Vermont Legislature SmartTranscripts:

[Chair Amy Sheldon]: We're live. All right. Good morning, and welcome to the House Environment Committee. This morning, we are going to hear from Bree Beatley on the Bottle Redemption PRO. Welcome back, Bree.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Thank you, chair Sheldon, members of the committee. Appreciate the invitation. Opportunity to chat with you all again about this issue. I am Brie Deetly. I am I am the principal for Breezeway Consulting in Somerville, Massachusetts. I am an independent consultant. I work on my own, and have worked for decades, I hate saying that, on, this and related, environmental solid waste issues, recycling, extended producer responsibility programs all around the country, and, I have worked on deposit issues in Vermont for many years, having been involved in a number of studies of the system going back to the nineteen nineties, the act one forty eight study a few years ago, and most recently did some reviewing of the, DEC systems analysis that was done by an outside consultant. I also manage the commingling program, which currently, is responsible for about 84% of the returns that come through the system. That's a cooperative system among some of the major distributors that I'll talk about in a little bit. And I was, asked to participate on behalf of the Beverage Association, which is the trade group that represents the nonalcoholic beverage manufacturers and distributors in the state to speak to you today. That's who I'm representing. I am not representing the commingling group in in in this presentation. As part of the beverage association's sort of assistance and representation, I was asked to participate with senator Bray and a group of stakeholders several years ago to begin discussing the concept of reforming the deposit law around the construct of extended produced responsibility models. And that's really kind of where we are today is working on essentially those same principles that were arrived at through that consensus process again several years ago. Things have changed. There have been some different issues. Our primary issue ultimately with that legislation was whether or not we would have access to capital resources to make the investments in improving the system, and that's will be a a focus of my discussion today As we now, you know, as there's been some willingness signal to, free up some of those unclaimed deposits to reinvest into the system, which, as I'll note, is much more the norm of how these systems operate around the world. And so, it that allows us to sort of reengage here and and get, and focus on how this program will work. I do have written testimony that, you will if you haven't already gotten, I think Chris Chris Price has it to distribute. So but I'm gonna run through parts of that today. I wanna do a little bit of time on sort of some background issues just to level set, some issues and then get into the really two main issues I wanna talk about, which are the proposed systems. It's governance, which is really key, understanding that and understanding sort of where we are on that issue is key to understanding our support and interest in this proposal. And then second, talk about the capital requirements and some of the investments that might be made. So the system that we have in Vermont is looks very much like it did when the law was enacted back in the early 1970s, really with the exception of the establishment of the commingling group in 2008. And that means that despite the beverage industry and the beverage products that are available in the beverage market and the retail food business having changed enormously over that period, the bottle bill still operates pretty much the way it did in 1973. That means that almost every container is touched by someone in order for it to be redeemed. It's a very unautomated system. Aside from Hawaii, Vermont is the least automated redemption system in the country. About 98 of the containers are are handled or I'm sorry. 92% of the containers are manually redeemed. So our commingling group last year handled a 145,000,000 returns of cans and bottles. A 133 of those were handled by hand to be counted and sorted, and that makes for a fairly inefficient system. The investments haven't been made in technology. Customers in Vermont haven't been you know, haven't taken up some of the technology like reverse vending machines that have become dominant in other states just because of the geographic distribution and customer service issues. So we have we have a sort of, we we have a very manually structured system that's not very efficient because of the time and effort and labor that it takes, and it's tough to staff the redemption centers, with sufficient labor to handle that. Secondly, have quite a range because of Vermont's geography. We have quite a range of redemption centers. We have redemption centers that average about a thousand containers a week redeemed, and we have a redemption center that handles a thousand containers every fifteen minutes on average. So there's quite a range of locations, sites, the trucks that do the pickups, on behalf of at least of our members and most nearly every distributor in the state, which is Tamara, you know, is running trucks all over the state to very large and very small facilities. And right now, what's happening in those redemption centers is the containers that we, manage through the commingling system are sorted in a fairly simple fashion, whereas the containers that are not incomingling, the 16% that are not incomingling, have to be sorted somewhere between a 100 and a 150 different ways in order to account for the different distributors and brands that are represented by those containers. There's a lot of labor and a lot of time and a lot of space consumed with those noncommingled containers, and that's something that we're really trying to fundamentally address with the proposal that that's before you and and it was put together a few years ago. I do also wanna mention, because I always like to remind folks of the dimensions of sort of market distortions that the deposit system has created in the form of of incentives to shop outside the state and the incentives for redemption fraud. If you look at the systems analysis report that was just done for DEC or you look at work that was done historically under act one forty eight or some of the earlier studies that we were involved with, somewhere between 1218% of the containers that are that enter the waste management system in Vermont weren't sold in Vermont. In other words, something like, you know, on average, say, 15% more containers that were sold here get managed here, whether that's through redemption centers, community recycling, or disposal. So that's a combination of people shopping outside the state for their products and people bringing empty containers into the state. So, for redemption. So there is still quite a bit of leakage. There's not much that can be done about the sales side. That's an inevitable consequence of of having differential, right, you know, fees and prices on different sides of the border. But the fraud issue has been very difficult to manage because of the decentralized nature of the system, and I'll come back to that when I talk about the governance of of the proposed kind of PRO. So a minute on commingling. The way as I described, as containers come back, the way the system runs today, each individual distributor is responsible for the pickup and management and funding of the handling of their containers, which means any individual distributor, let's say, Polar beverage. For a Polar Beverage can that comes back, Polar is responsible for reimbursing the nickel that's paid out to a customer on that container, for paying the handling fee of 3 and a half cents on or of 4¢ on that container because it's not in the CoamingLink system, and is responsible for paying Tamra for the services of having that container picked up and processed. So each individual distributor has the responsibility of paying those fees. What we did with commingling, which started back in 2008, which was a system that was initiated by the beverage wholesalers and today includes the largest three beer wholesalers, Baker, Calmont, and Farrell, and includes the two largest soft drink distributors, Coke Northeast and pep and both Pepsi of Burlington and Pepsi of Marlboro. The that system was put together to say, you know what? Rather than have all of us individually have our brands separated and sorted, let's put them all together. So when those containers come into the redemption center, you can put a bud can and a Coors can and a Coke can and a Sprite can altogether in the same bag. And that means the redemption center doesn't have to worry about those separate sorts. And as I said, that accommodates over 80 about 84% of the containers that come back to the stores. That saved a lot of time and effort on behalf of the redemption centers. The rationale for having a two step handling fee of 3 and a half and 4¢ was to try to capture at least some of that cost savings that was reflected for the redemption centers. You'll see in this proposal, there's a proposal to raise the the at least in the short term, the handling fee even higher on the noncommingled brands because to try to reflect more of the cost differential that's there. But the thing about those remaining 16% and the reason that they're still separated into that 80, a 100, a 120, depending on where you are in the state, number of separate bins is because each of those distributors needs to be individually accountable for the number of returns and the fees. And the thing that commingling can't do at this juncture is capture all of that material because of how those products are sold and distributed. They're different than how the beer and soft drink companies manufacture and distribute their products, and I can talk about that more later if you'd like. So what we're trying to do really is put something in place to deal with that extra 16% of containers, at the same time improve the efficiency of the system. So that brings us to the front door of the proposal that's before you today, which again has evolved from the original principles, that was behind, House Bill 158, evolved into House Bill 175, and is before you now in concept. I'd wanna talk first about the governance of that system and the use of this sort of producer responsibility model, and why that's a good idea. Having a single entity in charge of centrally coordinating and managing the system has a number of advantages. First, I'll point out that around the world, there are dozens, even perhaps 100, redemption systems like this that operate in countries around the world. They're all over Europe. They're all over Asia. They're, all over Canada. They operate in many places. Virtually all of them function through the central coordination of a producer responsibility type organization. They are all centrally managed. That's just a a sort of a a principle that came into being, but it was not something that was adopted in The US in the early days of these programs. The bottle bills that were passed in this country between 1971 in Oregon up through 1983 in New York were all done on a distributor individual responsibility basis, and that has been an incredibly sticky process and an incredibly difficult process to undo in this country. California and Hawaii passed subsequent model bills where the state runs those systems. I'll just say that hasn't proven to be a raging success. However, the centralization of those systems is still, you know, is still an improvement over the very decentralized model that we have in Vermont and in a number of other states. What that single entity allows for is for the deposits to all be collected in a single place. And instead of those that redeem the containers having to go to each individual distributor effectively to be reimbursed, There's a single entity, a single payer, if you will, to reimburse all of the deposits, pay out all the refunds, pay out all of the fees, and coordinate how the system is operated. That is a very different model. It's much more efficient, and it means that all we need to ask of the redemption centers is that they separate the materials, put the cans with cans, the bottles with the bottles, the glass with the glass, and, you know, maybe separate some sizes so that, we have accountability on on the weights of the containers. But that's much simpler than having to figure out, you know, what brand does this new craft beer who distributes that new craft brand that's gonna last in the market for three weeks, and where does that can go, and how do you expect a teenage kid who comes into work at the redemption center on weekends to figure that all out? So the centralization of the reimbursement and the funds clearing is really central to, to why this makes sense. The other thing is that this allows for more coordination in how the system runs and is operated. Today, it's, as I said, fragmented. The commingling group is the closest thing we have to sort of being able to coordinate and centralize how things go, but that's really not you know, it's not really possible to to make strategic decisions about what the system looks like and how the system's designed without the authority of that central organization to which all distributors are required to belong. And that's that's really what what we're moving towards here with the PRO. So what a PRO allows for is the PRO to be responsible for making sure that the operations and the financial and the redemption centers are financially viable. But what we wanna do, and I'll talk about it in a minute, is make investments in those redemption centers to improve how the system works, to make it work better for consumers, to make it work better for the pickup agent who's going to pick materials up, and just generally streamline how the system operates. We do that through incorporating technology. There's a lot of new technology that's available. The extent of technology really in Vermont today are the single feed, one can or bottle at a time reverse vending machines that exist at, supermarkets. And those have only penetrated the redemption market in Vermont, as I said, to about 7% of all the returns that come back. It's not a large uptake. There is one redemption center in Vermont that has a what we call bulk feed reverse vending machine where the, operators of the redemption center dump bags of containers in, and those containers are separated and scanned, sort of behind the wall, if you will, at the redemption center. And that's a technology that we want to move towards, as we look towards centralizing the system, automating the system, and making the system more accountable. In terms of the accountability aspect of this, today, the only way that we can really tell who's responsible for what is we're relying on the manual sorting of the redemption centers. And the redemption centers do a stunningly good job of keeping that straight, considering the complexity of the marketplace. Last year I think it was last year, maybe it was two years ago in my testimony, I provided a list of all of the distributors and brands that fell outside of the commingling program. There were 700 combinations of beverage brands and distributors that fell outside of the commingling system. So 700 separate items and products that redemption centers needed to know where they went into who's bin in order to properly sort those containers. That's what we're trying to undo and get rid of with commingling, or or rather with, with automation, with centralized operation. You could call it commingling for the entire program. That's really kind of what we're moving towards. That will not be easy, and that will not be easy for a couple of reasons. One is the unlike many systems that are developed in other deposit jurisdictions around the world, we're not starting de novo here. This is not like, you know, one of the Baltic states in Europe where they're just developing new programs, from scratch. It's it's not even like Quebec, which has had a deposit program for many years, but which has completely reinvented that system and is starting from scratch. They are rebuilding an entirely new redemption infrastructure, for $200,000,000 of of capital investment. I was up there in in the December looking at at their new facilities, and it's pretty stunning what they're attempting to accomplish, but also pretty stunning is the investment that's required to completely redo that system. We're retrofitting, or what we're talking about doing here is retrofitting innovation and technology into an existing system. We wanna use as much of the infrastructure that exists today as possible. It's not easy to cite new redemption centers. The largest many of the largest redemption centers are colocated with large retail stores. We wanna keep that because that's where people go. That's where the traffic is. That's where the parking lots are. That's where the loading docks are. We need to optimize that to the extent that we can do that. And so, it's really important, that we use the existing infrastructure, but there are limitations on the implementation of a program like this where we are using as much of that infrastructure as we can. So we're kind of working around an existing system but trying to bring improvements and investments to that system. So let me move from the implementation governance aspects of this to the investment aspects of this. As I said, the sticking point for us with the original legislation that came out of the compromise had to do with the unclaimed deposits. And, when the unclaimed deposits were, transferred away from the distributors several years ago in Vermont, Vermont joined Massachusetts in being the only bottle bill states in the country where all of the unclaimed deposit money was siphoned out of the system. In every other deposit state, some or all of the funds are rerouted back to distributors or into the system to help fund its operation. Massachusetts, which was the first state to declare unclaimed deposits as abandoned property back in 1989, Massachusetts sort of started that trend. And over the years, a number of other states first took that unclaimed deposit money and then have gradually, in most cases, given some or all of that money back to the distributors, given the problems that that created. And as I said, California and Hawaii, which are run by the state, maintain all of that money in in in the system to pay for it. And as you look around the world, as I mentioned, the structure for many of the programs, virtually all the programs around the world, is the central producer responsibility model. And I can say that those systems all retain all of the funds related to the system in the system very much as, say, a, you know, a mattress recycling PRO or an electronics recycling EPR program. Though any fees, any revenues that are generated through those systems all remain with those systems. And so we, our hang up on the original proposal was we need access to that capital in order to make the investments needed here, especially given that we don't have control over the facilities that we're working with. We're working with independently owned facilities. We need to bring resources to them and then work with them to figure out how best to put that technology into place in their operations. So we were asked over the course of the last several months, you know, put some more flesh on that on those bones for us. Tell us what you're envisioning for investments, how that money might be used. And, I mentioned earlier, bulk feed reverse vending machines. That's really very much state of the art as to what you're seeing in redemption centers today. That's handling the bulk of the material in the new redemption centers that that you see that you can see in Quebec. Again, state of the art systems custom designed for the Quebec market, and there's a lot of use of of those bulk high volume reverse vending machines in place where where the consumer typically is the one that tips their bag into the, into the machine and then gets credit for the machine either through an automated system or just directly from the, redemption center operator. So we asked, we worked with an outside consultant that does a lot of work on redemption and recycling systems in Europe and Canada to help us, sort of scope out some options and, look at what might be an initial step for capital investments in Vermont, what that might cost, and, how we might go about doing that. So we we looked at two scenarios, and we focused the scenarios on the 20 largest redemption centers in Vermont. Those 20 centers are primarily, combined retail and redemption, although, several of them are independent redemption centers, stand alone redemption centers. And we look we focused on those 20 because those 20 are responsible for about two thirds of the returns that come back every year in the state. And, you know, they're centrally located. They're in in high population areas. They're located, you know, near roads, highways, whatever. They have good access, and it's likely that they would remain a very high volume a high a high share of the returns of the system. And we looked at two scenarios for those 20 redemption centers. One was simply to retrofit all of them with high volume bulk reverse vending machines. That is for all of them would revert to a system or convert to a system where either the customer or the operator of the redemption system would take the containers from consumers, dump them into a hopper. The machine would count them, so you would get and the counting is very much faster than you're accustomed to today with the the single feed machine that can handle significant significantly more containers very quickly. That allows you to remit the deposit to the consumer really quickly, get them on their way. And on the backside of that, those containers have have gone through a barcode scanner, and then they can be simply packed into, you know, they can be densified and they can be packed into much more efficient bins to be hauled around the state because instead of hauling around big bags of air with empty cans and bottles in them that have to be sorted and counted someplace else, they've already been sorted and counted at the point of redemption. They've been scanned, so we already know through the UPC code that's on the container whose whose container those are. So today, we have, what, 7% of containers being scanned and knowing exactly whose they are. The rest were relying on manual redemption. If you put bulk reverse vending machines in, you know, 20 of the largest reverse redemption centers, you're gonna have the barcode information on more than two thirds of of containers that are coming back, which is a vast improvement in the amount of of accuracy and reliability of of what is actually coming back in the state to the system. So one option is to do that. Now that means that a redemption center who is willing to participate with the pro in that investment, that facility is gonna have to be retrofitted. That facility is gonna need new electric service. It's gonna potentially have to have its floor reinforced. They're gonna have to clear out an area for that machine to be installed. It's gonna replace a ton of floor space that today is just being used for those 80 or a 100 bins that have plastic bags in a cardboard box that are being, you know, filled one at a time by hand when the kid throws it into the bin when you when you go into the redemption center. So it's gonna be a big change in the operation of those facilities. It's gonna require literally individual negotiation with each of those redemption centers to figure out if they're willing to participate, how we're gonna do that, what the arrangement's gonna be with the redemption center, how much with the pro, how much the pro is going to pay, what the timing is going to be, how do they maintain their operations while that's being put in. It's going to be very complicated. So we also looked at a scenario where we wouldn't go quite that far with redemption centers. About half of them, we would say, you know, rather than make that full commitment, we're just going to use much less floor space, take up much less create much less weight on your facility, and we're going to put in a high speed AI counting and recognition system. That's a system that's being that has been developed and is being used in a number of jurisdictions where, what happens at the point of redemption is simply that the containers get counted at very high speed and run through an AI recognition program where the the system has been trained on deposit containers and knows what deposit containers and their labels and their shapes and material composition look like. And the AI can recognize those as those are eligible deposit containers. We'll count it. If something comes through that doesn't look right, it won't be counted. So that takes a lot of space, but it doesn't allow for scanning. Those containers are not barcode scanned at that point, so they need to be transported someplace else to be barcode scanned. So there's a trade off there between what's coming in the door and whether it's being scanned or whether it has to be hauled someplace and scanned off-site. And the last thing I'll mention with regard to this is we have, as I said, we're focused here in this straw dog that we put together to to do this plastic analysis. Yeah. We're we are looking at just just two thirds roughly of the containers. The remaining containers still remain, you know, a problem. So what do we do in those remaining locations? Well, we take the containers that come back. They're sorted just by material, and we're going to have to transport those someplace too to a centralized location. We figured there'd probably have to be two centralized locations in the state that have the ability to do bulk scanning of those containers so that we would scan samples of those containers for the UPC code. So what we're doing in the process here is converting the entire system over to one where we're scanning sufficient containers on the back end to know how to allocate the cost of the system out to the participating distributors in the PRO. Now that system of those two models for redemption center investment and the centralized processing look to are estimated to cost between 3.3 and $3,900,000 in capital investment. Hence, the arrival at the $3,500,000 of a proposal for providing funding to the PRO to make those investments. Now that's only the capital investment in that system. There's going to be increased operating costs on behalf of the distributors to make that system function. Administrative costs, outreach and education costs, we didn't factor any of that in. So that's gonna add to that. But simply the administration of the new technology, we estimate, will add somewhere between 0.3 and 0.4¢ a container to the distributor's cost to manage. As a result of all that, that's justification for saying we are going to need to negotiate individual contracts with with these participating redemption centers to set not a handling fee, but, you know, simply a compensation for them functioning as as the pro's agent, as the as the pro's, sort of outpost for handling the containers and reimbursing them for their costs, recognizing that we've made significant investments. We're probably allowing them to get rid of a lot of the labor that they're probably having a hard time hiring anyway to run their bottle rooms. So we need to, again, have a sort of bespoke customized compensation system for each of the redemption centers depending on how they're being set up. We're essentially contract with them to work on behalf of the pro on the in terms of doing the redemption. So that's the origin of the funding numbers. That's the thinking behind the system. There is a lot of slip between cup and lip here in terms of how this ultimately would come forward. We have not spoken directly or solicited bids from any vendors. We have not had conversations. You know, we have a lot of redemption centers we need to talk to about these issues. There's a lot of work that needs to be done to see if this can be, you know, brought to fruition. So what, you know, what we're looking for in the legislation, you know, we appreciate, you know, a great deal, the willingness to sort of put on the table this these funds, and, hope that, you know, I've just got the latest version of legislation yesterday afternoon. There's a couple of things we need to look at in terms of clarifying certain conditions in there, but, you know, it's very close to the principles that were laid out originally. We're excited at the prospect of having a state and a jurisdiction to work in where we can sort of try this model. We've been trying for years in New York State to implement reforms somewhat like this. It is tough. It is pushing a rock uphill, and that's not even nearly close to as difficult as it is to make changes to these systems. So, you know, just personally, given my history on this issue, I'm really appreciative of the opportunity that you're giving us here to to work to undo, you know, a system that has been really kinda stuck in a mode that's over 50 years old that just does not reflect the way these systems work, the way consumers think, what consumers want in terms of convenience. And so being able to make these investments, make these changes, I think, really could be the beginning of a reform movement that would affect all of the deposit systems in the Northeast and move them off of the dead center that they've been on, for quite some time. Thank you for your time, and I am happy to take any questions about, what I said.

[Chair Amy Sheldon]: Great. Thank you for that thorough testimony and the written support for it. Do members have questions? Thank you. Representative North.

[Rep. Rob North]: Thank you, chair. Thank you. Thank you, Brie, for this testimony. Very very helpful. Lots of good information. Just a couple of questions. Going going back to the beginning, and you talked about, there being, 16% more redemption eligible containers handled in Vermont than were actually sold.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Yeah.

[Rep. Rob North]: Yeah. So if that's what's happening, how do we end up with 3,000,000 of sheets per year roughly?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: If that were not happening, well, there there there's two things. One is, a significant number of those containers. There was never a deposit collected on them because they were bought in White River Junction or in Keene or, you know, wherever they were purchased and then brought in and consumed in Vermont. So there's a refund being paid out on those containers for which no deposit was ever collected. So and then if none of that happened, if everything that was sold in Vermont was redeemed in Vermont, there would be even more unclaimed redemption, unclaimed refunds, because what the fraud does is, eat into the pool of unclaimed redemption. The redemption rate in Vermont is probably not as high as what it appears to be because of the existence of fraud. The actual redemption rate is probably, you know, eight to 10 lower than than what you see because of the existence of both cross border purchases and cross border redemption.

[Chair Amy Sheldon]: On that topic, though, I would like to just you can you reiterate how the PRO will reduce or eliminate that?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Well, we we can't eliminate it. You know, that's a bit more of every redemption system, that that has to deal with cross border issues. I I don't know if any of you have followed the saga of Connecticut, which despite urgent warnings from me and many others, rose its increased its deposit to 10¢ two years ago. And, to say that the containers are flooding in from outside the state, from New York, etcetera, would be an understatement. The that's been a disaster. The redemption rate is over a 100% for many distributors. So you can avoid shooting yourself in the foot, by not, you know, by not having differentials. But the reality is Vermont has a differential between New Hampshire and Vermont. And so I think the primary thing that a PRO and central management can do is there's not much we can do on the on the sales side. People are gonna shop where they're gonna shop. But on the redemption side, right now, all of the data, all the information about redemption is very decentralized. Right? It's collected by Tamara. It's distributed out through invoices to individual distributors. It's on an individual redemption center basis. A single coordinated entity that's looking at all of that data centrally can get a much better idea of where the materials are, where the materials are moving, where there's a lot more material being handled than there sort of should be, where there are spikes, and frankly, support enforcement efforts. You know, where there's a single entity, we can do more enforcement. We can leverage more enforcement. We can invest resources to try to target problems where you have someone who is every week bringing over trailer loads of materials from, as we've documented in the past and got the attorney general to document, people bringing over municipally recycled containers from New Hampshire towns to redemption centers in Vermont and redeeming them with, you know, town branded vehicles, you know, with signs on the side of the truck that it was coming over from a New Hampshire town. So that kind of stuff, we can coordinate and centralize. We can look at the data and manage it. We won't be able to eliminate it, but we'll have a lot more transparency in the system to be able to find the problems and and flag them.

[Rep. Rob North]: Okay. Thank you. Yeah. One more question on on a little bit different topic. One thing that you mentioned that I I really liked the sound of is is the investing in automation so that we can do the scanning and accounting at the redemption center, And then crush the material and no need for then collection of large bags of uncrushed containers for a second counting or an auditing of that. This is what happens now at yet a second handler. Thus, and this is the key part that I want to ask about, the retention centers then are acting then as the PRO's agent or the PRO's agent. Is that concept the way you've described that? That was kind of a new thought to me. But is that included in our current bill as drafted, or is that a recommendation that you're offering to the bill?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: I I think I think it's implied in here. The idea is that the, you know, the capital would come from the pro, and the the the I think the reference to it relates to the ability to where the where the handling fee for these centers would be eliminated, and the pro would negotiate with them, basically, contract conditions for operating. So the the pro is obligated to to have redemption available, and and there are some convenience criteria in the bill for how many redemption centers per county there have to be and population based things that that we need to understand a little more. But the pro has to have something there. And so the best thing for the pro to do is make sure that those redemption centers stay in business. So you're gonna have to there's a there's a a good condition for an agreement between the two parties. They wanna keep having customers come in and and do redemption and be happy with how the redemption goes, and we need a location for them to be redeeming, for people to be redeeming at. So that's how you arrive at a, you know, a way of of contracting with the redemption center for that redemption operation and setting up a compensation scheme with them that will keep them in business.

[Rep. Rob North]: Yeah. Yeah. I I I it's the problem we're trying to solve is efficiency, eliminating the the manual counting and eliminating the double or the second set of counting at yet a second layer of distributor from the center seems critically important. I just want to make sure so acting as the PRO's agent, don't if that verbiage or that exact those exact words need to get into our bill, but some something along those lines to make sure that that's clearly what's desired.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: And I'll just augment that by saying that the from the I I can't speak for Tamara, but I I know that, you know, one of their issues is, of course, you know, getting enough trucks, getting enough drivers to run up and down all of the different roads that you need to run up and down all year round to get to some of these redemption centers. Being able to put in those trucks compacted bins of compacted presorted material instead of empty bags or air air filled bags. Boy, the logistics of that and the greenhouse gas emission consequences of that and the the logistics and fuel consumption aspects of that. I mean, it's just so much more efficient to move densified material around. That's why they've that's that's been great.

[Rep. Rob North]: Even just on ground storage of all that material before they come pick it up. I mean, you could extend your yeah. I mean, yeah, the centers I've visited is that's one of their main problems. They gotta keep renting more and more and more space to handle these all these bags of empty containers. Yeah. It's

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: a good thing those bags are light because, boy, some of the places that those bags get stored are yeah. Thank

[Rep. Rob North]: you. Thank you so much for your your

[Chair Amy Sheldon]: So a couple things that have been coming up. Who do you imagine owning the equipment, that the capital investments will be paying for?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: It's a good question. Prob well, the pro. I I presume the pro would would essentially own them. The pro would be responsible for maintaining them. So, yeah, I think that's I think the pro would take ownership of that equipment. That would be factored into the the terms, with the redemption center because the redemption center obviously is gonna be concerned about having to assume financial responsibility for maintenance. Maintenance is a big thing on these. You know, there's there's belts and scanners and things that can get jammed, and so that's a big issue. So they're gonna want that to be very clear that that's the PRO's responsibility.

[Chair Amy Sheldon]: Okay. And you mentioned in your scenarios, I think, and at the very beginning, increasing the handling fee for the non commingled in order, I think, to bring them into the PRO, do you see a future where they'd all be just I mean, I guess I thought they were all gonna be obligated to be in the PRO anyway.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Yeah. That's a that's really a short term thing. That that's really just a short term provision. The they would under this under the language here, they would all be compelled to join the PRO. Yeah. So, yeah, that would just be a an interim solution. I one of the things that I've talked to to the administration about and that we've talked internally about is that given the fact that at least as of the most recent draft, the program's target start date is nine months before any of this capital would be available to the group. So, you know, hopefully, we can compress that a little bit or make that overlap, so that it's not so so that the capital is available, you know, prior to the program actually going into effect. But in any event, this will not be a light switch moment where we, you know, have a date on which all of these machines magically appear in 20 different locations, and they're all up and running. There's gonna be a phase in of this system. There's gonna have to be. Number one, the technology is in fairly high demand. It's there's a big waiting time on some of this equipment because it's being used you know, for example, they're building out all these new sites in in Quebec, and there's a number of new deposit systems being propped up in in Europe. So there is demand for this equipment, so there's waiting time for it. But the other thing is that just the logistics of getting these facilities prepped and and ready and shored up and get their, electrical service up to standards and and things like that. What I think is going to happen is we will have essentially a mandatory commingling system that operates for some portion of the universe while the technology is going into another portion of the universe. So we're gonna kinda have both things happening at the same time. We will have a the the those facilities that are not, you know, that are not planned for on-site investment are going to become commingled type facilities where, again, we'll be just asking them to sort by container type and size, not by brand. And so we're gonna have to manage that as a commingling system, but we're gonna have to do some scanning on the back end in order to make sure that we're properly allocating costs. So there will be a transition into that system.

[Chair Amy Sheldon]: Okay. And I I guess I thought that our kind of calendar, if you will, reflected that phase in need. And I guess, if it needs to be different, you should let us know. Yeah,

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: I think it's flexible. The way I interpret it is, you know, the the plan will be well, the the the plan start date is sort of squishy, but the plan itself will outline sort of how we view the program coming online. And I suspect that the plan will embed in it. It it will obviously reflect a lot of consultation with redemption centers and with equipment vendors and others. So we'll have a much better idea of what that phase in will look like. And I think that the plan will embody that implementation. It will show that implementation plan, and then that will be up to, ANR to evaluate and say, you know, this is this is acceptable. This is a reasonable way of of phasing this in. I think we all understand that that we're not in a light switch situation, that it it's gonna be a phase in situation.

[Chair Amy Sheldon]: Great. Further questions? Representative Satcowitz.

[Rep. Larry Satcowitz]: Thank you so much for this. This is really, really helpful testimony. My question is around the role of Tamara. It seems they're fulfilling a role in the system where they're the sole actor or very nearly so. I'm And wondering how that's handled now in the current way we do things and how that might change with the PRO because it seems like they're essentially a monopoly. And so they have a certain would have a certain amount of power over, you know, setting rates and things like that where there's no competition.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Yeah. So TOMRA functions, you know, a couple of different ways in in the system. One is they are a technology provider. But as I said, as you know, or as I've said, the the the penetration of that technology, is relatively limited. There are relatively few containers that come back through the reverse vending machines that are in the state, but there Tomer does have competition on that front. There's another firm called Invipco that provides machines, and Price Chopper has its own reverse vending technology that it uses. So there's competition there. TOMRA has evolved into sort of the the single provider of pickup services. That is partly a function that is largely a function of just the the geo geography and structure of the system in Vermont. Given the lack of density, it's it would be very difficult to sort of have another competitive operation in the state that could economically handle the containers. I don't know if you ever seen the processing facility up in Essex. That's, you know, it's a fairly large recycling. It's comparable to a it's really like a MRF. It's like the Chittenden MRF or the the Casella MRF down in Rutland. You know, it's handling a lot of recyclable materials, and you want those facilities to be large and have scale economies. And right now, the material from Vermont goes either to their Rotterdam facility for sorting and counting or to the Essex facility for sorting and counting. And I think there are a couple of factors that sort of one is that has proven to be, you know, efficient and effective, and they've done a good job. I mean, they've really they have done a a solid job for people. They are there is competition for them in the region, and the entity that does the work for Tamara is actually a joint venture, that's a a regional joint venture, that covers New York and Vermont and Connecticut. And there are competitors in that market to them. So they would be able to speak to that a little bit better. But, you know, what I think is going to change a little bit here is Tamara would become much Tamara certainly would be a candidate for technology provider for this system. They're not the only ones. There are other companies, that provide the technology that that we're talking about using here. Tamara does appear to be sort of a natural for working with in terms of doing the pickups, but picking up and moving material is gonna be a little bit different under this system. Today, what Tamara has to do is, you know, distributor by distributor account for how many bags of what is coming out of those redemption facilities. If you're picking up bins of compacted material from the back of a reverse vending machine, for example, anybody can haul that. You know, you don't have to have the specialized, you know, material or whatever that the TOMRA has and the handhelds and the computers and the systems to process that. Anybody can move that material around the state. And it may be both in the pros and commerce interests to contract out some of that hauling of the material from those locations to a processing facility. And those processing facilities could, again, be operated by anybody. So I think there's gonna be some sort of shifts in how that system works. And I you know, we're like like I said, we have not formally approached Tamara about this. We I've certainly had conversations with them. I know Mike Noel was in to talk to you. I have an email from Mike to get back to him. We've talked about this issue. We've talked around this issue, not just in Vermont, but in other states. So I guess remains to be seen, but I will say just for the for where we stand today, you know, they've done a really good job. They've made they've made investments in the state, and we have, you know, relied on them, and they have kept the system going, to be blunt. I mean, without them, I'm not quite sure, you know, how we would have been able to keep the system moving. So they have fulfilled a really important role here, and I think just the the scope of the system and the scope of the actors that we're working with through commingling has sort of, you know, kept the system competitive because the companies are big enough to be able to negotiate, you know, favorable terms with them.

[Rep. Sarah "Sarita" Austin]: Representative Austin? Yes. Are you aware of any technology that could possibly, like with AI, recognize out of state materials?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Unfortunately, no. The the way and that's that's one of the big changes in in the industry, in the beverage industry since this law was implemented back in the seventies, even in the eighties. The way in which these containers are produced in the the brands, the way the products are made, the way they're distributed has changed enormously. In when this program was started, everything that was in the program was made and bottled locally, was primarily in glass. Some of it was in cans, but it was all being bottled locally. There were many more bottlers in Vermont, and everybody was just handling the material that they had put into the market. It was very close, very small. You know, nowadays you have large production facilities the way that that all the all the industry in beverage works is there are very large production facilities that serve and produce output for multiple states. In some cases, there are products that are only made in one factory anywhere in the country, and then they're distributed everywhere. So the idea of being able to sort of have a a state specific inventory or state specific set of products ended with the restructuring of the beverage industry, both beer and and soft drinks, you know, that happened in the nineteen eighties. So it's it's very difficult to distinguish containers. There are some brands that have done made labeling changes or done things to distinguish deposit from nondeposit states. That's very difficult for most most distributors because either they don't control the production side, or it means that they would have to maintain multiple inventories in their warehouses, which means you'd have to have a a New Hampshire inventory and a Vermont inventory and a Connecticut inventory because they all have different deposits, different scopes. It it's it just some it simply does not work anymore with the way that beverages, in fact, all consumer goods are are now sort of distributed and produced. There were attempts and have been attempts to require some state specific markings on containers. Those have been struck down by federal courts in both Michigan and New York State over the years as as being in violation of restraint of trade interstate commerce violations. So it is really a challenging issue to deal with with cross border problems.

[Chair Amy Sheldon]: Thank you. You have one more?

[Rep. Rob North]: I do.

[Chair Amy Sheldon]: Okay. One more and then we do need to move on.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Go ahead.

[Rep. Rob North]: Again, Priti, thank you so much for this explanation. So if the handling equipment is getting so much better, what's wrong with just running everything through the blue bin recycling system and getting rid of this parallel redundant redemption system?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: How much time do we have?

[Chair Amy Sheldon]: Two minutes.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: That you you one can make that argument. I I will say that, you know, there are places in this country that have recently implemented EPR for packaging and and paper that have really good recycling systems, Washington, Maryland, Minnesota, where people have talked about, okay, we're going have EPR, we're going have universal recycling, it's going to be spectacular. Why don't we layer a deposit on top too? And there's a lot of thinking of we're making all this investment in recycling. We should sort of stick to a single system. You know, it it the the fundamental answer is that deposits can drive very high rates of return for containers. We don't have very high rates of return for containers in most US deposit states. Oregon's the highest and it's 86%, and that's the highest by a lot. Massachusetts is 33. Deposits don't necessarily work well. EPR doesn't necessarily work well. It really has much more to do with how the system is designed. What the Europeans have done is effectively impose such a high hurdle on the the recycling rate for beverage containers that the only way for them to achieve that is to layer deposits on top of their EPR systems in Europe. That's why they've done it. Is it worth building a separate system and running a separate system for an incremental 10 or 15 percentage point return rate on beverage containers? I don't get elected to answer those questions. But in states that have had deposits, you know, I think our industry has come to the conclusion that because of how they've been institutionalized and because of people's conditioning and popularity of those systems, it's best to try to make those systems work as well as they possibly can. And if we make these kinds of investments, I think we can really amp up the performance of the system. And, you know, I think that's the way that's the way to go. Would we advocate for a new, you know, a new program if we were starting over? It probably wouldn't look at all like this.

[Rep. Rob North]: Thank you for your honesty. Appreciate it.

[Chair Amy Sheldon]: Thank you for your testimony. Appreciate

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: the time. Thanks very much.

[Chair Amy Sheldon]: Actually, I guess I I do have one follow on to that because I do hear that the bottle system results in cleaner material that's more readily recycled into new bottles and that that's one of its strongest points, and that's why we are investing in it.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Yep. That's that's certainly true. And I think we also know that that the technology advances we're talking about here are also in place and murphs and where you have where you're educating consumers about recycling and recycling behavior, the producers are funding those systems and EPR programs, and you're putting robots on the line at a MRF, and the robot is actually picking every single PET bottle out at a speed that you can't even conceive of. You're getting pretty clean streams there too. So technology is rising the level for everybody. But just like here, somebody has to make that investment. You need somebody, you know, in the position to make that investment. If if we had if Vermont had fully funded act one forty eight and, you know, we had a complete sort of EPR system in Vermont for comprehensive recycling, we might be in a different place thinking about that. But but, yeah, having material separated by the customer at at, you know, at the point of redemption saves on processing it downstream for sure.

[Chair Amy Sheldon]: Great. Thank you again for your testimony. Oh, and actually, so you're going to look at the latest draft. Does your testimony here reflect any thoughts on changes or suggested changes?

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: There's some reference to it, but it's the reference to the version before Mr. O'Grady went over it with you yesterday afternoon because I hadn't seen that version when I wrote the testimony. So I'm catching my tail here a little bit. I'll work with Chris Rice, and we will try to coordinate our comments and get back to the relevant parties on that.

[Chair Amy Sheldon]: Alright. Great. Thank you.

[Brie Deetly, Principal, Breezeway Consulting (representing the Vermont Beverage Association)]: Yeah. Thank you.

[Chair Amy Sheldon]: Members, we're gonna take a five minute break, and we can be in for more on bottle redemption.