BILL NUMBER: AB 2390 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 23, 2014
AMENDED IN ASSEMBLY APRIL 22, 2014
INTRODUCED BY Assembly Member Muratsuchi
FEBRUARY 21, 2014
An act to add Section 43870 to the Health and Safety Code,
relating to air resources.
LEGISLATIVE COUNSEL'S DIGEST
AB 2390, as amended, Muratsuchi. Low Carbon Fuel Standard: Green
Credit Reserve.
Existing law requires that the State Energy Resources Conservation
and Development Commission, in partnership with the State Air
Resources Board, and in consultation with specified state agencies,
develop and adopt a state plan to increase the use of alternative
fuels, as defined, not later than June 30, 2007.
The California Global Warming Solutions Act of 2006 establishes
the State Air Resources Board as the state agency responsible for
monitoring and regulating sources emitting greenhouse gases. The act
requires the state board to adopt a statewide greenhouse gas
emissions limit, as defined, to be achieved by 2020, equivalent to
the statewide greenhouse gas emissions levels in 1990. The state
board is additionally required to adopt rules and regulations in an
open public process to achieve the maximum technologically feasible
and cost-effective greenhouse gas emissions reductions. Pursuant to
the act, the state board has adopted the Low Carbon Fuel Standard
(LCFS) regulations. Under federal law, the Renewable Fuel Standard
(RFS) is administered by the United States Environmental Protection
Agency.
This bill would require the Governor
Treasurer , by June 30, 2015, to designate a state
agency to establish and administer a Low
Carbon and Renewable Fuels Credit Reserve (Green Credit Reserve or
Reserve) to facilitate and encourage the development of renewable and
low carbon transportation fuels produced in California from in-state
feedstocks by providing stability and predictability for the value
of credits generated by the production of those fuels pursuant to the
low carbon low-carbon fuel standard
and the federal renewable fuel standard. The bill would provide for
the Green Credit Reserve to enter into specified contracts with
developers of projects that are intended to produce renewable and
low-carbon transportation fuels that qualify for state and federal
low carbon low-carbon or renewable fuel
credits, and that will commit the Reserve to purchase the LCFS and
RFS credits at a contracted price when the renewable fuel is produced
and the credits are certified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) On January 18, 2007, Governor Arnold Schwarzenegger issued
Executive Order S-01-07 ordering that a statewide goal be established
to reduce the carbon intensity of California's transportation fuels
by at least 10 percent by 2020 and requiring that a low
carbon low-carbon fuel standard for
transportation fuels be established for California.
(b) In January 2010, the State Air Resources Board adopted
regulations to implement the Low Carbon Fuel Standard (LCFS)
(Sections 95480 to 95490, inclusive, of Title 17 of the California
Code of Regulations), which will reduce greenhouse gas emissions by
reducing the full fuel-cycle, carbon intensity of transportation
fuels used in California by 10 percent by 2020. Under the LCFS, all
refiners, blenders, producers, or importers of transportation fuels
in California are required to reduce the carbon intensity of their
fuels, or purchase LCFS credits, as necessary, to comply with the
LCFS.
(c) The federal Renewable Fuel Standard (RFS), created under the
Energy Policy Act of 2005, established a national renewable fuel
volume mandate. Under the Energy Independence and Security Act of
2007, the RFS was expanded to include additional fuels, renewable
fuel categories, and increased volumes of renewable fuels. Under the
program, petroleum refiners and importers of gasoline are required by
the United States Environmental Protection Agency to obtain
sufficient renewable fuel credits, known as Renewable Identification
Numbers (RINs), to show that they have complied with their
obligations.
(d) LCFS and RFS credits can have significant value, over and
above the market value of the fuel itself. When the value of LCFS and
RFS credits is combined with the underlying value of the fuel, the
fuel can command a premium price, far above the value of conventional
petroleum fuels. Yet companies that wish to invest in plants and
equipment to produce low carbon low-carbon
transportation fuels that qualify for the state's LCFS and the
federal RFS may find it difficult to secure adequate financing if
banks and other financing sources provide financing based only on the
projected value of the fuel produced and not based upon the
anticipated but uncertain future value of LCFS and RFS renewable fuel
credits.
(e) Developers of projects to produce renewable and low
carbon low-carbon transportation fuels and
institutions that finance those projects may benefit from a mechanism
to provide stability and predictability for the value of credits
earned pursuant to the state's LCFS and the federal RFS. That
mechanism would allow financial institutions to provide financing
based on the full value of renewable and low carbon
low-carbon fuel that is produced, including the
value of the LCFS and RFS credits generated by the production of the
fuel.
(f) It is in the interest of the state to establish a Low Carbon
and Renewable Fuels Credit Reserve (Reserve), to enter into long-term
voluntary contracts with developers of projects to produce renewable
and low-carbon transportation fuels in this state that will commit
the Reserve to purchase the LCFS and RFS credits at a contracted
price at such time as the renewable fuel is produced and the LCFS or
RFS credits are certified. The Reserve would, at its discretion, hold
and eventually sell the credits to refiners, blenders, producers,
and importers of transportation fuels that are subject to the LCFS
and RFS.
(g) The Reserve will provide stability and predictability for the
value of LCFS and RFS credits and allow project developers to obtain
long-term financing based on the full value of the project. It
additionally will stimulate innovation, create jobs in California,
and further enhance the ability of parties subject to the LCFS and
RFS to comply.
SEC. 2. Section 43870 is added to the Health and Safety Code, to
read:
43870. (a) For purposes of this section, the following terms have
the following meanings:
(1) "CARBOB" means California reformulated gasoline blendstock for
oxygenate blending.
(1)
(2) "Green Credit Reserve" or "Reserve" means the Low
Carbon and Renewable Fuels Credit Reserve.
(2)
(3) "LCFS" means the Low Carbon Fuel Standard
administered by the state board pursuant to Sections 95480 to 95490,
inclusive, of Title 17 of the California Code of Regulations.
(3) "RFS" means the Renewable Fuel Standard administered by the
United States Environmental Protection Agency pursuant to the federal
Energy Policy Act of 2005 as later modified by the federal Energy
Independence and Security Act of 2007 and any future modifications to
that program.
(4) "LCFS credit" means a marketable credit associated with the
production and use of a low carbon low-carbon
fuel pursuant to the requirements of the state LCFS.
(5) "Renewable and low-carbon transportation fuel" means a
transportation fuel that is derived from a renewable resource, as
determined by the State Air Resources Board, and has a carbon
intensity that does not exceed 50 percent of the carbon intensity of
CARBOB or diesel fuel, as applicable, as of the date of contract
execution pursuant to subdivision (e).
(6) "RFS" means the Renewable Fuel Standard administered by the
United States Environmental Protection Agency pursuant to the federal
Energy Policy Act of 2005 as later modified by the federal Energy
Independence and Security Act of 2007 and any future modifications to
that program.
(5)
(7) "RFS credit" means a marketable credit, also
referred to in the RFS as a Renewable Identification Number, or RIN,
that is associated with the production and use of a renewable fuel
pursuant to the requirements of the federal RFS.
(b) Not later than June 30, 2015, the Governor shall
designate a state agency to establish and administer
Treasurer shall establish a Green Credit Reserve. The purpose
of the Reserve shall be to facilitate and encourage the development
of renewable and low carbon low-carbon
transportation fuels produced in California from in-state feedstocks
by providing stability and predictability for the value of credits
generated by the production of those fuels pursuant to the LCFS and
RFS. The Treasurer shall coordinate with the State Air Resources
Board to adopt criteria and guidelines for the Reserve that ensure
that it meets these purposes.
(c) In order to carry out its purpose, the Reserve shall do all of
the following:
(1) Enter, at the discretion of the Reserve, into long-term
contracts with developers of projects, as defined in subdivision (d),
that are intended to produce renewable and low-carbon transportation
fuels in California from in-state feedstocks that qualify for the
state's LCFS and the federal RFS. The contracts shall commit the
Reserve to purchase credits, at a price established pursuant to
paragraph (2), when the project developer produces qualifying fuel
and the credits are certified.
(2) Guarantee, at the time of contract execution, a price or price
schedule for the purchase of LCFS and RFS credits that the Reserve
determines is sufficient to support financing of the project without
subjecting the state to unnecessary risk.
(3) Hold credits purchased pursuant to paragraph (1) until
such the time as the
Reserve deems it appropriate to sell the credits.
(4) Sell credits to qualified parties under the LCFS and RFS.
(5) Manage the purchasing, holding, and selling of LCFS and RFS
credits so as to minimize the risk of financial loss to the state.
(6) Develop criteria to be used by the Reserve in evaluating
projects with which to contract, including consideration of whether
an auction mechanism should be employed and, if so, the type of
auction, in the event that suitable projects exceed the capital
resources available to the Reserve.
(7) Develop mechanisms for the Reserve to use when it sells
credits to qualified parties pursuant to the state's LCFS and the
federal RFS, including consideration of whether an auction mechanism
should be employed, and if so, the type of auction.
(8) Develop contractual terms and conditions to be included in
contracts between project developers and the Reserve.
(9) Obtain any federal approvals necessary to authorize the
Reserve to purchase, hold, and sell RFS credits.
(10) Recommend any statutory changes necessary or useful to the
establishment or administration of the Reserve.
(d) For purposes of this section, projects that are intended to
produce renewable and low-carbon transportation fuels in California
from in-state feedstocks that qualify for the state LCFS and the
federal RFS include the following:
(1) Facilities that produce transportation fuels from agricultural
, livestock, food, or food processing waste that is
remaining after all reasonably usable
economically recoverable food content is extracted , and
from nonfood crops .
(2) Facilities that produce transportation fuel from forest waste
produced from sustainable forest management practices.
(3) Facilities that capture and clean landfill gas that is used
for transportation fuels.
(4) Wastewater treatment facilities that produce transportation
fuels from biogas or biosolids.
(4) Digester gas facilities, including wastewater treatment,
(5) Other facilities
that produce transportation fuels from organic waste .
(e) Long-term contracts for the purchase of credits by the Reserve
shall be made available not later than September 1, 2015. Contracts
may be for a term that does not exceed the total amount of time
included in all of the following provisions:
(1) A time period, as specified in the contract, to finance,
design, and construct a facility to produce the fuel that is expected
to produce LCFS credits or RIN credits as those credits are defined
at the time the contract is entered into.
(2) A defined start-up period to begin commercial-scale production
of the fuel.
(3) A period of time, as specified in the contract, but not more
than 15 years after the start-up period, for the production of the
fuel.
(f) The Reserve is obligated to purchase only those LCFS and RFS
credits that are actually produced by the fuel producer, that meet
the requirements of the contract and the requirements of the LCFS or
RFS in effect at the time the contract is executed, and that are
certified at the time they are generated. Future amendments,
modifications, or changes to the RFS or LCFS that are made after the
contract execution date shall not affect the requirements of the
Reserve to purchase the RFS credits or LCFS credits, or their
equivalent, as those terms are defined at the time the contract is
executed.
(g) The Reserve shall not enter into contracts for the purchase of
LCFS or RFS credits from LCFS obligated parties or RFS regulated
parties that are required to obtain and retire those credits pursuant
to the LCFS and RFS.