BILL ANALYSIS Ó AB 768 Page 1 Date of Hearing: May 18, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 768 (Gatto) - As Amended: April 25, 2011 Policy Committee: Natural ResourcesVote:6-0 Transportation 14-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill requires the Air Resources Board (ARB) to allow an out-of-state producer of biomethane to generate Low-Carbon Fuel Standard (LCFS) credits through the sale of biomethane distributed to California consumers through gas swaps if the producer can demonstrate a physical pathway to California through the use of pipelines. FISCAL EFFECT Minor annual costs to ARB, no more than tens of thousands of dollars, to review producer demonstrations of its use of pipelines connected to California. (Air Pollution Control Fund.) COMMENTS 1)Rationale . The author finds it appropriate to allow biomethane producers the flexibility to use gas swaps for purposes of LCFS credit because, the author contends, such swaps result in the use of biogas in California despite the lack of physical delivery OF a given unit of biogas to the state. 2)Background. ARB adopted in 2009 the LCFS regulation as an early action measure to achieve greenhouse gas reductions required by AB 32 (Núñez, Chapter 488, Statutes of 2006). The regulation allows producers of certain alternative fuels, including biogas, to generate tradable LCFS credits, provided the producer can demonstrate a physical pathway by which the fuel enters the state for use by California consumers. The regulation does not allow gas swaps, also known as AB 768 Page 2 displacement trade contracts, in which the producer demonstrates that gas injected into a pipeline outside of California is credited for an equal amount of gas removed from the pipeline for use in California, even though the actual gas subject to the credit is never delivered to California. ARB is required to review the LCFS regulation in 2012 and 2015, which will include public participation and benefit from an ARB staff review to be completed this year. Changes to the regulation such as that required by this bill could be considered during the review and adopted by the board. 3)Support . This bill is supported by Clean Energy and Cambrian Energy, both of whom could make use of the bill's gas swap provisions, and the Coalition for Clean Air. 4)Opposition. There is no formal opposition registered to this bill. Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081