BILL ANALYSIS Ķ
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 577 Hearing Date: 6/30/2015
-----------------------------------------------------------------
|Author: |Bonilla |
|-----------+-----------------------------------------------------|
|Version: |6/17/2015 As Amended |
-----------------------------------------------------------------
------------------------------------------------------------------
|Urgency: |No |Fiscal: |Yes |
------------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Jay Dickenson |
| | |
-----------------------------------------------------------------
SUBJECT: Biomethane: grant program
DIGEST: This bill establishes a grant program, funded by the
Greenhouse Gas Reduction Fund (GGRF), for biomethane projects.
ANALYSIS:
Existing law:
1)Directs the California Air Resource Board (ARB) to monitor and
regulate sources of emissions of greenhouse gases (GHG) that
cause global warming in order to reduce GHG emissions to 1990
levels by 2020. (Health & Safety Code §38510 et seq.)
2)Establishes the Greenhouse Gas Reduction Fund (GGRF), and
requires all moneys collected by the ARB from the auction or
sales of allowances, pursuant to a market-based compliance
mechanism, be deposited in the GGRF and made available for
appropriation by the Legislature. (Government Code §16428.8)
3)Establishes the GGRF Investment Plan and Communities
Revitalization Act to set procedures for the investment of
regulatory fee revenues derived from the auction of GHG
allowances. (Health and Safety Code §§39710 to 39720)
4)Requires the GGRF Investment Plan to allocate: (a) a minimum
of 25% of the available moneys in the fund to projects that
provide benefits to identified disadvantaged communities, and,
(b) a minimum of 10% of those available moneys in the fund to
projects located within identified disadvantaged communities.
(Health and Safety Code §§39711 to 39723)
AB 577 (Bonilla) PageB of?
5)Requires the California Public Utilities Commission (CPUC) to
adopt standards that specify the concentrations of
constituents of concern that are found in biomethane, and to
adopt monitoring, testing, reporting, and recordkeeping
protocols, to ensure the protection of human health and the
integrity and safety of pipelines and pipeline facilities.
(Health & Safety Code §25421 et seq.)
6)Requires the CPUC to adopt pipeline access rules that ensure
that each gas corporation provide nondiscriminatory open
access to its gas pipeline system to any party for the
purposes of physically interconnecting with the gas pipeline
system and effectuating the delivery of gas. (Public
Utilities Code §784.)
7)Requires each of California's three large investor-owned
utilities (IOUs) to procure a share of 250 megawatts (MW) of
bioenergy from facilities less than 3 MW as follows: (a) 110
MW from biogas from wastewater treatment, municipal organic
waste diversion, food processing, and codigestion; 90 MW from
dairy and other agricultural bioenergy; and (c) 50 MW from
bioenergy using byproducts of sustainable forest management.
8)Requires the California Energy Commission (CEC) to hold public
hearings to identify in its Integrated Energy Policy Report
impediments that limit procurement of biomethane in
California, including, but not limited to, impediments to
interconnection, and to offer solutions. (Public Resources
Code §25326.)
This bill:
1)Directs CEC to implement a program to award monies, upon
appropriation from the GGRF, to projects that (a) produce
biomethane, (b) upgrade or expand existing biomethane
facilities, or (c) develop collection and purification
technology or infrastructure for biomethane.
2)Requires CEC, in making biomethane awards, to consider both
(a) opportunities to colocate biomethane producers with
vehicle fleets and (b) the location of biomethane sources and
their proximity to natural gas pipeline injection sites.
3)Further requires CEC to prioritize biomethane projects to
AB 577 (Bonilla) PageC of?
maximize reduction in GHG emissions achieved by a project for
each dollar awarded.
Background
What is biomethane? Biomethane is purified biogas, which is the
gaseous product of anaerobic digestion and is comprised
primarily of methane (50% -70%) and carbon dioxide (30% -
50%).<1> Biomethane is considered a "low-carbon" fuel because
its combustion destroys methane, a potent climate-warming gas.
In addition, biomethane can be used to displace the use of
fossil fuels, such as natural gas, thereby further decreasing
its carbon intensity.
Many programs support biomethane production and use. There are
many state programs that, directly or indirectly, encourage the
use of biomethane. Utilities can meet the RPS through the use
of biomethane if produced from qualifying renewable resources.
Recently enacted statute (SB 1122, Rubio, Chapter 612, Statutes
of 2012) requires IOUs to collectively procure at least 250 MW
of generation eligible for the RPS from bioenergy generation
projects, including projects that can produce biomethane. The
CEC has invested more than $49 million in 13 biomethane
feasibility, demonstration and production projects throughout
the state. And biomethane can be used to help satisfy the
requirements of the ARB's Low-Carbon Fuel Standard, which
requires a reduction of at least 10% in the carbon intensity of
California's transportation fuels by 2020.
In addition, efforts are underway that should ease the further
development and commercialization of biomethane. The IOUs have
been wary of injecting biogas into their natural gas pipelines
for fear of introduction of contaminants that could damage the
pipelines or harm human health. In response, the Legislature,
in 2012, enacted AB 1900 (Gatto, Chapter 602, Statutes of 2012).
That bill directs the CPUC to identify landfill gas
constituents, develop testing protocols for landfill gas
injected into common carrier pipelines, adopt standards for
biomethane to ensure pipeline safety and integrity, and adopt
rules to ensure open access to the gas pipeline system.
The CPUC, pursuant to AB 1900, adopted concentration standard
limits for constituents of concern that may be found in
---------------------------
<1> Biogas Potential in the United States (National Renewable
Energy Laboratory)
AB 577 (Bonilla) PageD of?
biomethane, and monitoring, testing, reporting, and
recordkeeping requirements. The CPUC's standards should enhance
the IOUs' willingness to inject biomethane into their pipelines.
The CPUC is still in the process of completing additional work
resulting from enactment of AB 1900. Nonetheless, in keeping
with AB 1900's call to further development of the California
biomethane market, the CPUC issued a proposed decision that
would require IOU ratepayers to subsidize 50% of the
interconnection costs, up to $1.5 million, of any biomethane
project built over the next five years, with a program cap of
$40 million. The CPUC is also formally contemplating allocating
some of the IOUs' cap-and-trade revenue towards subsidizing
biomethane projects, which, presumably, would be in addition to
the 50% interconnection subsidy the CPUC has already proposed.
The budget may be better. As described above, there are many
programs encouraging the production and use of biomethane, and
there is the prospect of the CPUC-proposed interconnection cost
subsidy in the offing. Nonetheless, proponents contend that the
cost to comply with the CPUC regulations for cleaning and
conditioning biomethane prohibits development of the biomethane
industry in California. As evidence, proponents report that no
new biomethane pipeline injection project has been built since
the CPUC adopted the AB 1900 biomethane standards.
As a remedy, the bill directs CEC to implement a program to
subsidize the cost of biomethane projects. Yet, this bill
appropriates no funds for the new program and, as of yet, the
2015-16 Budget appropriates no funds from the GGRF to for
biomethane projects. Such an appropriation, should one occur,
will likely result from the budget process. In addition, the
Legislature may attach control language to any such
appropriation, which would govern uses of the money and its
administration. The Legislature has deferred action on
appropriations from the GGRF for this budget cycle and will
likely take action on such appropriations later this summer.
The committee may wish to defer action on this bill in deference
to the budget process.
Projects funded from the GGRF must reduce GHGs. This bill seeks
to subsidize biomethane projects with monies in the GGRF. The
Legislature established the GGRF to govern the investment of
regulatory fee revenues derived from the auction of GHG
AB 577 (Bonilla) PageE of?
allowances pursuant to the cap-and-trade program adopted by ARB
under the California Global Warming Solutions Act of 2006 (AB 32
Nuņez/ Pavley, Chapter 488, Statutes of 2006). In doing so, the
Legislature established parameters for uses of money in the
fund, paramount among them that it be used to facilitate the
reduction of GHGs in California. The program established by the
bill must reduce GHGs to be in compliance with the law.
Appropriately, this bill requires CEC to maximize the reduction
of GHG emissions achieved by a project for each dollar awarded.
Presumably, CEC will implement the program to ensure its
estimation of the GHG emissions achieved by each project is
determined on a net basis, considering the life cycle of each
project's biomethane production.
The bill additionally directs CEC, in granting biomethane
awards, to consider opportunities to colocate biomethane
producers with vehicle fleets to generate biomethane and convert
it to transportation fuel in the same location. The specificity
of this consideration seems inconsistent with the bill's other,
general direction to CEC - that it maximize the reduction of GHG
emissions achieved by a project for each dollar awarded. The
author and committee may wish to amend the bill to make this
consideration more general, as follows:
Public Resources Code Section 5680.
(a) (1) The commission shall develop and implement a
grant program to award moneys appropriated pursuant to
Section 39718.5 of the Health and Safety Code for
projects that do any of the following:
(A) Produce biomethane.
(B) Upgrade or expand existing biomethane production
facilities.
(C) Develop collection and purification technology or
infrastructure for biomethane.
(2) Biomethane produced from those projects shall meet
the requirements established pursuant to Section
25421 of the Health and Safety Code.
(b) In granting an award, the commission shall consider
both of the following:
(1) Opportunities to colocate biomethane producers with
AB 577 (Bonilla) PageF of?
vehicle fleets to generate biomethane and convert it to
transportation fuel in the same location. The highest
and best use of the local biomethane project.
(2) Location of biomethane sources and their proximity
to natural gas pipeline injection sites.
(c) In prioritizing projects eligible for grants pursuant
to this section, the commission shall maximize the
reduction of greenhouse gas emissions achieved by a project
for each dollar awarded.
(d) Grants awarded pursuant to this section may be funded,
upon appropriation by the Legislature, from the Greenhouse
Gas Reduction Fund established pursuant to Section 16428.8
of the Government Code.
Double Referral. Should this bill be approved by this committee,
it will be re-referred to the Senate Committee on Environmental
Quality for its consideration.
Prior/Related Legislation
AB 590 (Dahle, 2015) authorizes a program to subsidize the
generation of electricity at existing in-state biomass
facilities three megawatts and larger. The program would be
funded from the GGRF, upon appropriation. The bill is currently
under consideration by this committee.
SB 360 (Cannella, 2015) authorizes the CPUC to consider
providing the option to all gas corporations to engage in
competitive bidding and direct investment in ratepayer financed
biomethane collection equipment in California. The bill is
waiting to be considered in this committee.
AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC
to identify landfill gas constituents, develop testing protocols
for landfill gas injected into common carrier pipelines, adopt
standards for biomethane to ensure pipeline safety and
integrity, and adopt rules to ensure open access to the gas
pipeline system.
AB 2196 (Chesbro, Chapter 605, Statutes of 2012) ensured that
biogas qualifies for RPS credit, provided its production,
delivery and use meet certain conditions.
AB 577 (Bonilla) PageG of?
SB 1122 (Rubio, Chapter 612, Statutes of 2012) required IOUs to
collectively procure at least 250 MW of generation eligible for
the RPS from small bioenergy generation project, including
biogas projects.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
ASSEMBLY VOTES:
Assembly Floor (77-1)
Assembly Appropriations Committee (17-0)
Assembly Natural Resources Committee(9-0)
SUPPORT:
Bioenergy Association of California (source)
CR&R Waste Services
California Association of Sanitation Agencies
California Chapters of the Solid Waste Association of North
America
California Refuse Recycling Council
California Special Districts Association
Clean Energy
Coalition for Renewable Natural Gas
ES Engineering, Inc.
East Bay Municipal Utility District
Harvest Power California, LLC
Sanitation Districts of Los Angeles County
Southern California Gas Company
The Coalition for Renewable Natural Gas
Western Placer Waste Management Authority
OPPOSITION:
California Taxpayers Association
ARGUMENTS IN SUPPORT: Supporters contend the state should
subsidize the biomethane projects to ensure development of the
industry in state so that Californians can realize the resultant
environmental and economic benefits.
ARGUMENTS IN OPPOSITION: Opponents question the legality of
AB 577 (Bonilla) PageH of?
collection of cap-and-trade regulatory fees and, therefore,
oppose the creation of programs to disperse revenues derived
from those fees.
-- END --