BILL ANALYSIS AB 2037 SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator S. Joseph Simitian, Chairman 2009-2010 Regular Session BILL NO: AB 2037 AUTHOR: V.M. Perez AMENDED: April 13, 2010 FISCAL: Yes HEARING DATE: June 28, 2010 URGENCY: No CONSULTANT: Randy Pestor SUBJECT : SUMMARY : AIR POLLUTION Existing law : 1) Requires the Public Utilities Commission (PUC) to establish a greenhouse gas (GHG) emission performance standard by February 1, 2007, for all baseload generation of load serving entities, and requires the State Energy Resources Conservation and Development Commission (CEC) to establish the standard by June 30, 2007, for local publicly-owned electric utilities. Enforcement of the standard must begin immediately upon establishment of the standard. (Public Utilities Code 8340 et seq.). 2) Provides the California Air Resources Board (ARB) with primary responsibility for control of mobile source air pollution, including adoption of rules for reducing vehicle emissions and the specification of vehicular fuel composition. (Health and Safety Code 39000 et seq. and 39500 et seq.). The ARB must coordinate efforts to attain and maintain ambient air quality standards. (39003). ARB must also issue guidance to air pollution control districts (APCDs) and air quality management districts (AQMDs) on permitting or certifying electrical generation technologies, which must provide guidance for addressing best available technology (BACT) technology determinations. (41514.10). 3) Provides that APCDs and AQMDs have primary responsibility for controlling air pollution from all sources, other than emissions from mobile sources, and establishes certain AB 2037 Page 2 powers, duties, and requirements for those districts. (40000 et seq.). 4) Requires every air pollution control district in a federal nonattainment area for any national ambient air quality standard to establish by regulation a system by which air contaminant emission reductions that are to be used to offset future emission increases can be banked prior to use to offset future emission increases. The system must provide that only those emission reductions not otherwise required by any federal, state, or district requirement are approved by the district before they may be banked and used to offset future emission increases. (40709). The system must meet certain requirements (e.g., identification of tracking sources possessing emission credit balances, periodic analysis of increases or decreases in emissions occurring when credits are used, procedures for emission reductions credited to the bank or accruing to internal accounts). (40709.5). This bill : 1) Prohibits a load-serving entity or local publicly-owned electric utility from entering into, and the PUC from approving, a long-term financial commitment for a new electrical generating facility constructed in California or in a shared pollution area if that facility does not meet the following requirements: a) If the facility was constructed in California, the facility was constructed to meet BACT standards to control air pollution that applied at the time construction began in the air basin in California in which the facility was constructed. Offsets to mitigate air pollution from operation of the facility must have been obtained for any pollutant determined to be nonattainment of federal ambient air quality standards by the United States Environmental Protection Agency (USEPA) in the air basin where the facility was constructed, at the time construction began. b) If the facility was constructed outside of California AB 2037 Page 3 in a shared pollution area, the facility was constructed to meet BACT standards to control air pollution that applied at the time construction began in the air basin in California adjacent to the facility. Offsets must be obtained based on the federal ambient air quality standards in the air basin in California adjacent to the facility at the time construction began. c) Prohibits offsets under the above provisions if air pollution emissions are otherwise fully mitigated by other measures. 2) Requires the PUC, CEC, APCDs, AQMDs, and ARB to explore with federal agencies and other governments, methods to encourage recognition by all relevant agencies of offsets achieved anywhere in a shared pollution area and the use of cross-border trading of offsets, emission reduction credits, and available mitigation funds. 3) Provides definitions for certain terms, including a "shared pollution area" (an area encompassing California and another state or country, determined by USEPA to share air pollution if the air pollution emitted in that area, but not within California, affects public health in California). COMMENTS : 1) Purpose of Bill . According to the author, "Air emissions produced by power generation plants on the other side of the CA border create negative impacts on the air quality in the adjacent air basins/air sheds, affecting public health and the quality of life for the residents of the region. Current law does not prohibit a domestic utility company from importing power from power plants sited in locations that do not conform to our state's strong air quality standards." The author notes that Imperial County officials are concerned over air pollution and public health impacts associated with power plant siting, and the officials have sought to maintain a dialogue with domestic and foreign partners AB 2037 Page 4 about how to mitigate air pollution from the other side of state and national borders. According to the author, "Efforts by Imperial County officials and U.S. Federal officials have resulted in retrofits and the installation of best available control technology (BACT) on the La Rosita facility. SEMPRA, the owner of Termoelectrica, agreed to construct that plant with BACT. However, neither of these companies procured the emissions offsets that would have been required had the plants been built in California. AB 2037 is intended to address adverse air pollution impacts by only authorizing the approval of energy contracts to out-of-state power plants that meet California emissions and offsets standards. Specifically, this bill would require facilities sited near the California border regions to meet best available control technology standards." 2) Opposition and support concerns . According to opponents, some have "recently sued the United States Environmental Protection Agency in an effort to get the Imperial County [APCD] to adopt more strict rules on particulate pollution. This bill would allow the county to offset particulate pollution by simply purchasing cheap and completely unverifiable credits from Mexico, completely undermining efforts by the public health community to get actual pollution reductions in the county with the worst asthma hospitalization rate in the nation." According to the Imperial County board of supervisors, in supporting AB 2037, "The [USEPA] holds this region responsible for the quality of our air, yet they have not given us any tools to deal with American companies who build facilities just south of the border in an effort to escape our more stringent standards. With this proposed law in place, it would be difficult for new power plants to be built with the intent to export power into California unless they are constructed to meet all California standards, including the procurement of offsets." 3) Outstanding issues . First, AB 2037 references new electrical generating facilities and provides a definition for that term to be an electrical generating facility AB 2037 Page 5 constructed after January 1, 2011. However, other provisions of this bill apply "if the facility was constructed." To avoid confusion, amendments are needed to simply reference "new electrical generating facility" and clarify that this term refers to an electrical generating unit permitted after that date. Second, AB 2037 includes a definition for "shared pollution area" as an area encompassing California and another state or country determined by USEPA to share air pollution emitted in that area, but not within California, that affects public health in California. However, other provisions of this bill apply to an "air basin in California adjacent to the facility." To ensure consistent terms, the definition of "shared pollution area" needs clarification, (e.g., air sheds). Also, the USEPA Administrator has authority under the federal Clean Air Act to designate an "air quality control region" for an interstate area (42 U.S.C. 7407) (the Act also includes provisions for interstate pollution abatement (42 U.S.C. 7426), international air pollution (42 U.S.C. 7415), and international border emissions (42 U.S.C. 7509a)), so it may be appropriate for USEPA, ARB, and affected local governments to address these international air quality issues through those provisions of federal law. Third, offset provisions in AB 2037 are unclear and appear to allow offsets to be obtained in California for a facility constructed in another state or country, or obtained in another country for a facility constructed in California. Since it is uncertain how these offsets could be verified under federal and state law, provisions relating to offsets should be stricken from this bill. Fourth, since current law already addresses requirements for facilities in California, AB 2037 should focus on BACT for facilities permitted in another state or country (any reference to a facility in California, if needed, should ensure that the facility meets all air pollution control district, state, and federal requirements, and that definitions are consistent with those laws). AB 2037 Page 6 SOURCE : Imperial County SUPPORT : American Lung Association, Breathe California, California Air Pollution Control Officers Association, California Rural Legal Assistance Foundation, Clean Air Initiative, Economic Research Institute - Imperial County, Imperial County Board of Supervisors, Imperial Irrigation District, San Joaquin Valley Latino Environmental Advancement Project, Seeley Citizens United, Sierra Club California, South Coast Air Quality Management District, The Institute for Socio-Economic Justice and Progressive Community Development, Inc., Union of Concerned Scientists OPPOSITION : Californian Communities Against Toxics, California Environmental Rights Alliance, California Safe Schools, Coalition for a Safe Environment, Comite Pro Uno, Del Amo Action Committee, Greenaction, Just Transition Alliance, Pacoima Beautiful, Society for Positive Action