BILL ANALYSIS Ó
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CONSENT
Bill No: AB 523
Author: Valadao (R)
Amended: 6/6/12 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 6-0, 6/12/12
AYES: DeSaulnier, Gaines, Harman, Kehoe, Pavley, Wyland
NO VOTE RECORDED: Lowenthal, Rubio, Simitian
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 7-0, 6/18/12
AYES: Simitian, Strickland, Blakeslee, Hancock, Kehoe,
Lowenthal, Pavley
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-2, 1/30/12 - See last page for vote
SUBJECT : Alternative and Renewable Fuel and Vehicle
Technology
Program
SOURCE : Author
DIGEST : This bill prohibits the California Energy
Commission (CEC), beginning on July 1, 2013, from funding
corn ethanol production projects under its Alternative and
Renewable Fuels and Vehicle Technology Program.
ANALYSIS : AB 118 (Núñez), Chapter 750, Statutes of 2007,
created the Alternative and Renewable Fuel and Vehicle
CONTINUED
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Technology Program, which the CEC administers to provide
grants, revolving loans, loan guarantees, loans, or other
appropriate funding measures to public agencies, vehicle
consortia, businesses, consumers, recreational boaters, and
academic institutions to develop and deploy innovative
technologies that transform California fuel and vehicle
types to help attain the state's climate change policies.
Existing law provides, upon appropriation by the
Legislature, approximately $100 million annually through
2015 for this program. These funds comes from additional
fees on vehicle registrations, special identification
plates for various vehicles, and vessel registrations, plus
$10 million annually from the Public Interest Research,
Development, and Demonstration Fund, which is derived from
a portion of electric utility rates.
The CEC, through a competitive process, allocates these
funds to alternative fuel and vehicle technology projects.
To set priorities for the allocation of funds, the CEC must
develop an investment plan in consultation with a wide
array of stakeholders. The CEC adopted its first
investment plan at its
April 22, 2009 meeting and adopted its most recent plan for
the 2012-13 fiscal year on May 9.
Existing law makes the following projects eligible for
funding under the Alternative and Renewable Fuel and
Vehicle Technology Program:
Alternative and renewable fuel projects to develop,
improve, demonstrate, deploy, produce, and commercialize
alternative and renewable fuels, plus reduce the overall
carbon footprint of these fuels.
Alternative and renewable fuel infrastructure, fueling
stations, and equipment.
Projects to develop and improve vehicle technology that
provide for better fuel efficiency and lower greenhouse
gas emissions.
Vehicle retrofit projects to create higher fuel
efficiencies.
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Programs and projects to accelerate the commercialization
of vehicles and alternative fuels.
Infrastructure projects that promote alternative and
renewable fuel infrastructure development for existing
fleets, public transit, and existing transportation
corridors.
Workforce training programs related to alternative fuels
and vehicle technology.
Block grants administered by not-for-profit technology
consortia for specified purposes.
Analyses and assessments performed by state agencies to
determine the impacts of increasing the use of low-carbon
transportation fuels and technologies.
Homeowner modification of electrical sources to include a
plug-in electric vehicle charging station.
This bill prohibits the CEC, beginning on July 1, 2013,
from providing Alternative and Renewable Fuels and Vehicle
Technology Program funding to projects that produce ethanol
from corn, excluding that derived from corn stover (i.e.,
stubble left after harvesting the grain), leaves, cobs, or
other non-edible plant portions.
Comments
The author asserts that close to 40% of corn in the United
States is used to produce ethanol, which causes the price
of food and animal feed to increase. He introduced this
bill because as California families and businesses continue
to struggle with the ongoing economic downturn, he
considers it fiscally irresponsible to subsidize an
industry that negatively impacts food supplies and prices
and other employers in this state while providing little or
no environmental benefit.
California Ethanol Producers Incentive Program . In 2010,
the CEC adopted the California Ethanol Producers Incentive
Program (CEPIP) that provides a production incentive for
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commercial scale ethanol producers in California. The CEC
designed the CEPIP to provide an incentive for ethanol
producers to improve the environmental footprint of their
production facilities while providing a temporary financial
safety net during periods of unfavorable market conditions.
The CEPIP requires participants to repay incentives they
receive when market conditions are favorable.
Through the CEPIP, the CEC provided nearly $6 million of
Alternative and Renewable Fuels and Vehicle Technology
Program funds to three eligible companies. These three
ethanol producers received payments during 2011 at amounts
the CEC determined based on the difference between the
price of corn and the price of ethanol, and they must begin
to repay when ethanol prices rise relative to the price of
corn, again in increments the CEC determines. The
obligation to repay CEPIP incentives continues for five
years past the initial incentive payment date. It should
be noted that no CEPIP participant has repaid any funds to
date.
In response to the CEPIP, the Legislature passed SB 855
(Senate Budget and Fiscal Review Committee), Chapter 718,
as part of the 2010-11 Budget, which placed various
requirements on ethanol producers receiving CEPIP loans,
including that producers must repay all funds received if
they fail to adhere to a prescribed schedule to enhance
their facility operations or convert to non-corn feed
stocks.
This bill will effectively end the existing CEPIP as of
July 1, 2013.
The CEC itself acknowledges potential harm associated with
corn-based ethanol resulting from land use changes,
commodity price increases, and greater water use. The CEC
indicates that it intends to make no more AB 118 awards to
corn-based ethanol producers. Some are now advocating to
the CEC that it keep the CEPIP program but restrict it to
funding ethanol production from the non-edible portions of
the corn plant, as the latest amendments to this bill
clearly allow. The CEC is holding a workshop this summer
to examine using funds that the current investment plan
allocates to the production of gasoline and diesel
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substitutes for such purposes.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/2/12)
Agricultural Council of California
Alliance of Western Milk Producers
California Cattlemen's Association
California Dairy Campaign
California Poultry Federation
Dairy Farmers of America, Western Area Council
Diestel Turkey Ranch
Foster Farms
Hilmar Cheese Company
Land O' Lakes
Milk Producers Council
Sierra Club
Western United Dairymen
Zacky Farms
ASSEMBLY FLOOR : 73-2, 1/30/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Fletcher, Fuentes, Furutani, Beth Gaines,
Galgiani, Garrick, Gatto, Gordon, Grove, Hagman,
Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill,
Huber, Hueso, Huffman, Jeffries, Jones, Knight, Logue,
Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell,
Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NOES: Chesbro, Feuer
NO VOTE RECORDED: Fong, Gorell, Lara, Monning, V. Manuel
Pérez
JJA:m 7/2/12 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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