BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1191
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          Date of Hearing:   April 29, 2013

                        ASSEMBLY COMMITTEE ON TRANSPORTATION
                               Bonnie Lowenthal, Chair
                  AB 1191 (Patterson) - As Amended:  March 21, 2013
           
            SUBJECT  :  Energy: assessments and forecasts

           SUMMARY  :  Requires the California Energy Commission (CEC) to  
          conduct the transportation forecasting and assessment activities  
          of the Integrated Energy Policy Report (IEPR) on an annual basis  
          from 2014 to 2020.  Requires, as part of this annual reporting,  
          to evaluate the sufficiency of credits issued under the  
          California Air Resources Board's (ARB) low carbon fuel standard  
          (LCFS) regulations.  Specifically,  this bill :  

          1)Makes findings and declarations that:  

             a)   Transportation fuels and the transportation energy  
               sector provide the means of mobility for many activities  
               and users;  

             b)   CEC is charged with the responsibility of conducting  
               forecasting and assessment activities, including the  
               assessment of risks of supply disruptions and other events  
               on the availability and the price of transportation fuels  
               and on the state's economy;  

             c)   Recognize the importance of information contained in the  
               IEPR for use by other state agencies;  

             d)   Recognize that the LCFS applies to all providers of  
               transportation fuels in California and directed ARB to  
               determine if the LCFS could be adopted as a discrete early  
               action measure; and

             e)   Recognize that the LCFS was adopted as regulation by  
               ARB.  

          1)Requires CEC to conduct the transportation forecasting and  
            assessment elements of the IEPR annually (rather than  
            biennially) from 2014 to 2020.  

          2)Requires CEC, as a part of this annual evaluation until 2020,  
            to evaluate the sufficiency of credits issued under the LCFS  








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            regulations, including data on the projected and actual costs  
            of credits, availability and source of credits, and excess or  
            deficiency of credits.  

           EXISTING LAW  :  

          1)Requires the CEC to assess energy infrastructure trends and  
            issues facing California and to develop and recommend energy  
            policies for the state to address and resolve such issues as  
            part of the IEPR on a biennial basis.  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; and, 

             g)   Recommendations to reduce dependence on petroleum fuels  
               and decrease environmental impacts from transportation  
               energy use.  

          1)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, pursuant  
            to the California Global Warming Solutions Act (AB 32 (Nunez)  
            Chapter 488, Statutes of 2006).
             
          2)Pursuant to the LCSF regulation adopted by ARB, sets a  
            statewide goal to reduce the carbon intensity of California's  








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            transportation fuels by at least 10% by 2020.  

           FISCAL EFFECT  :  Unknown

           COMMENTS  :  In 2007, Governor Schwarzenegger issued Executive  
          Order S-1-07, calling for a reduction of at least 10% in the  
          carbon intensity of California's transportation fuels by 2020.   
          The executive 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.  

          The executive 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.  The regulation required that the  
          first carbon intensity reduction target requirement of 0.25%  
          starting 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 greenhouse gas  
          emissions reduction programs.  The regulation requires reviews  
          in 2012 and 2015, including availability of fuels and economic  
          impacts.  

          This bill would require CEC, in the development of its IEPR, to  
          provide information on the supply and availability of existing  
          and new fuels on an annual basis, rather than every other year.   
          Providing this information to decisionmakers on a more frequent  
          basis and integrating the reporting by ARB on the sufficiency of  
          LCFS credits into the IEPR will provide them with a better  
          understanding of statewide LCFS compliance as well as the  








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          ability to anticipate future impacts on the costs and  
          availability of traditional transportation fuels.  

          According to the sponsor of this bill, "the LCFS is one of the  
          most complex and challenging California regulations adopted that  
          requires refiners and importers of conventional fuel to lower  
          the carbon intensity of fuel by 10% by 2020.  This reduction in  
          carbon intensity is intended to take place through the  
          introduction of alternative fuels like lower carbon ethanols,  
          biodiesel, natural gas, electricity or hydrogen.  However, given  
          the state of technology, available volumes and the necessary  
          alternative vehicles, it is extremely unlikely that enough  
          alternative fuels are available or able to be deployed in  
          volumes that would allow compliance with the regulation.  The  
          infeasibility of compliance is supported by a Boston Consulting  
          Group study that found compliance was likely infeasible,  
          potentially creating significant impacts on the cost and  
          availability of traditional transportation fuels."  

           Chevron's commitment to biofuels  :  In a March 14, 2013 special  
          letter to the Sacramento Bee, Chevron Corporation indicates that  
          "Over the last five years, we have collaborated with the U.S.  
          Department of Energy, various universities and several advanced  
          biofuels startup companies, and have established a joint venture  
          with Weyerhaeuser.  We have also conducted in-house innovative  
          research and development, testing more than 100 different  
          feedstocks and 50 conversion technologies to identify ways to  
          make low-carbon fuel that would be commercial, scalable and  
          affordable for customers.  If and when these hurdles are  
          overcome, capital investment will surely follow? However, all of  
          this activity has led us to conclude that the LCFS, as currently  
          written, is not achievable due to technology, resource and  
          market limitations.  In fact, we are convinced the costs to  
          California businesses, consumers and the economy are likely to  
          be profound - and are as yet unrecognized by most people."  

           Double referral  :  This bill has been double-referred and was  
          approved by the Assembly Natural Resources Committee on April  
          15, 2013 (9-0 vote).  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Western States Petroleum Association (sponsor)








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          California Manufacturers & Technology Association
           
          Opposition 
           
          None on file
           

          Analysis Prepared by  :   Ed Imai / TRANS. / (916) 319-2093