BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 857 (Perea) - California Clean Truck, Bus, and Off-Road
Vehicle and Equipment Technology Program.
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|Version: August 18, 2015 |Policy Vote: T. & H. 8 - 1, |
| | E.Q. 5 - 2 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 24, 2015 |Consultant: Marie Liu |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 857 would reserve 50% or $100 million annually,
whichever is greater, of Greenhouse Gas Reduction Fund (GGRF)
monies that are allocated to the California Clean Truck, Bus,
and Off-Road Vehicle and Equipment Technology Program (AB 1204
program) to support the commercial deployment of existing zero-
and near-zero emission heavy-duty truck technology that meets or
exceeds the Air Resources Board's optional low NOx standard
between 2018 and 2023.
Fiscal
Impact:
Ongoing cost of at least $100,000 annually to the GGRF
(special) to provide $100,000 for zero- and
near-0zero-emission Class 7 and 8 trucks plus pressures to
provide funds for other types of eligible projects under the
AB 1204 program.
AB 857 (Perea) Page 1 of
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Initial costs of $844,000 for FY 2016-17 followed by annual
ongoing costs of $2.0 million to the GGRF (special) for the
ARB to update guidelines and procedures for the new program,
review grant solicitations, conduct fleet audits, conduct
on-site inspections, and verify fueling requirement
compliance.
Background: The California Global Warming Solutions Act of 2006 (referred
to as AB 32, HSC §38500 et seq.) requires the California Air
Resources Board (ARB) to determine the 1990 statewide greenhouse
gas (GHG) emissions level, to approve a statewide GHG emissions
limit equivalent to that level that will 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 the regulations. Under this authority, the ARB
initiated the cap-and-trade program. All monies, except for
fines and penalties, collected pursuant to the cap-and-trade
program deposited in the Greenhouse Gas Reduction Fund (GGRF)
(Government Code §16428.8).
Existing law requires that the GGRF only be used to facilitate
the achievement of reductions of GHG emissions consistent with
AB 32 (HSC §39710 et seq.). To this end, the Department of
Finance, in consultation with the ARB and any other relevant
state agencies, is required to develop, as specified, a
three-year investment plan for the moneys deposited in the GGRF.
The investment plan must allocate a minimum of 25% of the funds
to projects that benefit disadvantaged communities and to
allocate 10% of the funds to projects located within
disadvantaged communities. Additionally, the ARB, in
consultation with CalEPA, is required to develop funding
guidelines for administering agencies receiving allocations of
GGRF funds that include a component for how agencies should
maximize benefits to disadvantaged communities.
Existing law establishes the California Clean Truck, Bus, and
Off-Road Vehicle and Equipment Technology Program (SB 1204
(Lara) Chapter 524, Statutes of 2014) to fund development,
demonstration, precommercial pilot, and early commercial
deployment of zero- and near-zero-emission truck, bus, and
off-road vehicle equipment technologies with GGRF funds.
AB 857 (Perea) Page 2 of
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Priority is given to projects that benefit disadvantaged
communities. The SB 1204 program is administered by the Air
Resources Board (ARB) in conjunction with the California Energy
Commission (CEC). Until January 1, 2018, at least 20% of the
funds allocated to the SB 1204 program are reserved to support
early commercial deployment of existing zero- and
near-zero-emission heavy-duty truck technology.
Proposed Law:
This bill would make changes to the SB 1204 program to require
minimum investments in the commercial deployment of existing
zero- and near-zero emission heavy-duty truck technology
beginning in 2018. Specifically, this bill would require that
between January 2, 2018 and January 1, 2023, at least 50% or
$100 million, whichever is greater, of the funds allocated to
the SB 1204 program be reserved for the commercial deployment of
existing zero- and near-zero-emission heavy-duty truck
technology that meets or exceeds specified NOx emission
standards. Beginning in 2018, a heavy-duty truck would be
defined as a vehicle with a gross vehicle weight rate of 26,001
pounds or more (Class 7 and 8 trucks).
This bill would also require that heavy-duty trucks with an
internal combustion engine that receives awards under the
program between January 2, 2018 and January 1, 2020 use at least
30% renewable fuel. This requirement would be increased to 50%
for trucks that receive awards from the program after January 2,
2020. The ARB would be authorized to increase the minimum
percentage of renewable fuel required if it finds that the
higher percentage is commercially feasible and the CEC finds
there is sufficient supply available. Increases in fuel
requirements would only apply prospectively to future awards.
Staff
Comments: There are no funding guarantees for the existing SB
1204 program. However, because this bill requires that at least
$100 million be made available annually from 2018 to 2023 for
existing zero- and near-zero emission heavy-duty truck
technology, this bill would result in at least $500,000 in costs
AB 857 (Perea) Page 3 of
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to the GGRF to fund this portion of the project over five years.
The actual amount that is reserved could be larger if 50% of the
SB 1204 program allocations are larger than $200 million in
2018, which is unknown at this time.
This bill also creates unknown cost pressures to fund other
eligible projects under SB 1204 other than zero- and near-zero
emission heavy-duty truck technology. For illustration purposes,
if the bill's requirements were applied to next year, using
ARB's 2015-16 proposed funding plan for Low-carbon Investments
and the Air Quality Improvement Program, the SB 1204 program
would receive $148 million with $100 million reserved for
existing zero- and near-zero emission heavy-duty truck
technologies, or 2/3 of the funding. Reserving such a
substantial amount of funds for one category would put
considerable cost pressures on the program for other eligible
projects including for medium-duty trucks, lower class
heavy-duty trucks, busses, off-road vehicles, and demonstration
projects. These cost pressures are likely at least in the high
tens of millions of dollars and are likely to change in time as
markets and technologies change.
The ARB anticipates needing five positions at an annual cost of
$844,000 in 2017 to develop the required program and then six
positions plus a $1 million contract for a total annual cost of
$2.0 million to implement the program. It is possible that ARB
would elect to develop a program consistent with this bill on
its own, as it has the authority to do so under SB 1204.
However, this bill would require such changes to the program;
therefore the costs of the program are appropriately attributed
to this bill.
Moneys in this program are likely to go toward trucks fueled by
natural gas. However, the use of natural gas in itself does not
necessarily correspond to a significant reduction in GHG
emissions, which is a requirement as the program is funded by
the GGRF. To ensure the program results in GHG emission
reductions, this bill requires that trucks awarded monies from
the program be fueled by a minimum amount of renewable fuel.
This requirement necessitates ongoing oversight of awardees by
the ARB that has not been implemented before. ARB estimates
significant costs with overseeing fueling requirements,
including one position and a $1 million dollar contract for
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verification services (included in the totals discussed above).
The duration of these fueling requirement compliance costs are
unknown because the bill is silent as to how long the fueling
requirement would be imposed or enforced. Class 7 and 8 trucks
often are only owned by the first purchaser for only five to
seven years but then sold to other operators and remain on the
road for decades. Natural gas powered heavy-duty trucks are not
anticipated to have a different useful life. If the fueling
requirements are only imposed on the first owner of the truck,
then the GHG benefits of the program are likely to be limited to
five or seven years. However, imposing fueling requirements on
subsequent owners and tracking ownership changes could increase
and sustain ARB's administrative costs to oversee compliance for
decades years to come and long after the last awards are
allocated. Staff notes that the ARB is considering such fuel
requirements under the current AB 1204 program, so to some
extent these costs are pre-existing. However, because this bill
dramatically increases funding to projects that necessitate
fueling requirements, additional costs are justifiably
attributable to this bill.
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