BILL ANALYSIS
SB 579
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2009-2010 Regular Session
BILL NO: SB 579
AUTHOR: Lowenthal
AMENDED: August 24, 2009
FISCAL: Yes HEARING DATE: August 26,
2009
URGENCY: Yes CONSULTANT: Randy Pestor
SUBJECT : EMISSION REDUCTION CREDITS
SUMMARY :
Existing law :
1) 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).
2) Provides that air pollution control districts (APCDs) and
air quality management districts (AQMDs) have primary
responsibility for controlling air pollution from all
sources, other than emissions from mobile sources, and
establishes certain powers, duties, and requirements for
those districts. (40000 et seq.).
3) Creates certain AQMDs, with related authority, including
the South Coast Air Quality Management District (SCAQMD)
under the Lewis-Presley Air Quality Management Act. SCAQMD
covers portions of Los Angeles, Orange, Riverside, and San
Bernardino counties within the South Coast Air Basin.
(40400 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
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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).
5) Under the California Environmental Quality Act (CEQA),
requires lead agencies with the principal responsibility
for carrying out or approving a proposed project to prepare
a negative declaration, mitigated declaration, or
environmental impact report (EIR) for this action, unless
the project is exempt from CEQA (CEQA includes various
statutory exemptions, as well as categorical exemptions in
the CEQA guidelines). (Public Resources Code 21000 et
seq.).
This bill :
1) Provides that nothing in this bill affects the adoption,
readoption, amendment, or environmental review of SCAQMD
Rule 1315 ( Note : In Natural Resources Defense Council v.
South Coast Air Quality Management District (Super. Ct. Los
Angeles County, 2007, No. BS 110792), the court declared
SCAQMD actions in promulgating SCAQMD Rule 1315 (seeking to
create emission reduction credits from previous air quality
gains and placed into SCAQMD administered accounts) and
amending SCAQMD Rule 1309.1 (allowing power plants to
access credits in these accounts) violated CEQA).
2) Allows Rule 1304 exempt facilities, and Rule 1309.1 (as
amended May 3, 2002 - prior to the 2007 litigated
amendment) Priority Reserve essential public services, to
continue to operate if they are operating under a permit in
reliance on those rules.
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3) Authorizes SCAQMD to issue permits in reliance on Rule 1304
and Rule 1309.1 (as amended May 3, 2002).
4) Requires SCAQMD to track offsets or credits relating to the
above actions and to make this information available to the
public, and requires SCAQMD to ensure internal offset or
credit accounts account for all of the offsets or credits
for the above actions.
5) Requires the above provisions to be inoperative if: a) a
final outcome has been reached in Natural Resources Defense
Council v. South Coast Air Quality Management District ,
including exhaustion of all appeals; or b) SCAQMD completes
all environmental reviews required by that decision.
6) Sunsets the above provisions May 1, 2012.
7) Contains related legislative intent.
8) Contains an urgency clause.
COMMENTS :
1) Purpose of Bill . According to the author, "As a result of
[ Natural Resources Defense Council v. South Coast Air
Quality Management District] , the SCAQMD has been unable to
issue permits for credit applications from its internal
bank. The District has over 1,300 permit applications from
small business, government agencies and a variety of
business interests unrelated to the power plants that the
District is unable to process."
The author believes that "SB 579 provides an interim solution
to allow the parties not directly related to the
litigation, to obtain permits from the District while the
court case makes its way through the judicial system."
2) SCAQMD rule changes . Emission Reduction Credits (ERCs) can
be created when pollution is reduced in certain ways, and
those ERCs can later be sold or used to allow other
pollution to occur at a later time or in a different place
- a practice referred to as "offsetting" pollution.
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Several years ago, under SCAQMD Rule 1309.1, SCAQMD exempted
essential public services (e.g., schools, hospitals, fire
stations) from the need to obtain ERCs, allowing offsets to
instead be provided through a Priority Reserve without
charge. SCAQMD adopted Rule 1315 a second time on August
3, 2007, after a Court found that the rule must undergo
CEQA analysis, to establish a process for adding additional
credits to their internal accounts. These credits could
then be distributed to facilities under Rule 1304 (exempt
facilities) and 1309.1. SCAQMD also amended Rule 1309.1 on
August 3, 2007, so that new electrical generating
facilities could also access credits from the Priority
Reserve.
3) Challenging rule changes - Natural Resources Defense
Council v. South Coast Air Quality Management District
(Super. Ct. Los Angeles County, 2007, No. BS 110792) .
Certain environmental justice and environmental
organizations subsequently challenged the adequacy of
SCAQMD's project description, analysis, and mitigation
measures under CEQA when adopting Rule 1315 and amending
Rule 1309.1. The Superior Court found on July 28, 2008,
that SCAQMD violated CEQA by failing to adequately
describe, analyze, and mitigate the impacts of this action.
According to the court, "Rule 1315 is much more than a simple
codification of the District's existing tracking system.
As acknowledged by the District, the passage of Rule 1315,
with the interplay of 1309.1, results in the anticipated
emission of hundreds of tons of pollution into the Basin
every day . . . Rule 1315 has expanded exponentially the
universe of pollution credits available to entities needed
to increase emissions into an already polluted Basin . . .
How big to make the Priority Reserve, whether to allow
certain credits historically unavailable for use as credits
to be captured and re-sold, and whether to take credits
retroactively from clean air improvements already attained
have real, foreseeable and substantial consequences."
The Court also noted that "The environmental effects of Rule
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1315, in conjunction with the current and future amendments
to Rule 1309.1 are real, capable of being quantified and
not remote or speculative."
4) SCAQMD response to Court decision . SCAQMD responded to the
decision in three ways. First, SCAQMD appealed the case -
although on June 9, 2009, parties stipulated to an
extension of the briefing schedule with an August 11, 2009,
deadline for the Appellant. Second, SCAQMD issued a notice
of preparation for a new environmental document on March
17, 2009, and a consulting firm is preparing the document -
although that document is not yet complete. Third, SCAQMD
sponsored SB 696 to abrogate the Court decision and exempt
the issuance and use of offsets from CEQA - thereby seeking
to avoid the Court's direction while also involving the
Legislature in pending litigation.
5) SCAQMD and plaintiffs seek to resolve concerns over
essential public services and small businesses following
Energy, Utilities, and Commerce Committee hearing on SB 696
(Wright) . When SB 696 was heard by the Energy, Utilities,
and Commerce Committee, some committee members discussed
whether essential public services and small businesses
relying on SCAQMD ERCs should proceed while issues relating
to SCAQMDs compliance with state and federal requirements
are under review by the courts.
SCAQMD and the plaintiffs exchanged letters on these issues
between June 19, 2009, and July 7, 2009.
SCAQMD also wanted to address existing permits. According to
the plaintiffs, "Our position is, and always has been, that
nothing in Judge Jones' Writ and Injunction requires the
district to revoke permits issued between the time the
District adopted Rule 1315 and the date of final issuance
of the Writ and Injunction." Nevertheless, SCAQMD and the
plaintiffs agreed on language to clarify this issue.
With regard to essential public services and small businesses,
disagreement focused on two issues. First, plaintiffs
referred to "small business" as those facilities qualifying
for assistance offered by SCAQMD's Small Business
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Assistance Office as defined in Rule 102 (total gross
receipts of $5 million or less, or a business with 100 or
fewer employees) and public agencies. SCAQMD disagreed,
believing this to be too narrow.
Second, SCAQMD wanted to rely on Rule 1315 in accounting for
the ERCs. According to the plaintiffs, "Rule 1315 is the
subject of ongoing litigation, and a vital, non-severable
part of the project the District must analyze under CEQA.
The District's proposal to rely on Rule 1315 as the vehicle
to 'account for' credits in the internal bank during this
interim period is unacceptable."
The SCAQMD and plaintiffs could therefore not agree on a way
to address the essential public services and small
businesses while issues relating to SCAQMD's compliance
with state and federal requirements are under review by the
courts.
Nevertheless, there is continuing interest by various parties
in addressing essential public services and small
businesses, rather than powerplants, in a manner that does
not affect the NRDC decision, pending litigation, or
federal litigation.
There are also concerns that allowing credits for these
powerplants will adversely affect efforts to encourage
renewable energy sources - and place the Legislature in a
decision-making role with litigation pending.
SB 579 seeks to respond to these concerns.
6) Federal court actions . The plaintiffs also filed a
complaint in federal court on August 18, 2008, for
Declaratory and Injunctive Relief under the federal Clean
Air Act, arguing that the SCAQMD credits violate
requirements that credits be real, surplus, enforceable,
quantifiable, and permanent - and are therefore invalid.
SCAQMD filed a Motion to Dismiss this action on October 8,
2008, asserting that the court did not have jurisdiction to
hear the Complaint. The parties made various appearances
before the federal court on the SCAQMD's motion.
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Plaintiffs informed the Court on July 9, 2009, that they do
not intend to amend the complaint and would appeal a final
decision to dismiss the case for lack of jurisdiction, and
the Judge indicated it would take about 90 days to issue a
final decision on the matter. The Plaintiffs assert that
the decision does not mean the proposed Rule 1315 is legal
and does not mean SCAQMD has legal credits in its bank. A
status conference in the case is scheduled for August 31,
2009.
7) Related legislation . SB 696 (Wright) abrogates the Natural
Resources Defense Council v. South Coast Air Quality
Management District decision, requires SCAQMD to transfer
credits up to specified limits for a powerplant meeting
certain requirements (i.e., Sentinel powerplant) and
essential public services, and exempts these actions from
CEQA; requires SCAQMD Rules 1309.1 and 1315, relating to,
among other things, creation of internal accounts for
essential public services, small sources, exempt sources,
and eligible powerplants to be continued in full force and
effect without interruption; exempts adoption and
implementation of SCAQMD Rules 1309.1, 1315, and 1304, and
any amendments to these rules required by the U.S.
Environmental Protection Agency, from CEQA; establishes
offset credit accounts and sets account balances; and
authorizes amendments to an account to increase emission
credits for powerplants.
AB 1318 (V. Manuel Perez) abrogates the Natural Resources
Defense Council v. South Coast Air Quality Management
District decision, requires SCAQMD to transfer credits up
to specified limits for a powerplant meeting certain
requirements (i.e., Sentinel powerplant) and essential
public services, and exempts these actions from CEQA.
8) Clarification needed . Clarification is needed regarding:
a) permits already issued by SCAQMD relating to Rule 1304
and 1309.1 (e.g., dates those permits were issued, include
in legislative intent since many believe that these permits
are not affected by the NRDC decision); b) the types of
exempt facilities covered by this bill if all 1304
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facilities are not to be covered; c) the determinations
made in 40440.13(c); d) circumstances under which this
bill becomes inoperative (e.g., striking reference to the
NRDC case since there is a decision, requiring CEQA
certification with no challenges); and e) related technical
and clarifying amendments.
SOURCE : Senator Lowenthal
SUPPORT : None on file
OPPOSITION : None on file