BILL ANALYSIS Ó AB 8 Page 1 Date of Hearing: April 8, 2013 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair AB 8 (Perea and Skinner) - As Introduced: December 3, 2012 SUMMARY : Extends, until January 1, 2024, various fees and surcharges related to the clean air, fuel, tire recycling, and clean vehicle and replacement programs of the California Air Resources Board (ARB), the California Energy Commission (CEC) and the State Bureau of Automotive Repair (BAR). Directs funding from the programs for the construction of hydrogen fueling stations. Specifically, this bill : 1)Extends, from January 1, 2014 or January 1, 2015, to January 1, 2024, the sunset dates of various clean air and alternative fuels and vehicle programs, and the related fees and surcharges, under ARB, CEC, and BAR, as follows: a) $8 increase, from $12 to $20, in the smog abatement fee, paid to register vehicles that are less than six model years old and therefore exempt from smog check. The revenues are directed equally to the Alternative and Renewable Fuel and Vehicle Technology (ARFVT) Program and the Air Quality Improvement Program. b) $0.75 fee increase on tire sales to the Air Pollution Control Fund for the Carl Moyer Memorial Air Quality Standards Attainment (Carl Moyer) Program and other air emission reduction efforts. c) $3 additional fee on the annual vehicle registration fee ($2 for the ARFVT and $1 for the Enhanced Fleet Modernization Subaccount). d) $2 surcharge for local air districts on vehicle registrations to fund emission reduction programs, including the Carl Moyer Program. e) $5 increase of the fee for special identification plates for construction equipment, farm trailers, cotton trailers, logging vehicles, and cemetery equipment. The revenues are directed equally to the ARFVT Program and the Air Quality Improvement Program. AB 8 Page 2 f) $10 or $20 (depending upon the even or odd year of registration) increase for vessel registration. The revenues are directed equally to the ARFVT Program and the Air Quality Improvement Program. 2)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. 3)Repeals the authority of ARB, until January 1, 2024, from enforcing regulations related to the Clean Fuels Outlet regulation and the deployment of hydrogen fueling stations. 4)Requires ARB to provide a report by January 1, 2014, and every two years thereafter, the number of vehicles that automobile manufacturers project to be sold or leased. 5)Requires CEC to allocate $20 million each fiscal year from 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 ARFVT 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. 6)Makes various findings and recommendations relative to increasing alternative fuel use and decreasing the use of petroleum fuels to reduce greenhouse gas emissions. 7)Authorizes CEC to defer allocating the moneys as needed to keep the number of fueling stations appropriate for the fueling needs of hydrogen vehicles. 8)Upon consultation with ARB in determining that the private sector is establishing publicly available hydrogen fueling stations without the need for government support, authorizes CEC to cease funding for the hydrogen fueling stations. 9)Requires, on or before December 31, 2015, and annually thereafter, ARB and CEC to jointly review and report on progress toward establishing a hydrogen fueling network, as AB 8 Page 3 specified. 10)Authorizes CEC to design grants, loan programs, and other forms of financial assistance, and authorizes CEC to enter into an agreement with the State Treasurer's Office to provide financial assistance to further the development of the hydrogen fueling network. 11)Establishes 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 and for liquidation up to four years after expiration of the deadline to encumber. 12)Requires ARB, no later than July 1, 2013, to convene a working group to evaluate the policies and goals for the Carl Moyer Program and programs established pursuant to AB 923 (Firebaugh), Chapter 707, Statutes of 2004. 13)States the intent of the Legislature that ARB and CEC update the analysis of the state alternative transportation fuel use and requires coordination between the two agencies in implementing the various alternative fuel mandates. 14) 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. 15)Requires CEC, in consultation with ARB, to evaluate how the investments could be used to increase the use of alternative transportation fuels and to evaluate the impact of federal and state fuel policies on increasing the use of such fuels. 16)Requires, beginning November 1, 2015, and every two years thereafter, CEC and ARB, as a part of integrated energy policy report, to include the reporting information required pursuant to the preceding Sections 13) and 15). Requires that the report include details of the quantities of alternative fuels used as specified. 17)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. AB 8 Page 4 18)Provides that this bill does not preempt provisions of AB 32 (Nunez and Pavley), Chapter 488, Statutes of 2006, and that the bill be implemented consistent with environmental, public health, and sustainability considerations articulated in clean fuels and vehicle funding statutes. 19)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. EXISTING LAW : 1)Pursuant to AB 118 (Nunez), Chapter 750, Statutes of 2007, establishes various programs to help implement the state's AB 32 greenhouse gas emission reduction goals: a) The Enhanced Fleet Modernization Program, under which ARB, in consultation with the BAR, permanently removes cars and small trucks from operation due to the voluntary retirement of the vehicle by their owners. The program is funded through a $1 increase in the annual vehicle registration fee that is set to expire January 1, 2015. b) The ARFVT Program, administered by CEC to provide incentives to accelerate the development and deployment of clean, efficient, low carbon alternative fuels and technologies. The program is funded through increases in vehicle registration fees, smog abatement fees, boat registration fees, and special identification plate fees, plus $10 million annually in perpetuity from the Public Interest Research, Development, and Demonstration Fund, AB 8 Page 5 which is derived from a portion of electric utility rates. With the exception of the funds from the electric utilities, the authority to collect the fees expire on January 1, 2015. c) The Air Quality Improvement Program, administered by ARB in consultation with local air districts, funds projects that reduce criteria air pollutants, improve air quality, and provide research for alternative fuels and vehicles, vessels, and equipment technologies. The program is funded by increases in smog abatement fees, boat registration fees, and special identification plate fees scheduled to expire January 1, 2015. 2)Expands the Carl Moyer Program, pursuant to AB 923, to cover additional pollutants and engines, imposes a $1.00 fee on tire sales to fund the Moyer Program and the California Department of Resources Recycling and Recovery (CalRecycle), and establishes air quality improvement programs through local air districts. All of its provisions sunset on January 1, 2015. 3)Establishes the Carl Moyer Program as administered by ARB that funds the incremental cost of cleaner-than-required vehicles, engines, and equipment. The primary objective of the program is to achieve air quality emission reductions that would not otherwise occur through regulations or other legal mandates. 4)Requires ARB to adopt regulations that achieve the maximum feasible and cost-effective reduction of greenhouse gas emissions from motor vehicles, pursuant to AB 1493 (Pavley), Chapter 200, Statutes of 2002. 5)Requires CEC and ARB to adopt a state plan to increase the use of alternative transportation fuels, including setting alternative fuel goals for 2012, 2017 and 2022, pursuant to AB 1007, (Pavley), Chapter 371, Statutes of 2005. The "AB 1007 State Alternative Fuels Plan, December 2007" recommended goals for alternative fuel use of 9% by 2012, 11% by 2017, and 26% by 2022. 6)Requires that all hydrogen used for transportation fuel in the state must be at least 33.3% from renewable sources, pursuant to SB 1505 (A. Lowenthal) Chapter 877, Statutes of 2006. 7)Requires ARB to adopt a statewide greenhouse gas emissions AB 8 Page 6 limit equivalent to 1990 levels by 2020 pursuant to AB 32. In 2009, ARB adopted a low carbon fuel standard (LCFS) regulation pursuant to AB 32. The LCFS requires a reduction in the carbon intensity of California's transportation fuels by at least 10% by 2020. 8)Pursuant to ARB 's Clean Fuels Outlet regulations, requires certain owners and lessors of retail gasoline stations to equip an appropriate number of their stations with clean alternative fuels. ARB's recent amendments to the regulations focused primarily on providing outlets for hydrogen fuels. 9)Establishes the Public Interest Research, Development, and Demonstration Fund in the State Treasury, for use by the CEC to develop technologies to improve environmental quality as specified. FISCAL EFFECT : According to the Assembly Appropriations Committee in their fiscal estimates of last year's bill, SB 1455 (Kehoe), of 2012, which was similar to this bill, AB 8 will result in the following fiscal impacts: 1)Annual tire fee revenue, ranging from roughly $21 million to $26 million to ARB to fund the Carl Moyer Program, pursuant to a $0.75 per tire increase starting January 1, 2015. 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 ARFVT Program, administered by CEC; approximately $45 million for the Air Quality Improvement Program; administered by ARB; and, approximately $30 million for the passenger vehicle car scrap program, administered by BAR. 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 AB 8 Page 7 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. 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. COMMENTS : California faces significant challenges with air quality. According to the author, "California has some of the worst air quality in the nation with 91% of residents living in areas of poor air quality. Air pollution increases risks for, among other things, respiratory problems including asthma - with children being especially vulnerable - heart disease, stroke, cancer and reduced life span. There is a clear need to ensure a cleaner transportation future in order to improve air quality and public health, improve our energy security, and improve the overall efficiency of our transportation system. However, California's major clean transportation and air quality investment programs are set to expire in the near future." He asserts that his bill would provide California a long term transportation plan that achieves the use of cleaner more efficient transportation technologies. Fee and surcharge extensions : This bill would extend the sunset dates and the related fees and surcharges of various clean air and alternative fuels and vehicle programs as administered under ARB, CEC, and BAR, until January1, 2024. Without the extension, the temporary fee increases would terminate either January 1, 2015, or January 1, 2016, depending on the authorizing statute. The author has joined together in a single bill the extension of the various programs originally authorized pursuant to AB 118 and AB 923 and the fees that support them. Amendments to the Clean Fuels Outlet Regulation : On January 26, 2012, ARB considered amendments to the Clean Fuels Outlet regulation as part of its Advanced Clean Cars package. In order for the amendments to be officially adopted, they were required AB 8 Page 8 to be submitted to the Office of Administrative Law within one year of the initial rulemaking notice. The amendments were intended to ensure that there was sufficient hydrogen fueling infrastructure necessary to meet forecasted fuel cell vehicle deployment. Under the amendments, this infrastructure would have helped to ensure sufficient availability of hydrogen after fuel cell vehicles had become commercially available (i.e., large volumes). In order to meet the infrastructure needs, the amendments would have required that oil refiners assure that hydrogen fueling stations were available to the public once certain triggers were met (10,000 fuel cell vehicles in a regional air basin or 20,000 fuel cell vehicles statewide). The ARB did not file the amendments with the Office of Administrative Law because, in its view, a better way to achieve the goals of the regulation was developed through legislation, which, they believe, is embodied in this bill. According to ARB, "AB 8 would direct $20 million from the AB 118 program for each of the first three years to develop the hydrogen infrastructure. AB 8 would also authorize the CEC to allocate up to an additional $20 million annually after July 1, 2016, as necessary, to construct at least 100 publicly available hydrogen fueling stations in California. The dedication of funding for 100 hydrogen stations in lieu of requiring the development of such stations administratively as proposed through the Clean Fuels Outlet regulation provides a stronger, more certain path to achieving the state's air quality and climate change goals. Guaranteeing funding for infrastructure upfront will support the initial commercial launch of vehicles, which is in advance of the triggers as proposed in the regulations. By contrast, the regulation would have only provided for hydrogen fueling stations after a significant volume of vehicles were on the road. Adequate funding for hydrogen stations effectively achieves the goal of the proposed regulation, therefore rendering the regulatory changes unnecessary. As a result, this bill also repeals the authority of ARB, until January 1, 2024, from enforcing any element of the Clean Fuels Outlet 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." The Sierra Club California objects to the repeal of ARB's authority of enforcing any element of the Clean Fuels Outlet AB 8 Page 9 regulation and contends that it "undermines the integrity of the rulemaking process?It suggests that, if one of the regulated entities is dissatisfied with the outcome, that entity can march over to the Capitol and get the Legislature to simply throw out the rule?" In response, ARB contends that the bill provides greater certainty that the minimum fueling infrastructure will be in place to support the initial commercial launch of fuel cell vehicles, which are necessary for achieving the state's long-term air quality and climate change goals. Furthermore, the amendments to the regulation were controversial and would have been litigated, potentially delaying their implementation. They believe that the bill represents a collaboration among stakeholders and is a more certain and productive way to achieve the goals of the proposed regulation amendments. The need for hydrogen fueling stations : This bill requires the CEC to fund enough hydrogen stations to make fueling convenient to the owners of hydrogen vehicles or until the private sector takes over building and operating stations. According to the CEC, it currently costs about $1.5 million to construct a hydrogen fueling station. Currently, the CEC requires a match of non-state funds, so it provides about $1 million per station. For start-up funding for installation of a preliminary hydrogen fueling network, this bill directs up to $220 million ($20 million per year for three years plus up to $20 million per year for another eight years) of AB 118 revenues to the construction and operation of hydrogen fueling stations. It is ARB's contention that transitioning the vehicle fleet to lower carbon intensity and zero emission fueling technologies requires a portfolio of investments in a variety of fueling and vehicle technologies to achieve near- and long-term goals. They further contend that the bill provides parity to hydrogen when compared to other alternative fueling technologies, and it does so at a critical period in the deployment of hydrogen fuel cell vehicles. They express that "The auto manufacturers have committed to an initial commercial launch of fuel cell vehicles beginning in 2015 and it is critical that a minimum network of hydrogen fueling stations is in place to support those vehicles. Without the deployment of early stations, consumers will not have confidence that fuel will be available, undermining demand for these vehicles. The auto manufacturers have collectively invested several billions of dollars in this important zero AB 8 Page 10 emission technology. Only a dedicated, multi-year funding stream will provide the necessary certainty that the fueling infrastructure will be available." Proposition 26 : Proposition 26, which passed in November 2010, requires that any "change in statute which results in a taxpayer paying a higher tax must be imposed by an act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature." Because this bill extends the additional fees on vehicle and boat registrations and a portion of the tire fee, and because these fees are deemed taxes under Proposition 26, this bill requires a two-thirds vote. As the bill is also an urgency measure that requires two-thirds vote for passage, the Office of the Legislative Counsel indicates that their practice is to cite the urgency's two-thirds vote requirement as a priority over any other provision of the bill that may trigger a similar two-thirds vote. Support : Writing in support of this bill, the proponents note that the bill would provide the necessary funding for hydrogen fueling infrastructure to support commercial fuel cell vehicle deployment in California beginning in 2015. Fuel cell vehicles, in addition to other advanced clean vehicles, are necessary to meet federal and state clean air standards, AB 32 goals and to increase energy security. They further cite that the existing programs "have already resulted in significant air quality and public health benefits, supported advances in clean transportation." Oppose : Writing in opposition to this bill, as indicated earlier in the discussion of the Clean Fuels Outlet regulation, the Sierra Club California contends that the bill could set a dangerous precedent by prohibiting ARB from implementing and enforcing the regulation. They urge that the bill be amended to remove the prohibition language so that ARB's rulemaking authority will not be abrogated. Also, in opposition to the bill, the Howard Jarvis Taxpayers Association indicates that the tax increase will prove to be extremely regressive for California drivers. They also contend that the Legislature is "breaking another promise as these fees were supposed to sunset at the end of 2014, not be extended for another nine years." Related bills : SB 11 (Pavley) of 2013, a similar bill. That AB 8 Page 11 bill is awaiting hearing in the Senate Environmental Quality Committee and, upon approval, the Senate Transportation and Housing Committee. At some point in the legislative process, SB 11 and AB 8 may need to be reconciled. AB 1324 (Skinner) of 2013, would authorize, until January 1, 2018, Alameda County to increase the motor vehicle registration tax from $1 to $2, and increase the service fee on commercial motor vehicles from $2 to $4. That bill is scheduled to be heard in this committee next week. AB 767 (Levine) of 2013, would expand the current authorization provided to a few counties to all the counties to increase the tax on vehicle registrations for vehicle theft crimes. That bill is scheduled to be heard in this committee today. AB 1002 (Bloom) of 2013, would raise the tax on vehicle registrations by $6 for sustainable communities strategies purposes by local and regional planning entities. That bill is scheduled to be heard in this committee next week. SB 1455 (Kehoe) of 2012, a similar bill introduced last session that passed the Assembly but died in the final moments of the legislative session. Double referral : This bill has also been referred to the Assembly Natural Resources Committee. REGISTERED SUPPORT / OPPOSITION : Support: American Lung Association in California (Co-sponsor) California Air Pollution Control Officers Association (Co-sponsor) CALSTART (Co-sponsor) Achates Power Aemetis Alliance of Automobile Manufacturers Antonio Villaraigosa, Mayor, City of Los Angeles Association of Global Automakers Bay Area Air Quality Management District Bay Area Biosolids to Energy Coalition BIODICO Bioenergy Association of California Black Business Association Bosch Rexroth Americas AB 8 Page 12 California Air Resources Board California Association of Black Pastors California Association of Winegrape Growers California Center for Sustainable Energy California Citrus Mutual California Cotton Ginners & Growers Association California Council for Environmental and Economic Balance California Dairies, Inc. California Electric Transportation Coalition California Farm Bureau Federation California Grape & Tree Fruit League California Independent Oil Marketers Association California Manufacturers & Technology Association California Municipal Utilities Association California Natural Gas Vehicle Coalition California Rice Industry Association California Service Station & Automotive Repair Association California Small Business Alliance California Thoracic Society California Transit Association California Trucking Association Caltrain Carson Black Chamber of Commerce Caterpillar ChargePoint Clean Energy CleanWorld Coalition for Clean Air CODA Automotive CR&R Incorporated Dow Kokam Eaton Vehicle Group Efficient Drivetrains, Inc. Electric Vehicles International, LLC Environmental Defense Fund Environmental Enterprises Greater Corona Hispanic Chamber of Commerce Greenkraft, Inc. Harvest Power Hispanic Chamber of Commerce Contra Costa County Hydrogenics Corporation Honda North America, Inc. Hundai Motor America Hydrogenics Corporation Kern County Taxpayers Association AB 8 Page 13 King Canyon Unified Transportation Los Angeles Area Chamber of Commerce Metropolitan Transportation Commission Mission Motor Company Moreno Valley Black Chamber of Commerce Motiv Power Systems, Inc. Move LA Natural Resources Defense Council Navistar, Inc. Nisei Farmers League Odyne Systems, LLC Otto Construction Pacific Ethanol Physicians for Social Responsibility Propel Fuels Proterra Quallion Quantum Technologies Regional Asthma Management and Prevention Sacramento Black Chamber of Commerce Sacramento Metropolitan Air Quality Management District Sacramento Municipal Utility District San Diego Gas and Electric Company San Diego Urban Economic Association San Francisco County Transit Authority San Francisco County Transportation Authority San Francisco International Airport San Joaquin Valley Air Pollution Control District Sempra Energy utilities Sierra Energy & Sierra Railroad Silicon Valley Leadership Group Slavic American Chamber of Commerce Smith Electric Vehicles South Bay Latino Chamber of Commerce South Coast Air Quality Management District Southern California Gas Company Southern California Regional Rail Authority Synergex Technology Partners Tesla Motors The Grant Farm Total Transportation Services TransPower United Parcel Service (UPS) US Hybrid Corporation AB 8 Page 14 Ventura County Air Pollution Control Board Vision Industries Corporation Volvo Group North America Waste Management Western Agricultural Processors Association Western Propane Gas Association Western States Petroleum Association Yolo-Solano Air Quality Management District Opposition Automobile Club of Southern California CRM Company of Rancho Dominguez Howard Jarvis Taxpayers Association Sierra Club California, oppose unless amended Analysis Prepared by Ed Imai / TRANS. / (916) 319-2093