BILL ANALYSIS Ó AB 2181 Page 1 Date of Hearing: May 25, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2181 (Brown) - As Amended April 11, 2016 ----------------------------------------------------------------- |Policy |Natural Resources |Vote:|6 - 1 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Accountability and | |8 - 0 | | |Administrative Review | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill requires specified state departments, the University of California (UC), and the California State University (CSU) to evaluate the impact of greenhouse gas (GHG) emissions on certain infrastructure projects and incorporate GHG emissions considerations into their procurement processes. Specifically, this bill: AB 2181 Page 2 1)Requires specified state departments, UC, and CSU to report to the Legislature by January 1, 2018, on GHG emissions associated with specific emission-intensive products for infrastructure projects costing $1 million or more. 2)Defines the emissions-intensive products to be one produced by the following industries: a) cement manufacturing; b) flat glass manufacturing; c) iron and steel mills; and d) rolled steel shape manufacturing. 1)Requires by January 1, 2018, specified state departments, UC, and CSU to incorporate GHG information into their procurement processes to procure emissions-intensive products with the lowest GHG impacts. FISCAL EFFECT: 1)The Department of Water Resources (DWR) anticipates a 3-5% increase in costs which translates to an additional $3 to $5 AB 2181 Page 3 million increase on an annual construction budget of $100 million. 2)The Department of Parks and Recreation (which now includes the Department of Boating and Waterways) estimates costs would be absorbable. However, this assumes the science exists to determine emissions of concrete development and transportation, but they note they will not be able to identify or report on this information unless it is provided by the concrete companies. 3)The California Department of Corrections and Rehabilitation (CDCR) uses large amounts of the materials identified in this bill and anticipates unknown increased project costs if the costs of the materials increase. CDCR also notes their lack of ability to quantify or monetize GHG emissions across project lines will result in verification difficulties. This may require the need to contract out for such expertise which would also increase costs. 4)UC estimates $2 million per year in reporting costs and unknown increases in material costs and potential project delays. UC also notes this bill contradicts existing state requirements for competitive bidding and selection of products at the lowest cost. 5)CSU estimates increased costs of $560,000 to $840,000 to develop the data and tools necessary to integrate GHG as part of selection criteria developed over a 5 to 7 year period. Additionally, CSU estimates annual construction cost increases of $35 million for a $1 billion construction spending budget resulting from higher cost bidders receiving contracts. 6)Unknown, potentially significant cost increases to the AB 2181 Page 4 Department of Transportation, Military Department and Department of General Services. COMMENTS: 1)Purpose. This bill requires state departments, including the Department of Water Resources, Department of Transportation, Department of Boating and Waterways, Department of Corrections and Rehabilitation, Military Department, and Department of General Services, as well as the UC and CSU to report to the Legislature information about GHG emissions impacts of infrastructure projects that cost $1 million or more. Additionally, the entities must incorporate this information into their procurement processes, including bid specifications, to purchase emission-intensive products with the lowest GHG emissions profile that meet state quality or safety standards. Instead, it requires state entities to consider GHG emissions as a factor in evaluating potential bidders under their procurement processes. According to the author, this bill will "create a green infrastructure/sustainability policy that would reduce the GHG emissions associated with energy-intensive materials used in the construction of large infrastructure projects." The author is focusing on specified industry sectors because products in those areas are considered emission intensive. This bill requires that the emission totals incorporated in procurement processes must account for both the GHG emissions that are produced when the product is manufactured or produced and those associated with transporting the product from where it is made to the job site. AB 2181 Page 5 2)Background. The Air Resources Board (ARB), pursuant to the California Global Warming Solutions Act of 2006 (AB 32), is required 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. Governor's Executive Order B-30-15 directs state agencies to employ full life-cycle cost accounting to evaluate and compare infrastructure investments and alternatives. Considering GHG impacts beyond just the manufacturing impacts is in line with this executive order. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081