BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 2206           Hearing Date:    6/21/2016
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          |Author:    |Williams                                             |
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          |Version:   |6/14/2016    As Amended                              |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Jay Dickenson                                        |
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          SUBJECT: Renewable gas

            DIGEST:    As proposed to be amended, this bill requires the  
          California Air Resources Board (ARB) to adopt policies to  
          significantly increase the sustainable production and use of  
          "renewable gas." 

          (The current version of the bill also requests the California  
          Council on Science and Technology (CCST) to undertake a study on  
          the California Public Utilities Commission's (CPUC) biomethane  
          standards.  A similar parallel request of CCST is proposed in  
          the Budget Act.  Therefore, the author has proposed amending  
          this bill to remove the request of CCST.  In light of the  
          author's proposal, this analysis considers only the provisions  
          of the bill that direct ARB to consider and adopt policies to  
          significantly increase the sustainable production and use of  
          renewable gas.)

          ANALYSIS:
          
          Existing law:
          
          1)Directs the ARB to monitor and regulate sources of emissions  
            of greenhouse gases (GHG) that cause global warming in order  
            to reduce GHG emissions to 1990 levels by 2020.  (Health &  
            Safety Code §38510 et seq.)  ARB instituted a low-carbon fuel  
            standard as one element of achieving the GHG emission  
            reduction goal.

          2)Requires retail sellers of electricity - investor-owned  
            utilities (IOU), community choice aggregators (CCAs), and  








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            energy service providers (ESPs) - and publicly owned utilities  
            (POU) to increase purchases of renewable energy, such that at  
            least 50 percent of retail sales are procured from renewable  
            energy resources by December 31, 2030.  This is known as the  
            Renewable Portfolio Standard (RPS).  (Public Utilities Code  
            §399.11 et seq.)

          3)Declares electricity produced by certain renewable energy  
            resources, including natural gas produced from biomass,  
            digester gas or landfill gas, as potentially eligible for  
            credit under the RPS.  (Public Utilities Code §399.12, Public  
            Resources Code §25741)

          4)Defines "biogas" as gas that is produced from the anaerobic  
            decomposition of organic material and "biomethane" as biogas  
            that meets the standards adopted by CPUC for injection into a  
            common carrier pipeline.  (Health and Safety Code §25420)

          5)Requires CPUC to adopt policies and programs that promote the  
            in-state production and distribution of biomethane.  (Public  
            Utilities Code §399.24 )

          6)Requires the California Energy Commission (CEC) to hold public  
            hearings to identify in its Integrated Energy Policy Report  
            (IEPR) impediments that limit procurement of biomethane in  
            California, including, but not limited to, impediments to  
            interconnection, and to offer solutions.  (Public Resources  
            Code §25326.)

          This bill:

          1)Requires ARB to adopt a policy, consistent with existing state  
            policies and programs and in consultation with the CPUC, to  
            increase "renewable gas," including biogas as defined by  
            Health and Safety Code §25420, generated by an eligible  
            renewable energy resource that meets the requirements of the  
            RPS or generated by direct solar energy. 

          2)Directs ARB to ensure that eligible renewable gas provides  
            direct benefits to the state's environment by avoiding or  
            reducing the emission of criteria air pollutants, reducing or  
            avoiding emissions that adversely affect the waters of the  
            state, or reducing or avoiding nuisance associated with the  
            emission of odors.










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          Background

          Biogas, biomethane, and "renewable gas:" natural gas by other  
          names.  Bioenergy is renewable energy produced from biomass  
          wastes including forest and other wood waste, agriculture and  
          food processing wastes, organic urban waste, waste and emissions  
          from water treatment facilities, landfill gas and other organic  
          waste sources.  Biomass waste can be used to generate renewable  
          electricity, liquid fuels and biogas. 
          Statute defines "biogas" as a gas produced from the anaerobic  
          decomposition of organic material.  The result is a gaseous  
          mixture composed primarily of carbon dioxide and methane.   
          Depending on where it is produced, biogas can be categorized as  
          landfill gas or digester gas.  Landfill gas is produced by  
          decomposition of organic waste in a municipal solid waste  
          landfill.  Digester gas is typically produced from livestock  
          manure, sewage treatment or food waste.

          From an environmental perspective, biogas has several advantages  
          over conventional natural gas.  Combustion of natural gas,  
          including biogas, releases carbon dioxide (CO2) into the  
          atmosphere.  However, the combustion of natural gas destroys  
          methane, a gas that is a much more potent GHG than is CO2.  In  
          addition to destroying methane, the combustion of biogas, for  
          CO2 accounting purposes, is considered carbon neutral.  This is  
          because the carbon in biogas, unlike the carbon in conventional  
          natural gas, was so recently present in the atmosphere.  In  
          addition, biogas can be used to displace the use of fossil  
          fuels, such as conventional natural gas, thereby further  
          decreasing its carbon intensity.    

          Biogas can be used directly to produce electricity or can be  
          converted to biomethane by removing carbon dioxide and other  
          impurities.  Statute defines "biomethane" as biogas that meets  
          the standards, adopted by the CPUC in keeping with statute, for  
          injection into a common carrier pipeline.  Biomethane can  
          replace fossil sources of natural gas in homes and factories and  
          compressed or liquefied as natural gas used in vehicles.   
          Biomethane can also be used to produce renewable hydrogen in  
          fuel cells.<1>

          This bill introduces a new term, "renewable gas," to statute.   
          This bill does not provide an explicit definition of "renewable  
          gas."  Rather, it directs ARB, in coordination with the CPUC, to  



          ---------------------------
          <1> 2012 Bioenergy Action Plan








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          adopt a policy that is consistent with existing state policies  
          and programs to increase the production and use of renewable  
          gas, including biogas, generated by either an eligible renewable  
          energy resource that meets the requirements of the RPS Program  
          or direct solar energy.

          Many existing state policies and programs promote biogas.  The  
          Global Warming Solutions Act (aka "AB 32") requires a reduction  
          in California GHG emissions to 1990 levels by the year 2020.   
          Statute provides ARB broad authority to achieve statewide GHG  
          reductions.  In keeping with that authority, statute requires  
          ARB to adopt a "scoping plan" of measures that will,  
          collectively, reduce California GHG emissions, as required by  
          law.

          ARB adopted its latest update to the scoping plan in 2014.  The  
          plan includes a "cap-and-trade" program for the state's largest  
          GHG emitters.  The plan also includes dozens of sector-specific  
          measures, including measures to promote the development and use  
          of natural gas derived from renewable sources.  For Fiscal Year  
          2016-17, the administration has proposed the following ARB  
          biogas programs, both to be funded from the Greenhouse Gas  
          Reduction Fund (GGRF):
          
                 Very Low Carbon Fuels Incentives Project.  The proposed  
               Governor's Budget for 2016-17 would set aside $40 million  
               in Fiscal Year 2016-17.  The funding would pay for the  
               production of very low-carbon transportation fuels to  
               encourage their production in California.  ARB staff is  
               still developing the incentive mechanisms.  In any case,  
               biomethane producers would likely qualify for program  
               funding.
          
                 Low NOx Engine Incentives. ARB proposes to provide $23  
               million in funding for trucks with certified low-NOx  
               (oxides of nitrogen) engines.  ARB recommends requiring  
               such trucks to operate on renewable fuel, such as  
               biomethane, to maximize GHG emission reductions.  The ARB  
               describes the low-NOx engine incentives as complementary of  
               the Very Low Carbon Fuels Incentives Project, described in  
               the preceding bullet.
          
          In addition, since early in the century, state law has required  
          electric utilities to procure increasing amounts of electricity  
          generated by renewable resources, a requirement known as the  









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          RPS.  As of this year, each of California's electric utilities  
          is required to procure at least 50 percent of its electricity  
          from renewable resources.  Statute lists numerous goals of the  
          RPS program, each of which, according to statute independently  
          justifies the program.  Statute declares a facility that uses  
          natural gas produced from biomass, digester gas or landfill gas  
          as a renewable energy resource, the electricity produced by  
          which is eligible for credit under the RPS.

          Statute also directs the CEC to hold public hearings to identify  
          in its IEPR impediments that limit procurement of biomethane in  
          California, including, but not limited to, impediments to  
          interconnection, and to offer solutions.  Accordingly, in 2006,  
          2011 and 2012, the CEC released editions of its bioenergy action  
          plan, which it describes as strategies, goals, objectives, and  
          actions that California state agencies will take to increase  
          bioenergy development in California.  The 2012 Bioenergy Action  
          Plan made the following recommendations relative to biogas:

                 Increase research and development of diverse bioenergy  
               technologies and applications, as well as their costs,  
               benefits, and impacts.
                 Continue to develop and make accessible information  
               about the availability of organic wastes and opportunities  
               for bioenergy development.
                 Streamline and consolidate permitting of bioenergy  
               facilities and reconcile conflicting regulatory  
               requirements to the extent possible.
                 Assess and monetize the economic, energy, safety,  
               environmental, and other benefits of biomass.
                 Facilitate access to transmission, pipelines, and other  
               distribution networks.

          Similarly, statute directs the CPUC to adopt policies and  
          programs that promote the in-state production and distribution  
          of biomethane.  In response to statutory mandate, the CPUC, in  
          2014, adopted health and safety standards that limit the amounts  
          of certain constituents determined to be harmful to either human  
          health or pipeline integrity in pipeline injected biomethane.   
          The standards are to address the reluctance of energy utilities  
          to inject biomethane into natural gas pipelines.  In addition,  
          the CPUC, in 2015, found that gas producers should bear all  
          costs relating to the processing and pipeline injection of  
          biomethane.  As part of that decision, the CPUC adopted a $40  
          million ratepayer-funded program to offset a portion of the  









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          costs to gas producers of connecting to utility pipelines.   
          Program funding will pay up to 50 percent of a biomethane  
          project's interconnection cost, up to $1.5 million per project. 

          Given the state's many efforts to promote the use of biogas, it  
          is unclear why the ARB needs additional authority, as provided  
          by this bill, to increase the production and use of renewable  
          gas.  Bill proponents note the lack of development and use of  
          biogas as evidence of the need for a new, ARB-led policy.  Bill  
          opponents note the relative high price of biogas, relative to  
          the retail price of conventional natural gas, and worry that the  
          bill will lead to mandates to purchase biogas, despite the price  
          differential.  

          In any case, the language in this bill is nearly identical, with  
          a few differences, to language in a bill, SB 1043 (Allen), heard  
          and approved by this committee in April.  That bill was held on  
          the Senate Appropriations suspense file.

          Renewable gas produced from direct solar energy.  Only for  
          purposes of the requirements of ARB created by this bill, the  
          bill defines "biogas" as having the same meaning as in Health  
          and Safety Code §25420.  In addition, only for purposes of the  
          requirements of ARB created by this bill, the bill defines  
          "renewable gas" to mean gas generated either by: 

                 An eligible renewable energy resource that meets the  
               requirements of the RPS program.
                 Direct solar energy.

          The CEC reports it is funding research by the California  
          Institute of Technology (CalTech) on converting sunlight to  
          fuels.  While CEC staff note that the technology might be  
          transformational, they nonetheless characterize it as "very  
          early, higher risk research."  Similarly, ARB relays that gas  
          produced direct solar energy might complement or contradict the  
          state's environmental and energy goals, depending upon factors  
          such as the source of the gas.  

          It seems unwise to require ARB to adopt policies that promote  
          the use of such an unproven technology as gas produced by direct  
          solar energy.  Similarly, it seems unwise to direct ARB, in  
          absolute terms, to adopt policies to significantly increase the  
          sustainable production and use of "renewable gas," especially in  
          light of the many existing state policies and programs to  









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          promote the production and use of biogas.  Better, it seems, to  
          amend the bill to provide discretion to ARB, and to require it  
          to coordinate with the state's energy agency, in adopting such  
          policies.  Therefore, the author may wish to amend the bill, as  
          follows:


               SEC. 2.
                Section 39734 is added to the Health and Safety Code, to  
               read:

               39734.
                (a) For purposes of this section, "biogas" has the same  
               meaning as in Section 25420.
               (b) To meet the state's renewable energy, low-carbon fuel,  
               and waste diversion goals, the state board, in coordination  
               with the Public Utilities Commission  and the California  
               Energy Commission  , shall  consider and, as appropriate,   
               adopt a policy  or programs  that  is   are  consistent with  
               existing state policies and programs to increase the  
               production and use of renewable gas, including biogas,  
               generated by either of the following:
               (1) An eligible renewable energy resource that meets the  
               requirements of the California Renewables Portfolio  
               Standard Program (Article 16 (commencing with Section  
               399.11) of Chapter 2.3 of Part 1 of Division 1 of the  
               Public Utilities Code).
               (2) Direct solar energy.
               (c) In adopting the policy described in subdivision (b),  
               the state board shall ensure that eligible renewable gas  
               provides direct benefits to the state's environment by  
               reducing or avoiding all of the following:
               (1) Emissions of criteria pollutants.
               (2) Emissions that adversely affect the waters of the  
               state.
               (3) Nuisances associated with the emission of odors.


          Delete reference to CCST study.  As described at the top of this  
          analysis, the author has agreed to remove from the bill all  
          provisions found in Section 3 of the current version of the  
          bill.

          Double referral.  Should this bill be approved by this  
          committee, it has been referred to the Senate Committee on  









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          Environmental Quality.

          Prior/Related Legislation
          
          AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC  
          to identify landfill gas constituents, develop testing protocols  
          for landfill gas injected into common carrier pipelines, adopt  
          standards for biomethane to ensure pipeline safety and  
          integrity, and adopt rules to ensure open access to the gas  
          pipeline system.  

          AB 2196 (Chesbro, Chapter 605, Statutes of 2012) ensured that  
          biogas qualifies for RPS credit, provided its production,  
          delivery and use meet certain conditions.

          SB 1122 (Rubio, Chapter 612, Statutes of 2012) required IOUs to  
          collectively procure at least 250 MW of generation eligible for  
          the RPS from bioenergy generation project, including biogas  
          projects.

          AB 2313 (Williams, 2016) requires the CPUC to modify its  
          monetary incentive program for biomethane projects.  The bill  
          passed the Assembly 57-20 and is pending consideration by this  
          committee.

            AB 2773 (Quirk, 2016) requires the CPUC to modify its technical  
          standards applicable to biomethane to be injected into a common  
          carrier pipeline.  The bill was held on the Assembly Committee  
          on Appropriations suspense file.

          SB 1043 (Allen, 2016) included language nearly identical to  
          language in this bill.  The bill was held on the Senate  
          Committee on Appropriations suspense file

          AB 577 (Bonilla, 2015) would have required the CEC to develop  
          and implement a grant program for projects related to biomethane  
          production.  The bill was held on the Senate Committee on  
          Appropriations suspense file.
            
          SB 687 (Allen, 2015) would have established the renewable gas  
          standard (RGS), requiring all sellers of natural gas to provide  
          to retail end-use customers in California increasing amounts of  
          "renewable gas," so that, by January 1, 2030, at least 10  
          percent of the natural gas supplied is "renewable gas."  The  
          bill passed this committee on a vote of 7-3 and was held on  









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          suspense by the Senate Committee on Appropriations.
          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          Yes


            SUPPORT:  

          Bioenergy Association of California (Source)
          All Power Labs
          American Biogas Council
          Atlas ReFuel
          CR&R
          Clean Energy
          Eisenmann Corp.
          Harvest Power
          NGVAmerica
          Organic Waste Solution
          Sanitation Districts of Los Angeles County
          Solid Waste Association of North America
          TSS Consultants
          Victor Valley Water Reclamation Authority
          West Biofuels

          OPPOSITION:

          Agricultural Council of California
          Agricultural Energy Consumers Association
          California Dairies, Inc.
          California Farm Bureau Federation
          California Poultry Federation
          Dairy Institute of California
          Milk Producers Council
          Western United Dairymen

          ARGUMENTS IN SUPPORT:    According to the author:
          
               California has adopted dozens of policies to increase low  
               carbon fuels, renewable energy, energy efficiency,  
               recycling, carbon sequestration and more.  But, California  
               must reduce emissions from the gas sector and encourage  
               in-state refining of biofuel to meet long term climate  
               goals. Unfortunately, natural gas use has been increasing  
               in recent years and will likely to continue to do so given  
               the rapid increase in gas fired power plants and the  
               historically low price in natural gas.  Alternatively,  









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               biomethane, which can be produced from biological material,  
               can provide immediate and significant emissions reductions  
               and other benefits. 

               AB 2206 highlights what has been a significant challenge to  
               truly decarbonzing the gas sector - biomethane is an  
               under-utilized resource and the market has been slow to  
               develop in California because the collection, purification,  
               and pipeline injection of biomethane is cost prohibitive.  
               In fact, since the adoption of the regulatory standards for  
               pipeline biomethane, not one new project has been built. 

               Directing the ARB to exercise existing authority to promote  
               in state production of renewable gas will have a  
               significant impact on greenhouse gas emissions and  
               landfilling.  Increasing the use of renewable gas will  
               create jobs and economic productivity, and strengthen  
               California's energy security.
          
          ARGUMENTS IN OPPOSITION:    Opponents argue that the state would  
          be better served by continuing and expand incentives to in-state  
          biomethane projects and by seeking to address remaining  
          obstacles to their development.  Opponents also argue it is  
          premature to promote projects that produce or use synthetic gas,  
          including gas produced from direct solar energy.
          
          

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