*Update: AB 1149 (Gordon and Wieckowski), which was signed by Governor Jerry Brown, would extend a January 1, 2012 sunset for the Plastic Market Development program to continue investment in California’s plastics recycling and manufacturing infrastructure. It would also authorize CalRecycle to ‘reinvest’ up to 50% of savings from an anticipated drop in PET processing fee offsets back into Plastic Market Development Payments. 

About the Program:
Section 14549.2 of the Public Resources Code provides the Department of Resources Recycling and Recovery (CalRecycle) with the authority to use surplus redemption funds (money from containers not recycled), to make payments of up to $150 per ton to specified entities for empty plastic beverage containers that are processed and utilized for manufacturing in this state. In 2007-09, the total amount of funds authorized was $5 million. For 2010 and 2011, the legislature increased this payment authority to $10 million annually. The program was originally set to sunset on January 1, 2011 but AB 1149 (Gordon and Wieckowski), which was recently signed into law, extends  the sunset to 2017. It would also authorize CalRecycle to ‘reinvest’ up to 50% of savings from an anticipated drop in PET processing fee offsets back into Plastic Market Development Payments. 

Background:
While California’s Plastic Market Development program (PMD) has succeeded in increasing California processing and use of recycled plastic in-state, we continue to export in excess of 90% of plastic collected for recycling. Program funding levels have been inconsistent and generally insufficient to provide the confidence and stability to the market place necessary to support private sector investments by potential California processors and manufacturers.

Californians generate more than 8 billion polyethylene terephthalate (PET) plastic beverage containers annually. PET plastic is the fastest growing type of beverage container, accounting for nearly 40% of all containers sold (compared to 44% aluminum and just 15% glass).

In 2000, Californians collected just 1 billion PET plastic bottles for recycling. This year, a projected 6 billion PET plastic bottles will be collected for recycling (70-75% recycling rate). While California’s Beverage Container Recycling Program and the efforts of individual consumers are successfully diverting more than 200,000 tons of PET plastic from litter and landfill, more than 90% of these collected plastic bottles are baled and exported overseas (mostly China) for manufacturing into new value-added products.

Existing California-based manufacturers of products and packaging could be utilizing this material, reducing pollution and waste, and increase jobs and economic opportunity in California.

Since 2007, the PMD program has helped to develop this state’s recycled plastic processing and manufacturing capacity by providing a market-based financial incentivize to in-state processors (washing/flaking) and manufacturers that utilize California generated post-consumer plastic beverage containers. But in its current structure, the program has provided inconsistent and insufficient funding to support its mission.

Incentive Payment:  

The passage of AB 3056 (Chapter 907, Stat. 2006) created the Plastic Market Development Payment Program under the Bottle Bill Program to develop California’s markets for recycled empty plastic beverage containers.

Using unredeemed deposit money, the Department of Resources Recycling and Recovery (CalRecycle) pay up to $150 per ton to each of the following eligible entities:
1. A certified entity washing and producing flake, pellet, or other form usable for a product manufacturer from empty California Refund Value (CRV) plastic beverage containers collected in the state for recycling; and
2. A product manufacturer using the plastic material from the certified entity to manufacture a plastic product in CA.

So far, the Department of Resources Recycling and Recovery (CalRecycle) has made $10 million in payment to certified entities and CA’s product manufacturers for washing, and reprocessing 40,000 tons of flake, pellet and other form to produce a plastic product.

Plastic Market Development Payment Program will grant up to $10 million for FY 2010-11 and FY 2011-12. 

The PMD program has stimulated jobs as new recycling infrastructures are being developed. In CA, there are currently 96 processors, who bale the PET. The top 10 processors handle 60% of PET recycled in CA, while the other 86 processors handle the remaining 40%.

There are also washers or “certified entity” wash the PET flakes:
•    CarbonLITE: Based in Riverside, CA, this plant is scheduled to come on-stream in mid-2011. At that time, it will produce bottle-grade PET pellet and flake from post-consumer PET bottles with a first phase annual capacity of 100 million pounds and will create potentially 80 jobs.
•    Global PET - located in Perris, this plant is the primary producer of washed PET flake in California. Global PET has received several DOC grants, and has expanded their facility from flaking, to washing, to sheet production, and soon thermoforming. Global PET purchases approximately 40 million pounds of PET bales per year, and has the capacity to produce 20 million pounds of PET flake and sheet.
•    Peninsula Plastics Recycling – based in Turlock, this is a joint venture of Merlin Plastics of Canada, and Peninsula Packaging. This is a food packaging “flake” plant with a capacity of 80 million pounds, and produces clean, ready-to-use recycled plastic in the form of pellets or flakes. Peninsula Plastics was awarded a DOC grant to help finance a PET reclaiming facility in the Central Valley. The company plans to utilize 62.5 million pounds of recycled PET bales to produce 50 million pounds of recycled PET flake and pellets. Once the company is in full operation, they will sell one-half of the recycled PET to Peninsula Packaging for thermoformed packaging, and will produce bottle-grade recycled PET for the remainder of their output. Potential end-users for the bottle grade recycled PET include Ball Corporation, Liquid Container LP, Signode, Pactiv, PepsiCo, and Graham Packaging.  Employs 60 people.

Most PET recycled in CA is exported. However, the following companies use recycled PET to make clamshells container of produce and other foods.
•    Peninsula Packaging – located in Exeter, Peninsula Packaging produces thermoformed containers, with an average of 25 to 50 percent recycled content. The company, in operation for ten years, has 100 million pounds of PET thermoforming capacity. They purchase recycled PET from California, but must also purchase imported flake to meet their capacity needs. Currently, employs 265 people.
•    Global PET – In addition to washing, this company has recently expanded its business to include food container production. Global supplies containers to customers that include Lucky Supermarkets, Rubios Restaurant chain, and UCLA cafeterias. Global is set to generate $20 million in sales from its container manufacturing operations. Global PET received $8 million in state grants, which was used to open a manufacturing plant in Perris. The company hopes to utilize 60 million pounds of recycled PET per year, split between producing flake, sheet, and thermoformed product (food containers). Global currently employs 150 workers.