BILL ANALYSIS Ó
SENATE COMMITTEE ON NATURAL RESOURCES AND WATER
Senator Fran Pavley, Chair
2015 - 2016 Regular
Bill No: AB 429 Hearing Date: July 14,
2015
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|Author: |Dahle | | |
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|Version: |June 29, 2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|William Craven |
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Subject: Public contracts: preferences: forest products.
BACKGROUND AND EXISTING LAW
1) California has various programs that provide bid preferences
to specific types of contractors or for projects in certain
areas. Generally, various Government Code sections establish
the programs and the Department of General Services' (DGS) State
Contracting Manual specifies program parameters and compliance
requirements.
The two main bid preference programs, according to the Assembly
Committee on Accountability and Administrative Review that
considered this bill earlier in the year, are the Disabled
Veteran Business Enterprise Program and the Certified Small and
Microbusiness Program. DGS oversees these programs and
certifies these businesses so they are eligible for the
preferences when bidding for state contracts. Additional
smaller bid preferences are also overseen by DGS.
Another provision in Section 12400 of the Public Contract Code
that is similar to a purchasing preference requires the state to
engage in "environmentally preferable purchasing."
2) The Z'berg-Nejedly Forest Practice Act of 1973 prohibits a
person from conducting timber operations on timberland unless a
timber harvesting plan has been prepared by a registered
professional forester and has been submitted to the Department
of Forestry and Fire Protection and approved by the Director of
Forestry and Fire Protection or the State Board of Forestry and
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Fire Protection.
PROPOSED LAW
1) This bill contains numerous findings and declarations
regarding the economic and environmental importance of forested
lands including the importance of forested lands to sequester
carbon dioxide.
2) The bill establishes conditions for a purchasing preference
for lumber or other solid wood products that when those
materials are purchased by state agencies. These conditions
include:
a) The lumber or wood products must be harvested in
compliance with the California Forest Practices Act or verified
under a compliance offset protocol for U.S. forest projects
adopted by the State Air Resources Board or any other offset
protocol linked by the air board to implement AB 32.
b) The preference must be consistent with federal law;
c) The preference would apply only to direct purchases
of lumber and wood products by state agencies.
3) The bill states that the direct purchase of lumber or other
solid wood products pursuant to this preference are subject to
this purchasing preference "if price, fitness and quality are
equal, based upon verifiable, self-certification from
suppliers."
4) The lumber or other solid wood products that are subject to
this purchasing preference are only those purchased directly by
state agencies.
5) The preference would attach only when consistent with federal
law.
ARGUMENTS IN SUPPORT
The author states this bill would simply encourage state
agencies to give preference to California lumber products as
long as the price, quality and fitness of products are equal. He
is concerned that lumber production in the state has declined as
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demand for lumber has increased. Further, the author argues that
California's forests are harvested sustainably and are subject
to more rigorous regulation than competitors from other states
and nations. Those in support of the bill have made many of the
same points provided by the author.
The author believes that the provision that limits the bill to
situations when it is consistent with federal law should remove
the concern that the bill would be implemented if it conflicted
with federal trade agreements.
ARGUMENTS IN OPPOSITION
The opposition consists primarily of Canadian government and
Canadian forestry interests who make several points:
1) The bill discriminates against lumber and forest products
imported into California from what the opposition contends are
sustainably managed forests in Canada and elsewhere.
2) The bill violates U.S. obligations within the context of
World Trade Organization (WTO) agreements. The WTO agreement
requires California to provide "treatment no less favorable than
the treatment" of California wood products purchased in Canada.
3) While the bill claims to be open to California purchases from
all wood products harvested pursuant to the California Forest
Practices Act, as a practical matter such lumber only comes from
California because of the impossibility of verifying the lumber
from outside of California was harvested pursuant to California
law and regulations.
COMMENTS
1) Third time a charm? AB 2994 (Frommer) of 2004 would have
required state agencies to give preference to the purchase of
lumber and certain solid wood products harvested from forests in
California when price, fitness and quality are equal. AB 2994
was vetoed, and the veto message of Governor Schwarzenegger
stated: "While I support the goal of recognizing the stringent
environmental standards California has placed on the forestry
industry, many other industries face similar regulatory burdens
without the availability of bidding preferences. The preferences
imposed by this bill could result in costly legal challenges,
retaliation by other states and nations, and bid protests from
those claiming the preference should be granted and those
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objecting to it."
In 2007, AB 994 (Parra) would have established a similar
preference, but that bill was amended into a bill dealing with
another topic.
2) Assuming the bill moves forward, the author and sponsors are
undoubtedly aware of the possible legal quagmire that may ensue
as referenced in comment 1. While the constitutional and
international trade issues in purchasing preferences are not
often before this committee, it is safe to make two basic
observations:
a) It is uncertain whether courts would look kindly on this
purchasing preference in light of possible complaints from both
international and domestic competitors.
b) It is uncertain whether Canada would invoke international
trade agreements to challenge this law. Its clear preference is
to stop the bill rather than to initiate an international trade
dispute resolution protocol with the U.S.
3) If the bill becomes law, those implementing this law may need
to establish a mechanism to differentiate lumber products from
trees harvested in California or pursuant to an offset protocol
if satisfactory identification measures are not already in
place.
4) The Department of General Services informed the Committee
that state agencies make direct purchases of lumber (including
signage posts, survey stake, etc.) in an approximate amount of
$1.4 million annually. The WTO economic floor for activities
not covered by the trade agreement is $$498,000.
5) The bill would establish for the first time that lumber
harvested pursuant to an offset protocol linked by the State Air
Resources Board pursuant to section 12894 of the Government Code
is an appropriate basis for conditioning lawful timber imports
into California. The Committee may wish to ask the sponsors to
explain the rationale for this proposal.
The primary purpose of Section 12894 was to provide transparency
to the Legislature and the public of the Western Climate
Initiative. Four Canadian provinces are participating in the
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Western Climate Initiative (WCI), an agreement between British
Columbia, Alberta, Ontario, Quebec, and California to reduce
emissions and fight climate change through a cap-and-trade
system. Offset protocols were not originally intended to affect
the lumber import or export markets across national boundaries.
6) If the Committee is so inclined, it could consider a sunset
date in order to provide greater data about the effectiveness of
using the offset protocol, what the economic effects of the bill
are on both the domestic and other forest-based economies that
export to California, how the direct purchases of lumber by
state agencies is trending over a few years, whether any
international trade issues develop, and any other related
issues. Whether to impose a sunset and of what duration is a
decision of the Committee.
SUPPORT
Associated California Loggers
California Chamber of Commerce
California Farm Bureau
California Forestry Association
California Licensed Foresters Association
Forest Products Industry National Labor Management Committee
Green Diamond Resource Company
Mendocino/Humboldt Redwood Companies
Shasta Forests Timberlands, LLC and Red River Forests, LLC
Sierra Pacific Industries
Western Wood Preservers Institute
OPPOSITION
British Columbia
Coast Forest Products Association (20 companies from British
Columbia)
Forest Products Association of Canada
Interfor
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