BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1176 (Perea) - Vehicular air pollution.
          
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          |Version: July 7, 2015           |Policy Vote: T. & H. 10 - 0,    |
          |                                |          E.Q. 7 - 0            |
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          |Urgency: Yes                    |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 1176 would create the Advanced Low-Carbon Diesel  
          Fuels Access Program which will provide capital assistance for  
          projects that expand advanced low-carbon diesel fueling  
          infrastructure in communities that are disproportionately  
          impacted by environmental health hazards and where the greatest  
          air quality impacts can be identified. 


          Fiscal  
          Impact:  
           Ongoing annual costs of $225,000 to the Greenhouse Gas  
            Reduction Fund (GGRF, special) for program development, grant  
            administration, and review of contract extensions. 


           Ongoing annual costs of up to $350,000 to the GGRF (special)  
            for the ARB to provide project review and GGRF expenditure  
            oversight. 







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          Background:   GGRF:  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.


           LCFS:  The Low Carbon Fuel Standard (LCFS) was adopted by the ARB  
          in 2009 in response to an executive order by Governor  
          Schwarzenegger for with the goal of reducing GHG emissions from  
          the transportation sector by 16 million metric tons by 2020. The  
          LCFS requires producers of petroleum based fuels to reduce the  
          carbon intensity (CI) of transportation fuels by 10% by 2020.  
          The CI is based on emissions from the production, delivery, and  
          use of the fuel.


           CalEnviroScreen:  CalEnviroScreen was developed by the Office of  
          Environmental Health Hazard Assessment on behalf of the  








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          California Environmental Protection Agency for the purpose of  
          identifying communities that are disproportionately burned by  
          multiple sources of pollution. CalEnviroScreen is used to  
          designate disadvantaged communities that must benefit from a  
          minimum of 25% of the expenditures of GGRF.




          Proposed Law:  
            This bill would create the Advanced Low-Carbon Diesel Fuels  
          Access Program which will provide capital assistance for  
          projects that expand advanced low-carbon diesel fueling  
          infrastructure in communities that are disproportionately  
          impacted by environmental health hazards and where the greatest  
          air quality impacts can be identified. 
          The program would give priority to projects that meet all of the  
          following:
           Located in or near disadvantaged communities as identified by  
            CalEnviroScreen.
           Demonstrates the potential for cobenefits, including reducing  
            emissions of criteria pollutants or toxic air contaminants.
           Quantifies and measures cost-effectiveness and impacts on  
            disadvantaged and low-income populations.
           Ability to leverage additional public or private funding.
           Has the ability to obtain immediate benefits.
           Includes marketing and education outreach strategies designed  
            to increase the cost effectiveness of the program's goals.


          The program would be administered by the CEC in consultation  
          with the ARB and be funded by the GGRF. The CEC would be  
          required to develop guidelines for the program by March 1, 2016.  



          This bill would also the CEC to extend a contract, grant, loan,  
          or award issued under the Alternative and Renewable Fuel and  
          Vehicle Technology Program (ARFVTP) for two years if the moneys  
          are reprioritized by the CEC to apply towards a project that  
          benefits disadvantaged communities. 











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          Staff  
          Comments:  To implement this bill, the CEC would need 1 position  
          to develop guidelines for the grant program the implement and  
          manage the grants at an annual cost of $170,000. Staff notes  
          that these costs are considerably lower than typical estimates  
          to develop and implement grant programs. The lower cost can be  
          partially a result of the CEC having previously administered  
          grants for similar projects, particularly under the ARFVTP.  
          These guidelines could be used as the basis for the new program  
          envisioned under this bill. Still, the CEC's costs may be viewed  
          as a minimum. 
          Staff notes that the bill requires the guidelines to be  
          developed by March 1, 2016. Presuming this bill goes into effect  
          in October of this year as an urgency measure, the CEC would  
          have five months to develop the guidelines, which presumably  
          would be considered regulations and therefore subject to the  
          Administrative Procedures Act (APA). The development of  
          regulations takes at least one year, typically two. Even  
          emergency regulations typically take one year at the CEC. Thus  
          is unclear whether the CEC could meet the timelines established  
          in the bill. Typically adopting a regulation on short-frame  
          results in additional administrative costs that do not appear to  
          be considered in the CEC's estimate for this bill. 


          The CEC also anticipates approximately $50,000 in additional  
          workload annually to consider requests to extend contracts under  
          the ARFVTP. 


          The ARB also notes that it would have costs associated with this  
          bill. Specifically, the ARB notes workload associated with  
          coordinating with the CEC for the administration of the new  
          grant program, ensure compliance with the Low Carbon Fuel  
          Standard, the Alternative Diesel Fuel Regulation, developing  
          quantification methodologies, reporting on program and project  
          status, and evaluating disadvantaged community benefits. For  
          these responsibilities the ARB estimates it would need two  
          positions at an annual ongoing cost of $350,000 assuming the  
          grant program will not be allocated more than $20 million in  
          GGRF funding. Staff notes that ARB's estimated workload may be  
          duplicative of work that would be performed by the CEC as the  
          administering agency of the grant program. 








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          Staff notes that there are multiple programs under CEC and ARB  
          that fund infrastructure related to clean cars. By creating a  
          new program, the state may be spending more on administration of  
          multiple programs relative to the amount of financial assistance  
          issued. 


          One of the programs that previously offered assistance to  
          low-carbon diesel was the ARFVTP. However, the 2015-16  
          investment plan update does not include additional funding for  
          diesel substitute infrastructure because private investment is  
          supporting large-scale biodiesel blending.  Staff notes  that if  
          there is sufficient private investment in low-carbon diesel so  
          that it is no longer an eligible project under the ARFVTP, will  
          use of GGRF for this purpose be a cost-effective way of reducing  
          GHG emissions?


          Staff notes that expenditures of GGRF must reduce GHG emissions.  
          However, the list of eligible equipment under the bill includes  
          some items that may not lead to a reduction of GHG emissions- in  
          particular, signage and point-of-sale systems. Additionally,  
          staff notes that the GHG emission reductions associated with  
          expanded fueling infrastructure will be dependent on how much  
          fuel is dispensed. Thus the emission reductions for these  
          projects are somewhat uncertain and will not likely be realized  
          in the short-term.


          This bill directs the CEC to fund projects that are in  
          communities that are "disproportionately impacted by  
          environmental hazards," which is defined. However, the bill also  
          directs the CEC to use disadvantaged communities identified by  
          CalEnviroScreen pursuant to SB 535.  Staff recommends  that if the  
          CEC is to use the SB 535 definition of disadvantaged  
          communities, the phrase "disproportionately impacted by  
          environmental health hazards" can be deleted from the bill to  
          avoid confusion.


          Staff notes that there are multiple bills being considered by  
          both houses of the Legislature that propose projects that would  








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          be eligible to receive GGRF funds. It is unclear how these bills  
          will interact with each other. Staff notes that a discussion on  
          the spending of GGRF is anticipated in August as part of a  
          budget discussion.




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