BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 857            Hearing Date:    6/30/2015
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          |Author:   |Perea                                                 |
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          |Version:  |6/23/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Erin Riches                                           |
          |:         |                                                      |
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          SUBJECT:  California Clean Truck, Bus, and Off-Road Vehicle and  
          Equipment Technology Program


            DIGEST:  This bill establishes a five-year set-aside of 50% or  
          $100 million, whichever is greater, per year of funds from the  
          California Clean Truck, Bus, and Off-Road Vehicle and Equipment  
          Technology Program (SB 1204 Program) for commercial deployment  
          of existing zero- and near-zero-emission heavy-duty Class 7 and  
          8 trucks that meet or exceed the state Air Resource Board's  
          (ARB) optional low nitrogen oxide (NOx) emissions standard.

          ANALYSIS:
          
          Optional Low NOx Standard

          ARB regulations provide for an optional reduced NOx emission  
          standard for on-road heavy-duty engines of 0.02 grams per brake  
          horsepower-hour oxides of nitrogen (NOx).  This standard is  
          intended to encourage engine manufacturers to introduce new  
          technologies to reduce NOx emissions below the current mandatory  
          on-road heavy-duty diesel engine emission standards for model  
          years 2010 and later.  

          Low Carbon Fuel Standard

          The Low Carbon Fuel Standard (LCFS) was established through a  
          Governor's Executive Order in January 2007, and adopted by ARB  
          in regulation effective in 2010.  The LCFS aims to reduce  
          greenhouse gas (GHG) emissions from the transportation sector by  







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          about 16 million metric tons by 2020.  It is also intended 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.  The LCFS  
          requires producers of petroleum-based fuels to reduce the carbon  
          intensity of transportation fuels used in California by an  
          average of 10% by 2020.  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.   
            

          Alternative and Renewable Fuel and Vehicle Technology Program  
          (ARFVTP)

          Existing law establishes ARFVTP under the California Energy  
          Commission (CEC).  ARFVTP funds development and deployment of  
          alternative and renewable fuels and advanced transportation  
          technologies to help attain the state's climate change goals.   
          Eligible projects include, for example, development,  
          improvement, and production of alternative and renewable  
          low-carbon fuels; improvement of light-, medium-, and heavy-duty  
          vehicle technologies; and expansion of infrastructure connected  
          with existing fleets, public transit, and transportation  
          corridors.  FY 2014-15 funding for this program is $100 million.

          Proposition 1B:  Highway Safety, Traffic Reduction, Air Quality,  
          and Port Security Bond Act of 2006

          Proposition 1B, approved by voters in November 2006, included $1  
          billion for the Goods Movement Emission Reduction Program, a  
          partnership between ARB and local air districts to reduce air  
          pollution emissions and health risks from freight movement along  
          California's trade corridors.  This program has to date provided  
          funding for approximately 12,000 cleaner trucks.  For the next  
          funding cycle, ARB proposes to fund trucks in amounts ranging  
          from $10,000 to $200,000 for Class 6 to Class 8.

          Advanced Technology Demonstration Projects 
          
          Existing law establishes Advanced Technology Demonstration  
          Projects under CEC.  This program provides grants to local air  
          districts and other public agencies for zero-emission drayage  








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          trucks and multi-source facility projects.  Approximately $60  
          million is proposed for this program for FY 2015-16.  

          Carl Moyer Memorial Air Quality Standards Attainment Program  
          (Carl Moyer Program)

          Existing law establishes the Carl Moyer Program under ARB.  This  
          program provides grants through the state's 35 local air quality  
          management and air pollution control districts (air districts)  
          for deployment of engines, equipment, and emission-reduction  
          technologies that are cleaner than required by current laws or  
          regulations.  The program, which provides approximately $60  
          million for projects each year throughout the state, is funded  
          through vehicle registration fee surcharges and tire fees.

          Air Quality Improvement Program (AQIP)

          Existing law establishes AQIP, administered by ARB in  
          consultation with local air districts.  AQIP is funded through a  
          variety of sources, including Greenhouse Gas Reduction Fund  
          (GGRF) monies.  AQIP provides competitive grants for projects  
          that improve the air quality impacts of alternative fuels and  
          vehicles, vessels, and equipment technologies.  AQIP encompasses  
          several programs.

          Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project  
          (HVIP)
          
          HVIP, which is part of AQIP, is administered by ARB and its  
          contractor, CALSTART.  HVIP provides vouchers to California  
          fleet owners to help purchase hybrid and zero-emission trucks  
          and buses weighing 5,000 lbs. or more.  ARB's FY 2015-16 Funding  
          Plan, which the ARB board will vote on at its June 25, 2015,  
          meeting, allocates $12 million to HVIP.  

          Low NOx Truck Incentives

          Low NOx truck incentives, also under AQIP, provide funding for  
          heavy-duty trucks 14,000 lbs. or greater with engines certified  
          to the lower NOx standards.  ARB is proposing an additional  
          incentive for the use of alternative fuels.  The FY 2015-16 AQIP  
          Funding Plan allocates $7 million for this program. 

          California Clean Truck, Bus, and Off-Road Vehicle and Equipment  
          Technology Program (SB 1204 Program)








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          SB 1204 (Lara, Chapter 524, Statutes of 2014) created a new  
          program to fund development, demonstration, pre-commercial  
          pilot, and early commercial deployment of zero- and  
          near-zero-emission truck, bus, and off-road vehicle and  
          equipment technologies.  SB 1204 authorizes GGRF funding for  
          this program and requires it to prioritize projects located in  
          disadvantaged communities.  ARB's FY 2015-16 AQIP Funding Plan,  
          which the ARB board will vote on at its June 25, 2015, meeting,  
          allocates $148 million in GGRF funds to the SB 1204 Program.   
          The program will officially commence on July 1, 2015.

          Specifically, SB 1204 requires this program to fund: 

          1)Development, demonstration, and pilot commercial deployment of  
            zero- and near-zero-emission medium- and heavy-duty truck  
            technology, with at least 20% of funding going to early  
            commercial deployment of existing zero- and near-zero-emission  
            heavy-duty truck technology until January 1, 2018;

          2)Development of zero- and near-zero-emission bus technology,  
            demonstration, pre-commercial pilots, and early commercial  
            deployments;

          3)Development, demonstration, pilots, and deployment of zero and  
            near-zero emission off-road vehicles and equipment in port,  
            agricultural, marine, construction, and rail sectors; 

          4)Development of purchase incentives for commercially available  
            zero- and near-zero-emission truck, bus, and off-road vehicle  
            and equipment technologies and fueling infrastructure; and

          5)Development of projects that support greater goods movement  
            efficiency and GHG emissions reductions, including advanced  
            intelligent transportation systems and autonomous vehicles,  
            among other technologies. 

          SB 1204 requires ARB, in evaluating potential projects to be  
          funded, to prioritize projects that demonstrate benefit to  
          disadvantaged communities, support for projects addressing  
          technology and market barriers not addressed by other programs,  
          and support for enabling technologies that benefit multiple  
          technology pathways, among other characteristics.

          This bill:








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          1)Establishes a five-year set-aside beginning January 1, 2018,  
            of 50% or $100 million, whichever is greater, per year of SB  
            1204 Program funds to support the commercial deployment of  
            existing zero- and near-zero-emission heavy-duty truck  
            technology that meets or exceeds ARB's optional low NOx  
            standard.  

          2)Beginning in 2018, prohibits a heavy-duty truck with an  
            internal combustion engine receiving SB 1204 Program funds  
            from using a fuel with a carbon intensity of more than 79% of  
            the carbon intensity of diesel, as defined in the LCFS.  

          3)Authorizes ARB to reduce the maximum fuel carbon intensity in  
            subsequent years if it finds that greater reduction is  
            commercially feasible and the CEC finds that there is a  
            sufficient available renewable energy fuel supply.  Such a  
            reduction shall apply to funds awarded.  Provides that this  
            requirement shall not alter or affect the amount of credits or  
            grants for which a low-carbon fuel provider or truck operator  
            is eligible.
          4)Beginning January 1, 2018, for purposes of program  
            eligibility, defines a "heavy-duty truck" as one with a gross  
            vehicle weight rating of 26,001 pounds or more. 

          COMMENTS:

          Purpose.  The author states that there is a deficiency of clean,  
          low-carbon, heavy-duty vehicles involved in goods movement that  
          can provide an immediate and cost-effective solution to  
          achieving much-needed criteria and GHG emission reductions to  
          clean the air, improve public health, and help the state meet  
          its climate goals.  In the South Coast and San Joaquin air  
          districts, nearly 80% of smog-forming pollutants, such as NOx,  
          come from mobile sources; heavy-duty vehicles are the number one  
          producer of NOx.  Federal ozone standards require at least a 65%  
          reduction in NOx emissions by 2023 and an 80% reduction by 2032.  
           In addition, California's climate goals require an 85% to 90%  
          reduction in GHG emissions by 2050.  A significant portion (40%)  
          of the state's GHG emissions come from mobile sources.  

          The sponsor of this bill, the Southern California Gas Company,  
          states that by creating incentives for truck purchasers, many of  
          whom are involved in goods movement, the state can help buy down  
          the initial cost of heavy-duty ultra-low-emission trucks and  








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          thereby help expand the alternative heavy-duty truck market by  
          deploying new technology and accelerating the retirement of  
          older high-polluting trucks.  The sponsor states that replacing  
          just 1,000 heavy-duty diesel trucks with cleaner trucks is  
          equivalent to removing more than 3,000 gasoline-fueled cars from  
          the road in terms of GHG reductions, and taking more than 80,000  
          cars off the road in terms of NOx reductions.  The sponsor  
          indicates that the severity of the state's air quality issues,  
          particularly in the San Joaquin and South Coast areas, calls for  
          a significant investment in deployment of clean heavy-duty  
          trucks as quickly as possible.

          Where will the money go?  Although no heavy-duty engine has yet  
          been certified to meet ARB's optional low NOx standard, the  
          author states that manufacturers report that new technologies  
          will be available in the transportation marketplace within three  
          years that could meet this standard.  To achieve widespread  
          deployment, financial incentives will be necessary to buy down  
          the capital costs of technology purchases.  The committee  
          understands that there is only one engine manufacturing company  
          currently working on this technology; the sponsors note that  
          infusing state funds into this sector could encourage others to  
          enter the market.

          Jumping the gun?  The SB 1204 Program was established by  
          legislation just last year and is not even scheduled to  
          officially begin allocating funds until July 1, 2015.  The  
          sponsor indicates that the set-aside for heavy-duty trucks  
          included in SB 1204 was intended to target Class 7 and 8 trucks.  
           ARB, however, notes that it has customarily defined heavy duty  
          as greater than 14,000 lbs.  Since the program is not even  
          allocating funds yet, the committee may wish to consider holding  
          this bill and instead allowing the program to run its course for  
          at least a year before significantly revising program  
          allocations.

          Winners and losers.  By directing such a large portion of  
          program funds to deployment of Class 7 and 8 trucks that meet  
          the optional low NOx standard, this bill effectively removes  
          incentive funds from technological development of medium-duty  
          trucks.  The committee understands that there are currently  
          zero- and near-zero-emission trucks in commercial deployment,  
          but only in the lower weight classes (14,001-26,000 lbs.), which  
          are excluded from the set-aside in this bill.  It will take some  
          time before these technologies are ready for the Class 7 and 8  








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          weight classes (26,001 lbs. or greater).  Advanced technologies  
          typically begin in the lower weight classes before moving to  
          heavier weight classes.  By directing incentive funds away from  
          lower weight classes, this bill could stifle technological  
          innovations related to those trucks.  In addition, since there  
          are not yet any engines available that have been certified to  
          the low NOx standard, it is difficult to predict what the demand  
          for these vehicles will be in 2018 to 2023.  Finally,  
          medium-heavy-duty trucks, such as drayage trucks used at ports  
          and to transport goods to inland warehouses, are ubiquitous and  
          contribute significantly to GHG emissions.  The committee may  
          wish to consider amending the bill to significantly reduce both  
          the amount and the length of the set-aside in order to preserve  
          some funding for medium-duty technology.
            
          Appropriate use of GGRF funds?  Opponents of this bill also  
          state this bill would direct funding intended to reduce GHG  
          emissions (e.g., GGRF monies) to truck projects without any  
          regard for the projects' impacts on GHGs.  GGRF funds should be  
          used to promote the cleanest possible options, including new  
          emerging technologies that have both a GHG and a criteria  
          pollutant benefit.  However, this bill could have the effect of  
          restricting funding only to conventional natural-gas  
          technologies using limited amounts of renewable fuels, passing  
          up projects that are cleaner over the long term.  While  
          deployment of clean heavy-duty truck technologies is a  
          commendable goal, the current ARB and CEC programs are working  
          together to provide funds for a range of new clean technologies  
          and to ensure that funding is available to assist both existing  
          and emerging technologies.  Opponents note that programs such as  
          ARFVTP already provide assistance to natural gas projects that  
          appear to be the focus of this bill.  
           
          Undoing a deal?  This bill was amended in the Assembly Natural  
          Resources Committee to require a heavy-duty truck receiving SB  
          1204 Program funds under this bill to use a minimum of 10%  
          renewable fuel.  The author amended this bill on June 23, 2015,  
          to remove this requirement and instead require a recipient to  
          use a fuel with a carbon intensity of greater than 79% of the  
          carbon intensity of diesel, as defined in the LCFS.  The author  
          states that the amendment is intended to help address opposition  
          concerns about ensuring GHG reductions.  However, this amendment  
          appears to violate the agreement made in the Assembly.

          Double-referred.  This bill has also been referred to the  








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          Environmental Quality Committee.  

          Related Legislation:

          SB 513 (Beall) - would expand the eligible uses of funds raised  
          by local air districts under the Carl Moyer Air Quality  
          Standards Attainment Program and the local AB 923 incentive  
          programs.  SB 513 is pending in the Assembly Transportation  
          Committee.

          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          June 24, 2015.)
          
            SUPPORT:  

          Southern California Gas Company (sponsor)
          Alhambra Chamber of Commerce
          Anaheim Chamber of Commerce
          Antelope Valley Air Quality Management District
          Antelope Valley Board of Trade
          Antelope Valley Boys and Girls Club
          Bienvenidos Community Health Center
          Black Chamber of Orange County
          Boys and Girls Club of Greater Ventura
          Boys Republic
          Building Industry Association of Southern California
          Burbank Chamber of Commerce
          California Center for Public Policy
          California Natural Gas Vehicle Coalition
          Central City Association
          Cesar Chavez Foundation
          Charter Oak Unified School District
          City of Beaumont
          City of Commerce
          City of Fountain Valley
          City of Palm Desert
          City of Pomona
          City of South Gate
          City of Tulare
          Clean Energy








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          County of Kern Board of Supervisors
          County of Madera Board of Supervisors
          County of Tulare Board of Supervisors
          Cummins Westport Inc.
          Discovery Cube Science Center
          Duarte Unified School District
          El Concilio Family Services
          El Monte/South El Monte Chamber of Commerce
          Foothill Workforce Investment Board
          Hanford Chamber of Commerce
          Industry Manufacturers Council
          Inland Action
          Inland Empire Chamber Legislative Alliance
          Inland Empire Economic Partnership
          Irvine Chamber of Commerce
          Kern County Superintendent of Schools
          Kheir Clinic
          Los Angeles Business Council
          Los Angeles Area Chamber of Commerce
          Orange County Business Council
          Orange County Taxpayers Association
          Pacific Asian Counseling Services 
          San Diego Gas and Electric
          San Gabriel Valley Consortium on Homelessness
          San Joaquin Valley Air Pollution Control District
          Sempra Energy Utilities
          Temple City Chamber of Commerce
          United Chambers of Commerce, San Fernando Valley and Region
          United Parcel Service
          Valley Family Center
          Valley Presbyterian Hospital
          
          OPPOSITION:

          Alameda-Contra Costa Transit District
          American Lung Association of California
          Clean Power Campaign
          Environment California
          Hino Motor Sales U.S.A.
          Natural Resources Defense Council 
          Physicians for Social Responsibility, Los Angeles Chapter
          Sierra Club California
          Union of Concerned Scientists 
          Valley Improvement Projects









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