BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 11
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: pavley
VERSION:
12/3/12
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: April 9, 2013 URGENCY: YES
SUBJECTS:
Air quality, alternative fuels, and vehicle technology funding
programs, local air district vehicle registration surcharges,
and assessing alternative fuels use.
DESCRIPTION:
This urgency bill:
Extends until January 1, 2024 extra fees on vehicle
registrations, boat registrations, and tire sales in order to
fund the AB 118, Carl Moyer, and AB 923 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) authority
to require through regulation any person to provide hydrogen
fueling stations and instead allocates up to $220 million of
these fee funds to construct and operate retail hydrogen
fueling stations.
Extends the authority of local air districts to impose vehicle
registration surcharges in their areas.
Requires the ARB and the California Energy Commission (CEC) to
update their economic analysis assessing the future costs of
petroleum-based and alternative fuels and biannually to assess
the use of alternative fuels in the state.
ANALYSIS:
Clean Fuels Outlet
ARB adopted its Clean Fuels Outlet (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
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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 of last year, 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 person to construct, operate, or to fund the
construction or operation of any publicly available hydrogen
fueling station.
AB 118 Programs
AB 118 (Núñez), Chapter 750, Statutes of 2007, creates three
programs:
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.
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
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quality impacts of alternative fuels and vehicles, vessels, and
equipment technologies.
The Enhanced Fleet Modernization Program , under which ARB, in
consultation with the Bureau of Automotive Repair (BAR),
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:
A $3 additional fee on the annual vehicle registration
fee.
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.
A $10 or $20 increase of the fee to originally register a
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).
(See Comment #9 below.)
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
boats that AB 118 imposed so that they continue until January
1, 2024.
2.Requires the CEC to fund at least 100 publicly available
hydrogen fueling stations thRough its AB 118 program. To this
end, the bill mandates that the CEC allocate $20 million a
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year over the next three fiscal years plus up to $20 million a
year for the eight fiscal years after that to pay for hydrogen
fueling stations. The bill further provides that the fueling
network so established must provide convenient fueling to
hydrogen vehicle owners and expand as necessary to support a
growing market for vehicles requiring hydrogen fuel.
3.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. If hydrogen vehicles are not forthcoming,
then the CEC may defer the funding for an unspecified period.
4.Gives the CEC four years to encumber the funds that this bill
directs be appropriated for hydrogen fueling stations and four
more years actually to expend the funds to build hydrogen
stations. (For example, if $20 million is appropriated for
hydrogen stations through this bill in 2018, then the CEC has
until 2022 to award those funds projects and until 2026 to
actually expend the funds as the stations get built.)
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 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.
2.Requires ARB, no later than July 1, 2013, to convene, in
consultation with local air districts, a working group to
evaluate the policies and goals contained within the Carl
Moyer and also the AB 923 programs.
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AB 923 Air District Vehicle Registration Surcharge
Existing law imposes a basic vehicle registration fee of $46,
plus a $23 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.
Alternative fuel use
In 2005, the Legislature passed and Governor signed AB 1007
(Pavley), Chapter 371, which required the CEC, in partnership
with ARB and other specified state agencies, to develop and
adopt a state plan to increase the use of alternative
transportation fuels by June 30, 2007. The CEC adopted the
State Alternative Fuels Plan at its December 5, 2007 meeting.
The plan outlined specific strategies and targets to increase
the use of alternative fuels.
This bill :
1.Declares that it is in the state's interest to evaluate
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progress toward increasing the use of alternative fuels, which
was assessed in the State Alternative Fuels Plan.
2.Requires the CEC and ARB to report, beginning November 1,
2015, and every two years thereafter, on the status of their
analysis of alternative transportation fuel use in California.
3.Directs the CEC and ARB to update the economic analysis used
to develop and review ARB's regulations to assess more
accurately the future costs of petroleum-based and alternative
fuels.
COMMENTS:
1.Purpose . Proponents note that California suffers from some of
the worst air quality in the nation, with over 70% of our air
pollution coming from cars, trucks, trains, and other mobile
sources. Proponents further note 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.
The author notes that in order to address major health and
environmental risks, stringent air quality and climate
requirements, and under-investment in clean transportation
solutions, this bill provides incentives that address two
overarching challenges: More quickly turning over the
existing fleet of vehicles in California, and accelerating
next-generation vehicle technologies. According to the
author, the former will reduce near-term air emissions by
accelerating the turnover of older, dirtier vehicles and
off-road engines; provide assistance for on- and off-road
users to upgrade equipment prior to regulatory requirements,
and help prevent the loss of federal highway funds by
accelerating progress toward meeting state and federal air
quality health standards.
The author states that accelerating next-generation
technologies will reduce the cost of clean, next-generation
cars and trucks through research and development, as well as
direct purchase incentives; help meet AB 32 zero-emission
vehicle mandates and clean air goals; ensure widespread
availability of alternative fuels by providing infrastructure
for hydrogen, electricity, natural gas, biofuels, and other
clean fuels that move us towards clean air and energy
independence; facilitate roll-out of zero-emission hydrogen
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fuel cell electric vehicles that are crucial to achieving
California's long-term air quality and climate goals; and
expand California's manufacturing capacity for advanced
technology vehicles, fuels, and components, providing in-state
jobs.
2.Too much for one bill ? This bill extends the funding and
existence of three programs created by AB 118, the Carl Moyer
Program, and local air districts' authority to impose
surcharges on vehicle registrations, and it gives new duties
to CEC and ARB in developing and reporting on the state's
alternative fuels plan. This is a tremendous amount of policy
to include in a single bill.
Such breadth could limit the legislative review of each of
these programs, to many of which previous legislatures
assigned sunset dates for the purpose of ensuring that this
Legislature could consider each program's functions, statutory
language, and funding as its sunset date approaches. The
committee may wish therefore to amend some items out of this
bill in order to limit its scope to a more manageable size.
For example, the majority vote provisions of this bill,
authorizing air districts to extend their AB 923 vehicle
registration surcharges and assessing alternative fuel use,
could each be placed in other legislative vehicles. Ideally,
the Carl Moyer Program and related provisions of AB 923 would
also be moved to another legislative vehicle.
3.Abrogating a regulation . Typically state agencies object
strenuously when the Legislature considers passing a bill to
override a regulation that the agency has adopted or is
working on adopting. This bill is unusual in that the ARB
strongly supports the bill and appears to have negotiated its
contents, which include proscribing ARB's current efforts to
amend its CFO regulation and prohibiting it from adopting any
regulation for the next 11 years that would require anyone to
provide, fund, or operate a hydrogen fueling station in this
state.
This is a very broad prohibition that certainly does more than
just assure petroleum refiners and importers that they will be
spared from the requirement to provide hydrogen fueling
infrastructure in the future. This provision ensures that
until selling hydrogen at retail becomes a profit-making
enterprise, the state will have to subsidize both the capital
and operating costs of hydrogen fueling stations, as this bill
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will have foreclosed the option of using regulation alone or
in combination with a public subsidy to provide hydrogen fuel
to the expected fleet of hydrogen fuel cell vehicles. Rather
than abrogating ARB's authority for such a long period, the
committee may wish instead to direct ARB over the next 24
months to review the CFO regulation and during this time to
prohibit ARB from adopting any regulation similar to the
amendments it proposed to the CFO in January 2012.
4.How much money ? The extension of the vehicle registration
fees, trailer fees, tire fees, and boat registration fees in
this bill will result in approximately $180 million per year
for an additional eight years for the AB 118-related fees and
approximately $30 million per year for an additional nine
years for the Carl Moyer Program. In addition, this bill
extends the $2 surcharge that some air districts, including
the South Coast and Sacramento, have imposed on vehicles
registered in their jurisdictions. DMV reports that these fees
raise over $50 million each year. This bill, therefore, will
result in over $2 billion in additional fees on California
vehicle and boat owners between 2015 and 2023.
5.And to what end ? The Legislative Analyst's Office (LAO) in
its December 2012 report "Energy Efficiency and Alternative
Energy Programs" noted that it is difficult to isolate the AB
118 programs' effect on transforming California's vehicles and
fuels and further recommended that the Legislature develop a
comprehensive strategy for meeting the state's alternative
energy objectives with the several funding sources available.
Those funds come from fees on vehicles, corporate income
taxes, and legal settlements, and will come from the sale of
permits to emit carbon pollution. This bill would add an
additional $2 billion to those funds before the Legislature
has developed such a comprehensive strategy and a basis for
maximizing the transformative effect of these incentive funds.
The committee may wish to consider an amendment that requires
CEC to justify its AB 118 funding awards based on a cost per
ton of greenhouse gas emission reductions for each project and
for ARB, a cost per ton of reductions in criteria air
pollutants.
6.Choosing hydrogen . This bill directs up to $220 million ($20
million per year appropriated for three years plus up to $20
million per year for another eight years) of AB 118 revenues
to the construction and operation of hydrogen fueling
stations. When the Legislature adopted AB 118 in 2007,
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it included language stating that its funds would be spent to
develop and deploy fuels "without adopting any one preferred
fuel or technology."
There are many ways to reduce greenhouse gas emissions but
limited state funds to achieve these reductions. This bill
makes a major change to the intent of AB 118, choosing
hydrogen as a clear winner in the competition for the CEC's AB
118 funds. As noted in comment #5 above, these funds could be
awarded based on cost effectiveness. Alternatively, the
Legislature could choose now to mandate funds to strategies
that are known to be the most cost effective, such as
intelligent transportation systems or implementation of SB 375
to coordinate land use and transportation planning, or the
Legislature could assign some funds and direct that others be
awarded via cost-effectiveness criteria. The committee may
wish to consider building on the bill's hydrogen mandate by
mandating other greenhouse gas emission reduction strategies,
such as intelligent transportation systems, to receive
AB 118 funds.
7.What if the Hydrogen Highway is a dead end ? Nothing in
existing law precludes the CEC from funding hydrogen fueling
stations with AB 118 funds. Indeed, the CEC has already
allocated $48 million to this purpose and proposes to add
another $20 million in its 2013-14 allocations. This bill,
however, mandates a minimum of $60 million in funding with
essentially no way to reassign those funds if hydrogen
vehicles are not forthcoming.
Under this bill, if the number of hydrogen vehicles does not
increase, then ARB and the CEC may determine there is not a
need for all of the bill's annual $20 million allocation for
hydrogen fueling stations, but then all the CEC can do is
defer the allocation of funds. The AB 118 funds that the bill
reserves for hydrogen would then, presumably, remain unspent.
It is unclear under the bill what happens if the number of
hydrogen vehicles in the state never grows to a level needing
a fueling network. The committee may wish to consider whether
it is appropriate to mandate that the CEC allocate $60 million
for hydrogen fueling stations without a plan to return those
funds if the stations are not built and also whether the bill
adequately guards against building stations that only a small
number of vehicles will ever use.
8.Article XIX of the California Constitution . The California
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Constitution requires that revenues from fees and taxes
imposed by the state on vehicles and their use or operation
can only be used for certain purposes, including:
Collection of these fees and taxes;
Motor vehicle and traffic law administration and
enforcement;
Research, planning, construction, maintenance,
operation, and environmental mitigation of streets and
roads;
Research, planning, construction, improvement, and
mitigation of environmental impacts of exclusive mass
transit guideways; and
Mitigating the environmental effects of motor vehicle
sound and air emissions.
When the Legislature passed AB 118 in 2007, it funded the
program with increases in fees paid to register a motor
vehicle as well as utility ratepayer funds and surcharges on
boat registration fees. The vehicle fees, however, are the
only ones subject to the constraints in Article XIX above.
Now the specified utility ratepayer funds no longer exist due
to changes in law and the boat registration fees have proved
to be a very small revenue source (approximately $300,000 per
year). Given this, the AB 118 statute should be udpated to
reflect that virtually all expenditures made of AB 118 funds
by either the CEC or ARB need to comply with these
constitutional provisions. Writing in opposition, the
Automobile Club of Southern California notes that Article XIX
requires that funds from motor vehicle operations should not
be used for off-road equipment, something which the existing
AB 118 statute specifically authorizes in several places. The
committee may wish to amend this bill to direct the CEC and
ARB to ensure that funds from vehicle registrations are used
in compliance with Section 3 of Article XIX of the California
Constitution and to otherwise update the AB 118 statute to
reflect the very limited funds available for off-road
purposes.
1.Why do those who buy a boat in an even-numbered year pay more ?
To operate a boat in California waters, the owner must have
registered the boat either with the US Bureau of Customs or
the California Department of Motor Vehicles (DMV). DMV vessel
registrations and the related fees are due biannually in even
numbered years only. Therefore, if one buys a boat in an
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odd-numbered year, state law provides for a one-year
registration with half the fees of those who originally
register their boats in even numbered years. This enables all
boat registrations to end up on the two-year cycle even if
they originate in an odd-numbered year.
Due to a drafting error in AB 118, that bill never imposed a
surcharge on the renewal of boat registrations, but only on
original registrations. Because the two-year registration
period begins in even numbered years, those boat owners who
originally register in an odd year pay half what those who
originally register in even numbered years. While
unintentional, the result is that AB 118 penalizes those who
buy a boat in a even numbered year. The committee may wish to
consider an amendment to apply the same surcharge on original
boat registrations whether they occur in even or odd numbered
years.
2.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
also states that some usage of fees and taxes for AB 118's
programs appears to violate Article XIX of the California
Constitution.
The Howard Jarvis Taxpayers Association also opposes the
bill's imposition of taxes of $275 million annually until 2023
to fund programs and technologies that many taxpayers will
never use.
3. Technical amendments .
On page 7, delete lines 31-34, inclusive, and insert
"(b) The"
On page 18, line 13, delete "On and after April 1, 1922,
a" and insert "A"
SB 11 (PAVLEY) Page 12
On page 17, line 7, after "vehicles" insert a comma and
delete "offroad" and insert "off-road"
On page 18, line 19, delete "meaning" and insert
"meanings"
On page 18, line 39, delete "GVWR or greater, offroad"
and insert "gross vehicle weight rating (GVWR), off-road"
On page 22, line 17, after "PM" insert a comma
On page 28, line 23, and on page 30, line 20, delete
"offroad" and insert "off-road"
On page 45, line 5, and on page 46, line 31, delete
"on-road" and insert "onroad"
On page 51, line 3, delete "either of the following
amounts" and delete lines 4-10 inclusive
1.Committee of second referral . The Rules Committee referred
this bill to the Environmental Quality Committee and to the
Transportation and Housing Committee. This bill passed the
Environmental Quality Committee on April 3 by a 8 to 1 vote.
The author agreed there to amendments prior to the bill being
heard in the Appropriations Committee to 1) clarify that the
bill's mandated funding for hydrogen is subject to existing AB
118 statutory and regulatory requirements, and 2) direct the
CEC to develop a plan for constructing a hydrogen fueling
network that minimizes public financial resources while
maximizing user accessibility.
RELATED LEGISLATION
AB 8 (Perea) is nearly identical to this bill. Set for hearing
on April 8th in the Assembly Transportation Committee.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 3,
2013.)
SUPPORT: Alliance of Automobile Manufacturers
American Federation of State, County and
Municipal Employees,
AFL-CIO
American Lung Association (sponsor)
Associated General Contractors
Association of Global Automakers
Bay Area AQMD
Bioenergy Association of California
California Air Pollution Control Officers
Association (co-sponsor)
SB 11 (PAVLEY) Page 13
California Association of Winegrape Growers
California Citrus Mutual
California Cotton Ginners & Growers Association
California Electric Transportation Coalition
California Energy Commission
California Farm Bureau Federation
California Dairies, Inc.
California Electric Transportation Coalition
California Grape & Tree Fruit League
California Independent Oil Marketers Association
California Manufacturers & Technology Association
California Natural Gas Vehicle Coalition
California Rice Industry Association
California Service Station & Automotive Repair
Association
California Trucking Association
CALSTART (co-sponsor)
CAPCOA
Coalition for Clean Air
Construction Industry Air Quality Coalition
Contra Costa Council
Environmental Defense Fund
Linde North America
Metropolitan Transportation Commission
Natural Resources Defense Council
Nisei Farmers League
Sacramento Metropolitan Air Quality Management
District
San Francisco County Transportation Authority
San Joaquin Valley Unified APCD
State Government Affairs West Region, UPS
Waste Management - Government Affairs/West
Western Agricultural Processors Association
Western States Petroleum Association
OPPOSED: Automobile Club of Southern California
Howard Jarvis Taxpayers Association
Sierra Club California
Two individuals