BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2313 (Williams) - Renewable natural gas: monetary incentive
program for biomethane projects: pipeline infrastructure
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|Version: June 14, 2016 |Policy Vote: E., U., & C. 9 - 0 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 8, 2016 |Consultant: Narisha Bonakdar |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary:1) AB 2313 increases the monetary incentive amounts available to
biomethane projects and directs the California Public Utilities
Commission (CPUC) to consider whether to allow the recovery of
rates of the cost for specified activities.
Fiscal
Impact:
One-time costs of approximately $550,000 and ongoing costs of
approximately $60,000 (Utilities Reimbursement Account) to the
CPUC. (See staff comments)
Unknown, potentially significant costs to the state as a
ratepayer.
Background: Biogas and biomethane: 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
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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.
1900 (Gatto, Chapter 602, Statutes of 2012) was passed to
facilitate in-state biogas production by enabling it to be
transported in common carrier pipelines. In 2014, the CPUC
adopted standards for the protection of both public health and
pipeline and end-use equipment. The CPUC also adopted a
decision that considered the costs associated with injecting
biomethane into natural gas pipelines and assigned those to
biomethane producers as is consistent with the statutory
requirement to provide nondiscriminatory access to common
carrier pipelines. However, in the same decision, the CPUC
recognized that AB 1900 specifically required adoption of
"policies and programs that promote the in-state production and
distribution of biomethane" and adopted a ratepayer funded
program that will offset a portion of the costs to gas producers
of connecting to utility pipelines. The program is capped at a
total of $40 million and will pay up to 50 percent of a
project's interconnection cost but not exceed to $1.5 million.
No pipeline biogas project has been built or applied for since
the enactment of this bill.
Proposed Law:
This bill:
1)Requires the CPUC to modify and extend until December 31,
2021, its decision 15-06-029 for biomethane projects.
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2)Increases the incentive limitation for all projects except
dairy clusters from $1.5 million to $3 million.
3)Increases the incentive limitation for all dairy cluster
projects to $5 million.
4)Defines a dairy cluster biomethane project as a biomethane
project of three or more dairies in close proximity to one
another employing multiple facilities for the capture of
biogas that is transported by multiple gathering lines to a
centralized processing facility where the biogas is processed
to meet the biomethane standards adopted by the CPUC and
injected to a gas pipeline through a single interconnection.
5)Specifies that costs incurred for gathering lines for a dairy
cluster biomethane project must be treated as an
interconnection cost.
6)Sunsets the bill on January 1, 2022.
7)Requires the CPUC, upon exhaustion of the fund, to consider
whether to allow the recovery of rates of the cost of
investment to do each of the following:
a. Facilitate direct investment in the procurement and
installation of utility infrastructure necessary to
achieve interconnection between the natural gas utility
and distribution network and biomethane generation and
collection equipment.
b. Provide for the installation of utility
infrastructure to achieve interconnection with facilities
that generate biomethane.
Staff
Comments:
Purpose. According to the author "Since the new standards were
adopted, not one new pipeline biogas project has been built or
applied for the financial incentive. While a program like this
is important to supporting and promoting biomethane, the
individual project cap of $1.5 million isn't reflective of the
actual cost to interconnect. The Bioenergy Association estimates
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the cost to interconnect is $1.5-$3 million per mile. Recently,
SoCalGas gave a producer in Riverside County an initial estimate
of $5 million for a one-mile pipeline. Another project in
Tulare County received an estimate of $1.5 million for a
100-foot interconnection.
A decarbonized gas supply is essential in order to meet the
state's goals for reducing greenhouse gas emissions, short-lived
climate pollutants, and the state's goals for promoting the use
of renewable energy resources in place of burning fossil fuels.
AB 2313 addresses what has been a significant challenge to truly
decarbonizing 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.
CPUC fiscal. According to the CPUC, implementation of this bill
would require the following:
One (1) Administrative Law Judge II for one (1) year to
preside over a proceeding (e.g., R.13-02-008 or a new
proceeding) to implement proposed Public Utilities Code
sections 399.23 and 784.2.
One (1) Public Utilities Counsel IV for one (1) year to
litigate and advise the Commission on the aforementioned
proceeding.
One (1) Public Utilities Regulatory Analyst V for one (1) year
to facilitate workshops, gather information from stakeholders,
and advise the Commission on the aforementioned proceeding.
One half (0.5) Utilities Engineer full-time to staff the
aforementioned proceeding and adequately represent Integrity
Management (safety) concerns as well as review and analyze
data.
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