BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2181


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          Date of Hearing:  April 4, 2016


                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES


                                 Das Williams, Chair


          AB 2181  
          (Brown) - As Introduced February 18, 2016


          SUBJECT:  Public contracts:  contract specifications


          SUMMARY:  Requires specified state departments, the University  
          of California, and the California State University to evaluate  
          greenhouse gas (GHG) emissions impacts of their projects and  
          incorporate GHG emissions considerations into their procurement  
          processes.  


          EXISTING LAW:  

          1)Requires the Air Resources Board (ARB), pursuant to California  
            Global Warming Solutions Act of 2006 (AB 32), to adopt a  
            statewide GHG emissions limit equivalent to 1990 levels by  
            2020 and adopt regulations to achieve maximum technologically  
            feasible and cost-effective GHG emission reductions.  AB 32  
            authorizes ARB to permit the use of market-based compliance  
            mechanisms to comply with GHG reduction regulations, once  
            specified conditions are met.

          2)Pursuant to AB 32, ARB has identified "covered entities" that  
            are subject to the state's cap-and-trade program.  

          3)Requires state agencies to do the following: 









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             a)   Purchase products that contain specified minimum amounts  
               of postconsumer recycled-content material in 11 reportable  
               product categories:  paper products; printing and writing  
               paper; mulch, compost, and cocompost; glass products;  
               lubricating oils; plastic products; paint; antifreeze;  
               tires; tire-derived products; and, metal products.

             b)   Ensure that at least 50% of the purchases in the product  
               categories are for recycled-content products. 

             c)   Report annually to the California Department of  
               Resources Recycling and Recovery (CalRecycle) dollars spent  
               on recycled and non-recycled products purchased in the 11  
               categories. 

             d)   Beginning in 2020, increases the buy-recycled  
               requirement to 75% of reportable purchases for all product  
               categories except paint, antifreeze, and tires.  

          4)Pursuant to the Public Contract Code, defines "the department"  
            as any of the following for any project under their  
            jurisdiction: 

             a)   Department of Water Resources; 

             b)   Department of Transportation;  

             c)   Department of Boating and Waterways; 

             d)   Department of Corrections and Rehabilitation; 

             e)   Military Department (e.g., California Army National  
               Guard, California Air National Guard, California State  
               Military Reserve, and California Youth and Community  
               Programs); and, 

             f)   Department of General Services.  

          THIS BILL:  








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          1)On or before January 1, 2018, requires the department, the  
            Regents of the University of California, and the trustees of  
            California State University to report to the Governor and the  
            Legislature on the GHG emissions that are associated with  
            energy-intensive products in projects within their  
            jurisdictions.  Specifies that the emissions total take into  
            account the GHG emissions that are produced when the  
            energy-intensive product is manufactured or produced and the  
            GHG emissions associated with the transportation of the  
            energy-intensive product from the site of its manufacture to  
            the project site.  


          2)On and after January 1, 2018, requires the department, the  
            Regents, and the trustees to incorporate the GHG emissions  
            information into its procurement processes, including bid  
            specifications, to procure energy-intensive products with the  
            lowest GHG emissions profile that meet state quality and  
            safety standards. 


          3)Defines "project" as a project for infrastructure that is  
            estimated to cost $1 million or more.  


          4)Defines "energy-intensive product" as a product that is  
            produced by a company identified by ARB as "energy intensive,  
            trade exposed."  


          FISCAL EFFECT:  Unknown


          COMMENTS:   


          1)Author statement:  








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               Though California is committed to the reduction of GHG  
               emissions and supporting the development of its green  
               economy, the State has not fully addressed how it plans to  
               help traditional businesses comply with new environmental  
               regulations.  Unfortunately, when new rules increase the  
               costs of manufacturing, California companies are at a  
               competitive disadvantage to businesses located in other  
               state and countries that have lower environmental  
               standards.  Companies in our state that provide building  
               materials produced and shipped in California should not be  
               overlooked for infrastructure projects that will help us  
               achieve our important "green" goals.  The Governor has  
               already issued two executive orders relating to the need  
               for the state to procure green building materials that are  
               manufactured in the state of California.  


          2)High speed rail sustainability policy.  The California High  
            Speed Rail Authority is responsible for the development and  
            implementation of intercity high-speed rail service.  In 2013,  
            the Authority adopted a sustainability policy that establishes  
            "priorities and objectives" for the construction and  
            implementation of the high-speed rail program, including:   
            energy; station communities and ridership; sustainable  
            infrastructure; natural resources; and, business and  
            management.  These broad categories include a wide range of  
            goals and principals, including making energy efficiency a  
            priority in design, using renewable energy, maximizing GHG  
            emissions reductions, recycling steel and concrete, etc.  On  
            March 8th, the Authority's board of directors (board) approved  
            a resolution to update the sustainability policy to:
             a)   Revise specifications and contract provisions to improve  
               materials life-cycle scores and other stated board  
               objectives;
             b)   Develop a means of scoring construction bids that  
               demonstrate compliance with the Authority's sustainability  
               policy;








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             c)   Develop a baseline of the materials currently being  
               installed for the project to determine their environmental  
               characteristics;


             d)   Carry out information sessions with industry providers  
               and contractors;


             e)   Complete climate change vulnerability research and  
               develop appropriate mitigation and adaptation strategies;  
               and,


             f)   Report to the board and the public on the overall  
               impacts of implementing sustainable infrastructure  
               principles in the high-speed rail program, and how such a  
               program furthers the state's low carbon, natural resources,  
               and community benefit goals. 


            According to the author, this bill is intended to require  
            other state entities that oversee infrastructure projects to  
            adopt a similar sustainability policy.  


          3)Our emissions have sprung a leak.  Leakage refers to GHG  
            emissions reductions in state that are replaced by increased  
            GHG emissions out of state.  AB 32 requires ARB to design  
            measures to minimize leakage.   Industries for which  
            production is highly emissions intensive, which results in  
            high compliance costs, and industries facing strong  
            competition from out-of-state producers are generally at  
            highest risk of leakage.  In order to minimize leakage risk,  
            ARB provides free allocations to at-risk industries  
            (identified by the North American Industry Classification  
            System codes) into high, medium, or low risk for leakage.   








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            Over time, ARB will reduce the percentage of free allocations  
            for medium and low risk industry sectors.  


          4)Leak prevention.  This bill attempts to minimize leakage by  
            requiring departments that oversee infrastructure projects to  
            consider leakage caused by the use of products purchased out  
            of state and incorporate this information into its procurement  
            processes.  This bill refers to companies identified as  
            "energy intensive, trade exposed" by ARB to capture industries  
            that are at risk of leakage.  However, ARB does not identify  
            individual companies or products as "energy intensive, trade  
            exposed;" instead, ARB has assigned all industrial sectors  
            covered by the cap-and-trade program a leakage risk  
            classification of low, medium, or high.  The author's office  
            has indicated that the bill is intended to cover cement, iron  
            and steel mills, rolled steel shape manufacturing, and flat  
            glass manufacturing.   The committee may wish to amend the  
            bill to specify that the bill is limited to these products,  
            which are classified as high leakage risk by ARB.  


          5)Double referral.  This bill has also been referred to the  
            Assembly Accountability and Administrative Review Committee.  


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Gerdau Steel 


          United Steelworkers, District 12









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          Opposition


          None on file




          Analysis Prepared by:Elizabeth MacMillan / NAT. RES. / (916)  
          319-2092