BILL ANALYSIS                                                                                                                                                                                                    Ķ



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          (  Without Reference to File  )

          SENATE THIRD READING
          SB 1455 (Kehoe)
          As Amended  August 24, 2012
          2/3 vote 

           SENATE VOTE  :Vote not relevant  
           
           NATURAL RESOURCES   6-3         APPROPRIATIONS      10-4        
           
           ----------------------------------------------------------------- 
          |Ayes:|Chesbro, Brownley,        |Ayes:|Gatto, Blumenfield,       |
          |     |Dickinson, Huffman,       |     |Bradford, Campos, Davis,  |
          |     |Monning, Skinner          |     |Hall, Hill, Lara,         |
          |     |                          |     |Mitchell, Solorio         |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Knight, Grove, Halderman  |Nays:|Harkey, Nielsen, Norby,   |
          |     |                          |     |Wagner                    |
           ----------------------------------------------------------------- 
           SUMMARY  :  Extends until December 1, 2023, various fees and 
          surcharges related to the clean air, fuel, tire recycling, and 
          vehicle programs of the Air Resources Board (ARB), the 
          California Energy Commission  (CEC), the Department of Resources 
          Recycling and Recovery (CalRecycle), and the State Bureau of 
          Automotive Repair (BAR).  Prohibits ARB from moving forward with 
          implementation of the Clean Fuels Outlet regulation, and instead 
          directs funds from the Alternative and Renewable Fuel and 
          Vehicle Technology Fund for the construction and operation of a 
          hydrogen fueling network in California.  Requires CEC and ARB to 
          report on the status of the state's alternative transportation 
          fuel use in the Integrated Energy Policy Report (IEPR).  
          Specifically,  this bill  :   

          1)Extends the sunset dates of various clean air and alternative 
            fuels and vehicle programs, and the related fees and 
            surcharges, under ARB, CEC, and BAR to December 31, 2023.  The 
            fees and surcharges are:

             a)   AB 118 (Nuņez), Chapter 750, Statutes of 2007, which 
               authorizes a vehicle registration fee to fund the 
               Alternative and Renewable Fuel and Vehicle Technology 
               Program.








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             b)   AB 923 (Firebaugh), Chapter 707, Statutes of 2004, which 
               increased the vehicle registration fee for vehicles 
               registered in specified areas in the state and increased 
               the Tire Recycling Fee to fund air emissions reduction 
               activities.

             c)   The Carl Moyer Memorial Air Quality Standards Attainment 
               (Carl Moyer) Program, which can be used to fund the 
               incremental cost of cleaner-than-required vehicles, 
               engines, and equipment.

          2)Prohibits ARB from submitting regulations related to the Clean 
            Fuels Outlet regulation and the deployment of hydrogen fueling 
            stations to the Office of Administrative Law, and instead:   

             a)   Defines "publicly available hydrogen fueling station" to 
               mean the equipment used to store and dispense hydrogen fuel 
               to vehicles according to industry codes and standards that 
               is open to the public.  

             b)   Requires ARB to aggregate and make available to the 
               public no later than January 1, 2014, and every two years 
               thereafter, the number of vehicles that automobile 
               manufacturers project to be sold or leased.  

             c)   Requires CEC to allocate $20 million each fiscal year, 
               beginning July 1, 2013, through June 30, 2016, and up to 
               $20 million each fiscal year thereafter, not to exceed 20% 
               of moneys appropriated by the Legislature from the 
               Alternative and Renewable Fuel and Vehicle Technology Fund, 
               for purposes of constructing and operating a hydrogen 
               fueling network sufficient to provide convenient fueling to 
               vehicle owners and expand that network as necessary to 
               support a growing market for vehicles requiring hydrogen 
               fuel, until there are at least 100 publicly available 
               hydrogen fueling stations

             d)   Requires CEC's expenditures not exceed 20% of the moneys 
               appropriated annually by the Legislature from the 
               Alternative and Renewable Fuel and Vehicle Technology Fund.

             e)   Permits CEC to defer allocating the moneys as needed to 
               keep the number of fueling stations appropriate for the 








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               fueling needs of hydrogen vehicles.

             f)   States that once CEC determines, in consultation with 
               ARB, that the private sector is establishing publicly 
               available hydrogen fueling stations without the need for 
               government support, requires CEC to cease providing funding 
               for those stations.

             g)   Requires, on or before December 31, 2015, and annually 
               thereafter, that ARB and CEC jointly review and report on 
               progress toward establishing a hydrogen fueling network, as 
               specified.

             h)   Authorizes CEC to design loan incentive programs, 
               revolving loan programs, and other forms of financial 
               assistance, and authorizes CEC to enter into an agreement 
               with the Treasurer to provide financial assistance to 
               further the development of the hydrogen fueling network.

             i)   Requires that funds appropriated to CEC for the purposes 
               of this bill be available for encumbrance by CEC for up to 
               four years from the date of the appropriation.

             j)   Requires ARB, no later than July 1, 2013, to convene a 
               working group to evaluate the policies and goals contained 
               within the Carl Moyer and AB 923 (Firebaugh and Pavley), 
               Chapter 707, Statutes of 2004, programs.

             aa)  Sunsets these provisions on December 31, 2023.  

          1)Directs ARB and CEC, by November 1, 2014, to update the 
            economic analysis used to develop and review ARB's regulations 
            to include a range of petroleum and alternative fuel prices to 
            more accurately assess the future costs of petroleum-based and 
            alternative fuels.  

          2)Requires, beginning November 1, 2015, and every two years 
            thereafter, CEC, in consultation with ARB and as a part of its 
            IEPR, to provide a status of the state's alternative 
            transportation fuel use, including:  

             a)   An evaluation of how new and existing investment 
               programs could help to increase the state's alternative 
               fuels use; and, 








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             b)   An evaluation of how federal fuel policies and existing 
               state policies will help increase the use of alternative 
               fuels in the state.  

          3)Requires ARB when developing new and amended regulations, to 
            include a finding on the effect of the proposed regulations on 
            the state's alternative transportation fuels use.  

          4)Provides that this bill does not preempt AB 32 and that the 
            bill be implemented consistent with environmental, public 
            health, and sustainability considerations articulated in AB 
            32, clean fuels and vehicle funding statutes.  

          5)Requires ARB and CEC, when studying the state's alternative 
            transportation fuel use, to measure:  

             a)   In-state job creation through the continued development 
               of an alternative fuels industry in the state;  

             b)   Economic vulnerability of residents to future petroleum 
               fuel price spikes by the use of either petroleum fuels or 
               alternative fuels and vehicles;  

             c)   Alternative fuel market penetration in nonattainment 
               areas; and,  

             d)   Increase access to the supply of alternative fuels and 
               alternative fuel vehicles for all residents, including 
               barriers to supply.  

           FISCAL EFFECT :  According to the Assembly Appropriations 
          Committee, this bill will result in the following fiscal 
          impacts:  

          1)Annual fee revenue, ranging from $48 million to $60 million, 
            from the tire fee extension, 57% of which (roughly $27 million 
            to $34 million) will go to California Department of Resources 
            Recycling and Recovery (CalRecycle) to fund waste tire 
            management and 43% of which (roughly $21 million to $26 
            million) will go to ARB to fund the Carl Moyer Program 
            (special funds).  (Absent this bill, the tire fees drops, as 
            of January 1, 2015, from $1.75 per tire to $0.75 per tire, all 
            of which will go to CalRecycle to fund waste tire management.) 








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          2)Annual revenue of approximately $180 million from extension of 
            various vehicle, vessel, and other air quality-related 
            surcharges to fund AB 118 programs, as follows:  approximately 
            $105 million for the Alternative and Renewable Fuel and 
            Vehicle Technology (ARFVT) Program, administered by CEC; 
            approximately $45 million for the Air Quality Improvement 
            (AQI) Program; administered by ARB; and, approximately $30 
            million for the passenger vehicle car scrap program, 
            administered by BAR (special funds). 

          3)Annual local revenue, of approximately $50 million, from 
            extension of local surcharge on vehicle registration fees to 
            fund local vehicle emissions reduction projects (various local 
            funds). 

          4)Annual redirection of $20 million from the ARFVT Fund during 
            each fiscal year 2013-14 through 2015-16, and up to that 
            amount each fiscal year thereafter, away from projects for the 
            development and commercialization of nonpetroleum fuels and to 
            projects for the construction and operation of a hydrogen 
            fueling network.

          5)Ongoing costs in the hundreds of thousands of dollars to ARB, 
            CEC and BAR to continue to administer various air quality and 
            alternative fuel programs (special funds).  These costs will 
            be fully covered by the fee extensions authorized by this 
            bill. 

          6)Ongoing costs in the hundreds of thousands of dollars to ARB 
            and CEC to track and periodically report on alternative-fueled 
            vehicle sales and progress in establishing a hydrogen fueling 
            network, to evaluate alternative fuels use and include such 
            information in the IEPR, and to update the economic analysis 
            used in developing ARB's regulations (special funds.) 
           
           COMMENTS  :  California faces significant challenges with air 
          quality.  According to the author, "just when they are needed 
          most and a wide variety of new vehicles and technologies are 
          coming to the market, California's major clean transportation 
          and air quality investment programs are all set to expire in 
          2014 or 2015."  This bill would extend these programs and the 
          fees that support them until December 31, 2023.  








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          The CEC's State Alternative Fuels Plan outlines specific 
          strategies and targets to increase the use of alternative fuels, 
          including setting a goal of 26% penetration for alternative fuel 
          use in California for on-road and off-road vehicles by 2022.  
          This bill requires ARB and the CEC to measure the progress of 
          alternative fuels use in the state, as described.  

          On January 26, 2012, ARB considered amendments to the Clean 
          Fuels Outlet regulation.  The amendments are required be 
          submitted to the Office of Administrative Law by December 31, 
          2012, to take effect.  The amendments to the Clean Fuels Outlet 
          regulation were designed to ensure that there was sufficient 
          hydrogen fueling infrastructure necessary to meet forecasted 
          fuel cell vehicle penetration.  According to ARB, this 
          infrastructure is needed to demonstrate a market commitment to 
          hydrogen fuel.  In order to meet the forecasted station 
          infrastructure needs, the regulation would have required that 
          refiners provide the funding for hydrogen fueling stations 
          available to the public.  

          This bill prohibits ARB from submitting the January 26, 2012, 
          regulation amendments pertaining to the hydrogen fueling 
          infrastructure to the Office of Administrative Law.  The bill 
          also prohibits ARB from enforcing any element of the regulation 
          that requires, or has the effect of requiring, any person to 
          construct, operate, or provide funding for the construction or 
          operation of any publicly available hydrogen fueling station.  
          Instead, the bill dedicates $20 million from the AB 118 program 
          in each fiscal year, beginning July 1, 2013, through June 30, 
          2016, not to exceed 20% of total AB 118 funds annually, to 
          developing the hydrogen infrastructure.  The CEC may allocate 
          additional funds after July 1, 2016, as necessary to achieve the 
          publicly available hydrogen fueling infrastructure sufficient to 
          support automobile manufacturer deployment projections for fuel 
          cell vehicles in California.  
           

          Analysis Prepared by  :    Elizabeth MacMillan / NAT. RES. / (916) 
          319-2092 

                                                                FN: 0005836










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