BILL ANALYSIS                                                                                                                                                                                                    Ó

                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair

          SB 511 (Lieu) - Coastal resources: climate change: grants.
          Amended: April 30, 2013         Policy Vote: NR&W 8-1
          Urgency: No                     Mandate: No
          Hearing Date: May 23, 2013      Consultant: Marie Liu
          Bill Summary: SB 511 would require the Natural Resources Agency  
          (agency), in coordination with the State Air Resources Board  
          (ARB) to develop guidelines for the awarding grants for projects  
          that enhance greenhouse gas emissions avoidance and  
          sequestration associated with natural resources.  

          Fiscal Impact: Ongoing costs, likely in the hundreds of  
          thousands of dollars, from the GHG Reduction Fund (special) to  
          the Natural Resources Agency for administration of a grant  

          Background: The California Global Warming Solutions Act of 2006  
          (AB 32 (Nunez/Pavley) Chapter 488/2006) requires the state's  
          greenhouse gas (GHG) emissions to be reduced to 1990 levels by  
          2020. One of the actions to achieve the required GHG reductions  
          is through a "cap and trade" market-based compliance mechanism  
          where permits to emit GHG emissions can be purchased and sold on  
          the open market with the goal that the overall emission  
          reduction is reached at the least cost. The first auction for  
          credits held by ARB was on November 2013 and will continue  
          quarterly. Revenues are deposited in the GHG Reduction Fund  

          AB 1532 (Perez) Chapter 807/2012 required that the fund be used  
          for specified purposes. To that end, AB 1532 required the  
          Department of Finance, in consultation with ARB and other state  
          agencies to develop a three-year investment plan identifying  
          priority programmatic investments of auction proceeds. 

          SB 535 (de Leon) Chapter 535/2012 further required that at least  
          10% of the fund be spent for projects in disadvantaged  
          communities and at least 25% for projects that benefit  
          disadvantaged communities.


          SB 511 (Lieu)
          Page 1

          Proposed Law: This bill would require the agency, in  
          coordination with the ARB, to develop guidelines for the  
          awarding of grants for projects that enhance GHG emission  
          avoidance and sequestration associated with natural resources.  
          Specifically, eligible projects would be required to reduce GHG  
          emissions, provide incentives for pilot projects that act as  
          models for enhancing natural resources emission reductions and  
          sequestration, leverage other funds, promote investments in  
          projects with co-benefits including adaptation, and ensure  
          funding of projects in disadvantaged communities. The agency is  
          directed to use existing programs.

          This bill would also exempt the development of the guidelines  
          from the Administrative Procedure Act.

          Related Legislation: In this session, SB 798 (de Leon/Pavley),  
          AB 416 (Gordon), AB 574 (Lowenthal), AB 1023 (Eggman), and AB  
          1375 (Chau) all propose various expenditures from the GHG  
          Reduction Fund. 

          Staff Comments: The author's intention in this bill is to guide  
          the spending of monies from the GHG Reduction Fund, although  
          there is no language in the bill that actually indicates that  
          the grant guidelines are for the spending of GHG Reduction Fund  
          monies. Additionally, the bill language is unclear whether the  
          agency would be directed to establish guidelines for a new grant  
          program or whether the agency would only be allowed to use  
          existing programs. Assuming that the agency would be in charge  
          of implementing a new grant program, administrative costs are  
          usually approximately 5% of the monies to be allocated. Assuming  
          that the grant program would be allocating millions of dollars,  
          administrative costs are likely in the hundreds of thousands to  
          millions of dollars.

          The ARB released its draft Investment plan in April with the  
          final anticipated being released with the Governor's revised  
          budget in May. The draft established three investment  
          priorities: sustainable communities and clean transportation,  
          energy efficiency and clean energy, natural resources and waste  
          diversion. While there appears to be shared goals between this  
          bill and the investment plan, it is unclear how this bill is  
          meant to interact with the investment plan.


          SB 511 (Lieu)
          Page 2

          The Administrative Procedure Act (APA, beginning at Section  
          11340 of the Government Code) prohibits state agencies from  
          issuing or enforcing any rule, regulation, order, or standard of  
          general application unless it has been issued as a regulation  
          under the APA. The purpose of the APA is to provide the public  
          with meaningful opportunity to participate in the adoption of  
          state regulations and to ensure that regulations are clear,  
          necessary, and legally valid. Staff notes that exempting the  
          agency's guidelines from the APA may reduce administrative costs  
          for the agency, at least initially, but possibly at the expense  
          of a less vigorous review of the guidelines than is provided  
          under the APA process.

          Proposed Author Amendments: Delete existing language and insert  
          language to create the Natural Resources Climate Mitigation  
          Program under which the Secretary of the Natural Resources  
          Agency, in consultation with the ARB, would be required to  
          develop guidelines that promote projects based on the potential  
          to increase climate benefits, prioritize projects that are  
          consistent with land use GHG reduction plans, and ensure that  
          the appropriate level of funding for disadvantaged communities  
          is achieved.