BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 761 (Levine) - Carbon sequestration: working lands ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 2, 2015 |Policy Vote: AGRI. 3 - 0, E.Q. | | | 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 17, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- 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. AB 761 (Levine) Page 1 of ? 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 AB 761 (Levine) Page 2 of ? 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 AB 761 (Levine) Page 3 of ? 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 AB 761 (Levine) Page 4 of ? 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. -- END --