BILL ANALYSIS Ó
AB 590
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Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
AB 590
(Dahle) - As Amended April 21, 2015
SUBJECT: Greenhouse Gas Reduction Fund
SUMMARY: This bill creates the Biomass State Cost Share Account
within the Greenhouse Gas Reduction Fund (GGRF) and requires a
specified amount to be transferred annually from the GGRF to the
Account to be available for purposes, as specified.
Specifically, this bill:
a)Creates the Biomass State Cost Share Account within the GGRF.
b)Requires the following amount of moneys to be transferred from
the GGRF to the Biomass State Cost Share Account:
In 2015-16 fiscal year, $74 million,
In 2016-17 fiscal year, $118 million, and
In 2017-18, 2018-19, 2019-20 fiscal years, $120 million
in each of those fiscal years.
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a)Requires that moneys in the account, upon appropriation, be
available for expenditures by the California Energy Commission
(CEC) for the purposes of maintaining the current level of
biomass power generation in the state and revitalizing
currently idle facilities in strategically located regions.
b)Specifies that to be eligible for funding from the Biomass
State Cost Share Account, a facility's solid fuel biomass
electrical generation must satisfy all of the following:
The energy is generated on or after January 1, 2016,
The energy is generated within the state and sold to
customers within the state, and
The energy is net-metered generation.
a)Defines "net metered generation" to mean energy that is sold
to the grid and is not used onsite for the facility's own
electrical demand.
b)Requires a facility seeking funds from the Biomass State Cost
Share Account to submit an application to the CEC that
demonstrates that it is a solid fuel biomass facility and is
California Renewables Portfolio Standards Program Certified,
and submit monthly invoices to the CEC to document eligible
generation and the fuel used for that generation.
c)Requires the CEC to review each submitted invoice and make
monthly incentive payments to each applicant based on the
eligible generation and the applicable production incentive
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rate.
EXISTING LAW:
1)Requires the Air Resources Board (ARB), pursuant to the
California Global Warming Solutions Act of 2006, to adopt
rules and regulations that would reduce greenhouse gas (GHG)
emissions in the state to 1990 levels by 2020. (Health and
Safety Code Sections 38500 to 38599)
2)Establishes the 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 fund
and made available for appropriation by the Legislature.
(Government Code Section 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 Sections 39710 to 39720)
4)Requires the GGRF Investment Plan to allocate: 1) a minimum
of 25% of the available moneys in the fund to projects that
provide benefits to identified disadvantaged communities, and,
2) a minimum of 10% of those available moneys in the fund to
projects located within identified disadvantaged communities.
(Health and Safety Code Sections 39711 to 39723)
FISCAL EFFECT: Unknown.
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COMMENTS:
1)Author's Statement: "California is in danger of losing the one
asset it has to divert forest fuel reduction residues and other
wood waste materials today. In the last 12 months alone
California has closed five biomass facilities due to expired
contracts and poor economics. That's a loss of 108 MWs of
baseload renewable power and hundreds of jobs, both at the
plants and in the fuel supply infrastructure. California's RPS
program is failing to provide any incentive to procure biomass
power for a more balanced portfolio of renewables. Despite the
call for environmental and economic benefit considerations in
the RPS program, the only growth that is occurring in the
renewable industry is coming from solar and wind. By 2020,
when the state is mandated to procure 33 percent of its
electricity supply from renewables, intermittents could account
for some three-quarters of total renewables while half of the
biomass plants in the state will be closed. Without these
biomass resources, the health, environmental and economic
well-being of these regions which rely on them are damaged.
Cost sharing strategies are essential to resolving this
problem."
2)Background: The California Global Warming Solutions Act of
2006, enacted by AB 32 (Nunez, 2006, Chapter 488, Statutes of
2006), tasked the ARB to adopt rules and regulations that
would reduce GHG emissions in the state to 1990 levels by
2020. With it, the Legislature acknowledged the adverse
impacts and threat global warming poses to the economic
wellbeing, public health, natural resources, and environment
of California, and took an active step towards mitigating its
effect.
In 2012, the State Budget Act of 2012 created the GGRF as a
special fund in the State Treasury and required that any money
collected by the state board from the auction or sale of
allowances pursuant to a market-based compliance mechanism to
be deposited into the fund and available for appropriation by
the Legislature. The bill required the funds to only be used
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for projects that would reduce the emissions of GHGs and
further the regulatory purpose of AB 32. In addition, in
2012, the legislature passed AB 1532 (John A. Perez, 2012,
Chapter 807, Statutes of 2012), which created 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. Furthermore, the
legislature also passed SB 535 (De Leon, 2012, Chapter 830,
Statues of 2012), which required the investment plan to
allocated specific funds to projects that provide benefits and
are located in identified disadvantaged communities.
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 25 percent
of cap and trade funds for investments in transit, affordable
housing, and sustainable communities. Forty percent will be
appropriated annually for investments in programs that include
low-carbon transportation, energy efficiency and renewable
energy, and natural resources and waste diversion. No funds
have been specifically appropriated for biomass power
generation.
3)Biomass Energy in California: Biomass is a waste and
byproduct consisting of organic residues from plants and
animals which are obtained primarily from harvesting and
processing agricultural and forestry crops, and can be
utilized as fuels for producing energy. Examples of biomass
include, forest slash, urban wood waste, lumber waste,
agricultural wastes, etc.
At its peak, California's biomass industry produced 800
megawatts (MW) of electricity from 66 direct combustion
biomass facilities. By 1996, the energy production from
biomass had dwindled to about 590 MW. Currently there are
still about 30 direct combustion biomass facility operations
with a capacity of 640 MW. The reduction in biomass energy
produced was a result of the expiration of price support and
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incentives provided to the biomass industry from the state.
This bill would establish the Biomass State Cost Share Account
within the GGRF, and require a specified amount to be
transferred annually from the GGRF to the account to be made
available for the purposes of maintaining the current level of
biomass power generation in the state and revitalizing
currently idle faculties in strategically located regions.
4)Arguments in Support: According to the California Biomass
Energy Alliance, the sponsor of the bill, "Biomass ? is an
important tool in helping California meet mandated GHG
reductions. Diverting wood residues/byproducts/wastes into
fuel provides a net reduction of over 3.5 million tons of
biogenic GHG emissions per year. An additional 1.5 - 3.5
million tons of avoided GHG emissions per year results from
the biomass industry's displacement of fossil-fueled
generation by the electric utilities. This doesn't even take
into account the emissions reductions potential if further
investments were made to avoid catastrophic wildfire such as
the 2013 Rim Fire. ? GGRF funds are an appropriate use of
funds because using waste and residue forms of biomass -
forest products manufacturing residues, in-forest residues,
agriculture residues and urban wood residues and wastes - in
the production of electricity reduces GHG emissions. In the
absence of this energy conversation, the bulk of these
materials would otherwise be open burned, buried in landfills,
or allowed to remain in the forest as overgrowth material that
diminishes forest health, and poses increased risks of
devastating wild fires and insect and disease outbreaks."
5)Arguments in Opposition: According to the California Chamber
of Commerce (CalChamber), "CARB's decision to arbitrarily
withhold and sell (auction) allowances will raise billions of
dollars at the expense of California businesses and consumers.
This approach runs contrary to expressed goals of AB 32,
which is maximizing benefits and minimizing leakage risks and
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costs. As CalChamber has long held, CARB lacks authority to
raise revenue through the auction of allowances. Given the
substantial legal uncertainties surrounding CARB's authority
to impose an auction, expending the proceeds is premature."
6)Proposed amendment. AB 590 includes a provision that defines
net metered generation to mean energy sold to the grid and not
used onside for the facility's own electricity demand. This is
inconsistent with the current statutory definition of net
metering in Public Utilities Code Section 2827.
The author may wish to strike the definition of net metered
generation.
Suggested amendments:
16428.81.(a) There is hereby created the Biomass State Cost
Share Account within the Greenhouse Gas Reduction Fund
established pursuant to Section 16428.8.
(b) The following amounts shall be transferred from the
Greenhouse Gas Reduction Fund to the Biomass State Cost Share
Account:
(1) In the 2015-16 fiscal year, seventy-four million dollars
($74,000,000).
(2) In the 2016-17 fiscal year, one hundred eighteen million
dollars ($118,000,000).
(3) In the 2017-18, 2018-19, and 2019-20 fiscal years, one
hundred twenty million dollars ($120,000,000) in each of those
fiscal years.
(c) The moneys in the Biomass State Cost Share Account, upon
appropriation by the Legislature, shall be available to the
State Energy Resources Conservation and Development Commission
for expenditure for the purposes of maintaining the current
level of biomass power generation in the state and
revitalizing currently idle facilities in strategically
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located regions. Protecting these existing resources will help
the state meet its goals to reduce greenhouse gas emissions,
protect existing jobs, and provide waste disposal benefits.
(d) To be eligible for funding from the Biomass State Cost
Share Account, a facility's solid fuel biomass electrical
generation shall satisfy all of the following requirements:
(1) The energy is generated on and after January 1, 2016.
(2) The energy is generated within the state and sold to
customers within the state.
(3) The energy is net-metered generation. "Net-metered
generation" for purposes of this section means energy that is
sold to the grid and is not used onsite for the facility's own
electrical demand.
(e) A facility seeking funding from the Biomass State Cost
Share Account shall submit an application to the commission
that demonstrates that it is a solid fuel biomass facility and
is California Renewables Portfolio Standard (RPS) Program
certified. An applicant shall submit monthly invoices to the
commission to document eligible generation and the fuel used
for that generation. The commission shall review the submitted
invoices and make monthly incentive payments to each applicant
based on the eligible generation and the applicable production
incentive rate.
7)Prior Legislation:
AB 1532 (John A Perez) 2012: Creates 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 pursuant to the cap and trade program
adopted by the ARB under the California Global Warming
Solutions Act of 2006. Chaptered by the Secretary of State -
Chapter 807, Statutes of 2012.
SB 1122 (Rubio) 2012: Requires statewide procurement of up to
250 MW of renewable energy from small biomass or biogas
technologies that utilize low emission technologies.
Chaptered by the Secretary of State - Chapter 612, Statutes of
2012.
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SB 535 (De Leon) 2012: Requires the GGRF Investment plan to
allocate specific funds to projects that provide benefits to
identified disadvantaged communities, and to projects located
within identified disadvantaged communities. Chaptered by the
Secretary of State - Chapter 830, Statutes of 2012.
AB 32 (Nunez) 2006: Enacts the Global Warming Act of 2006,
which creates a statewide GHG emission limit that would reduce
emissions by 25% by 2020. Chaptered by the Secretary of State
- Chapter 488, Statutes of 2006.
REGISTERED SUPPORT / OPPOSITION:
Support
California Biomass Energy Alliance (Sponsor)
Agra Marketing
ALW Enterprises, Inc.
Associated Builders and Contractors of California
Associated California Loggers
Basic Logging
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Beneficial Ag Services
Brahma Group, Inc.
Burney Forest Products
C & S Waste Solutions of Lassen County
Cal Ag Recovery
California Biomass Energy Alliance
California Farm Bureau Federation
California Forestry Association
Cascade Resource Consultants
County of Kern
County of Lassen
County of Sierra
Covanta Energy
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Clean Harbors Environmental Services
CR&R Incorporated
CT Bioenergy Consulting LLC
Del Logging, Inc.
DPS Inc.
Ecology Recycling and Transportation Services
EWP Renewable Corporation
Fondse Farms Trucking, LLC
G & F Agricultural Service Inc.
Gilton Solid Waste Management, Inc.
Greenleaf Power
Headrick Logging
IHI Power Services Corp.
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Independent Energy Producers Association
J.T. Thorpe & Son, Inc.
Green Waste Recovery, Inc.
Greenleaf Power, LLC
Kochergen Farms Composting, Inc.
Lake County Waste Solutions
Lassen County Fire Safe Council
Lassen Forest Products
Nortech Waste LLC
Old Durham Wood, Inc.
Propel AG Services LLC
Pacific Recycling Solutions
Pacific Ultrapower Chinese Station
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Rural County Representatives of California
Rio Bravo Fresno
San Joaquin Valley Air Pollution Control District
Selma Disposal & Recycling
Shadd Trucking
Sierra Pacific Industries
Solid Waste Association of North America - California Chapter
Sonoma Compost
Sustainable Forest Action Coalition
TriCo Welding Supplies, Inc.
Ukiah Waste Solutions
Vision Recycling
Wadham Energy LP
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Wegis & Young
Western AG Chipping, LLC
Wheelabrator Shasta
Wilson Ag
Z-Best
Numerous Individuals
Opposition
California Chamber of Commerce
California Taxpayers Association
Analysis Prepared by:Edmond Cheung / U. & C. / (916) 319-2083
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