MINUTES OF THE SENATE COMMITTEE ON NATURAL RESOURCES Sixty-eighth Session May 3, 1995 The Senate Committee on Natural Resources was called to order by Chairman Dean A. Rhoads, at 1:30 p.m., on Wednesday, May 3, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Dean A. Rhoads, Chairman Senator Lawrence E. Jacobsen, Vice Chairman Senator Mark A. James Senator Mike McGinness Senator Ernest E. Adler Senator John B. (Jack) Regan Senator O. C. Lee STAFF MEMBERS PRESENT: Fred Welden, Chief Deputy Research Analyst, Legislative Counsel Bureau Kathy E. Cole, Committee Secretary OTHERS PRESENT: John Sande, Lobbyist, Western States Petroleum Association Carl Wallrath, Used Oil Program Coordinator, Chevron Scott G. Colpitts, P.E., Vice President Environmental Affairs, Evergreen Holdings, Inc. Dick Rowe, Deputy Director, Division of Agriculture, Department of Business and Industry Jack N. Armstrong, D.V.M., Acting Administrator, Division of Agriculture, Department of Business and Industry Rose McKinney-James, Director, Department of Business and Industry Steve Mahoney, Chief, Livestock Identification Bureau, Division of Agriculture, Department of Business and Industry Chairman Rhoads opened the hearing on Senate Bill (S.B.) 402. SENATE BILL 402: Revises provisions relating to labeling of lubricating oil and used and recycled motor oil. John Sande, Lobbyist, Western States Petroleum Association, along with Carl Wallrath, Used Oil Program Coordinator, Chevron, spoke in support of this bill. Mr. Sande informed the committee that Mr. Wallrath would give his testimony first and then they would jointly propose some amendments toward the language of the bill. Mr. Wallrath read from a prepared statement (Exhibit C). A general discussion ensued with regard to labeling re-refined oils nationwide; that is, there needs to be uniformity in the language and defining of these types of oils. Further, both Mr. Wallrath and Mr. Sande referred to the implications of agencies and industries who want to market their products by including the wording "recycled re-refined oil based products" in their advertising, but who have difficulty in doing so due to the lack of labeling consistency. Mr. Wallrath then explained the basic steps taken in order to process re-refined oil. He declared that "used oil" according to the proposed amendment is defined as "oil that has been used up in its original capacity." According to Mr. Wallrath, it has either gained some contaminants inside the oil or its lost some of its physical characteristics to be useful. Continuing on, Mr. Wallrath reiterated that the used oils have become a problem in relation to discarding it, especially if it is improperly disposed of. For instance, if the oil is dumped down a drain or onto the ground, it will get into the water table and eventually it will be a problem to the environment. In an effort to address this issue the Evergreen Oil Company and other re-refiners have come up with a process that takes that used oil and brings it back to a central location where they are then able to get the water and sludge materials out. Next, they take the oil and distill it so that they leave behind most of the contaminants that were left in the oil after filtration. The distillation process then divides the oil into components that can be handled. Mr. Wallrath pointed out that one of the components that they get out of the distillation processing is light gasoline. After the oil has been distilled it is treated with hydrogen which will in turn purify the remaining lubricating part of the oil. Mr. Wallrath concluded his testimony by stating this is the final step which cleans up the oil and makes it "virtually indifferent to virgin crude oil." Chairman Rhoads asked if the processing of re-refined oil is as costly as processing virgin crude oil. Mr. Wallrath made it clear that the processing of re-refined oil is indeed costly, however, it is less expensive then processing virgin crude oil. Senator Adler wondered whether they could use this distilling process with synthetic oils as well. Mr. Wallrath concurred that this could be done in like manner as with other used oils. Scott G. Colpitts, P.E., Vice President, Environmental Affairs, Evergreen Holdings, Inc., referred to his proposed amendments (Exhibit D) and then testified that the distillation process of re-refining oil is their patent. Furthermore, their marketing emphasis is on using a recycled product which will meet the "virgin specifications." Mr. Colpitts stated that they need a label which will clearly show the quality of the product, that it is indeed "equal to virgin crude oil." Chairman Rhoads asked if the state was involved in the testing of this re-refined oil. Mr. Colpitts said he did not believe that the state was; however, he wasn't sure on this. Mr. Colpitts went on to explain that the testing procedures are quite lengthy and detailed and that his company believes it is not necessary for the state to do more testing. Indeed, he said, "They should rely, as do we, on API (American Petroleum Institute) who does the licensing for us." Mr. Sande asked to clarify this last statement by saying, "I believe the Department of Agriculture does have the ability to test for the SAE class of requirements, but not for the API as proposed in this bill." Mr. Sande then drew attention to the specific recommended amendments for S.B. 402. Chairman Rhoads noted that this bill originally called for a fiscal note. Mr. Sande explained that the agencies that would be affected have worked out an agreement with the Division of Agriculture and have decided that a fiscal note would not be necessary as there would not be any added expenses. There was more discussion about the "specifications equivalency ratings," the efforts to prevent fraud on the labeling of used oil, and the ways to ensure that the general public is educated with regard to the recycled oil. According to Mr. Sande, as long as the used oil meets the API certification then it will meet the specifications for small engines such as lawnmowers, but it would not meet the requirements for a new automobile. Senator Regan asked of the witnesses, "What size of a market are we speaking about with the western states? You say that you have refineries on the west coast and the one in Chicago. [So,] how large a market is [there for] the used/recycled oil?" Mr. Colpitts responded by stating: Currently, the states we serve are California, Arizona, and Nevada. Our production is 8-billion gallons a year...that roughly translates to 8-million gallons a year of motor oil... The Safety Clean Plant in Chicago has in production about 60-billion gallons a year. While, the production numbers are small, relative to the rest of the industry, this [bill] is a very important step in attempting to use this resource [used oil]... The oil industries are divided on this issue [of re-refining oil and yet they]...support recycling... [As noted,] Chevron is more concerned about the environmental issues of recycling [which] is number one... Senator Regan and other senators expressed their concerns over the language of this bill. Mr. Sande tried to explain that from an environmental point of view, it is necessary that they do not have "mixed signals" coming from the Legislature. Furthermore, he believed that the main purpose of this bill was to encourage recycling of oil to keep it from getting into our environment as a bad product. Mr. Colpitts interjected that there is enough room for those who recycle the re- refined oil to come in and provide a good product. Moreover, the marketplace will take care of itself through pricing and competition. Senator Regan stressed that there is a cost savings in that they are not taking virgin oil and processing it. The senator expounded even further that the savings would benefit both economically and environmentally. Mr. Colpitts concurred that this would be so. Senator Adler asked if there was a limit as to how many times you could recycle the used or re-refined oil. Mr. Colpitts stressed that there is no limit to the amount of times the oil can be recycled. He called attention to the prior testimony which explained the refining process. Accordingly, this process removes the impurities and the additive package; it cleans up the oil and reblends the oil with the additives in it, so that there is no "discrete end" to how many times it can be recycled. Mr. Colpitts then told the committee that they have at present a substantial customer base including the United States Postal Service in the southwest. Further, he reiterated that "there are customers out there that use it [the re-refined oil]. We sell oil through our distributor and in our State of Nevada... We were asked to come to Nevada, because of our collection services..." Chairman Rhoads asked, "Do you pay anything for the oil?" Mr. Colpitts responded by saying, "We like to charge them when we collect it, but sometimes we pay." Senator Jacobsen then asked, "In the recycled oil are there any additives in there that would be more hazardous then what they are currently...in the way of smoke or fumes?" The senator noted that oftentimes farmers use oil to help put their fencing in the ground or a railroad service might use drain oil to fire their engines. Mr. Wallrath assured the senator that they use the same additives in the re-refined oil as they do on their regular oil, so, that there is no difference in the end point of that oil. Mr. Colpitts asked to respond to Senator Jacobsen's question with regard to impurities. He said, "The product that we produce is water-white and we are able to [collect] all the contamination in the water. [Then,] all of the contamination from our process goes into asphalt...and it's sold into the roof and shingle market; so, there are no by-products that need to be landfilled and nothing makes it to the final oil that would cause it to become off-spec. or have a contamination in it." Dick Rowe, Deputy Director, Division of Agriculture, Department of Business and Industry, said, "We are in agreement with this bill and with the amendments that Mr. Sande has proposed. With the amendments he has proposed, with the API doing the testing on a performance rating that will remove the fiscal note that was originally attached to this bill." In response to an earlier question, Mr. Rowe concurred that they do indeed test the viscosity and the impurities of motor oil. "However," he said, "the Department of Agriculture does not have the laboratory capabilities of running a performance-type rating test." Chairman Rhoads closed the hearing on S.B. 402 and opened the hearing on Senate Bill (S.B.) 409. SENATE BILL 409: Revises provisions governing qualifications of administrator of division of agriculture of department of business and industry. Jack N. Armstrong, D.V.M., Acting Administrator, Division of Agriculture, Department of Business and Industry, said, "[This] bill expands a rather restrictive language that exited before." Chairman Rhoads asked if they are currently recruiting. Mr. Armstrong affirmed that the recruitment notices went out approximately a month ago and included the language contained in this bill, along with the notice that the position was pending legislative approval. He further told the committee that the state personnel office had received a rather large amount of applicants, a total of 90 applicants, so far. Rose McKinney-James, Director, Department of Business and Industry, offered her support of this bill. Further, she declared that it is important that they have the ability to attract qualified individuals to head this division which is one of the larger divisions in the state. Indeed, Ms. James said, "[This position] is one that will require the kinds of skills that are set forth in this bill." There was a discussion which followed Ms. James' testimony with regard to the language of the bill. Ms. James restated that what they were trying to avoid was a restriction which would limit the candidate to either 5 years of experience in agriculture or livestock oversight; when in fact, there is a need to have someone with overall administrative experience. She surmised that the language of the bill would provide them with an adequate net to capture such a person. Chairman Rhoads closed the hearing on S.B. 409 and opened the hearing on Senate Bill (S.B.) 410. SENATE BILL 410: Revises provisions governing payment of expenses relating to estrays. Mr. Armstrong said: The bill before you is in response to a recent internal audit division report that we had. This bill responds to two of the findings in the internal audit report with regard to the estray account. It provides the ability to develop a fiscal tracking system for the estray account, pinpointing the revenue and expenses incurred as a result of the estray program. Currently, the estray money is placed in a savings account, an interest-bearing savings account, and they have no access to pay costs incurred as a result of gathering estrays of advertising and selling the animals. So, this and the current receipts of the estray sales are placed in what is called the agricultural working capitol fund which is an inappropriate place, but that's the only way that they can expense out. What the bill does is put the revenue and expense portion of that budget in an interest-bearing checking account so that that will stand independent of other budgets within the agency. Steve Mahoney, Chief, Livestock Identification Bureau, Division of Agriculture, Department of Business and Industry, said that this was a type of cleanup bill that would allow them to pay expenses as they should be properly paid from the collection of the sale of these animals. Chairman Rhoads closed the hearing on S.B. 410 and opened the hearing on Senate Concurrent Resolution (S.C.R.) 23. SENATE CONCURRENT RESOLUTION 23: Encourages purchase of local agricultural products. SENATOR MCGINNESS MOVED TO DO PASS S.C.R. 23. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR JACOBSEN WAS ABSENT FOR THE VOTE.) ***** Chairman Rhoads opened the hearing on Assembly Bill (A.B.) 178. ASSEMBLY BILL 178: Revises certain requirements for defining boundaries of mining claims. SENATOR REGAN MOVED TO DO PASS A.B. 178. SENATOR JAMES SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR JACOBSEN WAS ABSENT FOR THE VOTE.) ***** Chairman Rhoads adjourned the meeting at 2:38 p.m. RESPECTFULLY SUBMITTED: Kathy Cole, Committee Secretary APPROVED BY: Senator Dean A. Rhoads, Chairman DATE: Senate Committee on Natural Resources May 3, 1995 Page