BILL ANALYSIS                                                                                                                                                                                                    Ó

                              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.
          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  

          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  


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          minimum of 10% to projects located within disadvantaged  

          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  

          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  

          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  

          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,  


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          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  


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               baseline carbon intensity valuation.
             e.   Does not produce higher levels of oxides of nitrogen  
               (NOx) or particulate matter (PM) than petroleum diesel  

          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  


          Purpose.  The author states that a significant number of  
          disadvantaged communities are located in the San Joaquin Valley,  


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          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  

          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  

            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  
                          June 24, 2015.)


          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


          None received

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