BILL ANALYSIS Ó AB 577 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 577 (Bonilla) - As Amended May 5, 2015 ----------------------------------------------------------------- |Policy |Rules |Vote:|11 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Natural Resources | |9 - 0 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill establishes the Biomethane Collection and Purification Grant Program (Program) at the California Energy Commission (CEC) and allocates $13 million, upon appropriation by the Legislature, from cap and trade revenues to fund the program. AB 577 Page 2 Specifically, this bill: 1)Allocates $13 million from the Greenhouse Gas Reduction Fund (GGRF) upon appropriation by the Legislature, to CEC to award grants pursuant to the Program. 2)Establishes the Program and requires CEC to develop and implement grants for projects that build or develop collection and purification technology, infrastructure, and projects that upgrade existing biomethane facilities to meet the state's biomethane standards. 3)When awarding grants, requires CEC to consider: a) Opportunities to co-locate biomethane producers with vehicle fleets to generate biomethane for conversion to transportation fuel. b) The location of biomethane sources and their proximity to natural gas pipeline injection sites. 4)Requires CEC to prioritize projects that provide the maximum greenhouse gas (GHG) reductions FISCAL EFFECT: 1)Cost pressures of up to $13 million (GGRF) to fund the Program. 2)Unknown increased administrative costs for CEC to develop and AB 577 Page 3 implement the Program. COMMENTS: 1)Purpose. According to the author, the biogas market in California has not been developed because the collection and purification can be incredibly costly. For example, meeting the pipeline purification standards for biogas in California can add 40% or more to total project costs. This bill seeks to promote the development and commercialization of biogas in California by providing incentives for purification technology, infrastructure, and projects to upgrade existing facilities to meet the state's standards. 2)Background. The anaerobic digestion of biodegradable organic matter produces biogas, consisting of methane, carbon dioxide, and other trace amounts of gases. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste. According to a CEC estimate, 358 megawatts (MW) is potentially available from new landfill gas development. Of these landfills, some are small and are therefore unlikely to be developed for gas by 2020. Biogas can also be used in place of gasoline or diesel for transportation. According to a November 2014 report by the Bioenergy Association of California, California could generate as much as 10% of its total gas consumption (2,415 gasoline gallon equivalents) from organic waste, or the equivalent of 7,000 megawatts of renewable power. AB 577 Page 4 Current bioenergy production in California includes 33 biomass plants that generate a combined 600 megawatts of electricity (nearly 2 percent of California's total electricity supply); 11 dairy digesters that produce electricity, combined heat and power, and biogas; 500 megawatts of electricity is generated at biogas facilities at wastewater treatment plants and landfills; and, 50 to 100 million gasoline gallon equivalent are produced at in-state ethanol and biodiesel facilities. According to the CEC, despite its many benefits, bioenergy production uses only 15% of California's available biomass waste, and production is decreasing. The CEC's Bioenergy Action Plan identifies the following recommended actions: a) Increase research and development of diverse bioenergy technologies and applications, as well as their costs, benefits, and impacts. b) Continue to develop and make accessible information about the availability of organic wastes and opportunities for bioenergy development. c) Streamline and consolidate permitting of bioenergy facilities and reconcile conflicting regulatory requirements to the extent possible. d) Assess and monetize the economic, energy, safety, environmental, and other benefits of biomass. e) Facilitate access to transmission, pipelines, and other distribution networks. This bill provides funding to achieve the recommended actions of facilitating access to transmission, pipelines, and other distribution networks. 3)AB 32 Cap and Trade Revenues. The California Global Warming Solutions Act of 2006 (AB 32) requires ARB to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations, including market-based compliance mechanisms, to achieve maximum technologically feasible and cost-effective GHG emission reductions. AB 577 Page 5 As part of the implementation of AB 32 market-based compliance measures, ARB adopted a cap and trade program that caps the allowable statewide emissions and provides for the auctioning of emission credits, the proceeds of which are quarterly deposited into the GGRF available for appropriation by the Legislature. The 2014-15 Budget Act allocates cap and trade revenues for the 2014-15 fiscal year and establishes a long-term plan for the allocation of cap-and-trade revenues beginning in fiscal year 2015-16. The Budget continuously appropriates 35% of cap-and-trade funds for investments in transit, affordable housing, and sustainable communities. Twenty-five percent of the revenues are continuously appropriated to continue the construction of high-speed rail. The remaining 40% will be appropriated annually by the Legislature for investments in programs that include low-carbon transportation, energy efficiency and renewable energy, and natural resources and waste diversion. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081 AB 577 Page 6