BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 761 (Levine) - Carbon sequestration:  working lands
          
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          |Version: June 2, 2015           |Policy Vote: AGRI. 3 - 0, E.Q.  |
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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 761 would establish a grant program at the  
          Department of Food and Agriculture (CDFA) to fund voluntary  
          projects that increase carbon sequestration and greenhouse gas  
          (GHG) emission reductions on working lands.


          Fiscal  
          Impact:  
           Unknown cost pressures, at least in the tens of millions of  
            dollars, to the General Fund or the GHG Reduction Fund  
            (special) to fund the grant program.
           Unknown initial and ongoing costs, likely in the hundreds of  
            thousands to low millions, to the General Fund or the GHG  
            Reduction Fund (special) to CDFA and potentially to the ARB to  
            administer the grant program.
           Minor and absorbable costs for the Department of Conservation,  
            the Department of Resources Recycling and Recovery, and the  
            Department of Water Resources.







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          Background:  The Cannella Environmental Farming Act of 1995, requires CDFA  
          to establish an environmental farming program to provide  
          incentives to farmers whose practices promote the wellbeing of  
          ecosystems, air quality, and wildlife and their habitat and  
          requires the Secretary of CDFA to convene a five-member  
          Scientific Advisory Panel on Environmental Farming to advise and  
          assist federal, state, and local government agencies on issues  
          relating to air, water, and wildlife habitat.  (FAC §§561)
          In his 2015-16 budget proposal, Governor Brown directed $10  
          million from the GGRF toward a new "Healthy Soils Initiative" to  
          increase carbon in soil to improve soil health, agricultural  
          productivity, soil water-holding capacity, and decreased  
          sediment erosion. Governor Brown directed CDFA, under its  
          existing authority provided by the Cannella Environmental  
          Farming Act, to coordinate with other key agencies to work on  
          several new initiatives. CDFA has since developed five action  
          measures: protect and restore soil carbon; identify funding  
          opportunities, including market development; provide research,  
          education and technical support; increase governmental  
          efficiencies to enhance soil health on public and private lands;  
          and ensure interagency coordination and collaboration.




          Proposed Law:  
            This bill would, upon appropriation by the Legislature, create  
          a grant program to fund voluntary projects that increase carbon  
          sequestration and GHG emission reductions on privately-owned  
          agricultural lands, ranches, and rangelands. The bill would  
          define carbon farming as a land management strategy that results  
          in quantifiable GHG benefits using the US Department of  
          Agriculture's COMET-Planner, COMET-Farm, and other  
          quantification tools.
          Funding would be prioritized based on the extent that a project  
          demonstrates carbon farming, sequesters carbon in agricultural  
          soils, and achieves related co-benefits such as reducing  
          irrigation demand, increasing yield, enhancing habitat,  
          enhancing soil structure, among other things. 


          CDFA, in consultation with the Department of Conservation, the  








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          Department of Resources Recycling and Recovery, the Air  
          Resources Board (ARB), and the Department of Water Resources,  
          would be required to develop and adopt project solicitation and  
          evaluation guidelines to implement the grant program. CDFA would  
          be required to post quantified benefits of each project on its  
          website.




          Related  
          Legislation:  SB 367 would, upon appropriation, establish a $25  
          million grant program, to fund projects that reduce GHG  
          emissions and increase carbon storage in agricultural soils and  
          woody biomass. SB 367 is currently in the Assembly  
          Appropriations Committee. 


          Staff  
          Comments:  By creating a new grant program to fund carbon  
          farming, this bill would create cost pressures to fund a wide  
          variety of projects. Staff assumes that these cost pressures are  
          at least in the tens of millions of dollars based on the  
          Governor's budget proposal, appropriations made in earlier  
          versions of this bill, and SB 367. 
          Under this bill, CDFA would incur administrative costs to create  
          and then implement the new grant program. CDFA indicates that  
          its costs are unknown as their costs would be dependent on the  
          total amount allocated to the program, the number of grant  
          applications received and awarded, and the size of the grants  
          awarded. Staff notes that as a rough guide, administrative costs  
          are often approximately 5% of the size of the grant program.  
          Assuming the grant program would be in the tens of millions of  
          dollars, administrative costs would be in the hundreds of  
          thousands of dollars to the low millions of dollars. 


          To collaborate with CDFA on the development of the grant program  
          guidelines, the Department of Conservation, the Department of  
          Resources Recycling and Recovery, and the Department of Water  
          Resources anticipate minor and absorbable costs.


          The ARB has indicated that it anticipates significant costs  








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          associated with this bill to develop, review, and implement GHG  
          reduction methodologies for carbon farming. While this bill  
          references two existing methodologies to quantify emissions  
          developed by the US Department of Agriculture (COMET-Planner and  
          COMET-Farm), ARB believes it would need to review the tools and  
          each of the 30 mitigation options covered by those tools for  
          California use. ARB also anticipates costs to develop its own  
          GHG quantification methodology. For these activities, ARB  
          assumes it would need 6 PYs in the first year, 4 PYs in the  
          second, and then 2 PYs ongoing for these responsibilities at a  
          cost of $974,000, $672,000, and $390,000, respectively.  
          Additionally, ARB estimates that it would need 2 PYs ongoing to  
          collaborate with CDFA on development of their funding program,  
          report on the program's GHG emission reductions, and to evaluate  
          disadvantaged community benefits at an additional annual cost of  
          $350,000. These costs assume a $50 million grant program. 


          Staff notes that while the ARB may have some costs to  
          collaborate with CDFA, it is unclear if these costs are  
          duplicative of workload that would be done by CDFA.  
          Specifically, it is not clear whether ARB needs to independently  
          verify tools developed by the US Department of Agriculture in  
          its entirety or develop a separate quantification tool.  
          Presumably CDFA potentially has the expertise and the  
          responsibility to do these verifications on their own as the  
          administrator of the program while ARB's role would be limited  
          to an oversight role to assure that the assumptions made in  
          these methodologies are consistent with other similar programs. 


          Staff notes that the Governor's proposal for the Healthy Soils  
          Initiative did not include an explicit budget change proposal  
          for ARB costs associated with the initiative. However, ARB did  
          receive a block of positions related to working with other  
          agencies on GGRF expenditures and emission reduction  
          quantification. It is unclear whether the block of positions  
          covered the staffing needs that would be created by the Health  
          Soils Initiative budget change proposal, but it if did, it would  
          suggest ARB's staffing needs associated with this bill have  
          already been provided to the ARB. If not, staff assumes that to  
          the extent the ARB has costs associated with the program, these  
          costs would be offset by a reduction in CDFA's costs so that the  
          total administrative costs for the grant program would still be  








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          limited to approximately 5% of the grant program's size. 


          This bill does not indicate a funding source. However, given the  
          eligibility criteria established by the bill, this program could  
          be funded by the Greenhouse Gas Reduction Fund, which receives  
          proceeds from the cap-and-trade auctions and must be used to  
          facilitate the achievement of GHG emission reductions consistent  
          with AB 32 (HSC §§39710). 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.




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