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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