BILL ANALYSIS                                                                                                                                                                                                    Ó


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                                    THIRD READING

          Bill No:  AB 8
          Author:   Perea (D) and Skinner (R), et al.
          Amended:  9/3/13 in Senate
          Vote:     27 - Urgency

          AYES:  DeSaulnier, Beall, Cannella, Galgiani, Hueso, Lara, Liu,  
            Pavley, Roth
          NOES:  Gaines, Wyland

          AYES:  Hill, Calderon, Corbett, Fuller, Hancock, Jackson, Leno,  
          NOES:  Gaines

           SENATE APPROPRIATIONS COMMITTEE  :  5-2, 8/30/13
          AYES:  De León, Hill, Lara, Padilla, Steinberg
          NOES:  Walters, Gaines

           ASSEMBLY FLOOR  :  54-20, 6/27/13 - See last page for vote

           SUBJECT  :    Air quality, alternative fuels, and vehicle  
                        technology funding programs and local air district  
                        vehicle registration surcharges

           SOURCE  :     American Lung Association
                      California Air Pollution Control Officers  



                                                                       AB 8

           DIGEST  :    This bill extends until January 1, 2024, extra fees  
          on vehicle registrations, boat registrations, and tire sales in  
          order to fund the AB 118 (Núñez, Chapter 750, Statutes of 2007),  
          the Carl Moyer Program, and AB 923 (Firebaugh, Chapter 707,  
          Statutes of 2004) Programs that support the production,  
          distribution, and sale of alternative fuels and vehicle  
          technologies, as well as air emissions reduction efforts;  
          suspends until 2024, the Air Resources Board's (ARB's) authority  
          to require through regulation any fuel supplier provide hydrogen  
          fueling stations and instead allocates up to $220 million of  
          these fee funds to construct and operate retail hydrogen fueling  
          stations; and extends the authority of local air districts to  
          impose vehicle registration surcharges in their areas to achieve  
          air emission reductions from vehicles and off-road engines.

           ANALYSIS  :     Clean Fuels Outlet (CFO)  .  ARB adopted its CFO  
          regulation to provide fueling stations to meet the needs of  
          those driving clean, alternative fuel vehicles.  When it first  
          began work on the regulation in 1990, ARB planned to use it as a  
          tool to provide methanol, ethanol, and compressed natural gas  
          fueling stations once a certain number of vehicles using those  
          fuels were certified in California.  Those vehicles were not  
          forthcoming, and ARB last updated the regulation in 2000.

          In January 2012, however, ARB considered and passed amendments  
          to the regulation to require major refiners and importers of  
          gasoline to provide hydrogen fueling stations when the number of  
          vehicles using hydrogen fuel reaches 10,000 within an air basin  
          or 20,000 statewide with specified adjustments.  Refiners and  
          importers of gasoline would provide these hydrogen fueling  
          stations in proportion to their market share.

          ARB filed the CFO regulation with the Office of Administrative  
          Law as required by state law, but then in December withdrew it  
          in order to pursue this legislation to dedicate public funds to  
          building a hydrogen fueling network, which would effectively  
          achieve the goal of the CFO regulation through public subsidy.   
          ARB is in the process of reintroducing the CFO rulemaking  
          package as a contingency measure in case this legislation fails.

          This bill eliminates, until 2024, ARB's authority to enforce any  
          element of its existing CFO regulation or any other regulation  
          that requires any supplier of gasoline to construct, operate, or  
          to fund the construction or operation of any publicly available  



                                                                       AB 8

          hydrogen fueling station.

           AB 118 Programs  .  AB 118 created three programs:

          1.The Alternative and Renewable Fuel and Vehicle Technology  
            Program, which the California Energy Commission (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  

          2.The Air Quality Improvement Program, which the ARB administers  
            in consultation with local air districts to provide  
            competitive grants to fund projects to reduce criteria air  
            pollutants, improve air quality, and support research to  
            improve the air quality impacts of alternative fuels and  
            vehicles, vessels, and equipment technologies.

          3.The Enhanced Fleet Modernization Program, under which ARB, in  
            consultation with the Bureau of Automotive Repair, provides  
            for the voluntary retirement of passenger vehicles and light  
            and medium duty trucks that are high polluters.

          AB 118 provides, upon appropriation by the Legislature,  
          approximately $180 million annually until 2016 for these  
          Programs.  These funds come from additional fees on vehicle  
          registrations and vessel registrations.  In addition, the CEC  
          received $10 million annually from the Public Interest Research,  
          Development, and Demonstration Fund, when that fund existed.  It  
          was derived from a portion of electric utility rates to fund  
          research.  Specifically, AB 118 raised the following fees on  
          vehicle and vessel registrations from July 1, 2008, until  
          January 1, 2016:

          1.A $3 increase in the annual vehicle registration fee.

          2.An $8 increase in the Smog Abatement Fee, paid to register  
            vehicles that are less than six model years old and therefore  
            exempt from smog check.

          3.A $10 or $20 increase of the fee to originally register a  



                                                                       AB 8

            vessel in California.  If a boat owner originally registers a  
            boat in an odd-numbered year, the increase is $10 ($10 to  
            $20); but if the boat owner originally registers it in an  
            even-numbered year, then the increase is $20 ($20 to $40).

          4.A $5 increase of the fee for identification plates for  
            construction equipment, farm trailers, cotton trailers,  
            logging vehicles, and cemetery equipment.  These plates are  
            required to operate the vehicles on public roads.

          This bill:

          1.Extends for eight additional years the fees on vehicles and  
            vessels that AB 118 imposed so that they continue until  
            January 1, 2024.

          2.Limits consumer incentives that ARB or CEC provide from AB 118  
            funds to subsidize the purchase of vehicles to no greater  
            amount than the compensation a vehicle owner receives to  
            retire a vehicle through the Enhanced Fleet Modernization  
            Program (typically $1,500).

          3.Requires the CEC to allocate $20 million annually until 2024  
            to fund at least 100 publicly available hydrogen fueling  
            stations through its AB 118 Program.  In order for CEC to fund  
            specific stations, each year ARB must aggregate information it  
            receives on the number of hydrogen-fueled vehicles that  
            manufacturers project to sell or lease over the next three  
            years, plus the number of hydrogen-fueled vehicles already  
            registered.  Based on this information, ARB will evaluate the  
            need for, good locations for, and operating standards required  
            of hydrogen fueling stations and report its findings to the  

          4.Permits CEC, after consulting with ARB, to allocate money away  
            from hydrogen fueling stations, if all $20 million in a year  
            is not needed to meet the need identified by ARB.  CEC may  
            then allocate remaining funds to other projects within the  
            Alternative and Renewable Fuel and Vehicle Technology Program.

          5.Permits the CEC, after consulting with ARB, to cease to  
            provide subsidies to hydrogen fueling stations only if the  
            private sector is establishing stations without the need for  
            public subsidy.



                                                                       AB 8

          6.Gives the CEC four years to encumber the $20 million annual  
            appropriation that the bill allocates for hydrogen fueling  
            stations and four more years to expend the funds to build  
            hydrogen stations.  (For example, if $20 million is  
            appropriated for hydrogen stations through this bill in 2023,  
            then the CEC has until 2027 to award those funds to projects  
            and until 2031 to expend the funds as the stations get built.)

          7.Directs CEC and ARB jointly to review and report annually on  
            progress toward establishing a hydrogen fueling network  
            beginning on December 31, 2015.

          8.Requires both ARB and CEC to apply a benefit-cost score when  
            deciding to which projects each will award AB 118 funds, as  

             A.   For the Alternative and Renewable Fuel and Vehicle  
               Technology Program, the bill defines a benefit-cost score  
               as a project's expected or potential greenhouse gas  
               emissions reduction per dollar the CEC awards to a project.  
                The CEC shall rank projects proposed for funding awards  
               based on its solicitation criteria, but then shall give  
               additional preference to funding those projects with higher  
               benefit-cost scores.  Thus, within an allocation, say for  
               hydrogen fueling stations, those projects seeking funds  
               that have greater reductions of greenhouse gas emissions  
               per dollar spent should receive AB 118 funding before those  
               with lower reductions.

             B.   For the Air Quality Improvement Program, the bill  
               defines benefit-cost score as the reasonably expected or  
               potential criteria pollutant emission reductions per dollar  
               ARB awards to a project and defines a project to be the  
               category investments that ARB identifies for funding.  ARB  
               shall provide preference in awarding funding to those  
               projects with higher benefit-scores but allows ARB to  
               provide additional preference, as applicable, to projects  

               (1)    Reduce toxic air pollutants.
               (2)    Contribute to regional air quality.
               (3)    Promote alternative fuels and vehicle technologies.
               (4)    Achieve climate change benefits.



                                                                       AB 8

               (5)    Support market transformation of California's  
                 vehicle or equipment fleet.
               (6)    Leverage private capital.

               Thus, ARB could apply the cost-benefit test to a category  
               of funding, and while it may not achieve the greatest  
               criteria pollutant reduction per dollar spent, still fund  
               it because ARB grants that category sufficient additional  
               preference.  For example, ARB could award funds to rebates  
               for buyers of electric cars even though this category is  
               not the most effective at reducing criteria air pollutants,  
               because ARB gives the rebates sufficient additional  
               preference related to promoting alternative vehicle  
               technologies and supporting transformation of California's  
               vehicle fleet.

           Carl Moyer Program  .  AB 1571 (Villaraigosa, Chapter 923,  
          Statutes of 1999) established the Carl Moyer Memorial Air  
          Quality Standards Attainment Program through which ARB provides  
          grants to offset the incremental costs of purchasing or  
          retrofitting engines in order to reduce specified air emissions.  
           The Carl Moyer Program originally received General Fund  

          In 2004, AB 923 (Firebaugh, Chapter 707) expanded the Carl Moyer  
          Program to cover additional pollutants and engines and imposed a  
          75-cent per tire fee on tire sales to fund the Carl Moyer  
          Program.  Its provisions will sunset on January 1, 2015.

          This bill:

          1.Extends the Carl Moyer Program, as amended by AB 923, until  
            January 1, 2024, including the 75-cent fee on tire sales to  
            fund the Program.  (This bill also extends until 2024 a  
            25-cent tire fee that funds tire recycling programs.)

          2.Requires ARB, no later than July 1, 2014, to convene, in  
            consultation with local air districts, a working group to  
            evaluate the policies and goals contained within the Carl  
            Moyer Program.

           Air District Vehicle Registration Surcharge  .  Existing law  
          imposes a basic vehicle registration fee of $46, plus a $23  



                                                                       AB 8

          surcharge for additional personnel for the California Highway  
          Patrol, and authorizes local agencies to impose separate vehicle  
          registration fee surcharges in their respective jurisdictions  
          for a variety of special programs.  AB 923 specifically  
          authorizes, until January 1, 2015, local air districts in which  
          federal air quality standards are consistently not met (i.e.,  
          "nonattainment areas") to levy a surcharge of up to $6 on  
          registration fees of motor vehicles registered within that  
          district.  Funds from this surcharge must be used to reduce air  
          pollution from motor vehicles. 

          Legislation prior to AB 923 authorized the first $4 of the $6  
          surcharge to pay for reducing air pollution from motor vehicles  
          and carrying out related planning, monitoring, enforcement, and  
          technical studies necessary to implement the California Clean  
          Air Act of 1988.  AB 923 authorized the next $2 and directed the  
          resulting revenue to specific strategies to achieving emission  
          reductions from motor vehicles and off-road engines.

          AB 923 sunsets on January 1, 2015, after which the maximum  
          surcharge that air districts can impose will return to $4 per  
          registered vehicle.

          This bill extends until January 1, 2024, the time during which  
          an air district may impose a surcharge of $6, rather than $4.

           Related Legislation
          SB 11 (Pavley) is nearly identical to this bill.  SB 11 passed  
          the Senate on 5/29/13 by a 32-5 vote with a commitment from the  
          author to make several amendments.  She took those amendments  
          when the Senate Appropriations Committee considered the bill in  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

           Annual revenues of $180 million (special fund) for various AB  
            118 programs until 2024, of which $20 million be directed for  
            the construction and operation of a hydrogen fueling network  
            in FY 13-14, FY 14-15, and FY 15-16 and up to $20 million in  



                                                                       AB 8

            the remaining years.

           Annual tire fee additional revenue of approximately $34  
            million (special fund) for the Carl Moyer Program beginning  
            January 1, 2015 through 2024.

           Annual costs in the hundreds of thousands of dollars to the  
            ARB, CEC, and Bureau of Automotive Repair to continue to  
            administer various air quality and alternative fuel programs  
            and associated reporting requirements which will be fully  
            covered by the surcharge extensions.

           SUPPORT  :   (Verified  9/1/13)

          American Lung Association (co-source)
          California Air Pollution Control Officers Association  
          CALSTART (co-source)
          Achates Power
          Air Resources Board
          Alameda-Contra Costa Transit District
          Alliance of Automobile Manufacturers
          Altec Green Fleet
          Associated General Contractors of America
          Association of Global Automakers
          Baker Commodities, Inc.
          Bay Area Air Quality Management District 
          Bay Area Biosolids to Energy Coalition
          Biodico Sustainable Biorefineries
          Black Business Association
          Butte County Air Quality Management District
          California Association of Black Pastors
          California Association of School Transportation Officials
          California Association of Winegrape Growers
          California Biodiesel Alliance
          California Citrus Mutual
          California Cotton Ginners & Growers Association
          California Council for Environmental and Economic Balance
          California Dairies, Inc.
          California Electric Transportation Coalition
          California Energy Commission
          California Farm Bureau Federation
          California Forestry Association 



                                                                       AB 8

          California Grape & Tree Fruit League
          California Hydrogen Business Council
          California Independent Oil Marketers Association 
          California Industry Air Quality Coalition 
          California League of Conservation Voters
          California Manufacturers & Technology Association 
          California Municipal Utilities Association
          California Natural Gas Vehicle Coalition
          California Otolaryngology Society
          California Public Health Association-North 
          California Refuse Recycling Council
          California Rice Industry Association
          California Service Station & Automotive Repair Association
          California Small Business Alliance
          California Thoracic Society
          California Transit Association
          California Trucking Association
          Californians Against Waste
          Capstone Turbine Corporation
          Carson Black Chamber of Commerce
          Catholic Charities Diocese of Stockton
          Center for Sustainable Energy
          Clean Power Campaign
          Clean World
          Coalition for Clean Air
          Coalition of Energy Users
          CODA Automotive
          Community Action to Fight Asthma 
          Community Fuels
          Construction Industry Air Quality Coalition
          Contra Costa Council
          Cool Planet Energy Systems
          CR&R, Inc.
          Crimson Renewable Energy, LP
          Dow Kokam
          Efficient Drivetrains, Inc.
          Electric Vehicles International, LLC
          Electrification Leadership Council
          Energy Independence Now



                                                                       AB 8

          Environmental Defense Fund
          Feather River Air Quality Management District
          Global Automakers Association
          Greater Corona Hispanic Chamber of Commerce
          Greencraft, Inc.
          Health Care without Harm
          Honda North America, Inc.
          Hydrogenics Corporation
          Hyundai Motor America
          Imperial Western Products
          Kern County Taxpayers Association
          Kings Canyon Unified Transportation
          Los Angeles Area Chamber of Commerce
          Los Angeles County Economic Development Corporation
          Los Angeles County Medical Association
          Los Angeles County Metropolitan Transportation Authority
          Madera County Board of Supervisors
          Metropolitan Transportation Commission 
          Mission Motors
          Moreno Valley Black Chamber of Commerce
          Motiv Power Systems, Inc.
          Move LA
          Murrieta Valley Unified School District
          Napa Valley Unified School District Transportation Department
          Natural Resources Defense Council
          Navistar, Inc.
          New Leaf Biofuel
          Nisei Farmers League
          Northern Sonoma County Air Pollution Control District
          Odyne Systems, LLC
          Otto Construction
          Pacific Ethanol
          Physicians for Social Responsibility -Sacramento Chapter
          Physicians for Social Responsibility -San Francisco Bay Area  
          Promethean Biofuels
          Propel Fuels
          Public Health Institute
          Quallion, LLC
          Quantum Technologies



                                                                       AB 8

          Regional Asthma Management and Prevention 
          Renewable Energy Group, Inc.
          Rexroth Bosch Group
          Sacramento Area Council of Governments 
          Sacramento Black Chamber of Commerce
          Sacramento Metropolitan Air Quality Management District
          Sacramento Municipal Utility District 
          San Diego Gas & Electric
          San Diego Regional Asthma Coalition
          San Diego Urban Economic Corporation
          San Francisco County Transportation Authority
          San Joaquin Valley Air Pollution Control District
          Santa Clara Valley Transportation Authority 
          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
          Technology Partners
          Tesla Motors
          Total Transportation Services Incorporated 
          Tulare County Board of Supervisors
          United Postal Service 
          U.S. Hybrid Corporation
          Ventura County Air Pollution Control District
          Vision Industry
          Vote for Environment 
          Waste Management 
          Western Agricultural Processors Association 
          Western Growers Association
          Western Propane Gas Association
          Western States Oil
          Western States Petroleum Association 
          Worksite Wellness LA
          Yokayo Biofuels
          Yolo-Solano Air Quality Management District
          Zero Motorcycles



                                                                       AB 8

           OPPOSITION  :    (Verified  9/1/13)

          Automobile Club of Southern California
          Howard Jarvis Taxpayers Association
          Sierra Club California

           ARGUMENTS IN SUPPORT  :    The author introduced this bill because  
          the San Joaquin Valley (Valley), which he represents, remains  
          one of the worst air quality regions in the nation with ozone  
          levels continuing to exceed federal standards and leading the  
          nation with the most days of polluted air.  Proponents note that  
          the whole state suffers from some of the worst air quality in  
          the nation, with over 70% of California's air pollution coming  
          from cars, trucks, trains, and other mobile sources and with  
          over 90% of residents living in counties with unhealthy air  
          during some parts of the year.  In 2010, California had all ten  
          of the most polluted counties in the nation and four were in the  
          Valley.  In addition, a recent study by the UC Davis Center for  
          Regional Change cited that, as a result of air pollution  
          generated by stationary agricultural and industrial sources  
          coupled with the automobiles and diesel trucks that stream  
          through the region's highways, residents of the Valley suffer  
          from high rates of asthma and other respiratory ailments.

          Despite significant improvements in emission reductions and the  
          toughest air regulations, the author asserts that we cannot  
          improve air quality and public health and achieve our clean air  
          goals of a 90% reduction in emissions by the mid-2020s for the  
          Valley and the state without incentives and investments to  
          accelerate the transition to a cleaner transportation sector.   
          He introduced this bill to provide California a long-term  
          transportation plan that achieves the use of cleaner, more  
          efficient transportation technologies while meeting federal and  
          state clean air mandates.

          While California faces the challenge of meeting several state  
          and federal air quality and emission reduction mandates by the  
          mid-2020s, proponents point out that the state's three major  
          clean transportation Programs -- AB 118, the Carl Moyer Program,  
          and the AB 923 Program -- are set to expire or to lose their  
          current funding source in the next few years.

          This bill seeks to extend California's clean air and clean  



                                                                       AB 8

          vehicle incentive programs in order to meet clean air, public  
          health, climate, and economic development goals.

          The author and supporters state that without extension of these  
          incentive Programs, it would be extremely difficult for  
          California to meet its clean air, clean vehicle, and emission  
          reduction goals.

           ARGUMENTS IN OPPOSITION  :    The Sierra Club opposes the  
          provision of the bill abrogating ARB's CFO regulation and  
          eliminating ARB's authority to adopt a similar regulation until  
          2024.  The Sierra Club asserts that if this provision remains in  
          the bill and becomes law, it will open the flood gates for  
          additional legislation overriding ARB's rulemaking authority,  
          and California will never meet its air pollution or greenhouse  
          gas reduction goals.

          The Automobile Club of Southern California objects to fees and  
          taxes imposed on gasoline powered on-road vehicles being used to  
          pay for environmental mitigation stemming from off-road  
          equipment, heavy-duty vehicles, and school buses.  The club  
          notes that this violates the "polluter pays" principle and that  
          it has consistently opposed similar proposals to impose fees on  
          passenger vehicles to fund cleanup programs for non-vehicular  
          and heavy duty diesel commercial vehicles.

          The Howard Jarvis Taxpayers Association also opposes the bill's  
          extension of $2 billion tax extension through 2023 because it is  
          regressive and because with two million Californians out of  
          work, the Legislature should be cautious before passing more  
          taxes onto consumers.  
           ASSEMBLY FLOOR  :  54-20, 6/27/13
          AYES:  Achadjian, Alejo, Atkins, Bloom, Blumenfield, Bocanegra,  
            Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,  
            Campos, Chau, Chesbro, Cooley, Daly, Dickinson, Eggman, Fong,  
            Fox, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray,  
            Hall, Holden, Jones-Sawyer, Levine, Lowenthal, Medina,  
            Mitchell, Mullin, Muratsuchi, Nazarian, Olsen, Pan, Perea, V.  
            Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,  
            Stone, Ting, Weber, Wieckowski, Williams, Yamada, John A.  
          NOES:  Allen, Ammiano, Chávez, Dahle, Donnelly, Beth Gaines,  
            Grove, Hagman, Harkey, Jones, Linder, Logue, Maienschein,  



                                                                       AB 8

            Mansoor, Morrell, Nestande, Patterson, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Bigelow, Conway, Gorell, Roger Hernández,  
            Melendez, Vacancy

          JA:ej  9/3/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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