BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 11 (Pavley/Cannella) - Alternative fuel and vehicle
technologies: funding programs.
Amended: May 15, 2013 Policy Vote: EQ 8-1, T&H 6-2
Urgency: Yes Mandate: No
Hearing Date: May 23, 2013 Consultant: Marie Liu
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 11 would extend until January 1, 2024, extra
charges on vehicle registrations, boat registrations, and tire
sales in order to fund the AB 118, Carl Moyer, and AB 923
programs. This bill would also extend the authority of local air
districts to impose vehicle registration surcharges in their
area.
Fiscal Impact:
Annual revenues of $180 million (special fund) for various
AB 118 programs until 2024, of which $20 million be directed
for the construction and operation of a hydrogen fueling
network in FY 13-14, FY 14-15, and FY 15-16 and up to $20
million in the remaining years.
Annual tire fee additional revenue of approximately $26
million (special fund) for the Carl Moyer Program.
Annual costs in the hundreds of thousands of dollars to
the ARB, CEC, and Bureau of Automotive Repair to continue to
administer various air quality and alternative fuel programs
and associated reporting requirements which will be fully
covered by the surcharge extensions.
Annual costs of approximately $225,000 to the Air
Pollution Control Fund (special fund) beginning in 2013 for
the evaluation, analysis, review, and reporting aimed to
encourage implementation of the state alternative
transportation fuels goal.
Background: The California Alternative and Renewable Fuel,
Vehicle Technology, Clean Air, and Carbon Reduction Act of 2007
[AB 118 (Núñez) Chapter 750/2007] increased vehicle registration
fees (+$3), Smog Abatement Fee (+$8), boat registration fees
($10/$20), and special identification plates (+$5) until January
1, 2016 to fund three programs:
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1. The Alternative and Renewable Fuel and Vehicle
Technology Program (ARFVTP), administered by the California
Energy Commission (CEC), provides grants, revolving loans,
loan guarantees, and other financial to accelerate the
development and deployment of clean, efficient, low carbon
alternative fuels and technologies. ARFVTP is funded by $2
of the vehicle registration fee and receives approximately
$100 million per year total.
2. The Air Quality Improvement Program (AQIP), administered
by the Air Resources Board (ARB) in consultation with local
air districts, funds projects that reduce criteria air
pollutants, improve air quality, and provide research for
alternative fuels and vehicles, vessels, and equipment
technologies. AQIP is funded by smog abatement fees, boat
registration fees, and special identification plate fees
and receives between $30-36 million per year.
3. The Enhanced Fleet Modernization Program (EFMP), under
which ARB, in consultation with Bureau of Automotive Repair
(BAR), pays to permanently remove cars and small trucks
from operation through voluntary retirement by their
owners. EFMP is funded by $1 of the vehicle registration
fee and receives approximately $30 million per year.
The Carl Moyer Memorial Air Quality Standards Attainment Program
(Moyer Program) [AB 1571 (Villaraigosa), Chapter 923/1999],
administered by ARB and local air districts, funds the
incremental cost of cleaner-than-required vehicles, engines, and
equipment. The primary objective of the program is to achieve
air quality emission reductions that would not otherwise occur
through regulations or other legal mandates. The Moyer Program
is funded by vehicle registration surcharges adopted by local
air districts in nonattainment areas. Authority to assess these
fees sunset on January 1, 2015.
The Moyer Program was expanded by AB 923 (Firebaugh), Chapter
707/2004 to cover additional pollutants and engines and imposed
a $1 fee on tire sales to fund the Moyer Program and CalRecycle,
and establishes air quality improvement programs through local
air districts. AB 923's provisions sunset on January 1, 2015.
The Alternative Fuels Law required CEC and the ARB to develop
and adopt a state plan to increase the use of alternative fuels
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by June 30, 2007. In response, the CEC and ARB published the
State Alternative Fuels Plan in 2007 and set alternative fuel
use goals of 9% in 2012, 11% in 2017, and 26% by the year 2022.
Proposed Law: This bill would extend all the surcharges for the
AB 118 programs, the Moyer Program, and AB 923 until January 1,
2024. All fees would be extended at their current rate except
the AB 923 tire fee, which will be extended at $0.75 instead of
$1 after January 1, 2015.
All programs would also be extended unchanged except the ARFVTP
program, which would be amended to specifically make intelligent
transportation systems an eligible project and to award
financial assistance to provide at least 100 publically
available hydrogen fueling stations. Specifically on the
hydrogen set-aside:
The funding would be $20 million annually for three
years plus up to $20 million for an additional eight years
for grants, loan incentive programs, revolving loan
programs, or other forms of financial assistance.
The funds must be deployed in a manner to achieve a
network sufficient to provide convenient fueling to vehicle
owners and to expand that network to support a growing
market for hydrogen fueled vehicles.
The CEC would have four years to encumber the
appropriation.
The CEC may cease providing funding for the building of
hydrogen fueling stations if the CEC, in consultation with
the ARB, determines that the private sector is establishing
publically available hydrogen fueling stations without
government support.
The CEC and ARB would be required to annually report on
progress towards establishing a hydrogen fueling network
and the remaining cost and timing to establish a network of
100 publically available hydrogen fueling stations.
This bill would require ARB, by July 1, 2013, to convene a
working group to evaluate the policies and goals of the Moyer
Program and AB 923.
This bill would also require the CEC and ARB to report
biennially, beginning in 2014, on the status and implementation
of the state's alternative fuels goal. CEC and ARB would be
required to evaluate of the use of applicable investment
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programs, the impact of federal fuel policies, and the impact of
existing state policies on attaining the alternative fuels goal.
Related Legislation: AB 8 (Perea) was introduced with identical
language to the introduced version of SB 11 but has been amended
differently. AB 8 is in the Assembly Appropriations Committee.
Staff Comments: In respect to the AB 118 program, this bill
would result in annual revenues of approximately $180 million
from extension of various vehicle, vessel, and other air
quality-related surcharges. This would result in approximately
$105 million for ARFVTP, approximately $45 million for AQIP, and
approximately $30 million for EFMP.
This bill represents a departure from the discretion the
Legislature granted the CEC in determining the best way to
allocate ARFVTP funds in order to "develop and deploy innovative
technologies that transform California's fuel and vehicle types
to help attain the state's climate change policies." Under the
current structure, the CEC prepares an investment plan with a
stakeholder advisory committee to outline the program's funding
priorities. Funds are awarded according to the investment plan.
In contrast, this bill would predetermine the minimum amount of
spending that must be spent on hydrogen.
From 2008 to 2010, CEC awarded $22.7 million to fund 11 public
hydrogen fueling stations and one hydrogen transit stations.
These stations are expected to be operational sometime late this
year to mid-2014. The FY 11-12/12-13 proposed awards were
recently announced allocating an additional $12 million for
seven stations. This solicitation received $15 million in
applications for up to $28.6 million in funding. The draft
2013-14 investment plan included an additional $20 million for
hydrogen infrastructure funding. Staff notes that if the most
recent round of funding is indicative of future demand for
financial assistance, combined with the four year encumbrance
period allowed under this bill, it is possible that a
substantial backlog of available funding in the ARFVTP could
develop.
In the current round of solicitations, funding is being made
available as grants for up to 65% of the project costs (75% was
offered in the earlier round of funding). According to the CEC,
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higher funding compared to other alternative fuels is necessary
as hydrogen is at a much earlier stage of fueling infrastructure
development.
According to the CEC, the average cost for hydrogen fueling
stations with a fillable supply has been $2.2 million in past
solicitations. Stations with onsite generation cost between $3
and $4 million. Assuming the average cost of building the
initial fueling network stays the same, that most fueling
stations are based on fillable supplies (vs. onsite generation),
and that the CEC continues to only give grants for 65% of the
costs, supporting the establishment of 100 publically available
stations will cost approximately $145 million. This bill would
provide between $60 and $220 million for hydrogen
infrastructure.
Staff notes that by funding early fueling stations in
preparation for the early commercial rollout of hydrogen fueled
vehicles in 2015-17, the state is helping to mitigate the
industry's risk that these vehicles will become a viable market.
Under this bill, the payoff for the state to mitigate this risk
would be secondary- the air quality improvements and greenhouse
gas (GHG) emission reductions that will be a result of a change
in fuel use. In order to reach the 2050 GHG reduction targets
set by ARB, nearly all vehicles will need to be zero emission by
2050.
This bill may need several technical amendments. Under this
bill:
1. CEC and ARB would be required to jointly review and report
on progress towards establishing a hydrogen fueling network.
However, the audience of the report is not specified.
Presumably the report should be made available to the
Legislature and the public.
2. ARB would be required to convene a working group to evaluate
the policy goals of the Moyer Program and AB 923 by July 1,
2013. Although this bill is an urgency clause, it is highly
unlikely that the Governor will sign this bill before July 1,
2013, should it be passed by the Legislature.
3. The tire fee is currently collected by the Board of
Equalization (BOE) under a contract with the ARB and
CalRecycle. The BOE has suggested that the AB 923 provisions
be amended to allow it to be appropriated money directly to
administer the fee collection. BOE further notes that the
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change in the AB 923 fee under this bill will result in some
additional administrative needs, though the 2015
implementation date mitigates the cost.
The author made commitments to the Senate Environmental Quality
Committee and the Transportation and Housing Committee to
address several matters in the bill. The most recent amendments
reflect commitments made in the Environmental Quality Committee.
The author has provided this committee with draft amendments to
address the following issues discussed in the Transportation and
Housing Committee:
1. Requirements that the ARFVTP and the AQIP incorporate a
benefit-cost score that reflects the expected GHG or criteria
pollutant emission reduction per dollar awarded expected.
2. Ensure the likelihood that the building of hydrogen fueling
stations and the release of hydrogen-fueled vehicles are
synchronized.
3. Clarify that Article XIX of the California Constitution
applies to some of the revenues collected under AB 118.
Proposed Author Amendments: Clarify that Article XIX applies and
incorporate a cost-benefit requirement into the ARFVTP and the
AQIP.