BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            AB 857
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          |Author:    |Perea                                                |
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          |Version:   |6/23/2015              |Hearing      |7/15/2015       |
          |           |                       |Date:        |                |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Rebecca Newhouse                                     |
          |           |                                                     |
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          SUBJECT:  California Clean Truck, Bus, and Off-Road Vehicle and  
          Equipment Technology Program

            ANALYSIS:
          
          Existing law:  
          
          1) Under the California Global Warming Solutions Act of 2006  
             (commonly referred to as AB 32), requires the Air Resources  
             Board (ARB) to determine the 1990 statewide greenhouse gas  
             (GHG) emissions level and approve a statewide GHG emissions  
             limit that is equivalent to that level, to be achieved by  
             2020, and to adopt GHG emissions reductions measures by  
             regulation.  ARB is authorized to include the use of  
             market-based mechanisms to comply with these regulations.  
             (Health and Safety Code (HSC) §38500 et seq.)

          2) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the  
             State Treasury and requires all moneys, except for fines and  
             penalties, collected pursuant to a market-based mechanism be  
             deposited in the fund and requires the Department of Finance,  
             in consultation with ARB and any other relevant state agency,  
             to develop, as specified, a three-year investment plan for the  
             moneys deposited in GGRF. (Government Code §16428.8)

          3) Requires the investment plan to allocate a minimum of 25% of  
             the available moneys in the fund to projects that provide  
             benefits to disadvantaged communities, and a minimum of 10% of  
             the available moneys in the fund to projects located within  
             disadvantaged communities.  (HSC §39713).







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          4) Requires moneys from GGRF be used to facilitate the  
             achievement of reductions of GHG emissions in this state  
             consistent with the California Global Warming Solutions Act of  
             2006, and to the extent feasible complement efforts to improve  
             air quality, and direct investment toward the most  
             disadvantaged communities and households in the state, among  
             other things.  (HSC §39712).

          5) Requires the State Energy Resources Conservation and  
             Development Commission (CEC) to implement the Alternative and  
             Renewable Fuels and Vehicle Technology Program (ARFVTP) to  
             provide funding measures to specified entities to develop and  
             deploy technologies and alternative and renewable fuels in the  
             marketplace to help attain the state's climate change  
             policies. (HSC §43865 et seq.)

          6) Creates the Air Quality Improvement Program (AQIP), to be  
             administered by ARB in consultation with local air districts,  
             to fund air quality improvement projects.  (HSC §44274)

          7) Establishes certain vehicle and vessel related surcharges and  
             fees, until January 1, 2016, including an $8 fee increase in  
             the smog abatement, a $3 fee increase in the annual vehicle  
             registration fee, a $5 fee increase for special identification  
             plates and a $10-20 fee increase for vessel registration, to  
             fund the AQIP and ARFVT programs, among others. (HSC §44060.5  
             and Vehicle Code §§9250.1, 9261.1, & 9853.6)

          8) Creates the California Clean Truck, Bus, and Off-Road Vehicle  
             and Equipment Technology Program, funded through the GGRF, for  
             the development, demonstration, pre-commercial pilot, and  
             early commercial deployment of zero- and near-zero-emission  
             truck, bus, and off-road vehicle and equipment technologies.  
             Until January 1, 2018, no less than 20% of funding made  
             available for the purposes of this paragraph shall support  
             early commercial deployment of existing zero- and near-zero  
             emission near-zero-emission heavy-duty truck technology.  (HSC  
             §39719.2 )

          This bill:  

          1) Appropriates 50% or $100 million annually, whichever is  
             greater, of GGRF funds allocated to the California Clean  








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             Truck, Bus, and Off-Road Vehicle and Equipment Technology  
             Program for medium and heavy-duty trucks, to support the  
             commercial deployment of existing zero- and near-zero-emission  
             heavy-duty truck technology that meets or exceeds ARB's  
             optional low oxides of nitrogen (NOx) standard, between  
             January 1, 2018 and January 2, 2023.

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

          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  
             sufficient available renewable energy fuel supply and  
             specifies that such a reduction shall apply prospectively to  
             funds awarded.  

          4) Provides that the above requirement shall not alter or affect  
             the amount of credits or grants for which a low-carbon fuel  
             provider or truck operator is eligible.

          5) 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 gross vehicle weight  
             rating (GVWR) or more.

            Background
          
          1) Cap-and-trade auction revenue.  ARB has conducted 11  
             cap-and-trade auctions.  The first 10 have generated almost  
             $1.6 billion in proceeds to the state.

             Several bills in 2012, and one in 2014, provided legislative  
             direction for the expenditure of auction proceeds including  
             the following:

                       SB 535 (de León, Chapter 830, Statutes of 2012)  
                  requires that 25% of auction revenue be used to benefit  
                  disadvantaged communities and requires that 10% of  
                  auction revenue be invested in disadvantaged communities.  










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                       AB 1532 (J. Pérez, Chapter 807, Statutes of 2012)  
                  directs the Department of Finance to develop and  
                  periodically update a three-year investment plan that  
                  identifies feasible and cost-effective GHG emission  
                  reduction investments to be funded with cap-and-trade  
                  auction revenues.  AB 1532 specifies that GGRF moneys may  
                  be allocated to reduce GHG emissions through investments  
                  including, but not limited to, development of  
                  state-of-the-art systems to move goods and freight,  
                  advanced technology vehicles and vehicle infrastructure,  
                  advanced biofuels, and low-carbon and efficient public  
                  transportation.

                       SB 1018 (Budget Committee, Chapter 39, Statutes of  
                  2012) created the GGRF, into which all auction revenue is  
                  to be deposited.  The legislation requires that before  
                  departments can spend moneys from the GGRF, they must  
                  prepare a record specifying: (1) how the expenditures  
                  will be used, (2) how the expenditures will further the  
                  purposes of AB 32 (Nuñez, Pavley, Chapter 488, Statutes  
                  of 2006), (3) how the expenditures will achieve GHG  
                  emission reductions, (4) how the department considered  
                  other non-GHG-related objectives, and (5) how the  
                  department will document the results of the expenditures.  


                       SB 862 (Budget Committee, Chapter 36, Statutes of  
                  2014) requires the ARB to develop guidelines on  
                  maximizing benefits for disadvantaged communities by  
                  agencies administering GGRF funds, and guidance for  
                  administering agencies on GHG emission reduction  
                  reporting and quantification methods. 

             Legal consideration of cap-and-trade auction revenues.  The  
             2012-13 Budget analysis of cap-and-trade auction revenue by  
             the Legislative Analyst's Office noted that, based on an  
             opinion from the Office of Legislative Counsel, the auction  
             revenues should be considered mitigation fee revenues, and  
             their use requires that a clear nexus exist between an  
             activity for which a mitigation fee is used and the adverse  
             effects related to the activity on which that fee is levied.   
             Therefore, in order for their use to be valid as mitigation  
             fees, revenues from the cap-and-trade auction must be used to  
             mitigate GHG emissions or the harms caused by GHG emissions. 








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             In 2012, the California Chamber of Commerce filed a lawsuit  
             against the ARB claiming that cap-and-trade auction revenues  
             constitute illegal tax revenue.  In November 2013, the  
             superior court ruling declined to hold the auction a tax,  
             concluding that it is more akin to a regulatory fee.  The  
             plaintiffs filed an appeal with the 3rd District Court of  
             Appeal in Sacramento in February of last year.

             AB 32 auction revenue investment plan.  The first three-year  
             investment plan for cap-and-trade auction proceeds, submitted  
             by Department of Finance, in consultation with ARB and other  
             state agencies in May of 2013, identified sustainable  
             communities and clean transportation, clean energy and energy  
             efficiency, and natural resources and waste diversion, as the  
             three key sectors that provide the best opportunities for  
             achieving the legislative goals and supporting the purposes of  
             AB 32.  The plan recommended the aforementioned sector receive  
             the largest allocation of funds from the GGRF, but did not  
             specify a monetary amount. 

             Budget allocations.  The 2014-15 Budget allocates $832 million  
             in GGRF revenues to a variety of transportation, energy, and  
             resources programs aimed at reducing GHG emissions.  Various  
             agencies are in the process of implementing this funding.  SB  
             862 (Committee on Budget and Fiscal Review), a budget trailer  
             bill, established a long-term cap-and-trade expenditure plan  
             by continuously appropriating portions of the funds for  
             designated programs or purposes.  The legislation appropriates  
             25% for the state's high-speed rail project, 20% for  
             affordable housing and sustainable communities grants, 10% to  
             the Transit and Intercity Rail Capital Program, and 5% for  
             low-carbon transit operations.  The remaining 40% is available  
             for annual appropriation by the Legislature.  

             Of that 40%, $200 million was appropriated to ARB to implement  
             low carbon transportation programs.

          2)NOx and ozone.  Smog is formed from the reaction of oxides of  
            nitrogen (NOx) with volatile organic compounds (VOCs) to  
            produce ground-level ozone, or tropospheric ozone.  Ozone has a  
            number of negative health effects including irritated  
            respiratory system, reduced lung function, aggravated asthma  
            and inflammation and damage of the lining of the lung.  Active  








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            children are the group at highest risk from ozone exposure.  In  
            addition to negative public health impacts, ozone itself is a  
            powerful SCLP.

             Under the federal Clean Air Act, the United States  
             Environmental Protection Agency (US EPA) established National  
             Ambient Air Quality Standards (NAAQS) that apply for outdoor  
             air throughout the country.  These standards exist for several  
             air pollutants due to their negative impact on public health  
             above specified concentrations, including ozone.  ARB has also  
             adopted state ambient air quality standards for various air  
             pollutants that are, in some cases, more stringent than  
             federal standards.  Local air districts are required to adopt  
             and enforce rules to achieve and maintain the state and  
             federal ambient air quality standards.  Nonattainment areas  
             are regions that do not meet the ambient air quality standard  
             for one of those pollutants.  There are several nonattainment  
             designations ranging from concentrations slightly above the  
             standard, termed marginal nonattainment, to extreme  
             nonattainment, where pollution levels far exceed the national  
             standard.  

             To comply with the standards for ozone, local air districts  
             have regulations limiting emissions of NOx and VOCs for  
             stationary sources located in their jurisdiction.  These local  
             air district requirements have cut in half the emissions of  
             VOCs and NOx, and significantly reduced ozone concentrations  
             throughout California. 

             On November 25, 2014, the US EPA proposed to strengthen the  
             current 2008 NAAQS for ground-level ozone, based on extensive  
             scientific evidence about ozone's effects on public health and  
             welfare.  US EPA's proposal finds that the current level of  
             the standard, 75 parts per billion, is not adequate to protect  
             public health.



             The San Joaquin and South Coast air basins are both in extreme  
             nonattainment for the 2008 NAAQS for ozone.  States with  
             nonattainment areas would have until 2020 to late 2037 to meet  
             the proposed health standard, with attainment dates varying  
             based on the ozone level in the area.









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          3)Heavy-duty vehicle incentive funding.  California has a number  
            of programs to provide funding for low emission, near-zero and  
            zero-emission vehicles to help improve air quality throughout  
            the state, and reduce GHG emissions.

             a)   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 NOx and PM 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.  Currently, the majority of projects for trucks are  
               on-road trucks.  The maximum funding for a log truck is  
               $60,000 and the maximum funding for a non-log truck is  
               $45,000.

             b)   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. 

             c)   AB 118. AB 118 (Núñez, Chapter 750, Statutes of 2007)  
               created the ARFVT program and AQIP.  AB 118 provides, upon  
               appropriation by the Legislature, approximately $180 million  
               annually until 2023 for these programs.  These funds  
               primarily come from additional fees on vehicle registrations  
               and vessel registrations. 

               i)     Air Quality Improvement Program: AQIP, administered  
                 by ARB in consultation with local air districts, provides  
                 competitive grants to fund projects to improve the air  
                 quality impacts of alternative fuels and vehicles,  
                 vessels, and equipment technologies. AQIP encompasses  








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                 several programs, including the following:

                                     The Hybrid and Zero-Emission Truck  
                         and Bus Voucher Incentive Project (HVIP),  
                         administered by ARB and its contractor CALSTART,  
                         provides vouchers to California fleet owners to  
                         help purchase hybrid and zero-emission trucks and  
                         buses.  For fiscal year 2015-16, ARB proposes  
                         allocating $12 million for this program. 

                                     The On-Road Heavy-Duty Vehicle Air  
                         Quality Loan Program (Truck Loan Assistance  
                         Program), administered by ARB and the California  
                         Pollution Control Financing Authority, helps small  
                         business truckers to secure financing for newer  
                         trucks or diesel exhaust retrofits in advance of  
                         compliance deadlines for ARB's in-use truck and  
                         bus regulation.  As of April 30, 2015, about $57  
                         million in Truck Loan Assistance Program funding  
                         has been expended to provide about $446 million in  
                         financing to small business truckers for the  
                         purchase of nearly 7,500 cleaner trucks, exhaust  
                         retrofits, and trailers.  For fiscal year 2015-16,  
                         ARB proposes allocating $15 million for this  
                         program. 

               ii)  Alternative and Renewable Fuel and Vehicle Technology  
                 Program: ARFVTP, administered by CEC, provides funding for  
                 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. 

             a)   Low Carbon Transportation.  SB 1204 (Lara, Pavley,  
               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  








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               it to prioritize projects located in disadvantaged  
               communities.  The bill specified that, until January 1,  
               2018, 20% for early commercial deployment of existing  
               zero-and near-zero emission heavy-duty truck technology.   
               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 funding  
               plan was approved on July 1, 2015.  

                Pursuant to SB 1204, ARB has created several new program  
                categories to fund the development and deployment of zero  
                and near-zero emission trucks, buses and off-road vehicles.

               i)     Advanced Technology Demonstration Projects,  
                 administered by ARB, provide grants to local air districts  
                 and other public agencies to fund advanced-technology  
                 vehicle, equipment, or emission-control projects that are  
                 not yet commercialized.  Approximately $60 million is  
                 proposed for this program for FY 2015-16, including $30  
                 million for on-road trucks.

               ii)    Zero Emission Truck and Bus Pilots seek to leverage  
                 resources, promote efficiencies, and help drive down per  
                 vehicle costs via large, location-specific deployments of  
                 zero-emission trucks and buses.  Eligible project types  
                 include zero-emission transit buses, zero-emission school  
                 buses, and zero-emission freight/delivery trucks.  $45  
                 million for buses and $20 million for trucks is proposed  
                 for the 2015-16 fiscal year.

               iii)   Zero Emission Off-Road Freight Equipment Pilot  
                 Commercial Deployment Projects provide incentives for zero  
                 emission off-road freight equipment to accelerate  
                 deployment and drive consumer acceptance in the early  
                 stages of commercialization.  Eligible off-road  
                 zero-emission projects would include forklifts, transport  
                 refrigeration units, yard trucks, airport ground support,  
                 and cargo handling equipment.  The current funding plan  
                 proposes $9 million for these projects. 

               iv)    Low NOx truck incentives, also under AQIP, provide  
                 funding for heavy-duty trucks 14,000 pounds GVWR or  
                 greater with engines certified to the lower NOx standards.  
                  ARB is proposing an additional incentive for the use of  








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                 alternative fuels.  The FY 2015-16 AQIP Funding Plan  
                 allocates $7 million for this program. 
            
          Comments
          
          1) Purpose of Bill.  According to the author, "California  
             continues to suffer from the worst air quality in the nation,  
             contributing to serious health risks including asthma, cancer,  
             birth defects and even premature death.  Air pollution affects  
             everyone and remains a public health threat, particularly for  
             those who live in disadvantaged communities near major  
             transportation corridors such as freeways, ports and rail  
             depots.  

             "A recent report by the American Lung Association revealed  
             that the five most ozone-polluted areas are in California;  
             with Los Angeles-Long Beach topping the list, followed by  
             Visalia-Porterville-Hanford, Bakersfield, Fresno-Madera, and  
                                                                       Sacramento-Roseville; and the California Environmental  
             Protection Agency tells us that disadvantaged communities in  
             the Central Valley and near our ports suffer significantly  
             from multiple sources of air pollution.  While we have made  
             great strides in bettering the state's air, we still have a  
             long way to go.  California agencies have documented that the  
             transportation sector is the largest contributor of air  
             pollution, accounting for 80 percent of our smog-forming  
             pollutants and 40 percent of our greenhouse gas emissions.   
             While our car-dependent culture is largely to blame,  
             heavy-duty diesel trucks are the biggest polluters in this  
             sector.  Replacing heavy-duty diesel trucks represents the  
             best, most cost effective way to get our cities off the "most  
             polluted" list, and more critically, help the many  
             disadvantaged communities that sit along key goods movement  
             corridors."

          2) Low NOx and natural gas.  ARB regulations provide for an  
             optional reduced NOx emission standard for on-road heavy-duty  
             engines of 0.02 grams NOx per brake horsepower-hour.  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, and represents a 90%  
             reduction in NOx from the current NOx standard.  The movement  
             of goods and freight is a major contributor to NOx pollution  








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             in the state's nonattainment air basins.  

             AB 857 includes a five year set-aside beginning in 2018 for  
             low NOx heavy duty trucks meeting this standard of $100  
             million per year, or 50%, depending on which is greater, of  
             GGRF moneys appropriated to the California Clean Truck, Bus,  
             and Off-Road Vehicle and Equipment Program established through  
             SB 1204 (Lara, Chapter 524, Statutes of 2014).  Currently, no  
             heavy-duty engine has been certified to meet ARB's optional  
             low NOx standard, however the author states that manufacturers  
             report that new technologies will be available in the  
             transportation marketplace within three years that could meet  
             this standard for heavy-duty vehicles using natural gas. 

          3) $500 million for commercial deployment of low-NOx heavy-duty  
             trucks.  The program established through SB 1204 (Lara) is  
             intended to fund the development, demonstration and early  
             commercial deployment of near-zero and zero-emission trucks,  
             buses, off-road vehicles, and equipment in order to accelerate  
             commercial success, and large-scale adoption of these  
             technologies. 

             As noted, AB 857 requires at least $100 million annually for  
             five years, or half a billion dollars total, go toward the  
             commercial deployment of heavy-duty trucks meeting a low-NOx  
             standard of 0.02 grams per brake horsepower-hour, and where  
             heavy duty is defined in the bill as greater than 26,000  
             pounds GVWR.

             As total proposed GGRF moneys for the 2015-16 fiscal year is  
             $148 million, $100 million represents two thirds of the  
             funding for the entire SB 1204 program to fund all other  
             non-heavy-duty truck deployment projects, including  
             demonstration projects, freight equipment, and pilot  
             deployments of near-zero and zero-emission buses, off-road  
             vehicles and equipment.

             The result is that, after allocation to heavy-duty trucks,  
             there will be a much smaller pot of money to divvy up among  
             all the other projects, ensuring significantly reduced  
             investments in every other category, with some project  
             categories possibly eliminated from funding.  Although low-NOx  
             heavy duty trucks represent an important cleaner technology  
             investment in the near term, allocating two-thirds of the  








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             funding squeezes out every other investment and may stifle  
             advancement in those areas, further pushing progress toward  
             commercial deployment of those near-zero and zero-emission  
             technologies further off into the future.  

             With so much of the funding directed to trucks, and of that  
             category, only the heaviest trucks (Class 7 and 8 with weights  
             over 26,000 pounds GVWR), this bill seems to work counter to  
             the goals of SB 1204 to create a comprehensive program to  
             advance near-zero and zero-emission medium and heavy duty  
             vehicles, including medium-duty trucks, busses, and other  
             off-road vehicles.  

             Additionally, 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.  According to ARB, advanced technologies and initial  
             deployments typically begin in the lower weight classes  
             (14,001-26,000 pounds GVWR) before moving to heavier weight  
             classes. For example, approximately 68% of all HVIP vouchers  
             have gone to trucks that are 26,000 pounds GVWR or less.  So  
             in addition to stagnating other near-zero and zero-emission  
             vehicle and equipment types, heavy-duty truck technology could  
             also stall at the low-NOx natural gas stage, instead of  
             continuing to push for a near-zero or zero-emission future. 

             For this reason, an amendment is needed to expand the  
             definition of heavy-duty to weight classes of 14,000 pounds  
             GVWR and greater.

          4) Other funding for low-NOx vehicles.  As noted in the  
             background, the state has multiple other programs that could  
             provide incentive funds for the purchase of low-NOx heavy duty  
             natural gas trucks, such as Proposition 1b funds, the Carl  
             Moyer Program, AB 118's Alternative and Renewable Fuel and  
             Vehicle Technology Program administered by CEC, and ARB's  
             Truck Loan Assistance Program.  In light of this, it is not  
             clear why such a large fraction of the funding is warranted  
             for a single technology and vehicle class from the SB 1204  
             program.

          5) In three years' time.  The set-aside in AB 857 begins in 2018.  
              Is it necessary to guarantee half a billion dollars for a  








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             technology that has yet to be certified to meet the low-NOx  
             standard?  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.  Currently, ARB has the ability to  
             determine, on an annual basis, how to apportion funds based on  
             promising technologies, technological developments, market  
             conditions, and a variety of other factors. This flexibility  
             allows appropriations to vary from year to year if market  
             forces change or technological advances occur. Is it prudent  
             to remove this discretion at the agency level to make these  
             funding determinations?  If the Legislature instead decides  
             that a set-aside for this technology is warranted, is it  
             necessary to establish it now in statute when the technology  
             is not available and has not been demonstrated?  Would it be  
             more prudent to wait until that time to establish if the  
             vehicles are ready for deployment? 

          6) GHG emissions reductions. Moneys for low NOx heavy-duty trucks  
             required by this bill would be funded through the GGRF, and as  
             such, are required to achieve GHG emissions reduction.  
             Proponents state that there are significant GHG emission  
             reductions when switching from diesel fueled trucks, to  
             natural gas.  However, as previously noted, AB 857 potentially  
             stifles development of other zero-emission transformative  
             technologies, and in this way, may not be structured to allow  
             for the prioritization of projects or funding categories in  
             order to maximally reduce GHG emissions. 

             In addition to the fact that stifled innovation may hamper GHG  
             emission reduction efforts in the long term, there are many  
             other vehicles types such as medium-heavy-duty trucks,  
             including drayage trucks used at ports and to transport goods  
             to inland warehouses, which are abundant and contribute  
             significantly to GHG emissions in the state, but that are not  
             included in the $100 million set-aside of funds. 

             Where is the natural gas coming from?  California imports 90%  
             of its natural gas from out of state.  And although ARB's life  
             cycle analysis should incorporate all aspects of production,  
             and delivery through their carbon intensity accounting, recent  
             scientific reports indicate that there have been large  
             underestimates of methane emissions, the primary component of  
             natural gas (where methane has 20 to 30 times the global  








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             warming potential of CO2) throughout the United States.  These  
             initial studies imply that estimates of the carbon intensity  
             of natural gas imports may need to be reevaluated to provide a  
             more accurate picture of the actual climate impacts from a  
             transportation system that continues to rely more heavily on  
             natural gas. 

             Low-NOx natural gas engines and GHG emissions.  The low NOx  
             heavy-duty trucks that would quality for the funds allocated  
             in AB 857, although a large technological advancement in terms  
             of reduced NOx, do not represent gains over conventional  
             natural gas trucks in terms of GHG emission reductions. 

             Renewable natural gas.  Renewable gas, or biomethane, is  
             purified biogas, which is the gaseous product of anaerobic  
             digestion and is comprised primarily of methane and carbon  
             dioxide.  Biomethane is considered a "low-carbon" fuel because  
             its combustion destroys methane, a potent climate-warming gas.  
              In addition, biomethane can be used to displace the use of  
             fossil fuels, such as natural gas, thereby further decreasing  
             its carbon intensity.  

             Assembly Natural Resources amendment.  In order to ensure more  
             significant GHG emission reductions for the large GGRF  
             investments toward low-NOx heavy duty trucks required under AB  
             857, an amendment was taken in the Assembly Natural Resources  
             Committee to require that, to be eligible for funding, these  
             trucks use at least 10% renewable fuel.  In an attempt to  
             express this value in a way that accounts for the carbon  
             life-cycle of fuels, this provision was later amended by the  
             author to specify a carbon intensity value of no greater than  
             79% for the fuel as compared to diesel, in order to qualify  
             for funding.
              
             It is unclear what assumptions went into this calculation and,  
             therefore, what level of renewable fuel on average would be  
             required by a carbon intensity of 79% of conventional diesel.   
             Additionally, because carbon intensities are dependent on the  
             specific life-cycle for each fuel, it is not clear how ARB  
             would implement this provision and verify a carbon intensity  
             requirement for individual trucks or fleets. 

             Assuming a carbon intensity threshold of 79% does accurately  
             represent a 10% renewable gas requirement, this value is a  








          AB 857 (Perea)                                          Page 15 of  
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             still a very low bar for renewable fuel, considering the  
             significant growth in the production of renewable fuel used as  
             a transportation fuel in the last few years.  According to  
             ARB, in 2012, only about 2% of natural gas used as a  
             transportation fuel was renewable.  In 2013, the percentage  
             increased five-fold to 10%.  In 2014, the amount more than  
             doubled to 21%, but the last quarter of 2014 saw 42% renewable  
             and the first quarter of 2015 was 60%.
           
             In order to justify the use of GGRF moneys with a meaningful  
             renewable fuel requirement that recognizes the substantial  
             growth in renewable gas over the last few years, an amendment  
             is needed to1) set the renewable fuel requirement at 50%, or  
             the equivalent carbon intensity value compared to conventional  
             diesel, as determined by ARB, and 2) provide ARB the  
             discretion to increase or lower the percentage based on  
             technological feasibility and supply considerations. 

          7) Additional amendments from Assembly Natural Resources.  
             Amendments taken in the Assembly Natural Resources Committee  
             required the owner or responsible official of a heavy-duty  
             truck that received incentive funding under AB 857 to document  
             the required renewable content by volume of fuel dispensed, as  
             determined by ARB. 

             Author's amendments have since struck this requirement. 
                             
             An amendment is needed to restore that language to honor the  
             agreement made in that committee. 

          8) Piece by piece.  GGRF investments must facilitate the  
             achievement of GHG emissions reductions.  However, after that  
             requirement is fulfilled, there are a number of other policy  
             goals that should be considered, including benefits to  
             environmental quality, resource protection, public health and  
             the economy, as well as benefits to disadvantaged communities.  
              And although the fund is growing, it is still a limited  
             source of revenue.  In order to create an optimized investment  
             strategy from GGRF moneys, proposals should not be considered  
             in isolation, but be assessed in aggregate to determine what  
             suite of measures best meets the requirements of the fund,  
             uses resources most efficiently, and maximizes policy  
             objectives. 









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             As budget discussions on a cap-and-trade investment strategy  
             have been pushed to later this session, an opportunity exists  
             to have a comprehensive discussion on the universe of GGRF  
             proposals currently in the Legislature, during budget  
             negotiations this summer.  If the Legislature feels that AB  
             857 is an appropriate expenditure of GGRF moneys, then this  
             measure should also be considered through the budget process  
             for cap-and-trade expenditures, along with all other measures  
             proposing to expend, or authorize for expenditure, GGRF  
             moneys.

            Related/Prior Legislation

          SB 1204 (Lara, Pavley, Chapter 524, Statutes of 2014) established  
          the California Clean Truck, Bus, Off-Road Vehicle and Equipment  
          Program, funded through the GGRF, for the development and  
          deployment of near-zero and zero-emission truck, bus, off-road  
          and equipment technologies.              

            

          DOUBLE REFERRAL:  

          This measure was heard in Senate Transportation and Housing  
          Committee on July 7, 2015, and passed out of committee with a  
          vote of 8-1.  
           

          SOURCE:                    Southern California Gas Company  

           SUPPORT: 

          Agile Sourcing Partners
          Agility Fuel Systems, Inc. 
          Alameda Construction Services, Inc.
          Alhambra Chamber of Commerce
          A.M. Ortega, Inc.
          Anaheim Chamber of Commerce
          Antelope Valley Air Quality Management District
          Antelope Valley African American Chamber of Commerce
          Antelope Valley Board of Trade
          Antelope Valley Boys and Girls Club
          ARB, Inc.
          Arborland Montessori School








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          Asian Business Association of the Inland Empire
          Association of California Cities - Orange County
          Azusa Chamber of Commerce
          Bienvenidos Community Health Center
          Binational Health Week Planning Committee, Los Angeles
          Bioenergy Association of California
          Black Business Association 
          Black Chamber of Orange County
          Boys & Girls Club of Greater Ventura
          Boys and Girls Clubs of Greater Redlands-Riverside of San  
          Bernardino & 
               Riverside Counties 
          Boys & Girls Club of Pomona Valley
          Boys Republic
          BREATHE California of Los Angeles County
          Brotherhood Crusade
          Building Industry Association of Southern California, Inc.
          Burbank Chamber of Commerce
          California Black Chamber - Council of Chambers
          California Center for Public Policy
          California Food Policy Council
          California Natural Gas Vehicle Coalition
          California Trucking Association
          Cambodia Town, Inc.
          Cars are Basic
          Casa 0101
          Casa Esperanza
          Central City Association of Los Angeles
          Cesar Chavez Foundation
          Charter Oak Unified School District
          City of Atascadero
          City of Beaumont
          City of Buena Park
          City of Commerce
          City of Compton 
          City of Downey
          City of El Monte 
          City of Fontana
          City of Fountain Valley
          City of Goleta
          City of Hanford
          City of Huntington Beach
          City of Lake Elsinore
          City of Los Angeles, Council Member Felipe Fuentes








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          City of Lynwood
          City of Maywood
          City of McFarland
          City of Monterey Park
          City of Palm Desert
          City of Perris
          City of Pico Rivera
          City of Pomona
          City of Riverside
          City of San Fernando
          City of South Gate
          City of Tulare
          City of Westminster
          Clean Air Now
          Clean Energy
          CleanTech OC
          Clinica Msr. Oscar A. Romero Community Health Centers
          CM Distributors, Inc.
          Coachella Valley Economic Partnership
          Commerce Industrial Council Chamber of Commerce
          Congress of California Seniors
          COPE Health Solutions
          Councilmember Fernando Vasquez, City of Downey 
          County of Kings 
          County of San Bernardino 
          County of Santa Barbara
          County of Tulare
          Culver City Chamber of Commerce
          Cummins Westport Inc. 
          Dana Point Chamber of Commerce
          Desert Healthcare District
          Desert Valleys Builders Association
          Discovery Cube Science Center
          Dignity Health
          Duarte Chamber of Commerce
          Duarte Unified School District
          Economic Development Collaborative - Ventura County
          Economic Development Corporation serving Tulare County
          Economic Vitality Corporation of San Luis Obispo 
          EDCO
          El Concilio Family Services
          El Monte/South El Monte Chamber of Commerce
          Federacion de Clubes Jaliscienses Del Sur de California
          Foothill Workforce Investment Board








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          Fountain Valley Chamber of Commerce
          Fullerton Chamber of Commerce
          G&C Equipment Corporation
          Gardena Valley Chamber of Commerce
          Gateway Chambers Alliance
          Glendale Chamber of Commerce
          Glendora Unified School District
          Grandma's House of Hope
          Greater Conejo Valley Chamber of Commerce
          Greater Los Angeles African American Chamber of Commerce
          Greater San Fernando Valley Chamber of Commerce
          Greater West Covina Business Association 
          GreenFIX America, LLC
          Hanford Chamber of Commerce
          Harvest Power California, LLC
          Hemet San Jacinto Chamber of Commerce
          Herman Weissker, Inc.
          Hispanas Organized for Political Equality
          Huntington Beach Chamber of Commerce
          Industry Manufacturers Council
          Infinity Business Solutions
          Inglewood/Airport Area Chamber of Commerce
          Inland Action
          Inland Empire Economic Partnership
          Jabo Industries, LLC
          Kern County Board of Supervisors 
          Kern County Superintendent of Schools
          Kern Economic Development Foundation
          Kheir Clinic
          Laguna Nigel Chamber of Commerce
          La Verne Chamber of Commerce
          League of California Cities, Orange County Division
          Lincoln Training Center
          Los Angeles Area Chamber of Commerce
          Los Angeles Business Council
          Los Angeles County Business Federation
          Los Angeles Opportunities Industrialization Center
          Lyles Utility Construction, LLC
          Madera County Board of Supervisors
          Meals on Wheels Industry, Inc.
          Mojave Desert Air Quality Management District
          Montebello Unified School District Board of Education
          Moreno Valley Black Chamber of Commerce
          Mothers of East Los Angeles 








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          Mujeres del la Tierra
          Neal Construction Services
          National Construction and Development, Inc.
          National Congress of Black Women, Inc., Los Angeles Chapter
          North Orange County Legislative Alliance
          North of the River Chamber of Commerce 
          Oceanside Chamber of Commerce
          Ojai Valley Chamber of Commerce
          Orange County Business Council
          Orange County Hispanic Chamber of Commerce
          Orange County Taxpayers Association
          Orange County Transportation Authority 
          Otay Mesa Chamber of Commerce
          Our Weekly
          Oxnard Chamber of Commerce
          Pacific Asian Consortium in Employment
          Pacific Asian Counseling Services
          Palm Desert Area Chamber of Commerce
          Pasadena Chamber of Commerce, Board of Directors
          Pinnacle Petroleum, Inc. 
          Pomona Valley Hospital Medical Center
          Placita Santa Fe Merchants Association 
          Plaza Community Services
          Proteus, Inc.
          ReFuel by Atlas Disposal Industries
          Regional Chamber of Commerce - San Gabriel Valley 
          Riverside National Association for the Advancement of Colored  
          People
          Rosemead Chamber of Commerce
          Rowland Heights Community Coordinating Council
          Ryder
          Rowland Unified School District
          Salvadoran American Leadership and Educational Fund
          Salvation Army L.A. Red Shield Youth and Community Center
          San Diego East County Chamber of Commerce
          San Diego Gas & Electric (SDG&E)
          San Diego Port Tenants Association
          San Gabriel Valley Council of Governments
          San Gabriel Valley Regional Chamber of Commerce 
          San Joaquin Valley Air Districts
          San Joaquin Valley Air Pollution Control District
          San Joaquin Valley Regional Transportation Planning Agencies
          Santa Ana Chamber of Commerce
          Santa Clarita Valley Chamber of Commerce








          AB 857 (Perea)                                          Page 21 of  
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          Santa Maria Valley Chamber of Commerce
          Santa Monica Chamber of Commerce
          S E Pipe Line Construction Co.
          Sempra Energy Utilities 
          Sequoia Riverlands Trust
          Simi Valley Chamber of Commerce
          South Orange County Economic Coalition
          Southeast Community Development Corporation
                                                                       Southern California Gas Company (SoCalGas)
          Southwest California Legislative Council 
          S.W. Administrators, Inc.
          The Coalition for Renewable Natural Gas
          TELACU (The East Los Angeles Community Union)
          The Placita Santa Fe Merchants Association 
          The Salvation Army
          The Valley Economic Alliance
          Torrance Area Chamber of Commerce
          Uchida Pipe & Industrial Products
          United Chambers of Commerce, San Fernando Valley & Region
          University of California, Riverside Center for Sustainable  
          Suburban Development 
          UPS
          Utility Partners of America
          Valley Family Center
          Valley Presbyterian Hospital
          Valley Vista Services, Inc.
          Venice Chamber of Commerce 
          Vobecky Enterprises, Inc.
          Waste Mangement
          Western Riverside Council of Governments (WRCOG)
          West Valley Boys & Girls Club
          YMCA (Anaheim)
          3G CNG Corporation
          99 Cents Only Stores, LLC
          
          OPPOSITION:

          Alameda-Contra Costa Transit District
          American Lung Association of California
          BAE Systems, Inc.
          BYD Motors, Inc.
          Center for Transportation and the Environment
          Clean Power Campaign
          Complete Coach Works








          AB 857 (Perea)                                          Page 22 of  
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          Environment California
          National Parks Conservation Association
          Natural Resources Defense Council 
          Nuvera Fuel Cells, LLC
          Orange EV
          Physicians for Social Responsibility - Los Angeles Chapter
          Regional Asthma Management & Prevention
          Sierra Club California
          The Greenling Institute
          Union of Concerned Scientists 
          US Hybrid
          Valley Improvement Projects
          Wireless Advanced Vehicle Electrification (WAVE)
          XL Hybrids

                                           
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