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 ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 14, 2016 |Policy Vote: E., U., & C. 9 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 8, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- 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 AB 2313 (Williams) Page 1 of ? 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. AB 2313 (Williams) Page 2 of ? 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 AB 2313 (Williams) Page 3 of ? 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. -- END -- AB 2313 (Williams) Page 4 of ?