BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 692|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 692
Author: Quirk (D)
Amended: 9/1/15 in Senate
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE: 8-2, 6/30/15
AYES: Beall, Allen, Galgiani, Leyva, McGuire, Mendoza, Roth,
Wieckowski
NOES: Cannella, Bates
NO VOTE RECORDED: Gaines
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 7/15/15
AYES: Wieckowski, Hill, Jackson, Leno, Pavley
NOES: Gaines, Bates
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 52-27, 6/4/15 - See last page for vote
SUBJECT: Low-carbon transportation fuels
SOURCE: Author
DIGEST: This bill requires 3% of the aggregate amount of bulk
transportation fuel purchased by state agencies to be procured
from very low-carbon fuel sources.
ANALYSIS: The Air Resource Board (ARB) adopted the Low Carbon
Fuel Standard (LCFS) regulation in April 2009, effective the
following year, and the LCFS:
AB 692
Page 2
1)Aims to reduce greenhouse gas (GHG) emissions from the
transportation sector by about 16 million metric tons by 2020.
It is also designed to reduce California's dependence on
petroleum, create a lasting market for clean transportation
technology, and stimulate the production and use of
alternative low-carbon fuels.
2)Requires producers of petroleum-based fuels to reduce the
carbon intensity (CI) of transportation fuels used in
California by an average of 10% by 2020. It consists of two
elements: a cap on total GHG emissions from the entire fuel
sector, and a carbon credit-trading mechanism that
incentivizes the production and use of low-carbon fuels.
Petroleum importers, refiners, and wholesalers may either
develop their own low-carbon fuel products or buy LCFS credits
from other companies that sell low-carbon alternative fuels
such as biofuels, electricity, natural gas, or hydrogen. The
CI has been frozen at 1% since 2013 as a result of litigation,
but ARB plans to re-adopt the LCFS this year. After
re-adoption, the CI will begin to decrease toward the 10%
reduction required by 2020.
3)Provides that the baseline LCFS fuels are reformulated
gasoline mixed with corn-derived ethanol and low-sulfur
diesel. Lower carbon fuels may include ethanol, biodiesel,
renewable diesel, or blends of these fuels with gasoline or
diesel as appropriate. Compressed natural gas may also be a
low-carbon fuel, as well as hydrogen and electricity.
This bill:
1)Requires, beginning January 1, 2017, that at least 3% of the
aggregate amount of bulk transportation fuel purchased by
state agencies must be procured from very low-carbon fuel
sources.
2)Requires the amount of very low-carbon fuel purchased to
increase by 1% each year until January 1, 2024 (i.e., up to
10% by 2024).
3)Defines "very low-carbon transportation fuel" as a liquid or
gaseous fuel having not more than 40% of the CI of the closest
comparable petroleum fuel for that year as measured by LCFS
AB 692
Page 3
methodology.
4)Requires the Department of General Services (DGS) to
coordinate with state agencies that are buyers of
transportation fuel and submit to the Legislature an annual
progress report on implementation of the mandate in this bill.
5)Allows DGS, in consultation with ARB, to comply with the
requirement only to the extent feasible if it determines that
the very low-carbon fuel does not perform adequately or is not
available at a reasonable price in a reasonable period of
time.
Comments
Purpose. The author states that while the state has met the 1%
GHG reduction commitment of LCFS, it has done so primarily by
using corn and sugarcane ethanol and soybean biodiesel; only a
very small fraction of the California fuel market is currently
satisfied by fuels made from waste products. The main obstacle
preventing other fuels from entering the LCFS market is access
to capital. Building a commercial-scale low-carbon fuel
production facility requires hundreds of millions of dollars.
The market for low-carbon fuels is uncertain due to fluctuations
in the petroleum markets, changes in the regulatory landscape,
and the inherent uncertainty involved when deploying new
technology. This bill guarantees a market for very low-carbon
fuels by requiring the state fuel portfolio to include a minimum
share of very low-carbon fuels. This requirement will give
assurance to prospective producers of very low-carbon fuels that
there will be a market for them, even if they are not
cost-competitive in the short term.
Background on state fuel purchases. The largest state agency
purchasers of fuel are the Departments of Transportation,
Forestry and Fire Protection (CalFIRE), Corrections and
Rehabilitation, Water Resources, and Fish and Wildlife. The
state government purchases a significant amount of fuels for its
fleet; in FY 2007-08, for example, the state purchased
approximately 34 million gallons of gasoline, 11 million gallons
of diesel fuel, 327,174 gasoline gallon equivalents of
compressed natural gas and propane, and 66,183 gallons of E-85.
In 2014, for the third year in a row, California was named the
18th "greenest" fleet out of 100 public-sector fleets in North
AB 692
Page 4
America. Pursuant to legislative and gubernatorial directives,
DGS has established multiple sustainable fleet policies
emphasizing the purchase of more fuel-efficient vehicles and the
reduction of petroleum use.
Amendments. This bill was amended in the Senate Appropriations
Committee to restrict requirements to bulk purchases of fuel, to
simplify compliance, and to ease the compliance requirement if
DGS finds that the very low-carbon fuel does not perform
adequately or is not available at a reasonable price on a
reasonably timely basis. It was also amended to remove the
provision allowing Greenhouse Gas Reduction Fund revenues to be
used to offset any increased costs resulting from the purchase
of very low-carbon transportation fuel.
Related/Prior Legislation
AB 1176 (Perea) establishes the Advanced Low-Carbon Diesel Fuels
Access Program to fund low-carbon diesel fueling infrastructure
projects in communities that are disproportionately impacted by
environmental hazards and where the greatest air quality impacts
can be identified. AB 1176 was held on the Senate
Appropriations Committee suspense file.
AB 1992 (Quirk) would have authorized ARB to establish a very
low-carbon fuel market program, in which transportation fuel
providers could be required to include in their sales a
specified percentage of very low-carbon fuels, defined as having
no greater than 50% of the CI of the closest comparable
petroleum fuel. AB 1992 failed passage in the Senate
Transportation and Housing Committee in 2014.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Unknown costs, but potentially minor, to the General Fund and
various special funds to the DGS to manage fuel purchases to
meet the purchase requirements.
Potential costs up to $175,000, but likely minor, to the Cost
of Implementation Account (special) to ARB to assist state
AB 692
Page 5
agencies with compliance with the purchase requirements.
SUPPORT: (Verified8/27/15)
Biodico Sustainable Refineries
California Biodiesel Alliance
Coalition for Renewable Natural Gas
DuPont
OPPOSITION: (Verified8/27/15)
CalTax
ASSEMBLY FLOOR: 52-27, 6/4/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,
Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,
Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty,
Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Weber, Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones,
Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez,
Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Dahle
Prepared by:Erin Riches / T. & H. / (916) 651-4121
9/1/15 21:41:54
**** END ****
AB 692
Page 6