BILL ANALYSIS Ó
AB 199
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Date of Hearing: March 23, 2015
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB
199 (Eggman) - As Introduced January 29, 2015
SUBJECT: Alternative energy: recycled feedstock.
SUMMARY: Makes projects that use "recycled feedstock" eligible
for sales and use tax exclusions (STEs) authorized by the
California Alternative Energy and Advanced Transportation
Financing Authority (CAEATFA).
EXISTING LAW:
1)Establishes the California Global Warming Solutions Act of
2006 (AB 32), which:
a) Requires the California Air Resources Board (ARB) to
adopt regulations requiring the reporting and verification
of statewide GHG emissions;
b) Requires ARB to adopt a statewide GHG emissions limit
equivalent to 1990 emissions levels, to be achieved by
2020; and,
c) Authorizes ARB to use market-based compliance mechanisms
to comply with the regulations.
2)Establishes the California Integrated Waste Management Act of
1989, which requires local jurisdictions to divert 50% of
solid waste generated from landfill disposal and establishes a
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state policy goal that 75% of solid waste generated statewide
be diverted from landfill disposal by 2020.
3)Authorizes CAEATFA to provide financing for facilities that
use alternative energy sources and technologies. CAEATFA can
issue revenue bonds (without voter approval), make loans, loan
loss reserves, loan guarantees, and authorize STEs to develop
and commercialize alternative energy projects and "advanced
transportation technologies" that conserve energy, reduce air
pollution, and promote economic development and jobs.
THIS BILL:
1)Expands the definition of a "project" eligible for a STE to
include tangible personal property that processes or utilizes
recycled feedstock that is intended to be reused in the
production of another product or soil amendment.
2)Defines "recycled feedstock" as material that would otherwise
be destined for disposal, having completed its intended use
and product lifecycle.
3)Includes an urgency clause.
FISCAL EFFECT: Unknown. The total impact of all CAEATFA
approved STEs to the General Fund is limited to $100 million
annually. According to CAEATFA, all projects that are approved
for the STE have demonstrated that any costs to the state will
be offset by the increased economic activity created by the
project.
COMMENTS:
1)This bill. According to the author:
By targeting materials that would otherwise be landfilled
or exported for recycling overseas, AB 199 creates a
multiplier effect in terms of job creation and tax revenue.
This bill has an urgency clause for several reasons. The
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inconsistent application of existing "partial" sales tax
exemption has created uncertainty and an uneven playing
field for the recycling processing and manufacturing
sector. Moreover, drastic drops in oil prices have had the
effect of undermining the demand and price for
California-generated recycled materials - California
recycled material processors and recycled product makers
are starting to lose market share to out of state/country
"virgin" producers. Similarly, recent market and policy
drivers have led to decreases in the quality and supply of
recycled glass, requiring significant near term investment
in new equipment. Finally, the implementation of the
state's 75% recycling goal and recent organics recovery
policies has created an immediate demand for increased
recycled material processing and manufacturing
infrastructure.
2)Why recycling? According to ARB, a total reduction of 80
million metric tons (MMT), or 16% compared to business as
usual, is necessary to reduce statewide GHG emissions to 1990
levels by 2020. ARB intends to achieve approximately 78% of
the reductions through direct regulations. ARB proposes to
achieve the balance of reductions necessary to meet the 2020
limit (approximately 18 MMT) through a cap-and-trade program.
The Cap-and-Trade Auction Proceeds Investment Plan: Fiscal
Years 2013-14 through 2015-16 identifies the state's GHG
emission reduction goals and priority programs and identifies
three sectors as investment priorities: sustainable
communities and clean transportation; energy efficiency and
clean energy; and, natural resources and waste diversion.
Traditional recycling and organics management provide
significant GHG reductions over landfilling. Recycling
materials avoids the GHG emissions generated by extracting raw
materials, primary processing, and the transportation of those
materials. Recycling has also been shown to create local jobs
in California, rather than importing raw materials from
overseas. For example, for every 1% increase in recycled
content used in glass manufacturing, there is a corresponding
1% decrease in air emissions from glass manufacturing plants,
as well as related reductions from the reduced need for raw
materials.
AB 199
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Composting and other organics processing technologies, including
anaerobic digestion, reduce GHGs by avoiding the emissions
that would be generated by the material's decomposition in a
landfill. Landfill gas is generated by the decomposition of
organic materials such as food, paper, wood, and yard waste.
Fifty percent of landfill gas is methane (CH4), a potent
short-lived climate pollutant. According to the US EPA, "in
2012, CH4 accounted for about 9% of all US GHG emissions from
human activities? Methane's lifetime in the atmosphere is
much shorter than carbon dioxide (CO2), but CH4 is more
efficient at trapping radiation than CO2. Pound for pound, the
comparative impact of CH4 on climate change is over 20 times
greater than CO2 over a 100-year period." While most modern
landfills have systems in place to capture methane,
significant amounts continue to escape into the atmosphere.
According to ARB's GHG inventory, approximately 7 million tons
of CO2 equivalent are released annually. That number is
expected to increase to 8.5 million tons of CO2 equivalent by
2020. Soil amendments produced by organic waste have been
shown to improve soil health and structure, increase drought
resistance, and reduce the need for water, chemical
fertilizers, and pesticides. A recent study also found that
the application of compost to rangelands has significant
potential for carbon sequestration.
In addition to GHG emissions reductions, increased recycling
(including organic waste processing) is needed to achieve the
state's ambitious 75% recycling goal.
3)STE eligibility. CAEATFA is authorized to provide eligible
projects financial assistance in the form of a STE on property
used for the "design, manufacture, production, or assembly" of
advanced transportation technologies or alternative energy
source products, components or systems, as prescribed. To
date, CAEATFA has approved financial assistance to private
entities for projects that include: electric vehicle
manufacturing, solar photovoltaic manufacturing, landfill gas
capture and production, biogas capture and production (at
dairies and waste water treatment plants), demonstration
hydrogen fuel production, electric vehicle battery
manufacturing, and biomass processing and fuel production.
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Applicants must meet criteria developed by CAEATFA. In order to
qualify for a STE, the applicant must demonstrate that the
equipment to be purchased will be used to design, manufacture,
produce, or assemble an eligible advanced transportation
technology or alternative source product - including energy
efficiency - component or system. Eligible projects must meet
evaluation criteria relating to the fiscal and environmental
benefits of the project and to compare those benefits to the
cost of the STE. While there are no maximum or minimum limits
on individual STEs, the program is limited to $100 million
annually.
According to State Treasurer John Chiang:
AB 199 will have no negative impact on the state budget
because California manufacturers would not invest in the
recycling equipment without the tax exemption.
Additionally, projects must meet the "net benefits test" by
showing that the new project will create jobs in the state.
As of December 31, 2013, 48 CAETFTA applications were
approved for $1.68 billion in anticipated qualified
property purchases, resulting in $137.4 million in sales
and use tax exclusions and the creation of 8,164 jobs, 689
of which are attributable to the CAETFTA Program. The
projects are anticipated to produce an estimated $79.2
million in environmental benefits and $185.4 million in
fiscal benefits, resulting in $127.2 million in net
benefits to the state.
4)Previous legislation. The author of this bill carried AB 1021
in 2013, which was substantially similar to AB 199. AB 1021
was held in the Senate Appropriations Committee.
5) Double referral. This bill is double referred to the Revenue
and Taxation Committee.
REGISTERED SUPPORT / OPPOSITION:
AB 199
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Support
Association of Compost Producers
California Association of Sanitation Agencies
California Compost Coalition
California Electronic Asset Recovery
California Manufacturing and Technology Association
California Resource Recovery Association
Californians Against Waste
CarbonLITE Industries
Command Packaging
Cornerstone Environmental
CRM Co.
CR&R Environmental Services ECS Refining
Don't Waste LA Coalition
Full Cycle Bioplastics
Glass Packaging Insitute
Inland Empire Disposal Association
Institute of Scrap Metal Recycling Industries
Los Angeles Alliance for a New Economy
Los Angeles County Waste Management Association
Metropolitan Recycling
Mid Valley Disposal
Napa Recycling and Waste Services
Natural Resources Defense Council
North County Recycling
Northern Recycling and Waste Services
Kern Refuse Disposal
Recology
RePET
Republic Services
Solid Waste Association of Orange County
Sonoma Compost
State Treasurer John Chiang
StopWaste
Varner Brothers
Verdeco Recycling
Waste Management
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Opposition
None on file
Analysis Prepared
by: Elizabeth MacMillan / NAT. RES. / (916)
319-2092