash Fund balance back in line with allowable limits for cash fund carry-over.1 The Commission agreed and reduced the hazardous waste fees by 12% for Calendar Year 2011. As it turned out, the 12% fee reduction did not reduce the cash fund balance quickly enough so a year later, the Department determined that increasing the fee reduction to 30% for one additional year was necessary. Based on revenues, costs, and the fund balance at that time, the Department suspected that the 30% fee reduction could possibly be extended into a second year. However, due to an uncertain economy, the Department asked for, and the Commission implemented, a 30% fee reduction only for Calendar Year 2012. A year later, additional analysis confirmed that this fee decrease could be extended and the Commission continued the fee reduction for another year, Calendar Year 2013.

As 2013 ended, the Department again evaluated cost, revenue, and fund balance trends. By this time, the 30% fee decrease had caused a significant decrease in the cash fund balance as was intended. However, it was also apparent that, by mid-2014, revenues would need to be increased to ensure that the fund balance did not fall too far too fast. This rulemaking proposal to discontinue the fee decrease allows the fund balance to achieve allowable levels within about two years and avoids more significant fee increases in the short term future that would result from the fund balance decreasing too quickly. Based on the current projections, discontinuing the 30% fee reduction and restoring the fee amounts to the 2009 levels, as proposed in this rulemaking, should provide sufficient revenue to pay Hazardous Waste Program costs through July 1, 2017, and maybe longer. Fee amounts that were originally projected to be adequate for only two years back in 2009 will have remained in place for eight years - and were decreased for about half of that time.

Historical Background

It is useful to understand what caused the Department's 2009 cost and revenue predictions to be so far off, causing the subsequent need for a multi-year fee decrease. The "Great Recession" began in 2008, just before the Department began evaluating the need for a fee increase, and caused several unanticipated effects. The Department benefitted from higher-than-anticipated revenue, particularly in 2010, and lower-than-expected costs. Revenues were higher because:

1) Greater-than-expected volumes of hazardous waste were processed by Colorado's permitted Treatment, Storage, and Disposal (TSD) facilities. The spike in disposal volumes at TSDs was driven in part by the federal government's economic stimulus package which allowed EPA to fund large cleanups and removal projects around the nation.
2) The Program began collecting a sizable hazardous waste volume fee for a new waste stream at one of the permitted TSDs.
3) Other fee components (number of billable hours and number of hazardous waste generators) remained stronger than anticipated. The Department expected that the economic recession would cause some generators to close, decrease their operations, or decrease their generation of waste. In addition, the Department expected that the projects for which Program staff was billing hourly fees would be cut back by industry. In fact, these expected decreases did not occur.

Conversely, the Hazardous Waste Program had lower expenses because:

1) Salaries did not increase in FY10 - FY13.
2) Salaries were actually cut 2.5% in FY11 and FY12 by legislative action diverting more salary to PERA (the retirement program for state employees) and decreasing the amount paid to PERA by the state the same amount.
3) The Hazardous Waste Program did not spend the budgeted $200,000 that had been built into the 2009 fee increase for building a new data management system. That system is still planned and is budgeted for FY14 and FY15.
4) The Hazardous Waste Program did not have to pay attorney costs out of the cash account in FY11 - FY13. These costs were paid by the Department via indirect budgets.
5) The Hazardous Waste Program lost ~4 FTE in FY11 due to some minor reorganization and movement of time and effort over to the Solid Waste Program.

Technical Background

§ 25-15-301.5, C.R.S., provides general directives for implementation of the hazardous waste regulatory program. These directives include several themes including maintaining program authorization from the U.S. EPA; implementing a program that is credible and accountable to industry and the public; implementing a program that is innovative and cost-effective; and implementing a program that sets a preference for compliance assistance. § 25-15-302(2), C.R.S., provides guidance for future fee adjustments by the Solid and Hazardous Waste Commission. This guidance includes setting the fees such that the revenue generated by each fee approximates the actual reasonable program costs attributable to the facilities paying the fee. Each of these directives and guides is more fully explained in the following paragraphs.

Maintaining EPA authorization for the Hazardous Waste Program: The Department is authorized by the U.S. EPA to operate the hazardous waste regulatory program in Colorado in lieu of the federal government. One of the key criteria evaluated by the U.S. EPA in authorizing the state program is having adequate resources, both in terms of funding and in terms of qualified personnel. While EPA has complimented us on program implementation emphasizing the excellence of our staff, they watch our revenues and our fee adjustments carefully. They are aware that this fee increase is necessary to maintain adequate resources.

Implementing a program that is credible and accountable to industry and the public: The program endeavors to maintain credibility and accountability through a high-volume, high-efficiency inspection program that maintains a high level of compliance in the regulated community and preserves a level and fair playing field for all regulated entities. In addition, the program maintains a high-efficiency corrective action program that meets or exceeds its commitments to the regulated community. Since 2000, we have provided annual reports on program performance to the legislature that present the efficiency and effectiveness of our program implementation.

Implementing a program that is innovative and cost-effective: In the Hazardous Waste Compliance Assurance Unit, the number of inspections each inspector is expected to perform is included in each inspector's performance plan. In addition, timeliness limits for the administrative duties associated with each inspection are also set in the performance plans. These expectations have been modified upwards several times over the years as inspector experience and efficiency improved. Another huge success for Compliance Assurance has been the self-certification programs. These programs have drastically improved compliance in targeted sectors without adding any staff. These programs are being copied in other areas of CDPHE and in other states.

The program has set up numerous performance limits in the Hazardous Waste Corrective Action Unit which program staff routinely meet. In addition, the Unit has developed generic soil cleanup standards for the more common contaminants and exposure scenarios, thereby relieving parties performing cleanups the expense of having to hire a risk assessor to perform this work. We have updated these tables several times. In 2013, the Unit finalized the "Conditional Closure of Low Threat Sites with Residual Ground Water Contamination Policy and Guidance." This policy has been under development for several years and represents a huge conceptual step forward in how cleanup projects can be finished in an economic and safe manner.

Implementing a program that sets a preference for compliance assistance: Section 25-15-301.5(2)(g), C.R.S., requires that the Program expend at least 10 percent of the annual budget on compliance assistance efforts. In FY 2013, as it has every year, the Program met that requirement as 17.0 percent of staff time was devoted to compliance assistance.

The program has developed and continues to invest in a broad range of compliance assistance services to assist the regulated community in managing hazardous waste. These compliance assistance services include the following activities:

* A part-time customer assistance and technical assistance phone line (303-692-3320);

* A wide range of hazardous waste guidance documents and compliance bulletins;

* An extensive, useful and informative Website - www.colorado.gov/cdphe/hm;

* Compliance assistance site visits through the Generator Assistance Program (GAP);

* Hazardous waste management training to industry provided quarterly by our staff; and

* Hazardous waste training periodically requested by industry groups and others.

During FY 2013, the program provided 26 compliance-assistance training sessions to industry around the state. These trainings were attended by 1,817 people. The training sessions covered a variety of topics, and focused on hazardous waste and other related environmental regulations. In addition, program inspectors routinely incorporate compliance assistance and pollution prevention into the approximately 350 compliance inspections performed each year. Inspectors provide guidance documents to facilities during inspections as well as person-to-person advice and consultation. In FY 2013, the program conducted 63 Generator Assistance Program (GAP) site visits that had compliance assistance as the single major focus.

Setting fees where each fee approximates the actual program costs attributable to the fee-paying entities: The 2009 fee increase was calculated carefully to collect proportional amounts of revenue from each hazardous waste sector equivalent to the amount of time and effort the Department spent regulating that sector. To achieve equity between fee-paying sectors, the 2009 fee increase was not equivalent across the board. Some fees were increased more than others so that each fee approximated the actual program costs attributable to that sector. That proportion between sectors is still largely correct. Therefore, the fairest and simplest approach for this fee increase is simply restoring the 2009 fee levels, with one notable exception, explained below.

Stakeholder Process

As this proposed fee increase simply restores fee levels to those set in 2009, the Department only conducted limited stakeholder outreach. This outreach included a key group of stakeholders that had been involved in the 2009 fee increase as well as all of the regulated entities that pay large fee amounts. Only one stakeholder responded. This stakeholder is a large hazardous waste disposal facility that would like to mitigate effects on their market competitiveness by raising the fees back to 2009 levels in steps over time rather than in a single event. The Department is proposing to address this concern through a non-regulatory two-step increase back to the 2009 levels over the next 18 months. This two-step increase will only apply to those facilities in this regulated class. All other fees will be raised the full amount effective July 1, 2014.

Specifically, the Department proposes to remove the parenthetical fee decreases in the regulations for the TSD annual fees2, exactly like the other fee categories. However, instead of charging the TSD facilities the higher amounts beginning on July 1, 2014, we are proposing to assess fees at the current reduced levels through December 31, 2014; assess fee amounts two-thirds of the way back to the 2009 levels between January 1 and December 31, 2015, and then raise the fees back to the full 2009 levels on January 1, 2016.

This phase-in of the 2009 fee amounts for the TSDs is justified because our level of effort at the TSD facilities has slightly decreased in the intervening years relative to the other fee-paying sectors. The lower fee revenues that result from this phase-in of the 2009 fees achieves equity between fee-paying sectors, as required by statute (C.R.S. § 25-15-302(b)(I) and (II)).

1 § 24-75-402, C.R.S., requires that the fiscal-year end balance in this type of account not exceed 16.5% of the previous year's expenditures

2 Those fee amounts presented on the "Annual Fee Schedule" in 6 CCR 1007-3, §100.31.

Statement of Basis and Purpose Rulemaking Hearing of May 20, 2014

Notes

6 CCR 1007-3-8.83
37 CR 24, December 25, 2014, effective 3/2/2015 38 CR 11, June 10, 2015, effective 6/30/2015 39 CR 05, March 10, 2016, effective 3/30/2016 39 CR 11, June 10, 2016, effective 6/30/2016 40 CR 06, March 25, 2017, effective 4/14/2017 40 CR 11, June 10, 2017, effective 6/30/2017 40 CR 21, November 10, 2017, effective 11/30/2017 41 CR 06, March 25, 2018, effective 4/14/2018 41 CR 11, June 10, 2018, effective 6/30/2018 41 CR 24, December 25, 2018, effective 1/14/2019 42 CR 06, March 25, 2019, effective 4/14/2019 42 CR 06, March 25, 2019, effective 5/30/2019 42 CR 11, June 10, 2019, effective 6/30/2019 43 CR 12, June 25, 2020, effective 7/15/2020 44 CR 06, March 25, 2021, effective 4/14/2021 44 CR 11, June 10, 2021, effective 6/30/2021 44 CR 24, December 25, 2021, effective 1/14/2022 45 CR 11, June 10, 2022, effective 6/30/2022 45 CR 17, September 10, 2022, effective 9/10/2022 45 CR 17, September 10, 2022, effective 9/30/2022 45 CR 23, December 10, 2022, effective 1/30/2023

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