BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 577 (Bonilla) - Biomethane: grant program
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|Version: July 6, 2015 |Policy Vote: E., U., & C. 7 - |
| | 0, E.Q. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 17, 2015 |Consultant: Marie Liu |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 577 would require the California Energy Commission
(CEC) to develop and implement a grant program for projects
related to biomethane production.
Fiscal
Impact:
Annual costs of $518,000 for each $10 million of grant dollars
to the Greenhouse Gas Reduction Fund (GGRF, special) to the
CEC to administer the grant program.
Potential costs, no higher than $320,000 to the GGRF (special)
to the Air Resources Board to coordinate with the CEC, develop
quantification methodologies, and to process funding
disbursements. If these costs are needed, the costs will
likely be offset by a reduction in administrative costs to the
CEC.
Cost pressures, at least in the mid-tens of millions of
dollars, to the GGRF (special) to fund eligible projects under
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the grant program.
Background: The California Global Warming Solutions Act of 2006 (referred
to as AB 32, HSC §38500 et seq.) requires the ARB to determine
the 1990 statewide greenhouse gas (GHG) emissions level, to
approve a statewide GHG emissions limit equivalent to that level
that will be achieved by 2020, and to adopt GHG emissions
reductions measures by regulation. ARB is authorized to include
the use of market-based mechanisms to comply with the
regulations. All monies, except for fines and penalties,
collected pursuant to a market-based mechanism are deposited in
the Greenhouse Gas Reduction Fund (GGRF) (Government Code
§16428.8).
Existing law requires that the GGRF only be used to facilitate
the achievement of reductions of GHG emissions consistent with
AB 32 (HSC §39710 et seq.). To this end, the Department of
Finance, in consultation with the ARB and any other relevant
state agencies, is required to develop, as specified, a
three-year investment plan for the moneys deposited in the GGRF.
The investment plan must allocate a minimum of 25% of the funds
to projects that benefit disadvantaged communities and to
allocate 10% of the funds to projects located within
disadvantaged communities. Additionally, the ARB, in
consultation with CalEPA, is required to develop funding
guidelines for administering agencies receiving allocations of
GGRF funds that include a component for how agencies should
maximize benefits to disadvantaged communities.
Methane is a "short-lived climate pollutant" as it has a much
shorter lifetime in the atmosphere than CO2, but is 20-30 times
more effective than CO2 in trapping heat in the atmosphere over
a 100-year period. Methane is the principal component of natural
gas and can be produced biologically under uncontrolled
anaerobic conditions, such as wetlands and landfills, and
controlled anaerobic conditions in digesters. The gases produced
in such conditions, known as "biogas" can be processed to
produced high purity, or "pipeline quality," methane. This
methane is referred to as "biomethane" to differentiate it from
natural gas.
Existing law requires the California Public Utilities Commission
AB 577 (Bonilla) Page 2 of
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(CPUC) to adopt standards that limit the concentrations of
constituents that may be found in biomethane to protect human
health and pipeline safety (HSC §25421).
Proposed Law:
This bill would require the CEC to develop and implement a
grant program to award monies to projects that do the following:
Produce biomethane.
Upgrade or expand existing biomethane production
facilities.
Develop collection and purification technology or
infrastructure for biomethane.
In awarding the grants, the CEC must consider the highest and
best use of local biomethane projects and, the proximity of the
biomethane sources with natural gas pipeline injection sites.
The CEC must maximize the greenhouse gas emission reductions for
each project per each dollar awarded.
The biomethane produced must meet CPUC standards for biomethane.
The grant program may be funded by the GGRF.
Staff
Comments: The CEC estimates that it would need approximately
three PYs at an annual cost of $518,000 for each $10 million
dollars of grants. These staff would be responsible for public
outreach, solicitation design, grant award management,
development of regulations, and reporting.
This bill would create cost pressures on the GGRF, or other
AB 577 (Bonilla) Page 3 of
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potential funding sources, to fund biomethane production,
collection, and purification. To give a point of reference to
the potential cost pressures, the CEC notes that there are
approximately 63 projects generating biomethane for electricity
or transportation fuel that would be eligible to receive funding
in this bill. It takes anywhere from $1 million to $5 million to
upgrade biomethane facilities to produce gas that meets the
CPUC's pipeline quality standards. Also, biofuels, which
includes biomethane has received $20 million in grants in the
last funding cycle of the CEC's Alternative and Renewable Fuel
and Vehicle Technology. This program is often oversubscribed for
biofuels. Given this information, staff believes that the cost
pressures in this bill are at least in the mid-tens of millions
of dollars.
The bill would allow for grants to be awarded for both
operational and infrastructure costs associated with biomethane
production. While there may be need to offset the operational
costs of biomethane production, staff notes that the state will
receive more lasting benefits on infrastructure projects. At the
very least, the author may wish to consider prioritizing capital
costs, though the requirement that the grants be for the highest
and best use of local biomethane projects may address the issue
of capital vs operational costs.
As a matter of clarification, staff recommends the author
specify that the grant program is for the collection of
biomethane, not just the production of biomethane, as the
production of biomethane only has a GHG benefit if the
biomethane is collected and used.
If this grant program is funded by the GGRF, the ARB believes
that it would have costs associated with this bill to coordinate
with the CEC to minimize overlap of this program with existing
programs at the Department of Food and Agriculture and the
CalRecycle, to coordinate with expenditure records and program
guidelines, and to develop GHG and co-benefit quantification
methodologies. The ARB also estimates costs for funding
disbursements and accounting. Assuming that the grant program
established under this bill will have between $10 and $20
million to distribute, ARB estimates its costs would be $320,000
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annually for two positions. Staff notes that it is unclear
whether some of these costs are duplicative of costs for
workload that would be done by the CEC, especially the one
position for processing funding disbursements and accounting. To
the extent that ARB has costs associated with this program,
these costs are likely to be offset by a reduction in the CEC's
costs.
Staff notes that there are multiple bills being considered by
both houses of the Legislature that propose projects that would
be eligible to receive GGRF funds. It is unclear how these bills
will interact with each other. Staff notes that a discussion on
the spending of GGRF is anticipated in August as part of a
budget discussion.
Staff notes that the author intends for the grant program to be
able to receive funding from the GGRF. A previous version of
this bill appropriated $13 million from the GGRF for the grant
program created in this bill. That appropriation has been
deleted from the bill, but there is still reference that
appropriation. Staff recommends that the language be deleted.
[On page 3, lines 30-31, delete "appropriated pursuant to
Section 39718.5."]
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