BILL ANALYSIS                                                                                                                                                                                                              1

                                 ALEX PADILLA, CHAIR

          AB 2037 -  V. Manuel Perez -            Hearing Date: June 15,  
          2010                       A
          As Amended:         April 13, 2010                FISCAL       B


           Existing law  prohibits a load-serving entity or local publicly  
          owned electric utility from entering into a long-term financial  
          commitment with or for a new electrical generating facility  
          unless it meets the state's greenhouse gas emissions performance  

           Existing law  requires air districts to adopt and implement local  
          and regional programs to reduce air pollution and to achieve  
          state and federal ambient air standards.  These responsibilities  
          include the adoption and enforcement of requirements for new and  
          modified power plants to ensure that emissions from such  
          facilities are mitigated and are in compliance with federal and  
          state law.  Air district standards may include requiring power  
          plants to install "best available control technology" (BACT) to  
          control emissions and to obtain emission reduction credits, or  
          "offsets" to mitigate emissions.
           This bill requires new electrical generation facilities, within  
          or outside of California, which enter into long-term financial  
          commitments with a California utility to meet BACT requirements  
          and to obtain offsets to mitigate air pollution for air  
          pollutants within a shared pollution area, as defined, in  

           This bill  requires the California Public Utilities Commission,  
          California Energy Commission, the Air Resources Board (ARB),  
          local air pollution control districts, and air quality  
          management districts, to explore with federal agencies and with  
          other governments, methods to encourage the recognition by all  


          relevant agencies of offsets achieved anywhere in a shared  
          pollution area.  

          Power Plants Beyond California - Currently, two electrical  
          generation facilities are located near Mexicali, about 3 miles  
          south of the international border and about 12 miles southwest  
          of Calexico, California.  The Termoelectrica de Mexicali plant,  
          owned by Sempra Energy, is a 500-megawatt (MW) facility that  
          produces electricity for export into the U.S.  InterGen owns and  
          operates the La Rosita 750 MW facility located on the InterGen  
          Complex. Half of the electricity from the InterGen Complex is  
          generated for use within Mexico and the remaining half is  
          produced for export into the U.S.  

          While both of these facilities were eventually retrofitted to  
          meet BACT standards, current law does not require new facilities  
          to follow BACT standards or procure regional air emission  
          offsets that would be required if those facilities were built in  
          California.  Specifically, if the facilities were built in  
          California in 'non-attainment' areas, the offset program would  
          require the facilities to offset criteria pollutants produced  
          on-site by mitigating production of those pollutants off-site.   
          Imperial County, immediately north of the Mexicali power plants  
          is currently classified as a moderate non-attainment area and is  
          the recipient of transported pollution plants in Mexicali.

          Non-attainment areas and criteria pollutants - The federal Clean  
          Air Act requires the Environmental Protection Agency (EPA) to  
          set National Ambient Air Quality Standards for six common air  
          pollutants. These commonly found air pollutants (also known as  
          "criteria pollutants") are found all over the United States.  
          They are particle pollution (often referred to as particulate  
          matter), ground-level ozone, carbon monoxide, sulfur oxides,  
          nitrogen oxides, and lead. EPA designates these pollutants as  
          "criteria" air pollutants because they regulate them by  
          developing science-based guidelines for setting permissible  

          A "non-attainment area" is defined as an area where air  
          pollution levels persistently exceed National Ambient Air  
          Quality Standards, or an area that contributes to ambient air  


          quality in a nearby area that fails to meet standards.  
          Designating an area as a non-attainment area requires a formal  
          rulemaking process, and EPA normally takes this action only  
          after air quality standards have been exceeded for several  
          consecutive years. Non-attainment areas are given a  
          classification based on the severity of the violation and the  
          type of air quality standard they exceed. Much of southern  
          California and the central valley of California are in  
          non-attainment areas for at least one criteria pollutant. 

          The North America Free Trade Agreement (NAFTA) - NAFTA allows  
          free trade area between the United States, Canada, and Mexico to  
          facilitate trade and the cross-border movement of resources and  
          services and to increase investment opportunities in the  
          territories of the parties.  NAFTA provisions address energy  
          regulatory measures by stating that each party shall seek to  
          ensure that in the application of any energy regulatory measure,  
          energy regulatory bodies within its territory avoid disruption  
          of contractual relationships to the maximum extent practicable,  
          and provide for orderly and equitable implementation appropriate  
          to such measures."  While this passage suggests that California,  
          and U.S., policy should not "disrupt" energy exchange within the  
          NAFTA members, it does provide a "practicable" clause.  In this  
          case, the failure of California to meet federal and state  
          ambient air quality standards and the ARB's jurisdiction in this  
          regard may allow California to implement restrictions in order  
          to meet its state and federal requirements.  


             1)   Author's Purpose  .  The siting of new power plants  
               located just outside of California which deliver  
               electricity to the state can contribute to air pollution in  
               California air basins. Specifically, there is concern that  
               California's growing demand for electricity will encourage  
               more power-plants to be built in Mexico, where the  
               regulations including the air emissions standards are less  
               stringent. Emissions from some power plants located in  
               Mexico impact air basins within the State.  As a result,  
               the adverse air emissions generated from the Mexico-based  
               power plants can affect California residents and increase  
               the state's air quality mitigation requirements.  The  
               author's intent is to ensure that those power plants  


               serving California's electrical load and that share an air  
               basin with the state, meet the same air quality emissions  
               requirements as California-based plants.

              2)   Shared Air Basins  .  The net effect of the this bill  
               would be to compel energy producers to follow BACT and  
               offset protocols for facilities built across the border  
               that both export electricity to California and have a  
               "shared pollution area" with the state.  As California's  
               population and electrical demands grow, more power plants  
               may be built on the Mexican side of the California-Mexico  
               border which has shared basins with California's Imperial  
               and San Bernardino Valleys. Many of these areas on the U.S.  
               side of the border are already considered "non-attainment"  
               areas for multiple criteria air pollutants. Although the  
               bill technically affects all of California's border  
               regions, from a practical perspective the border regions  
               encompassing the Imperial and San Bernardino border areas  
               would most likely be the primary areas affected.  

               This bill relies on the EPA to determine the shared  
               pollution areas to which this bill would apply.  It is not  
               apparent why the state needs to rely on a federal agency  
               for this determination.  It may be more expedient for that  
               determination to be made at the state level such as by the  
               ARB.  This bill has been double-referred to the Senate  
               Environmental Quality Committee where the author may wish  
               to address this issue.

              3)   What Happens When a Contract is Renewed  ?  This bill only  
               applies to new financial commitments for electricity at  
               facilities outside of the state by a California utility.   
               The author has identified two specific plants that cause  
               adverse emissions for California's air basins.  The author  
               may wish to consider amending this bill so that its  
               provisions also apply upon renewal of a contract for  
               electrical generation.

              4)   Double Referral  .  This bill has been double-referred to  
               the Senate Committee on Environmental Quality.

                                   ASSEMBLY VOTES


          Assembly Utilities & Commerce        (10-4)
          Assembly Natural Resources             (6-3)
          Assembly Appropriations              (10-5)
          Assembly Floor                     (44-26)

          County of Imperial 
          Comite Civico Del Valle, Inc

          County of Imperial (Co-Sponsors)
          Comite Civico (Co-Sponsors)
          American Lung Association
          Breathe California
          California Air Pollution Control Officers Association (CAPCOA)
          California Rural Legal Assistance Foundation
          Economic Research Institute-Imperial Valley/CEESEM
          Imperial Irrigation District
          Imperial Valley Clean Air Initiative
          Institute for Socio-Economic Justice and Progressive Community  
          Development, Inc
          San Joaquin Valley Latino Environmental Advancement Project
          Seeley Citizens United
          The Sierra Club
          South Coast Air Quality Management District
          Union of Concerned Scientists

          None on file

          Maurice Pitesky 
          AB 2037 Analysis
          Hearing Date:  June 15, 2010