BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 678
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|Author: |O'Donnell |
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|Version: |7/9/2015 |Hearing | 7/15/2015 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: Greenhouse gases: Energy Efficient Ports Program.
ANALYSIS:
Existing law:
1) Under the California Global Warming Solutions Act of 2006
(also known as AB 32), requires the Air Resources Board (ARB)
to determine the 1990 statewide greenhouse gas (GHG)
emissions level and approve a statewide GHG emissions limit
that is equivalent to that level, to 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 these regulations. (Health and
Safety Code (HSC) §38500 et seq.)
2) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the
State Treasury, requires moneys collected pursuant to a
market-based mechanism be deposited in the fund. (Government
Code §16428.8)
3) Requires moneys from the GGRF be used to facilitate the
achievement of reductions of GHG emissions in this state
consistent with the California Global Warming Solutions Act
of 2006. (HSC §39712)
4) Requires the GGRF investment plan to allocate, at a minimum,
25% of the funds to benefit disadvantaged communities, and to
allocate 10% of GGRF moneys within disadvantaged communities.
AB 678 (O'Donnell) Page 2
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(HSC §39713)
This bill:
1) Requires ARB and the State Energy Resources Conservation and
Development Commission (CEC) to develop and implement the
Energy Efficiency and Greenhouse Gas Reductions Ports Program
to fund energy efficiency upgrades at public ports that help
reduce emissions of criteria pollutants and GHGs, and
specifies the following projects as eligible for funding
projects under the program:
a) Installation of solar, wind and other renewable
technologies at marine terminals, warehouses, and other
freight facilities at the ports.
b) Replacement of conventional lighting with light
emitting diodes.
c) Installation of cold ironing or shorepower equipment on
vessels, beyond action required by regulations, to
facilitate reduced emissions from diesel auxiliary engines
on ships, as specified, while berthing at a California
port.
d) Emissions control technologies on ships and other
vessels.
e) Other projects that reduce grid-based energy demand
from cargo handling operations at public seaports.
2) Requires ARB, in consultation with CEC, to develop guidelines
for this program, consistent with AB 32, and requirements for
the expenditure of GGRF moneys.
3) Requires a port to have adopted, in consultation with the
respective electric utility providing service to the port, an
energy plan for the port, as specified, and requires that
plan to be approved by the CEC, prior to receiving any funds
under the program.
4) Authorizes GGRF moneys appropriated to ARB to be used for the
Energy Efficient Ports Program.
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Background
1)Cap and trade auction revenue. ARB has conducted 11
cap-and-trade auctions. The first 10 have generated almost
$1.6 billion in proceeds to the state.
Several bills in 2012, and one in 2014, provided legislative
direction for the expenditure of auction proceeds including:
SB 535 (de Leon, Chapter 830, Statutes of 2012) requires that
25% of auction revenue be used to benefit disadvantaged
communities and requires that 10% of auction revenue be
invested in disadvantaged communities.
AB 1532 (J. Perez, Chapter 807, Statutes of 2012)
directs the Department of Finance to develop and
periodically update a three-year investment plan that
identifies feasible and cost-effective GHG emission
reduction investments to be funded with cap-and-trade
auction revenues. AB 1532 specifies that GGRF moneys
may be allocated to reduce GHG emissions through
investments including, but not limited to, energy
efficiency, and clean and renewable energy generation.
SB 1018 (Budget and Fiscal Review Committee,
Chapter 39, Statutes of 2012) created the GGRF, into
which all auction revenue is to be deposited. The
legislation requires that before departments can spend
moneys from the GGRF, they must prepare a record
specifying, among other things, how the expenditures
will be used, and how the expenditures will further the
purposes of AB 32.
SB 862 (Budget and Fiscal Review Committee,
Chapter 36, Statutes of 2014) requires the ARB to
develop guidelines on maximizing benefits for agencies
administering GGRF funds and guidance for administering
agencies on GHG emission reduction reporting and
quantification methods.
Legal consideration of cap-and-trade auction revenues. The
2012-13 budget analysis of cap-and-trade auction revenue by
the Legislative Analyst's Office noted that, based on an
opinion from the Office of Legislative Counsel, the auction
AB 678 (O'Donnell) Page 4
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revenues should be considered mitigation fee revenues, and
their use requires that a clear nexus exist between an
activity for which a mitigation fee is used and the adverse
effects related to the activity on which that fee is levied.
Therefore, in order for their use to be valid as mitigation
fees, revenues from the cap-and-trade auction must be used to
mitigate GHG emissions or the harms caused by GHG emissions.
In 2012, the California Chamber of Commerce filed a lawsuit
against the ARB claiming that cap-and-trade auction revenues
constitute illegal tax revenue. In November 2013, the
superior court ruling declined to hold the auction a tax,
concluding that it is more akin to a regulatory fee. The
plaintiffs filed an appeal with the 3rd District Court of
Appeal in Sacramento in February of last year.
AB 32 auction revenue investment plan. The first three-year
investment plan for cap-and-trade auction proceeds, submitted
by Department of Finance, in consultation with ARB and other
state agencies in May of 2013, identified sustainable
communities and clean transportation, energy efficiency and
clean energy, and natural resources and waste diversion as
the three sectors that provide the best opportunities, in
that order, for achieving the legislative goals and
supporting the purposes of AB 32.
Budget allocations. The 2014-15 Budget allocates $832
million in GGRF revenues to a variety of transportation,
energy, and resources programs aimed at reducing GHG
emissions. Various agencies are in the process of
implementing this funding. SB 862 (Budget and Fiscal Review
Committee), the 2014 budget trailer bill, established a
long-term cap-and-trade expenditure plan by continuously
appropriating portions of the funds for designated programs
or purposes. The legislation appropriates 25% for the
state's high-speed rail project, 20% for affordable housing
and sustainable communities grants, 10% to the Transit and
Intercity Rail Capital Program, and 5% for low-carbon transit
operations. The remaining 40% is available for annual
appropriation by the Legislature.
Of that 40%, $75 million was appropriated for energy
efficiency and weatherization upgrades in disadvantaged
communities to be administered by the Department of Community
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Services and Development and $20 million was appropriated to
CEC for energy efficiency projects in public buildings.
The Governor's proposed budget for 2015-16 increases those
appropriations to $140 million and $40 million respectively,
and adds additional appropriations of $60 million for
renewable energy and energy efficiency projects at the
University of California and California State University
campuses.
1)Regulations, incentives, and strategies. ARB has a variety of
programs designed to reduce toxic, criteria, and GHG emissions
from port operations.
a) At-berth regulation. Pursuant to authority under AB 32,
in December 2007, ARB approved the "Airborne Toxic Control
Measure for Auxiliary Diesel Engines Operated on
Ocean-Going Vessels At-Berth in a California Port"
Regulation (At-Berth Regulation) as a discrete early action
measure for GHG emissions reductions. The purpose of the
At-Berth Regulation is to reduce emissions from diesel
auxiliary engines on container ships, passenger ships, and
refrigerated-cargo ships while berthing at a California
port. The At-Berth Regulation defines a California port as
the ports of Los Angeles, Long Beach, Oakland, San Diego,
San Francisco, and Hueneme. The regulation provides vessel
fleet operators visiting these ports two options to reduce
at-berth emissions from auxiliary engines: 1) turn off
auxiliary engines and connect the vessel to some other
source of power, most likely grid-based shore power; or 2)
use alternative control techniques that achieve equivalent
emission reductions.
If alternative control techniques are not used, the
regulation specifically requires at least 50% of the
vessels docked at-berth to utilize shore power in 2014,
eventually reaching 70% in 2017 and 80% by 2020.
b) Fuel requirements for ocean-going vessels. ARB adopted
the regulation, "Fuel Sulfur and Other Operation
Requirements for Ocean-Going Vessels within California
Waters and 24 Nautical Miles of the California Baseline" on
July 24, 2008. This regulation is designed to reduce
particulate matter, oxides of nitrogen, and sulfur oxide
AB 678 (O'Donnell) Page 6
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emissions from ocean-going vessels; reductions that are
necessary to improve air quality and public health in
California.
c) Commercial harbor craft regulations. In November 2007,
ARB approved a regulation to target diesel particulate
matter (PM) and nitrogen oxides (NOx) emissions from
diesel-fueled engines on commercial harbor craft vessels,
including ferries, excursion vessels, tugboats, towboats,
crew and supply vessels, work boats, dredges, barges and
commercial and charter fishing boats.
d) Cargo handling equipment regulation. This regulation
helps reduce diesel particulate matter (PM) and oxides of
nitrogen (NOx) emissions from diesel-fueled cargo handling
equipment at California's ports and intermodal rail yards.
Cargo handling equipment is used to transfer goods or
perform maintenance and repair activities at ports and
other facilities. ARB adopted a regulation for mobile
cargo handling equipment at ports and intermodal rail yards
in 2005, and the regulation became effective on December
31, 2006 (engine must meet performance standards).
e) Sustainable freight. On January 23, 2014, ARB adopted
Resolution 14-2, which directed staff to engage all
interested stakeholders to provide input on the development
of a Sustainable Freight Strategy document. ARB staff is
working with the State's transportation and energy
agencies, as well as its economic development office, local
partners, and stakeholders to develop the Strategy. To
inform that effort, a Sustainable Freight Discussion Draft
approved by the board in April of this year, sets out ARB's
vision of a clean freight system, together with the
immediate and near-term steps that ARB will take to support
use of zero and near-zero emission technology. The full
Strategy will include additional measures to reduce
emissions to meet the state's air quality goals under the
State Implementation Plan.
f) Incentive funding.
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i) Carl Moyer. The Carl Moyer Memorial Air Quality
Standards Attainment Program (Carl Moyer Program)
provides grant funding for cleaner-than-required engines
and equipment. Local air districts administer the
grants. The Carl Moyer Program achieves reductions in
emissions of nitrogen oxides (NOx) and particulate matter
(PM) pollutants in areas of the state that are not in
attainment of national air pollutant standards.
According to ARB's website, eligible projects include
cleaner on and off-road vehicles, marine vessels,
locomotives, light duty passenger vehicles being scrapped
and agricultural equipment.
ii) Proposition 1B Goods Movement Emission Reduction
Program. The Goods Movement Emission Reduction Program,
funded through Proposition 1b approved in 2008, is a
partnership between ARB and local agencies (like air
districts and seaports) in order to reduce air pollution
emissions and health risk from freight movement along the
state's trade corridors. Local agencies apply to ARB for
funding, then those agencies offer financial incentives
to owners of equipment used in freight movement to
upgrade to cleaner technologies. Projects funded under
this Program must achieve early or extra emission
reductions not otherwise required by law or regulation.
iii) CalCAP. With ARRA funds, ARB has partnered with the
California Pollution Control Financing Authority to
facilitate loans through CPCFA's Capital Access Program
(CalCAP). CalCAP helps small business customers finance
products that include replacement of off-road vehicles,
portable diesel equipment, marine vessels, marine diesel
engine repowers, or purchases and installations of
ARB-verified exhaust retrofits in order to comply early
with various ARB regulations targeting emissions from
diesel engines, as well as other air pollutants.
Comments
1) Purpose of Bill. According to the author, "In order to
reduce the environmental impacts of port operations and
improve air quality, enhancement of the existing port
infrastructure and investment in renewable energy is needed.
AB 678 provides funding to California seaports so they can
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invest in energy efficiency, improve air quality around the
ports, and meet the important environmental demands put
forward by the Air Resources Board. These investments will
not only further reduce the environmental impacts associated
with ports, but have the potential to lower port operating
costs, resulting in improved competitiveness and job growth."
2) At-berth regulations. The author notes that due to ARB's
At-Berth Regulation requiring increasing percentages of
vessel fleets to plug into shore power when berthed at
California ports, there has been, and will continue to be,
significant increases in electricity demands at California
ports. The author also notes that the California ports have
invested in costly infrastructure to support the expected
demands of fleets plugging into shore power.
In recognition of that, AB 678 seeks to offer financial
assistance to ports in the form of energy upgrades, so as to
reduce the port's electricity demand on the grid, and help
offset the cost of increased electricity demand as a result
of the At-Berth Regulation.
3) Emissions reductions and reducing grid-based energy demand.
The bill specifies energy efficiency upgrades and investments
at public ports to reduced criteria air pollutants, toxic air
contaminants, and GHG emissions, as the stated goal of the
program. Several of the projects specified in the bill are
intended to help ports reduce electricity demand, thereby
reducing GHGs. These include renewable energy installation,
upgrading lighting to LEDs, as well as other projects that
reduce grid-based demand. Although helpful in offsetting the
port's increased electricity costs due to increased
electricity demand from berthed vessels, these types of
projects help reduce overall emissions, specifically those
emitted at the power plant that is supplying the electricity,
but do not help mitigate criteria air pollutants and toxic
air emissions generated from the ports.
In furtherance of reducing emission from the port, AB 678
specifies deployment of near-zero and zero-emission vehicles
and infrastructure as an eligible project under the program.
Unlike the projects to reduce grid demand, these types of
investments may result in reduced GHGs, criteria air
pollutants and toxic air emissions coming from the ports.
AB 678 (O'Donnell) Page 9
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Interestingly, however, these projects may also increase grid
demand if electric vehicles and electric-charging
infrastructure are deployed.
Other incentive programs for zero-emission and near-zero
emission vehicles. Although ports are responsible for
significant amounts of air pollution, including toxic and
criteria air pollutants emissions, there are a variety of
other incentive programs available for upgrading to near-zero
and zero-emission vehicle equipment and alternative vehicle
infrastructure. Some of these incentive programs are
currently funded through the GGRF already, such as the
California Clean Truck, Bus and Off-Road Vehicle Program
created through SB 1204 (Lara & Pavley, Chapter 524, Statutes
of 2014).
4) Incentives for vessels that may not spend significant time at
California ports. AB 678 specifies that an eligible project
under the bill is cold-ironing equipment (connecting to a
shoreside electrical power source) and emissions control
technologies for vessels, to reduce diesel auxiliary engine
emissions, beyond what is required by regulations. However,
the bill does not specify that these ships must spend above a
certain threshold of time at California ports in order to be
eligible for funding. This could result in vessels
qualifying for state investments that spend little or no time
at California ports, so that state funds are expended without
commensurate air quality benefits to the state.
Additionally, the bill specifies that only these projects
that go "beyond regulation" shall qualify as eligible for
funding. Since the regulation applies to entire vessel
fleets, and their total trips to California ports, it is
unclear how ARB, in granting individual vessel upgrades
through the program, ensures that these individual projects
go "beyond what is required under regulation."
5) GHG emissions reductions. AB 678 authorizes the use of the
GGRF for the Energy Efficient Ports Program. As noted in the
background, GGRF moneys are required to be used to achieve
GHG emissions reductions. However, there is no requirement
in the bill for the prioritization, or consideration of
projects based on the potential for GHG emission reductions.
Additionally, although the program's mission is partly to
AB 678 (O'Donnell) Page 10
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reduce harmful air emissions, there is no requirement for the
consideration of projects based on their ability to further
that goal, or achieve other cobenefits.
Amendments are needed to 1) require that in order to be
eligible for funding under the program, a project must
demonstrate that it will achieve GHG emissions reductions,
and 2) require eligible projects be prioritized for funding
based on the extent to which they reduce GHG emissions
reductions, and achieve cobenefits, including improved air
and water quality.
6) Piece by piece. GGRF investments must facilitate the
achievement of GHG emissions reductions. However, after that
requirement is fulfilled, there are a number of other policy
goals that should be considered, including benefits to
environmental quality, resource protection, public health and
the economy, as well as benefits to disadvantaged
communities. And although the fund is growing, it is still a
limited source of revenue. In order to create an optimized
investment strategy from GGRF moneys, proposals should not be
considered in isolation, but be assessed in aggregate to
determine what suite of measures best meets the requirements
of the fund, uses resources most efficiently, and maximizes
policy objectives.
As budget discussions on a cap-and-trade investment strategy
have been pushed to later this session, an opportunity exists
to have a comprehensive discussion on the universe of GGRF
proposals currently in the Legislature, during budget
negotiations this summer. If the Legislature feels that the
program established through AB 678 is an appropriate
expenditure of GGRF moneys, then this measure should also be
considered through the budget process for cap-and-trade
expenditures, along with all other measures proposing to
expend, or authorize for expenditure, GGRF moneys.
Related/Prior Legislation
SB 1204 (Lara & Pavley, Chapter 524, Statutes of 2014)
established the California Clean Truck, Bus, and Off-Road
Vehicle Program for the development and deployment of near-zero
and zero-emission heavy-duty vehicles, funded through the GGRF.
AB 678 (O'Donnell) Page 11
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DOUBLE REFERRAL:
This measure was heard in Senate Energy, Utilities and
Communications Committee on June 30, 2015, and passed out of
committee with a vote of 8-0.
SOURCE: Pacific Merchant Shipping Association
SUPPORT:
APM Terminals
California Infill Builders Federation
Port of Long Beach
South Coast Air Quality Management District
OPPOSITION:
None received
ARGUMENTS IN
SUPPORT: Supporters state that the program will help
reduce the negative environmental impacts caused by port
operations and improve
air quality. Supporters also state that AB 678 has the
potential to lower port
operating costs which can result in increased competiveness and
job growth.
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