BILL ANALYSIS �
AB 1021
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 1021
AUTHOR: Eggman
AMENDED: May 8, 2013
FISCAL: Yes HEARING DATE: July 3, 2013
URGENCY: No CONSULTANT: Rebecca Newhouse
SUBJECT : CALIFORNIA ALTERNATIVE ENERGY AND ADVANCED
TRANSPORTATION FINANCING AUTHORITY: RECYCLED
FEEDSTOCK
SUMMARY :
Existing law :
1) Declares that it is the policy goal of the state to divert
75% of the state's solid waste through source reduction,
recycling and composting by 2020 (Public Resources Code
(PRC) �41780.01).
2) Establishes the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) within the
State Treasurer's Office and authorizes it to issue revenue
or prepayment bonds to industry for the purpose of promoting
the development and utilization of alternative energy
sources and the development and commercialization of
advanced transportation technologies (PRC �26000 et seq.).
3) Authorizes CAEATFA to approve a sales and use tax exclusion
for specified projects until January 1, 2021 (PRC �26011.8).
4) Defines "projects" for the purposes of a sales and use tax
exemption under CAEATFA as tangible personal property that
is utilized for the design, manufacture, production, or
assembly of advanced transportation technologies or
alternative energy source products, components or systems
(PRC �26003).
5) Defines "solid waste disposal" for the purposes of preparing
integrated waste management plans, as the management of
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solid waste through landfill disposal or transformation at a
permitted solid waste facility (PRC �40192).
6) Defines "transformation" as incineration, pyrolysis,
distillation, or biological conversion and does not include
composting, gasification, or biomass conversion (PRC
�40201).
This bill :
1) Includes in the definition of "project" for purposes of a
sales and use tax exemption any tangible personal property
that processes or utilizes recycled feedstock that is
intended to be reused in the production of another product
or soil amendment.
2) Defines "recycled feedstock" to mean material that would
otherwise be destined for disposal having completed its
intended end use and product lifecycle that is intended to
be reused in the production of another product or soil
amendment.
COMMENTS :
1) Purpose of Bill . According to the author, "Increased
recycling efforts are proven to be an important job creation
tool, play an essential role in diverting waste from
landfills, and have beneficial impacts in reducing
greenhouse gas emissions, and therefore play an important
role in helping California achieve its greenhouse gas
emission reduction targets under AB 32."
The author also notes that, "AB 1021will help recyclers and
processors reduce their operating costs, and help them to be
more cost competitive with export markets while also
creating jobs and assisting the achievement of California's
waste reduction and greenhouse gas objectives. Processing
greater amounts of recyclables in state and reintroducing
these valuable raw materials into California's manufacturing
infrastructure would also have a significant economic
multiplier effect that would be lost if these materials were
landfilled or exported out of the country. There is more
potential to develop the market for recycled content in
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California and to generate more jobs for California. AB
1021 is intended to tap that potential through expanding the
tax exemption program originally established by SB 71
(Padilla), so that it includes the purchase of equipment
used to process recycled feedstock or uses recycled
feedstock in the manufacturing of a product."
2) Background . The California Alternative Energy Source
Financing Authority was created in 1980 with an
authorization of $200 million in revenue bonds to finance
projects utilizing alternative sources of energy, such as
cogeneration, wind and geothermal power. It was renamed in
1994 as the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) and was
expanded to include the financing of "advanced
transportation."
During the energy crisis of 2001, its authority was again
expanded, this time to provide financial assistance to
public power entities, independent generators, and others
for new and renewable energy sources, and to develop clean
distributed generation. CAEATFA's board, composed of the
Treasurer, Controller, Director of Finance, Chairperson of
the Energy Commission and President of the Public Utilities
Commission, decides which projects to assist.
In 2010 its authority was expanded by SB 71 (Padilla),
Chapter 10, Statutes of 2010, which allows CAEATFA to grant
a sales and use tax exemption to an eligible firm that
purchases property necessary to design, produce,
manufacture, or assemble advanced transportation
technologies or alternative energy source products,
components, or systems. Selected firms purchase equipment
without paying the sales and use tax that would normally
apply, lowering their cost of capital. Neither CAEATFA nor
the state is a creditor to the selected firm in any way
under the SB 71 program. Instead, CAEATFA calculates
whether the exemption will yield a net environmental and
economic benefit for the state. SB 1128 (Padilla), Chapter
677, Statutes of 2012, expands the sales and use tax
exemption to "advanced manufacturing" projects in specified
technology areas including nanotechnology and advanced
materials. CAEATFA is currently holding public workshops to
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solicit input on the proposed program structure that will
expand its existing sales and use tax exclusion program to
include advanced manufacturing projects and energy
efficiency products.
To date, CAEATFA has approved financial assistance for
private entities in the following fields: electric vehicle
manufacturing, solar photovoltaic manufacturing, landfill
gas capture and production, biogas capture and production
(dairies and waste water treatment plants), demonstration
hydrogen fuel production, electric vehicle battery
manufacturing, biomass processing and fuel production, and
others. Thus far, CAEATFA has approved $1.19 billion for 43
firms in qualified property that amounts to over $100
million in exemptions. Some of the firms have purchased the
property and deployed it in the manufacturing process, while
others have won the award, but not yet purchased the
equipment. While there is no maximum or minimum limit on
individual sales tax exemptions, the program is limited to
$100 million annually.
3) Benefits of recycling . Traditional recycling and organics
management provide significant GHG reductions over
landfilling. Recycling materials avoids the GHG emissions
generated by extracting raw materials, primary processing,
and the transportation of those materials. Recycling has
also been shown to create local jobs in California, rather
than importing raw materials from overseas. Recycling is
extremely cost-effective. For example, for every 1%
increase in recycled content used in glass manufacturing,
there is a corresponding 1% decrease in air emissions from
glass manufacturing plants, as well as related reductions
from the reduced need for raw materials.
Composting and other organics processing technologies,
including anaerobic digestion, reduce GHGs by avoiding the
emissions that would be generated by the material's
decomposition in a landfill. Landfill gas (primarily
composed of methane which is approximately 21 times more
potent as a greenhouse gas than CO2) is generated by the
decomposition of organic materials such as food, paper,
wood, and yard waste. While most modern landfills have
systems in place to capture methane, significant amounts
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continue to escape into the atmosphere. According to ARB's
GHG inventory, approximately 7 million tons of CO2
equivalent are released annually from landfills. That
number is expected to increase to 8.5 million tons of CO2
equivalent by 2020. Soil amendments produced by organic
waste have been shown to improve soil health and structure,
increase drought resistance, and reduce the need for water,
chemical fertilizers, and pesticides. In addition to GHG
emissions reductions, expanded recycling (including organic
waste processing) is needed to achieve the state's ambitious
75% recycling goal.
4) 75% recycling goal . AB 1021 would encourage the creation of
new recycling infrastructure, such as materials recovery
facilities (MRFs), which sort and process waste and recover
marketable materials, processors that clean and mechanically
process those materials and manufactures who utilize those
mechanically processed materials to create new products.
According to CalRecycle's report "California's New Goal:
75% Recycling," recycling infrastructure must be
significantly expanded in order to meet the 2020 goal. The
report also proposes financial incentives, such as a tax
credits, for the purchase of equipment and materials used in
the manufacture of recycled content products and suggests
that those incentives could include a tax credit for
equipment.
5) Is the language too broad ? AB 1021 specifies that any
property that processes or utilizes recycled feedstock that
is intended to be reused in the production of another
product or soil amendment qualifies as a project that is
authorized to receive a sales and use tax exemption, if
approved by CAEATFA. However, the language could be
interpreted as any property that burns waste to produce
heat, electricity or fuel, where that heat, electricity or
fuel is used to produce another product would qualify. Such
processes in California are defined as "transformation."
Waste converted at transformation facilities is considered
solid waste disposal, and not recycling by CalRecycle.
An amendment is needed to clarify that any technologies,
systems or components to be used in processes at solid waste
disposal facilities are not eligible for a sales and use tax
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exemption through CAEATFA.
In addition, the language could be interpreted to allow
equipment that processes only a nominal quantity of
recyclable material to qualify for a tax exemption through
CAEATFA.
An amendment is needed to specify that only property that
primarily processes or utilizes recycled feedstock is
eligible.
SOURCE : Californians Against Waste
SUPPORT : Association of Postconsumer Plastic Recyclers
California Compost Coalition
California Electronic Asset Recovery
California Manufacturers & Technology
Association
California Refuse Recycling Council
CarbonLITE Industries, LLC
Command Packaging
CR&R Waste and Recycling Services
Envision Plastics
Epic Plastics
Glass Packaging Institute
Institute of Scrap Recycling Industries, West
Coast Chapter
Mojave Desert & Mountain Recycling Authority
Napa Recycling & Waste Services
Northern California Recycling Association
rePLANET Recycling
Republic Services, Inc.
SIMS Recycling Solutions
StopWaste.Org
Strategic Materials, Inc.
Talco Plastics
Turlock Recycling
Verdeco Recycling, Inc.
Waste Management
Western Plastics Association
OPPOSITION : None on file
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