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 ----------------------------------------------------------------- |Author: |Perea | |----------+------------------------------------------------------| |Version: |6/23/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Erin Riches | |: | | ----------------------------------------------------------------- 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 AB 857 (Perea) Page 2 of ? 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 AB 857 (Perea) Page 3 of ? 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) AB 857 (Perea) Page 4 of ? 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: AB 857 (Perea) Page 5 of ? 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 AB 857 (Perea) Page 6 of ? 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 AB 857 (Perea) Page 7 of ? 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 AB 857 (Perea) Page 8 of ? 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 AB 857 (Perea) Page 9 of ? 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 AB 857 (Perea) Page 10 of ? -- END --