Equilon Enterprises LLC v. Board of Equilization (189 Cal. App. 4th 865, 2010)

Opinion

ROBIE, J.

In this tax refund case, plaintiff Equilon Enterprises LLC, doing business as Shell Oil Products US (Shell), sought a refund of $3,910,359.10 it paid for the year 2002 pursuant to regulations promulgated under the Childhood Lead Poisoning Prevention Act of 1991 (Health & Saf. Code, § 105275 et seq.), on the theory (among others) that the amount was an unconstitutional tax under section 3 of Proposition 13 (Cal. Const., art. XIII A, § 3). The trial court entered judgment against Shell and in favor of defendants Board of Equalization (the board) and State Department of Health Services (now the State Department of Public Health) (the department), concluding the fee Shell paid was a legitimate regulatory fee and not a tax.

On appeal, Shell contends the fee imposed on the gasoline industry under the department’s regulations, which require the industry to bear approximately 85 percent of the costs of the childhood lead poisoning prevention program (lead program), is an unconstitutional tax because it does not bear a reasonable relationship to the industry’s responsibility for cases of childhood lead poisoning in California. According to Shell, the paint industry is mainly responsible for childhood lead poisoning but is allocated only 15 percent of the lead program’s costs, and other industries “likely” responsible for childhood lead poisoning pay no lead program fee at all.

The lynchpin of Shell’s argument is that for the fee to be constitutional, it must be proportional to the gasoline industry’s responsibility for cases of childhood lead poisoning, rather than proportional to the industry’s responsibility for environmental lead contamination. We disagree. A regulatory fee is not an unconstitutional tax under Proposition 13 if there is a reasonable basis in the record for the manner in which the fee is allocated among those responsible for paying it. Here, there was a reasonable basis for the department to allocate the lead program fee in the manner it did, based on the gasoline industry’s responsibility for contaminating the environment with lead. The department was not obligated to allocate the fee based on responsibility only for those specific instances in which exposure to environmental lead contamination has actually resulted in childhood lead poisoning.

Because we reject this argument, as well as Shell’s other two arguments, we will affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Proper understanding of the issues in this case requires a detailed summary of the legislation underlying the fee regulations Shell has challenged. Accordingly, we begin by summarizing the legislation relating to the prevention of childhood lead poisoning, then we review the fee regulations, and then we turn to Shell’s lawsuit.

A

The 1986 Act

In 1986, the Legislature first enacted the Childhood Lead Poisoning Prevention Act (now codified as Health & Saf. Code, § 124125 et seq.) (the 1986 Act). (Stats. 1986, ch. 481, § 2, pp. 1794-1795.) In doing so, the Legislature found and declared “that childhood lead exposure represents the most significant childhood environmental health problem in the state today; that too little is known about the prevalence, long-term health care costs, severity, and location of these problems in California; that it is well known that the environment is widely contaminated with lead; that excessive lead exposure causes acute and chronic damage to a child’s renal system, red blood cells, and developing brain and nervous system; that at least one in every 25 children in the nation has an elevated blood lead level; and that the cost to society of neglecting this problem may be enormous.” (§ 124125.)

The Legislature further found and declared “that knowledge about where and to what extent harmful childhood lead exposures are occurring in the state could lead to the prevention of these exposures, and to the betterment of the health of California’s future citizens.” (§ 124125.)

In enacting the 1986 Act, the Legislature’s stated intent was “to establish a state Childhood Lead Poisoning Prevention Program within the Department to accomplish all the following: [ft] (a) [t]o compile information concerning the prevalence, causes, and geographic occurrence of high childhood blood lead levels[;] [