BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 1176 Hearing Date: 6/30/2015 ----------------------------------------------------------------- |Author: |Perea | |----------+------------------------------------------------------| |Version: |6/1/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |Yes |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Erin Riches | |: | | ----------------------------------------------------------------- SUBJECT: Advanced Low-Carbon Diesel Fuels Access Program DIGEST: This urgency bill establishes the Advanced Low-Carbon Diesel Fuels Access Program to fund low-carbon diesel fueling infrastructure projects in communities that are disproportionately impacted by environmental hazards and where the greatest air quality impacts can be identified. ANALYSIS: California Global Warming Solution Act of 2006 and Greenhouse Gas Reduction Fund AB 32 (Núñez, Chapter 488, Statutes of 2006) requires the state Air Resources Board (ARB) to develop a plan by 2020of how to reduce emissions to 1990 levels. AB 32 also requires ARB to ensure that greenhouse gas (GHG) emission reduction requirements and programs, to the extent feasible, direct public and private investment toward the most disadvantaged communities in the state. It authorizes ARB to adopt a schedule of fees to be paid by GHG emission sources regulated under AB 32 and deposited into the Greenhouse Gas Reduction Fund (GGRF), available upon appropriation by the Legislature to carry out AB 32 requirements. SB 535 (De León, Chapter 830, Statutes of 2012) requires the Department of Finance, when developing the three-year investment plan for GGRF monies, to allocate 25% of these funds to projects that provide benefits to disadvantaged communities, and a AB 1176 (Perea) Page 2 of ? minimum of 10% to projects located within disadvantaged communities. Low Carbon Fuel Standard The Low Carbon Fuel Standard (LCFS) was established through a Governor's Executive Order in January 2007. ARB adopted the LCFS regulation in April 2009, effective the following year. The LCFS aims to reduce GHG emissions from the transportation sector by about 16 million metric tons by 2020. It is also designed 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 (CI) of transportation fuels used in California by an average of 10% by 2020. It consists of two elements: a cap on total GHG emissions from the entire fuel sector, and a carbon credit-trading mechanism that incentivizes the production and use of low-carbon fuels. Petroleum importers, refiners, and wholesalers may either develop their own low-carbon fuel products or buy LCFS credits from other companies that sell low-carbon alternative fuels such as biofuels, electricity, natural gas, or hydrogen. The CI has been frozen at 1% since 2013 as a result of litigation, but ARB plans to re-adopt the LCFS this year. After re-adoption, the CI will begin to decrease toward the 10% reduction required by 2020. The baseline LCFS fuels are reformulated gasoline mixed with corn-derived ethanol and low -ulfur 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 also establishes ARFVTP, administered by 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, AB 1176 (Perea) Page 3 of ? 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. Carl Moyer Memorial Air Quality Standards Attainment Program (Carl Moyer Program) Existing law, AB 1571 (Villaraigosa, Chapter 923, Statutes of 1999), 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 provides approximately $60 million for projects each year throughout the state. AB 118 Advanced Technology Demonstration Projects This program, administered by ARB, provides grants to local air districts and other public agencies to fund advanced technology vehicle, equipment, or emission-control projects that are not yet commercialized. This bill: 1)Establishes the Advanced Low-Carbon Diesel Fuels Access Program under the CEC, in consultation with ARB. 2)Requires the program to provide capital assistance for projects to expand low-carbon diesel fueling infrastructure in communities that are disproportionately impacted by environmental hazards and where additionally the greatest air quality impacts can be identified. 3)Defines "low-carbon diesel fuel" as a biomass-based diesel fuel that meets the following criteria: a. Meets LCFS requirements. b. Contains a minimum of 21% biomass-based content. c. Complies with the Commercialization of Alternative Diesel Fuels regulation once the regulation becomes final. d. Has a recognized carbon intensity under the LCFS regulation of at least 50% lower than the petroleum diesel AB 1176 (Perea) Page 4 of ? baseline carbon intensity valuation. e. Does not produce higher levels of oxides of nitrogen (NOx) or particulate matter (PM) than petroleum diesel fuel. 4)Defines "low-carbon diesel fueling infrastructure" as equipment to store and dispense low-carbon diesel fuel to motor vehicles that is open to the public. Eligible equipment includes, but is not limited to, storage, tanks, piping, fittings, fuel dispensers, signage, and point-of-sale systems. 5)Provides for the program to be funded with GGRF monies, upon appropriation by the Legislature. 6)Requires the CEC, by March 1, 2016, to develop guidelines to ensure the program focuses on communities that are disproportionately impacted by environmental hazards and where the greatest vehicular pollution is identified, and to select disadvantaged communities for funding in consultation with the California Environmental Protection Agency. 7)Requires the CEC, in evaluating projects for funding, to prioritize the following characteristics: a. Occurs in or near disadvantaged communities. b. Demonstrates potential for co-benefits or multi-benefits, including reducing significant emissions of criteria pollutants or toxic air contaminants. c. Quantifies and measures cost-effectiveness and impacts on disadvantaged and low-income populations. d. Demonstrates the ability to leverage additional public or private funding. e. Demonstrates the ability to obtain immediate benefits. f. Includes marketing and education outreach strategies designed to increase the effectiveness of program goals. 8)Prohibits the program from funding a project that is already required to be undertaken pursuant to state, federal, or local laws. COMMENTS: Purpose. The author states that a significant number of disadvantaged communities are located in the San Joaquin Valley, AB 1176 (Perea) Page 5 of ? which is impacted by heavy freight traffic moving along the Interstate 5 and Highway 99 corridors, and along Interstate 710 from the Ports of Long Beach and Los Angeles to the Pomona Freeway (SR 60) in east Los Angeles. Both regions consistently rank among the top 25 most polluted locations in the U.S. and frequently significantly exceed federal air-quality standards. Medium- and heavy-duty diesel vehicles can immediately reduce emissions by using low-carbon alternative and renewable biomass-based diesel fuels such as renewable hydrocarbon diesel and low blends of biodiesel. By helping to fund the development and deployment of alternative and renewable fueling infrastructure, this bill can help provide greater access to advanced low-carbon diesel fuels and facilitate immediate and tangible reductions of GHG emissions and criterion pollution in the state's most impacted and disadvantaged communities. Appropriate use of GGRF funds? GGRF funds are intended to help reduce GHG emissions. This bill provides GGRF funding for low-carbon diesel fueling infrastructure that includes equipment such as signage and point-of-sale systems. It is unclear how ARB could quantify the GHG emissions of such equipment. The sponsor of this bill, Propel Fuels, states that focusing investments in low-carbon fueling infrastructure in disadvantaged communities is a highly cost-effective and environmentally impactful way to provide immediate and substantial reductions of GHG emissions and the associated co-benefits. Opening up the marketplace? The committee understands that the only company currently producing fuel that meets the requirements of this bill is Propel Fuels, the sponsor of this bill. The committee recognizes, however, that in order to achieve GHG reductions, a market for these fuels must be created, which may well require state assistance in terms of infrastructure support. By infusing state funds into this market, this bill could help other companies enter it. Do we need another program? There are already multiple programs under CEC and ARB to fund infrastructure related to clean cars. The committee may wish to weigh the benefits of creating another new program against providing more funding to existing programs. Technical amendments. The prior version of this bill additionally required CEC and ARB to allocate at least 50% of AB 1176 (Perea) Page 6 of ? ARFVTP and Air Quality Improvement Program funds to projects providing direct benefits to, or serving or located in, disadvantaged communities. This provision was removed in the Assembly Appropriations Committee, along with a $35 million appropriation of GGRF monies for the program created by this bill. However, a provision was inadvertently left in that would authorize CEC, as part of ARFVTP, to amend a contract, grant, loan, or other agreement or award to extend its terms by two years if the monies are reprioritized by CEC to apply toward a project that provides benefits to disadvantaged communities. The author will accept amendments to remove this provision. Double-referred. This bill has also been referred to the Senate Environmental Quality Committee. Related Legislation: AB 904 (Perea) - establishes the Clean Reused Vehicle Rebate Project to provide incentives for the purchase or lease of used electric vehicles and requires ARB to coordinate with other programs to enhance outreach to low-income and moderate-income communities. AB 904 is also being heard by this committee today. AB 692 (Quirk) - requires 3% of the aggregate amount of transportation fuel purchased by state agencies to be procured from very low-carbon fuel sources. AB 692 is also being heard by this committee today. Assembly Votes: Floor: 78-0 Appr: 13-0 Trans: 15-1 FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, June 24, 2015.) SUPPORT: AB 1176 (Perea) Page 7 of ? Propel Fuels (sponsor) Coalition for Clean Air Fresno Chamber of Commerce San Joaquin Valley Air Pollution Control District San Joaquin Valley Regional Transportation Planning Agencies OPPOSITION: None received -- END --