BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  June 27, 2011

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Wesley Chesbro, Chair
                     SB 771 (Kehoe) - As Amended:  June 20, 2011

           SENATE VOTE  :  38-0
           
          SUBJECT  :  California Alternative Energy and Advanced 
          Transportation Financing Authority 

           SUMMARY  :  Specifies that natural gas engines, landfill gas 
          engines, digester gas engines, landfill gas turbines, digester 
          gas turbines, and microturbines are ultralow-emission equipment 
          for energy generation based on thermal energy systems and thus 
          eligible for financial assistance under the California 
          Alternative Energy and Advanced Transportation Financing 
          Authority (CAEATFA) Act.

           EXISTING LAW:  

          1)Creates CAEATFA for the purpose of promoting the development 
            and utilization of alternative energy sources and the 
            development and commercialization of advanced transportation 
            technologies.  CAEATFA consists of five members: the Director 
            of Finance, the chairperson on the California Energy 
            Commission, the president of the Public Utilities Commission, 
            the Controller, and the Treasurer, who serves as the 
            chairperson of CAEATFA.

          2)Permits CAEATFA to provide bond financing to lend assistance 
            to a participating party to enter into loan agreements to 
            finance projects that use an alternative energy source or 
            advanced transportation technologies.

          3)Permits CAEATFA to approve a sales and use tax exemption on 
            tangible personal property utilized for the design, 
            manufacture, production, or assembly of advanced 
            transportation technologies or alternative energy source 
            products, components or system.  This sales and use tax 
            exemption will sunset on January 1, 2021.








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          4)Requires CAEATFA to establish a renewable energy program to 
            provide financial assistance to public power entities, 
            independent generators, utilities, or businesses manufacturing 
            components or systems, or both, to generate new and renewable 
            energy sources, develop clean and efficient distributed 
            generation, and demonstrate the economic feasibility of new 
            technologies, such as solar, photovoltaic, wind, and 
            ultralow-emission equipment.

          5)Defines "renewable energy" as either of the following:

             a)   A device or technology that conserves or produces heat, 
               processes heat, space heating, water heating, steam, space 
               cooling, refrigeration, mechanical energy, electricity, or 
               energy in any form convertible to these uses, that does not 
               expend or use conventional energy fuels (e.g. oil, 
               gasoline, natural gas), and that uses biomass, solar 
               thermal, photovoltaic, wind, or geothermal electrical 
               generation technologies.

             b)   Ultralow-emission equipment for energy generation based 
               on thermal energy systems such as natural gas turbines and 
               fuel cells.

           THIS BILL  adds natural gas engines, landfill gas engines, 
          digester gas engines, landfill gas turbines, digester gas 
          turbines, and microturbines to the list of energy generation 
          equipment that CAEATFA must consider "renewable energy" eligible 
          for financial assistance.

           FISCAL EFFECT  :  According to the Senate Appropriations 
          Committee, pursuant to Senate Rule 28.8, negligible state costs.

           COMMENTS  :

           1)CAEATFA.   CAEATFA was created in 1980 with an authorization of 
            $200 million in revenue bonds to finance projects utilizing 
            alternative sources of energy, such as cogeneration, wind and 
            geothermal power.  It was renamed in 1994 as currently titled 
            and its charge expanded to include the financing of "advanced 








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            transportation" technologies.

            During the energy crisis of 2001, its authority was again 
            expanded, this time to provide financial assistance to public 
            power entities, independent generators, and others for new and 
            renewable energy sources, and to develop clean distributed 
            generation.

            CAEATFA's authority is broad but in practice it has not been 
            utilized until recently.  The State Treasurer has tried to 
            reinvigorate the authority and has launched a sales and use 
            tax exemption program to stimulate green manufacturing as 
            authorized by SB 71 (Padilla, 2010).  

           2)Landfill gas and anaerobic digestion.   Landfilling is the main 
            method for disposal of municipal and household solid wastes or 
            refuses in the United States.  Although maintained in an 
            oxygen-free environment and relatively dry conditions, 
            landfill waste produces significant amounts of landfill gas 
            (mostly methane).  With Californians dumping more than 42 
            million tons of waste per year, the total amount of landfill 
            gases produced in California is tremendous. 

            Landfill gas is generated by the natural degradation of 
            municipal solid waste by anaerobic (without oxygen) 
            micro-organisms. Once the gas is produced, the gas can be 
            collected by a collection system, which typically consists of 
            a series of wells drilled into the landfill and connected by a 
            plastic piping system.  

            Anaerobic digestion is a biological process that produces a 
            gas principally composed of methane (CH4) and carbon dioxide 
            (CO2) otherwise known as biogas.  These gases are produced 
            from organic wastes such as livestock manure, food processing 
            waste, etc. 

            Anaerobic processes could either occur naturally or in a 
            controlled environment such as a biogas plant.  Organic waste 
            such as livestock manure and various types of bacteria are put 
            in an airtight container called digester so the process could 
            occur.  Depending on the waste feedstock and the system 








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            design, biogas is typically 55 to 75% pure methane.  
            State-of-the-art systems report producing biogas that is more 
            than 95 percent pure methane. 

           3)Square peg, round hole?   Landfill gas and digester gas are 
            considered renewable energy sources for purposes of the 
            Renewables Portfolio Standard and other state programs.  They 
            are not included in the definition of "renewable energy" for 
            CAEATFA's purposes, but it appears appropriate and consistent 
            with other statutes to add them.
            Conventional natural gas is not considered a renewable energy 
            source in any other context.  It is unclear that it would be 
            necessary or consistent with CAEATFA's purpose to provide 
            financial assistance to natural gas technologies.  However, if 
            the author's intent is to make engines fueled by conventional 
            natural gas specifically eligible for financial assistance 
            from CAEATFA, the author and the committee may wish to 
            consider amending the bill to make them eligible, without 
            calling them renewable.

           4)Double referral.   This bill has been double-referred to the 
            Utilities and Commerce Committee.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Clean Power Campaign
          Marin Sanitary Service
           
            Opposition 
           
          None on file


           Analysis Prepared by  :  Mario DeBernardo / NAT. RES. / (916) 
          319-2092 












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