BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 1507 (Lieu) Hearing Date: 08/02/2010 Amended: 07/15/2010 Consultant: Brendan McCarthy Policy Vote: EQ 7-0 AB 1507 (Lieu), page 2 _________________________________________________________________ ____ BILL SUMMARY: AB 1507 requires the Air Resources Board to revise project guidelines for the Carl Moyer program by July 1, 2011 to allow certain federal and state funds to be used on a project without being factored into cost-effectiveness calculations. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Updating guidelines $43 $85 Special * * Carl Moyer Fund. _________________________________________________________________ ____ STAFF COMMENTS: Under current law, the Carl Moyer Program provides incentive grants for engines, equipment, and other sources of pollution that exceed the standards established by law or regulation, thereby providing early or extra emission reductions. The Air Resources Board approves projects on the basis of their cost-effectiveness, and existing law prohibits grants for projects with a cost-effectiveness that exceeds $13,600 per ton of NOx (oxides of nitrogen) reduced. AB 118 (Nunez, Chapter 750 of 2007), provides approximately $200 million annually through 2015 for three programs to fund air quality improvements. One of these programs is the Alternative and Renewable Fuel and Vehicle Technology Program, which is administered by the Energy Commission and provides competitive grants and other financial incentives to help the state achieve its climate change goals, primarily by reducing greenhouse gas emissions. AB 1507 requires the Air Resources Board to revise project grant criteria and guidelines for the Carl Moyer program, such that federal funds or AB 118 funds can also be used to fund a project without those additional funds being factored into the cost-effectiveness criteria of the Carl Moyer Program. However, the bill specifies that the federal or AB 118 funds shall not be excluded from the cost effectiveness criteria if that would AB 1507 (Lieu), page 2 reduce the overall emissions reductions achieved by the project. The Air Resources Board indicates that it will need minor staff resources to update guidelines under the bill. In addition to the direct costs of the bill, there may be cost pressures on Carl Moyer or AB 118 funds. By allowing Carl Moyer and AB 118 funds to be combined to fund projects, the bill may result in fewer projects being funded, overall. However, this cost pressure is offset by a requirement of the bill that prohibits the Air Resources Board from allowing this combining of funds to have the effect of reducing the emissions reduction benefits of those funds. AB 1507 is similar to AB 1527 (Lieu) of last year. However, AB 1527 made similar changes to the funding criteria for the Goods Movement Emission Reduction Program, authorized by Proposition 1B of 2006. The Governor vetoed AB 1527, encouraging the author to work with the Air Resources Board as it reviewed its guidelines for the Carl Moyer and Goods Movement Emission Reduction Program guidelines. In March of 2010, the Air Resources Board updated its guidelines for the Goods Movement Emission Reduction Program to allow funding from multiple sources, but has not updated the guidelines for the Carl Moyer Program in a similar manner.