BILL ANALYSIS Ó
AB 523
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Date of Hearing: January 19, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 523 (Valadao) - As Amended: January 4, 2012
Policy Committee: Natural
ResourcesVote:5-4
Transportation 14-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill prohibits, effective July 1, 2013, corn-based ethanol
from receiving funding from the Alternative and Renewable Fuel
and Vehicle Technology Program (ARFVT Program).
FISCAL EFFECT
Negligible state costs, if any.
COMMENTS
1)Rationale. The author contends that corn-based ethanol
increases food prices and harms California industry, such as
agricultural livestock, that rely on corn as an input while
providing little or no environmental benefit and reducing
incentives to develop other alternative fuels. The author
therefore concludes it inappropriate for state money to
subsidize production of corn-based ethanol.
2)Background. In 2007, the Legislature enacted the California
Alternative and Renewable Fuel, Vehicle Technology, Clean Air,
and Carbon Reduction Act of 2007 (AB 118, Núñez, Chapter 50).
The act created two new programs-the ARFVT Program, to be
administered by the California Energy Commission (CEC), and
the Air Quality Improvement Program, to be administered by the
Air Resources Board. The programs are funded primarily by
increases in various vehicle, vessel, and other air
quality-related fees that are projected to raise upwards of
$150 million annually for each of eight years.
AB 523
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The act identifies the primary goals of the ARFVT Program as
development and commercialization of technologies for
renewable and nonpetroleum fuels that help to achieve the
state's climate change goals. The act states that the program
is not to prefer any particular vehicle or fuel technology.
Rather, the program is to provide financial incentives, such
as grants, loans, and loan guarantees for specified types of
projects that meet specified criteria, including furtherance
of a number of air quality and other environmental and energy
goals. The act also requires CEC to adopt an ARFVT Program
investment plan and to update the plan annually.
In implementing the ARFVT Program, CEC established the
California Ethanol Producers Incentive Program (CEPIP) to
financially assist California producers of lower-carbon
content ethanol fuels. Under CEPIP, CEC makes payments to
California ethanol producers facing difficult market
conditions. Such producers agree to repay the money when
market conditions improve, reduce the carbon intensity of the
fuel they produce, or displace an amount of their feedstock
with waste-based materials.
The CEC acknowledges potential harm associated with corn-based
ethanol resulting from land use changes, commodity price
increases and greater water use, and indicates it intends to
make no more AB 118 awards to corn-based ethanol producers
beyond CEPIP, which statute makes inoperative on July 1, 2013.
3)Support. This bill is supported by numerous California-based
agricultural interests, including many in the livestock
industry.
4)Opposition. At the time this analysis was written, there was
no formal opposition registered to the latest version of the
bill. However, an earlier version of this bill, which would
have ended CEPIP prior to the statutory inoperative date of
July 1, 2013, was heard by the Transportation Committee in May
of 2011 and was opposed by a number of ethanol producers and
related industrial groups, as well as several major labor
organizations. It is unknown whether these groups have
removed their opposition to the latest version of the bill.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081
AB 523
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