BILL ANALYSIS
AB 1318
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1318 (V. Manuel Perez)
As Amended September 11, 2009
2/3 vote. Urgency
-----------------------------------------------------------------
|ASSEMBLY: |63-3 |(July 13, 2009) |SENATE: | |(September 11, |
| | | | | |2009) |
-----------------------------------------------------------------
(vote not available)
Original Committee Reference: NAT. RES.
SUMMARY : Establishes special air pollution permitting
procedures for one power plant in the South Coast Air Quality
Management District (SCAQMD).
The Senate amendments :
1)Add a report to evaluate the electrical system reliability
needs of the South Coast Air Basin.
2)Delete specific numerical limits on the amount of emission
reduction credits (ERCs) that SCAQMD may transfer pursuant to
the bill.
3)Delete a requirement that SCAQMD's executive officer to
transfer from SCAQMD's internal accounts to an "essential
public service" facility offsets necessary to permit the
facility.
4)Delete a California Environmental Quality Act (CEQA) exemption
for the SCAQMD's actions undertaken pursuant to this bill.
5)Delete a provision abrogating the holdings of the Superior
Court in NRDC v. SCAQMD (2007 Superior Court of Los Angeles
County Case No. BS 110792) to the extent they are inconsistent
with the provisions of this act.
6)Require SCAQMD to rely on specified procedures to track ERCs.
7)Require SCAQMD to use any ERCs that have resulted from
emission reductions and shutdowns of minor sources since 1990.
8)Require SCAQMD to report within 60 days to the California
Energy Commission (CEC) ERCs to be transferred pursuant to the
AB 1318
Page 2
bill.
9)Require CEC to determine whether the ERCs satisfy all
applicable legal requirements.
10)Prohibit CEC certification of a power plant if CEC determines
the transfer of ERCs by SCAQMD do not satisfy all applicable
legal requirements.
EXISTING FEDERAL LAW , under the federal Clean Air Act:
1)Requires each major new and modified source of air pollution
to undergo "new source review" to ensure that facilities
install the best available control equipment, obtain offsets
for any new emissions, and comply with any other requirement
to ensure that the new and modified sources do not adversely
affect air quality; and,
2)Provides that, except as otherwise stated, the Act does not
preclude a state or any political subdivision from adopting
standards or requirements for the reduction of air pollution.
EXISTING STATE LAW :
1)Designates the state Air Resources Board (ARB) as the air
pollution control agency responsible for the coordination of
the activities of air pollution control districts and air
quality management districts for the purposes of the federal
Clean Air Act.
2)Subject to the powers of the ARB, requires air districts to
adopt and enforce rules and regulations to achieve and
maintain the state and federal ambient air quality standards
in all areas affected by non-vehicular emission sources under
their jurisdiction.
3)Authorizes each air district to establish a permit system that
requires, except as specified, that before any person builds,
erects, alters, replaces, operates, or uses any article,
machine, equipment, or other contrivance that may cause the
issuance of air contaminants, the person obtain a permit from
the air pollution control officer of the district.
4)Authorizes air districts, among their general powers, to
establish offset systems, by which reductions in air pollution
AB 1318
Page 3
at one source may be used to offset certain future increases
in air pollution at another source. The SCAQMD requires
sources to obtain offsets for increased emissions of
nonattainment pollutants, including SOx and PM10, in excess of
0.5 pounds per day. The SCAQMD has adopted rules creating
internal offset accounts, including a "priority reserve"
account to provide offsets for essential public service
facilities and other priority sources, including power plants
under certain circumstances (SCAQMD Rule 1309.1).
5)Pursuant to CEQA, requires a lead agency with the principal
responsibility for carrying out or approving a proposed
discretionary project to evaluate the environmental effects of
its action and prepare a negative declaration, mitigated
negative declaration, or environmental impact report (EIR).
If an initial study shows that the project may have a
significant effect on the environment, the lead agency must
prepare an EIR. Generally, an EIR must accurately describe
the proposed project, identify and analyze each significant
environmental effect expected to result from the proposed
project, identify mitigation measures to reduce those impacts
to the extent feasible, and evaluate a range of reasonable
alternatives to the proposed project. If mitigation measures
are required or incorporated into a project, the agency must
adopt a reporting or monitoring program to ensure compliance
with those measures.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required the SCAQMD's executive officer to transfer from the
SCAQMD's internal accounts to "eligible electrical generation
facilities" ERCs, or "offsets," up to the following amounts:
a) 0.1 tons (200 pounds) per day of sulfur oxides (SOx);
and,
b) 0.6 tons (1,200 pounds) per day of particulate matter
(PM10).
2)Established the following eligibility criteria for electrical
generation facilities, which limit the application of the bill
to the proposed CPV Sentinel power plant in Riverside County:
a) Have a purchase agreement, executed on or before
December 31, 2008, to provide electricity to a public
AB 1318
Page 4
utility (i.e., Southern California Edison) for use within
the Los Angeles Basin Local Reliability Area; and,
b) Be under the jurisdiction of the SCAQMD, but not within
the South Coast Air Basin.
3)Provided that offsets issued pursuant to the bill shall
satisfy all state and district requirements related to the
provision of offsets for new power plants.
4)Required payment for offsets according to a schedule of
mitigation fees included in SCAQMD Rule 1309.1. Requires fees
to be used for emission reduction purposes, at least 30
percent in areas within close proximity to the power plant and
at least 30 percent in areas designated by the SCAQMD as
"environmental justice areas."
5)Required the SCAQMD's executive officer to transfer from the
SCAQMD's internal accounts to an "essential public service"
facility offsets necessary to permit the facility. SCAQMD
rules define essential public service to include sewage
treatment facilities, prisons, police facilities, fire
fighting facilities, schools, hospitals, construction and
operation of a landfill gas control or processing facility,
water delivery operations, and public transit.
6)Required the bill to be implemented in a manner consistent
with the federal Clean Air Act.
7)Provided that the California Environmental Quality Act (CEQA)
does not apply to the SCAQMD's actions undertaken pursuant to
this bill.
8)Declared that the holdings of the Superior Court in NRDC v.
SCAQMD (2007 Superior Court of Los Angeles County Case No. BS
110792) are abrogated to the extent they are inconsistent with
the provisions of this act.
9)Declared the provisions of the bill are not severable.
10)Provided that the bill shall remain in effect until January
1, 2013.
11)Contained an urgency clause allowing this bill to take effect
immediately upon enactment.
AB 1318
Page 5
FISCAL EFFECT : According to the Assembly Appropriations
Committee, negligible state costs.
COMMENTS : Emission reduction credit banking is defined as "a
system? by which reductions in emissions may be banked or
otherwise credited to offset future increases?or a calculation
method which enables internal emission reductions to be credited
against increases" (Health and Safety Code Section 40709.5).
Once created, emission reduction credits may be banked with the
district for future use by the source that generated them, used
concurrently to offset new projects, or sold to other sources
for use as mitigation.
The most common method of creating emission reduction credits is
to control or curtail the emissions from an existing stationary
source. Control of emissions is generally from the application
of emission control technology beyond that which is required by
any regulation or rule. Curtailment could be from a change in
operating hours of a source, or through the shutdown of a
source. Credits must be generated pursuant to district rules
and regulations, and must be reviewed and certified by the
district.
The SCAQMD has adopted a variety of rules to govern the use of
offsets in the district, including Rule 1309.1, which
establishes a "priority reserve" account for essential public
service and other facilities, and Rule 1315, which governs the
tracking of offsets used within the district.
In 2007, SCAQMD adopted changes to these rules to permit the
transfer of offsets to power plants in exchange for mitigation
fees at prices set in the rules. A group of environmental and
environmental justice groups (NRDC, et al) sued SCAQMD, alleging
violations of CEQA, including failure to analyze or mitigate the
significant environmental effects of the rules.
In NRDC, et al. v. SCAQMD (Los Angeles Superior Court, 2007, No.
BS 110792), the court sided with the plaintiffs, finding the
SCAQMD's rule changes are subject to CEQA and enjoining the
distribution of offsets from the priority reserve account until
SCAQMD prepares the appropriate CEQA documentation. SCAQMD has
appealed the Superior Court ruling and begun preparing an EIR
for its rule changes. The plaintiffs have filed a separate suit
in federal court alleging the offsets held in SCAQMD's internal
AB 1318
Page 6
accounts are not valid under the Clean Air Act. The federal
suit is pending.
According to the CEC:
The CPV Sentinel Energy Project is a proposed nominally
rated 850-megawatt electrical generating facility. The
power plant site encompasses 37 acres of land situated
within unincorporated Riverside County, California.
The proposed project consists of eight natural gas-fired
General Electric LMS100 combustion turbine generators
operating in simple cycle mode. The project will supply
quick-start peaking capacity, energy, and ancillary
services into the California Independent System
Operator's Los Angeles Basin Local Capacity Requirement
Area, which has been identified as an area in need of
additional peaking capacity to meet resource adequacy
requirements and ensure grid reliability.
The proposed project will be constructed, commissioned,
owned, and operated by CPV Sentinel. CPV Sentinel
anticipates selling the capacity, energy, and ancillary
services under long-term contract to one or more load
serving entities. CPV Sentinel has a power purchase
agreement with Southern California Edison for five of the
units and anticipates securing an agreement to sell the
capacity, energy, and ancillary services under long-term
contract to one or more load-serving entities for the
remaining three units.
The CPV Sentinel power plant is under review by the CEC, but
cannot be approved until CPV obtains the offsets necessary to
mitigate its emissions. According to CPV, it must obtain 173
tons/year of PM10 offsets and 16.4 tons/year of SOx offsets to
satisfy SCAQMD (and therefore CEC) permit conditions, obtain
financing, and commence construction. Until the ruling in NRDC,
CPV had been depending on obtaining offsets from the SCAQMD's
priority reserve accounts. The SCAQMD planned to provide
offsets from the priority reserve to power plants in exchange
for mitigation fees at prices significantly lower than limited
offsets available in private markets. Recent trades of PM10
offsets in private markets have been reported at over six times
the fees SCAQMD planned to collect from CPV Sentinel for offsets
from its internal accounts.
AB 1318
Page 7
At the prices set in Rule 1309.1, it appears CPV would pay
SCAQMD mitigation fees of approximately $48 million for PM10 and
$1.4 million for SOx. The bill requires these fees to be used
for unspecified emission reduction purposes, at least 30% in
areas within close proximity to the power plant and at least 30%
in areas designated by the SCAQMD as "environmental justice
areas." SCAQMD rules permit the district to spend 10% of the
fees for its administrative costs.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0003212