BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1204
                                                                  Page  1

          Date of Hearing:   June 16, 2014

                        ASSEMBLY COMMITTEE ON TRANSPORTATION
                               Bonnie Lowenthal, Chair
                      SB 1204 (Lara) - As Amended:  May 6, 2014

           SENATE VOTE  :  26-10
           
          SUBJECT  :  Clean Truck, Bus, and Off-Road Vehicle and Equipment  
          Technology Program

           SUMMARY  :  Creates a new program to be administered by the  
          California Air Resources Board (ARB) and funded with cap and  
          trade revenues to develop zero- and near-zero emission truck,  
          bus, and off-road vehicle and equipment technologies and related  
          projects.  Specifically,  this bill  :  
           
          1)Creates the California Clean Truck, Bus, and Off-Road Vehicle  
            and Equipment Technology Program (program) to be administered  
            by ARB in conjunction with the State Energy Resources  
            Conservation and Development Commission (CEC).  

          2)Provides that the program be funded from cap and trade auction  
            proceeds.  

          3)Provides that the program is to fund development,  
            demonstration, pre-commercial pilots, and early commercial  
            deployments of zero- and near-zero emission truck, bus, and  
            off-road vehicle and equipment technologies.  

          4)Requires that priority be given to projects in disadvantaged  
            communities.  

          5)Limits expenditure of program funds for projects that:

             a)   Develop a market, demonstrate, and pilot commercial  
               deployment of zero- and near-zero emission medium- and  
               heavy-duty truck technology, including projects that  
               facilitate clean goods movement;

             b)   Develop zero- and near-zero emission bus technology,  
               demonstrate pre-commercial pilots, and provide early  
               commercial deployments, including pilots of multiple  
               vehicles at one site or region;









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             c)   Develop, demonstrate, pilot, and deploy zero- and  
               near-zero emission off-road vehicle and equipment in port,  
               agricultural, marine, construction, and rail sectors; and,

             d)   Develop purchase incentives, including point-of-sale  
               incentives, for commercially available zero- and near-zero  
               emission truck, bus, and off-road vehicle and equipment  
               technologies and fueling infrastructure to accelerate  
               market acceptance.  

          6)Requires that ARB, in consultation with CEC, develop  
            guidelines, as specified, for the implementation of the  
            Program consistent with the AB 32, California Global Warming  
            Solutions Act (Nunez, Chapter 488, Statutes of 2006).  

          7)Provides that projects required pursuant to state or federal  
            law, rules, regulations, are not eligible for funding under  
            the program.  

          8)Requires ARB, in consultation with CEC, to create a multiyear  
            framework and plan that articulates the overarching vision for  
            the Program, outlines performance criteria, and describes  
            agency roles.  

           EXISTING LAW  :

          1) AB 32 required ARB to determine the 1990 statewide greenhouse  
             gas (GHG) emissions level and approve a statewide GHG  
             emissions limit that is equivalent to that level to be  
             achieved by 2020.  Under AB 32, ARB is authorized to include  
             the use of market-based mechanisms to comply with these  
             regulations (such as cap and trade).  

          2) Requires the Department of Finance, in consultation with ARB  
             and any other relevant state agency, to develop a three-year  
             investment plan to guide allocations of cap and trade  
             revenues.   

          3) Requires the investment plan to allocate a minimum of 25% of  
             the available moneys in the fund to projects that provide  
             benefits to disadvantaged communities, and a minimum of 10%  
             of the available moneys to projects located within  
             disadvantaged communities.  

          4) Requires moneys from cap and trade revenues to be used to  








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             facilitate the achievement of GHG emissions reductions  
             consistent with AB 32.  

          5) Under the California Alternative and Renewable Fuel, Vehicle  
             Technology, Clean Air, and Carbon Reduction Act of 2007 (AB  
             118, Nunez, Chapter 750, Statutes of 2007), requires CEC to  
             implement the Alternative and Renewable Fuels and Vehicle  
             Technology Program (ARFVTP) to provide funding measures to  
             specified entities to develop and deploy technologies and  
             alternative and renewable fuels in the marketplace to help  
             attain the state's climate change policies.  

          6) Creates the Air Quality Improvement Program (AQIP),  
             administered by ARB in consultation with local air districts,  
             to fund air quality improvement projects.  

            7)   Establishes certain vehicle and vessel related surcharges  
               and fees, until January 1, 2016, to fund the AQIP and  
               ARFVTP, among others.  

            8)   Establishes the Carl Moyer Program, administered by ARB,  
               to fund the incremental cost of cleaner-than-required  
               vehicles, engines, and equipment and authorizes the funding  
               of projects reducing NOx, particulate matter (PM) and  
               reactive organic gases emissions under the Carl Moyer  
               Program until January 1, 2015, after which date, only the  
               reduction of NOx emission reduction projects will be  
               eligible for funding.  

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, the bill would incur costs of approximately $619,000  
          and 4 personnel years (PYs) in 2014-15, and ongoing costs of  
          $454,000 and 3 PYs to adopt the specified funding plan and  
          administer the components of that plan.  Additional costs  
          include ongoing costs of approximately $165,000 and 1 PY  
          beginning in 2014-15 to develop and administer the new programs,  
          $344,000 and 2 PYs, beginning in 2016-17, to develop and  
          implement a certification program for truck and bus hybrid and  
          zero-emission vehicle retrofits and remanufactures and unknown  
          ongoing costs to fund additional program expenditures, likely in  
          the millions to tens of millions annually.  

           COMMENTS  :  California has made great strides in its efforts to  
          curb GHG emissions and improve air quality and appears to be on  
          target to meet GHG emissions reduction goals set forth in AB 32.  








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           However, a much more demanding target looms beyond the AB 32  
          horizon.  Executive Order (EO) S-3-05, signed by Governor  
          Schwarzenegger in June of 2005 calls for California's GHG  
          emissions to be reduced by 80% below 1990 levels by 2050.  ARB  
          indicates that much of the "low hanging fruit" has been  
          addressed when it comes to quickly and easily reducing emissions  
          to meet the 2020 goal and that more assertive measures need to  
          be taken if California is to achieve its 2050 emissions goal.  

          Given that cars and trucks are responsible for nearly 40% of  
          California's GHG emissions, it stands to reason that addressing  
          transportation sector emissions represents the logical next step  
          toward achieving the 2050 emissions reduction goal as outlined  
          in EO S-3-05.  

          To this end, California has worked diligently to address  
          transportation sector emissions across many platforms, but  
          particularly toward replacing existing fleets (light-duty  
          through heavy-duty) with zero- and near-zero emissions vehicles  
          and equipment.  The light-duty fleet side has made much progress  
          and these clean cars are well on their way to becoming  
          mainstream choices for consumers.  This progress was made  
          through technology programs and specific manufacture and sales  
          requirements paired with incentive programs and infrastructure  
          development.  

          Unfortunately, turning over the fleet for medium- and heavy-duty  
          vehicles has not been on the same trajectory despite the fact  
          that these vehicles not only represent a significant source of  
          GHGs, they are powered by diesel engines which produce fine  
          particulate matter that leads to poor air quality and severe  
          health impacts--particularly in low-income and disadvantaged  
          communities that are often within close proximity to heavily  
          industrialized areas (such as the port) and along major  
          transportation corridors.  

          While programs at ARB and CEC address both light- and heavy-duty  
          vehicle sectors, there are some who believe that additional,  
          focused efforts are needed for the medium- and heavy-duty zero-  
          and near-zero-emission vehicles and equipment to improve market  
          penetration and make the purchase and use of this technology a  
          viable, and affordable option for medium- and heavy -duty fleet  
          operators.  Generally, the programs in place to address the  
          medium- and heavy-duty vehicle sector reside within ARBs and  
          CEC's AQIP and ARFVTP programs.  








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           Air Quality Improvement Program (AQIP)  :  AB 118 established the  
          AQIP, administered by ARB in consultation with local air  
          districts.  This program is funded through surcharges on vehicle  
          registration fees, a portion of vessel registration fees, a  
          portion of the Smog Abatement Fee, and an increase in the fee  
          for identification plates for various types of vehicles such as  
          farm trailers and logging vehicles, operated on public roads.  

          This program provides competitive grants to fund projects to  
          improve the air quality impacts of alternative fuels and  
          vehicles, vessels, and equipment technologies.  AQIP encompasses  
          several programs, including the Hybrid and Zero-Emission Truck  
          and Bus Voucher Incentive Project (HVIP).  HVIP, which is  
          administered by ARB and its contractor, CALSTART, provides  
          vouchers to California fleet owners to help purchase hybrid and  
          zero-emission trucks and buses.  

           Alternative and Renewable Fuel and Vehicle Technology Program  
          (ARFVTP)  :  AB 118 also establishes the ARFVTP, administered by  
          the California Energy Commission (CEC).  This program provides  
          funding for development and deployment of alternative and  
          renewable fuels and advanced transportation technologies to help  
          attain the state's climate change goals.  Eligible projects  
          include, for example, development, improvement, and production  
          of alternative and renewable low-carbon fuels; improvement of  
          light-, medium-, and heavy-duty vehicle technologies; and  
          expansion of infrastructure connected with existing fleets,  
          public transit, and transportation corridors.  

          Although these programs have been somewhat successful in  
          developing and deploying zero and near-zero-emission medium- and  
          heavy-duty vehicles, the total number of these vehicles in use  
          in California remains very low.  To achieve widespread  
          deployment, the authors believe that additional standards and  
          technology studies and development need to be performed.  The  
          authors contend that additional funding is needed to fully  
          develop and test actual systems, with a focus on performance  
          improvements and cost reduction.  They cite a need for early  
          demonstration projects to explore performance and integration  
          challenges which need to be followed up with larger  
          pre-commercial demonstrations to evaluate real world  
          performance.  Once these systems are developed and tested, the  
          authors note that targeted incentive programs must be created to  
          achieve full market penetration.  








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          The authors point out that many of the efforts that are needed  
          to develop and deploy zero- and near-zero-emission medium and  
          heavy duty vehicles, are not fully addressed in AQIP and ARFVTP.  
           They note that while it may be possible to add these  
          requirements into AQIP and ARFVTP, they contend that greater  
          progress would likely be achieved by creating a single  
          overarching program that is singularly focused on developing and  
          deploying these vehicles.  For example, the development of  
          studies and advanced research, including advanced technology  
          business case and feasibility studies to develop standards do  
          not fall neatly into AQIP or ARFVTP and the same is true for  
          development of pre-commercial commercial demonstration programs.  
          The authors note that some existing technological development  
          and deployment (incentives) programs can be tailored to address  
          medium- and heavy-duty transportation sector needs, but given  
          that much of the effort in these programs is currently going  
          toward light-duty clean cars, it is unclear whether or not  
          adding these programs into existing efforts would produce the  
          desired results.  

          This concern has led the authors to introduce this bill which  
          creates a separate and distinct program with the singular focus  
          of developing and deploying these technologies so that the goal  
          of fleet turnover can be achieved.  The authors believe that by  
          combining all efforts for this transportation sector into one  
          program, along with increased investments will ultimately result  
          in broad full-scale deployment of these clean vehicles,  
          particularly in disadvantaged communities.  
           
          Authors' amendments  :  The authors intend to take amendments in  
          committee to:

          1)Clarify that pilot programs and other programs focus on  
            technology, rather than market, development.

          2)Specify that the program include non-vehicle based projects as  
            intelligent transportation systems, autonomous vehicles, and  
            other freight information and operations technologies.  

          3)Require the development of guidance through the existing AQIP  
            Funding Plan process rather than the development of new  
            program guidelines.  

          4)Clarify that allowances for remanufactured and retrofitted  








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            vehicles that may qualify for incentives must be subject to  
            ARB approval.  

          5)Specify that the program is subject to sustainability goals  
            that minimize impacts to natural resources on state and  
            federal lands;

          6)Amends the requirement for the creation of a multiyear program  
            plan and instead requires ARB, in consultation with CEC, to  
            create an annual program plan.  

           Related legislation  :  SB 913 (DeSaulnier) would require ARB and  
          the Bureau of Automotive Repair to cooperate in issuing a  
          specified number of vouchers through EFMP and the Consumer  
          Assistance Program.  That bill is scheduled to be heard in the  
          Assembly Transportation Committee on June 23, 2014.  

          SB 1275 (De León) would require ARB to expand EFMP to provide  
          for ridesharing and car-sharing vouchers and that ARB to adopt a  
          funding plan for projects under AQIP and establish programs to  
          increase benefits from electric transportation for disadvantaged  
          and low- and moderate-income communities.  That bill is  
          scheduled to be heard today in the Assembly Transportation  
          Committee.  

           Previous legislation  :  AB 8 (Perea), Chapter 401, Statutes of  
          2013, extended until January 1, 2024, extra fees on vehicle  
          registrations, boat registrations, and tire sales in order to  
          fund the AB, the Carl Moyer Program, and AB 923 (Firebaugh,  
          Chapter 707, Statutes of 2004) programs that support the  
          production, distribution, and sale of alternative fuels and  
          vehicle technologies, as well as air emissions reduction  
          efforts.  

          SB 359 (Corbett) Chapter 415, Statutes of 2013, provided money  
          for ARB projects and programs aimed at encouraging deployment of  
          zero-emission and hybrid vehicles.  

          SB 535 (De Leon), Chapter 830, Statutes of 2012, required the  
          Department of Finance, when developing the three-year investment  
          plan for cap-and-trade monies, to allocate twenty-five percent  
          of the funds to projects that benefit disadvantaged communities,  
          and to allocate a minimum of ten percent of available cap and  
          trade revenues to projects located within disadvantaged  
          communities.  








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          AB 1532 (J. Perez), Chapter 807, Statues of 2012, created the  
          Greenhouse Gas Reduction Fund Investment Plan and Communities  
          Revitalization Act to set procedures for the investment of  
          regulatory fee revenues derived from cap and trade revenues.  

          AB 118 (Nunez), Chapter 750, Statutes of 2007 established the  
          Air Quality Improvement Program (AQIP), administered by ARB in  
          consultation with local air districts, and funded through  
          surcharges on vehicle and vessel registration fees, smog  
          abatement fees, and identification plates fees.  

          AB 32 (Nunez), Chapter 488, Statutes of 2006 required the ARB to  
          develop a plan of how to reduce emissions to 1990 levels by the  
          year 2020 and also required ARB to ensure that, to the extent  
          feasible, GHGs reduction requirement and programs direct public  
          and private investment toward the most disadvantaged  
          communities.  

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          American Lung Association
          Breathe California
          California Association of Port Authorities
          California Bus Association
          California League of Conservation Voters
          CALSTART
          Center for Transportation and the Environment
          City of Long Beach
          City of Salinas
          Coalition for Clean Air
          Communities for a Better Environment
          Environment California
          Environmental Defense Fund
          Greenlining Institute
          Los Angeles County Metropolitan Transportation Authority
          Natural Resources Defense Council
          Sierra Club
          Union of Concerned Scientists
          UPS
           
            Opposition 
           








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          California Chamber of Commerce  
           California League of Food Processors
          California Manufacturers and Technology Association

           
          Analysis Prepared by  :   Victoria Alvarez / TRANS. / (916) 319-  
          2093