BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 8| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 8 Author: Perea (D) and Skinner (R), et al. Amended: 9/3/13 in Senate Vote: 27 - Urgency SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-2, 8/20/13 AYES: DeSaulnier, Beall, Cannella, Galgiani, Hueso, Lara, Liu, Pavley, Roth NOES: Gaines, Wyland SENATE ENVIRONMENTAL QUALITY COMMITTEE : 8-1, 8/21/13 AYES: Hill, Calderon, Corbett, Fuller, Hancock, Jackson, Leno, Pavley 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 Association CALSTART CONTINUED AB 8 Page 2 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 CONTINUED AB 8 Page 3 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 policies. 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 CONTINUED AB 8 Page 4 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 CEC. 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. CONTINUED AB 8 Page 5 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 follows: 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 that: (1) Reduce toxic air pollutants. (2) Contribute to regional air quality. (3) Promote alternative fuels and vehicle technologies. (4) Achieve climate change benefits. CONTINUED AB 8 Page 6 (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 appropriations. 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 CONTINUED AB 8 Page 7 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 May. 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 CONTINUED AB 8 Page 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 (co-source) CALSTART (co-source) Achates Power Aemetis 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 CONTINUED AB 8 Page 9 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 Caltrain Capstone Turbine Corporation Carson Black Chamber of Commerce Caterpillar Catholic Charities Diocese of Stockton Center for Sustainable Energy Chargepoint 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 Eaton ECOtality Efficient Drivetrains, Inc. Electric Vehicles International, LLC Electrification Leadership Council Energy Independence Now CONTINUED AB 8 Page 10 Environmental Defense Fund Feather River Air Quality Management District Global Automakers Association Greater Corona Hispanic Chamber of Commerce Greencraft, Inc. Harvest 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 Metrolink 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 Chapter Promethean Biofuels Propel Fuels Proterra Public Health Institute Quallion, LLC Quantum Technologies Transpower CONTINUED AB 8 Page 11 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 Synergex 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 Volvo 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 CONTINUED AB 8 Page 12 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 CONTINUED AB 8 Page 13 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. Pérez NOES: Allen, Ammiano, Chávez, Dahle, Donnelly, Beth Gaines, Grove, Hagman, Harkey, Jones, Linder, Logue, Maienschein, CONTINUED AB 8 Page 14 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 **** END **** CONTINUED