BILL ANALYSIS Ó
AB 1191
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Date of Hearing: April 15, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 1191 (Patterson) - As Amended: March 21, 2013
SUBJECT : Energy: assessments and forecasts
SUMMARY : Requires the California Energy Commission (CEC), as
part of its biennial Integrated Energy Policy Report (IEPR), to
evaluate the availability, cost and source of credits issued
under the Air Resources Board's (ARB) Low Carbon Fuel Standard
(LCFS) regulations. Requires the CEC conduct the transportation
forecasting and assessment activities of the IEPR annually from
2014-2020.
EXISTING LAW :
1)Requires the CEC to assess energy infrastructure trends and
issues facing California and develop and recommend energy
policies for the state to address and resolve such issues as
part of the IEPR. The IEPR specifically requires the CEC to
conduct transportation fuel forecasting and assessment
activities including:
a) Assessment of trends in transportation fuels supply,
demand and prices.
b) Forecasts of statewide and regional transportation
energy demand.
c) Evaluation of the sufficiency of transportation fuel
supplies, including feedstock supplies, production and
refining capacity.
d) Assessment of the risks of supply disruptions, price
shocks or other events.
e) Evaluation of alternative transportation energy
scenarios.
f) Examination of the success of introduction, prices, and
availability of clean-burning transportation fuels.
g) Recommendations to reduce dependence on petroleum fuels
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and decrease environmental impacts from transportation
energy use.
2)Pursuant to the California Global Warming Solutions Act (AB
32), requires ARB to adopt a statewide greenhouse gas (GHG)
emissions limit equivalent to 1990 levels by 2020 and to adopt
rules and regulations to achieve maximum technologically
feasible and cost-effective GHG emission reductions. AB 32
also requires ARB to adopt early action measures (EAM) to
reduce GHG emissions. Pursuant to Governor Schwarzenegger's
Executive Order S-01-07, sets a statewide goal to reduce the
carbon intensity (CI) of California's transportation fuels by
at least 10 percent by 2020. The order required ARB to
consider adopting a LCFS to implement this goal, either as an
EAM or in another regulatory proceeding. In 2009, ARB adopted
the LCFS as a regulation, including provisions for review in
2012 and 2015 (codified in Title 17, California Code of
Regulations, section 95489).
THIS BILL :
1)Requires the CEC to evaluate the sufficiency of credits issued
under the LCFS regulations, including data on the projected
and actual costs of credits, availability and source of
credits, and excess or deficiency of credits.
2)Requires the CEC to conduct the entire transportation segment
of the IEPR annually (rather than biennially) from 2014 -
2020.
3)Establishes related findings and declarations regarding the
IEPR and LCFS.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. In 2007, Governor Schwarzenegger issued Executive
Order S-1-07, calling for a reduction of at least 10 percent
in the CI of California's transportation fuels by 2020. The
Order instructed the California Environmental Protection
Agency to coordinate activities between the University of
California, the CEC and other state agencies to develop and
propose a draft compliance schedule to meet the 2020 target.
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The Order further directed ARB to consider initiating
regulatory proceedings to establish and implement the LCFS.
In response, ARB identified the LCFS as an early action item
and adopted a regulation in 2009, to be implemented beginning
in 2010. 2010 was a reporting year and the first CI reduction
requirement of 0.25% began in 2011. The target increased to
0.5% in 2012 and 1.0% in 2013. To date, fuel suppliers have
over-complied, predominantly by blending ethanol with
gasoline, which is preferred in the near term because ethanol
blending is required by the federal Renewable Fuel Standard
and does not require significant changes in fueling and
vehicle infrastructure. However, natural gas, biodiesel and
electricity also have been used in significant amounts to
comply with the LCFS.
The LCFS regulation includes provisions permitting credits to
be generated from certain alternative fuels and requiring that
all fuels, including those used to generate credits,
demonstrate a physical pathway into the state. Credits are
awarded based on fuel performance that exceeds a regulatory
standard. Credits can be banked indefinitely and used for
compliance, sold to other regulated parties, and exported to
other GHG emissions reduction programs. The regulation
requires reviews in 2012 and 2015, including availability of
fuels and economic impacts.
2)Author's statement :
Currently, the IEPR does not include an annual review of
the developments of California's transportation fuels
market. With the development of new policies, like the
LCFS, it is imperative that state have annual reviews to
understand developments in the transportation fuels market.
The IEPR should serve as an annual tool to measure the
supply and availability of existing and new fuels as the
LCFS, and other policies, are implemented.
California has a rich history of cutting-edge innovation in
the transportation energy sector. The state has adopted
policies to drive the adoption and use of alternative
transportation fuels and vehicles. While the goals of
these policies are laudable, there is increasing concern
that these policies may impact California's transportation
fuels market, and ultimately consumers. For example, a
report from the Boston Consulting Group found that, if
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compliance pathways to the LCFS are unrealistic, there
could be significant impacts on the cost and availability
of traditional transportation fuels.
3)Credit check. The proponents of this bill suggest that
sufficient credits may not be available to economically comply
with the LCFS as the targets increase. They point to their
own study as evidence, though ARB apparently disputes the
study's assumptions and conclusions.
According to ARB, the LCFS regulation requires ARB to provide
a public report on credit and deficit generation quarterly.
The report includes how many credits and deficits generated in
the most recent quarter, total deficits and credits, as well
as credits and deficits in possession of regulated parties.
The report also includes number of credits transferred, number
of parties making transfers and the monthly average credit
price for transfers.
This bill poses the CEC as a neutral party to evaluate the
sufficiency of LCFS credits. While the added value of the CEC
reports may be debatable, the subject matter is consistent
with the CEC's existing transportation fuel analysis and
reporting duties.
4)Double referral. This bill has been double-referred to the
Assembly Transportation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Western States Petroleum Association (sponsor)
California Manufacturers & Technology Association
Opposition
None on file
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
AB 1191
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