BILL ANALYSIS Ó
AB 2415
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Date of Hearing: April 18, 2016
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB 2415
(Eduardo Garcia) - As Amended April 6, 2016
SUBJECT: California Clean Truck, Bus, and Off-Road Vehicle and
Equipment Technology Program
SUMMARY: Revises the Clean Truck, Bus, and Off-Road Vehicle and
Equipment Technology Program (Clean Truck Program) to require
the greater of 50% or $100 million, of the funds allocated each
year from 2018 to 2023 for development of a broad range of
medium- and heavy-duty truck technology, to be allocated instead
to support commercial deployment of existing heavy-duty truck
[>26,000 pounds gross vehicle weight rating(GVWR)] technology
that meets specified low oxides of nitrogen (low NOx) emission
standards.
EXISTING LAW:
1)Establishes the Air Quality Improvement Program (AQIP),
administered by the Air Resources Board (ARB), which funds
projects that reduce criteria air pollutants, improve air
quality, and provide research for alternative fuels and
vehicles, vessels, and equipment technologies. The two
primary programs adopted by ARB pursuant to AQIP are the Clean
Vehicle Rebate Project (CVRP) and the Hybrid and Zero
Emissions Truck and Bus Voucher Incentive Program (HVIP).
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AQIP is funded primarily by smog abatement fees paid by
vehicle owners to the Department of Motor Vehicles, with
smaller contributions from boat registration fees and special
identification plate fees.
2)Establishes the Alternative and Renewable Fuel and Vehicle
Technology Program (ARFVTP), administered by the California
Energy Commission, which provides grants and other financial
incentives to accelerate the development and deployment of
clean, efficient, low carbon alternative fuels and
technologies. ARFVTP is funded by vehicle registration fees
and receives approximately $100 million per year.
3)Establishes the Carl Moyer Memorial Air Quality Standards
Attainment Program (Moyer Program), administered by ARB and
local air districts, to fund the incremental cost of
cleaner-than-required vehicles, engines, and equipment. The
primary objective of the program is to achieve air quality
emission reductions that would not otherwise occur through
regulations or other legal mandates. The Moyer Program is
funded by vehicle registration surcharges adopted by local air
districts in nonattainment areas.
4)Requires ARB, pursuant to California Global Warming Solutions
Act of 2006 [AB 32 (Nunez), Chapter 488, Statutes of 2006], to
adopt a statewide greenhouse gas (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.
5)Establishes the Greenhouse Gas Reduction Fund (GGRF) and
requires all moneys, except for fines and penalties, collected
by ARB from the auction or sale of allowances pursuant to a
market-based compliance mechanism (i.e., the cap-and-trade
program adopted by ARB under AB 32) to be deposited in the
GGRF and available for appropriation by the Legislature.
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6)Establishes the GGRF Investment Plan and Communities
Revitalization Act [AB 1532 (John A. Pérez), Chapter 807,
Statutes of 2012] to set procedures for the investment of GHG
allowance auction revenues. AB 1532 authorizes a range of GHG
reduction investments and establishes several additional
policy objectives.
7)Requires the investment plan to allocate: (1) a minimum of
25% of the available moneys in the GGRF to projects that
provide benefits to identified disadvantaged communities; and,
(2) a minimum of 10% of the available moneys in the GHGRF to
projects located within identified disadvantaged communities
[SB 535 (De León), Chapter 830, Statutes of 2012].
8)Establishes the Clean Truck Program pursuant to SB 1204
(Lara), Chapter 524, Statutes of 2014, to use GGRF funds for
development, demonstration, pre-commercial pilot, and early
commercial deployment of zero- and near-zero-emission truck,
bus, and off-road vehicle and equipment technologies
including, but not necessarily limited to, medium- and
heavy-duty trucks, vocational trucks, short-haul and long-haul
trucks, buses, and off-road vehicles and equipment, port
equipment, agricultural equipment, marine equipment, and rail
equipment.
9)Requires, until January 1, 2018, that no less than 20% of
funding for the Clean Truck Program support commercial
deployment of existing zero- and near-zero-emission heavy-duty
trucks.
10)Defines "heavy-duty" as having a manufacturer's maximum GVWR
of 6,001 or more pounds, though ARB regulations define
"heavy-duty truck" as vehicles 14,000 pounds or more.
THIS BILL:
1)Revises the Clean Truck Program to require the greater of 50%
or $100 million of the funds allocated each year from 2018 to
2023 for development of a broad range of medium- and
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heavy-duty truck technology be allocated instead to support
commercial deployment of existing heavy-duty (>26,000 lbs
GVWR) truck technology that meets specified low NOx emission
standards (thereby limiting funds to Class 7 and 8 trucks and
excluding buses and lower weight class trucks that are
currently eligible under SB 1204).
2)Requires a heavy-duty truck with an internal combustion engine
receiving incentives to "use" the following percentages of
renewable fuel:
a) Not less than 30% between January 2, 2018 and
January 1, 2020.
b) Not less than 50% beginning January 2, 2020.
3)Specifies that the renewable fuel percentage in effect at the
time incentives are awarded shall not change that award.
4)Provides that these provisions do not alter or affect, in any
way, the amount of credit or grants for which a
low-carbon-fuel provider or truck operator is eligible
pursuant to law.
5)Defines "heavy-duty truck" as having a manufacturer's maximum
GVWR of 26,001 or more pounds, for purposes of the Clean Truck
Program, effective January 2, 2018.
FISCAL EFFECT: According to the Senate Appropriations Committee
analysis of similar legislation [AB 857 (Perea) of 2015]:
1)Ongoing cost of at least $100 million annually to the GGRF to
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provide $100 million for zero- and near-zero-emission Class 7
and 8 trucks plus pressures to provide funds for other types
of eligible projects under the SB 1204 program.
2)Initial costs of $844,000 for fiscal year 2016-17 followed by
annual ongoing costs of $2 million to the GGRF for the ARB to
update guidelines and procedures for the new program, review
grant solicitations, conduct fleet audits, conduct on-site
inspections, and verify fueling requirement compliance.
COMMENTS:
1)Existing GGRF funding and programs. The 2014-15 Budget Act
allocated GGRF revenues for the 2014-15 fiscal year and
established a long-term plan for the allocation of GGRF
revenues beginning in fiscal year 2015-16. Thirty-five
percent of GGRF is continuously appropriated for investments
in transit, affordable housing, and sustainable communities.
Twenty-five percent is continuously appropriated to continue
the construction of the high-speed rail project. The
remaining 40% is subject to annual appropriation by the
Legislature for investments in programs that include
low-carbon transportation, energy efficiency and renewable
energy, and natural resources and waste diversion.
An expenditure plan for the 40% was not included in the
2015-16 Budget Act, with the exception of $227 million
appropriated to continue funding for specified existing
programs. The remaining 2015-16 revenues, along with 2016-17
revenues, are available for appropriation this year.
ARB's low-carbon transportation program is among the largest
GGRF program areas, with $325 million appropriated to date.
The Governor's 2016-17 Budget proposes to appropriate
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approximately $3.1 billion from the GGRF, with $500 million to
ARB for low-carbon transportation and fuels.
GGRF revenues peaked in 2015 and are projected to decline over
the course of the cap-and-trade program. GGRF is structured
as a regulatory fee. By law, GGRF revenues must be used to
further the regulatory purposes of AB 32 and facilitate the
achievement of GHG emission reductions.
2)SB 1204. In 2014, SB 1204 established the Clean Truck
Program, which is administered by ARB. The intent of SB 1204
was to create a single, overarching program to develop and
deploy heavy-duty vehicles primarily because the author felt
that heavy-duty vehicles were not being adequately addressed
in HVIP and AQIP. Specifically, the Program, until January 1,
2018, provides GGRF funds for projects that develop
technology, demonstrate and pilot commercial and
early-commercial deployment of zero and near-zero emission
medium- and heavy-duty truck technology, and facilitate clean
goods movement. The Program works to develop zero-and
near-zero emission technologies for specified vehicles and
equipment not only for trucks, but also for buses, off-road
vehicles and equipment at the ports as well as in
agricultural, marine, and rail sectors. Within the Program,
funding priority is generally given to projects that
demonstrate benefits to disadvantaged communities, the ability
to leverage additional public and private funding, and provide
the potential for co-benefits.
When the Governor signed SB 1204, he included a signing
message stating:
To maximize reductions of these harmful emissions, the
focus of this funding must be on transformative, advanced
technology trucks and buses that can meet the objectives of
AB 32 by reducing emissions of both harmful criteria
pollutants and greenhouse gases. Only vehicles that are
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certified to the cleanest standards and run on renewable
fuels merit funding through this program.
In its proposed funding plan for low-carbon transportation,
ARB proposes to allocate $175 million for SB 1204 purposes,
including $23 million for purposes similar to this bill (low
NOx engine incentives with low carbon fuel).
3)Author's statement:
Over 80% of our polluting emissions come from mobile
sources, and trucks operating in the goods movement sector
are among the largest contributors. Trucking is vital to
California's economy - the world's 7th largest - but is
also the single largest source of pollution for the San
Joaquin and South Coast Air Basins. Poor air quality
creates a cost to everyone, and all too frequently, it is
the most vulnerable who are at risk, cutting along
economic, ethnic and racial divides. This disparity
adversely affects those living in communities situated near
pollution-affected corridors including freeways, ports, and
rail depots. This bill allows the trucking industry to
continue work uninterrupted yet become cleaner, offering
the greatest opportunity to improve air quality. By
sending market signals that all cost-effective solutions
will be considered, California can accelerate the
development of even cleaner, affordable technologies that
help drive down the cost of new heavy duty engines.
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The Federal Clean Air Act requires extreme non-attainment
areas to meet health-based air quality standards by 2023.
The South Coast Air Basin (which includes all of Orange
County and the non-desert regions of Los Angeles County,
Riverside County, and San Bernardino County) and the San
Joaquin Valley are both extreme non-attainment areas. Not
achieving these standards on time threatens federal
transportation dollars for California. ARB's draft Mobile
Source Strategy shows that these standards can be met by
2023. This can only be done if significant emission
reductions from heavy-duty trucks are achieved. The draft
strategy states that significant financial incentives are
needed to accelerate emission reductions from the trucking
sector.
4)A big slice of a shrinking pie. This bill seeks to allocate
$500 million of GGRF funds to support existing very heavy-duty
trucks based on meeting a low NOx emission standard for which
only one engine has been certified to date. Under current
law, these funds are broadly aimed at technology development,
demonstration, pre-commercial pilots, and early commercial
deployment of medium- and heavy-duty trucks (presumably
including electric, hybrid-electric and fuel cell trucks in a
broad range of weight classes) based first, like other uses of
the GGRF, on the value of those investments in achieving GHG
emission reductions.
This bill requires, each year from 2018-2023, that 50% of SB
1204 truck funds, or $100 million, whichever is greater, be
used for the deployment of certain heavy-duty vehicles - Class
7 and 8 trucks over 26,000 pounds that meet a low NOx standard
(i.e., meet or exceed an emission standard of 0.02 grams NOx
per brake horsepower-hour). The bill commits $100 million
annually for this purpose, regardless of available revenues,
need, or competing uses. The amount is likely to exceed 50%
of total SB 1204 funds each year, and may exceed the total
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amount available by the end of the program, given the
likelihood that total available GGRF revenues will decline.
The five-year, $500 million commitment for long-haul trucks
will come at the expense of the various other SB 1204-eligible
vehicles and equipment, including zero- and near-zero-emission
buses, off-road vehicles, medium- and heavy-duty trucks,
vocational trucks, short-haul trucks, and equipment in the
port, agricultural, marine, and rail sectors. In fact, this
bill's funding commitment is so large that it may sacrifice
other, broader GGRF funding priorities. The author and the
committee may wish to consider eliminating the $100 million
guarantee and instead rely on an appropriate percentage of
funds allocated for SB 1204.
5)Is the GHG benefit commensurate with the cost? If these low
NOx engines rely on conventional natural gas (or diesel) fuel,
they will achieve marginal, if any, GHG emission reductions.
According to ARB:
Preliminary ARB staff estimates indicate natural gas
heavy-duty vehicles provide little to no GHG improvement
over conventional diesel vehicles. Natural gas powered
trucks are expected to have higher well-to-wheel GHG
emissions than electric and fuel cell vehicles, which are
intrinsically more efficient than traditionally powered
vehicles and which have no tailpipe emissions. However, in
the future, the increased use of renewable natural gas
derived from sources such as landfills, dairies, and
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wastewater treatment plants could allow natural gas
vehicles to provide significant well-to-wheel GHG emission
benefits.
(September 2015 Draft Technology Assessment: Low Emission
Natural Gas and Other Alternative Fuel Heavy-Duty Engines,
page VI-3)
This raises a question about the appropriateness of using GGRF
funds, which the Governor seemed to address preemptively in
his signing message for SB 1204 by stating "only vehicles
that?run on renewable fuels merit funding."
6)Does the renewable fuel requirement deliver an additional GHG
benefit? Like AB 857 as amended by this Committee last year,
this bill seeks to justify the use of GGRF in part by
requiring truck to use some renewable fuel. However, this
bill adds one provision and omits another which raise
questions about whether the renewable fuel requirement will
result in an additional GHG benefit.
The new provision says the bill does not "alter or affect, in
any way, the amount of credit or grants for which a
low-carbon-fuel provider or truck operator is eligible
pursuant to law." The intent of this provision is to reserve
the ability of a fuel provider, for example, to claim credit
under the Low Carbon Fuel Standard (LCFS) for renewable
natural gas, and sell that credit separately from the fuel
sold to a truck owner for purposes of qualifying for funding
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under this bill. Because the LCFS credit represents the
reduction in carbon intensity (i.e., GHG benefit) of the
renewable fuel, and will be claimed by an entity with an LCFS
compliance obligation (e.g., oil company), it's not clear
there is any additional GHG benefit attributable to the
renewable fuel requirement. In fact, the bill may allow the
same benefit to be claimed twice, or double-counted - once for
LCFS compliance and again for the truck incentive.
Aside from accounting for GHG benefits associated with
individual volumes of fuel, there is a question of whether the
30% and 50% renewable fuel requirements will drive production
and sale of additional renewable fuel on a gross basis.
According to ARB, in 2015, 52% of natural gas used as a
transportation fuel was renewable. Last year, AB 857 included
the following provision to address this issue:
The state board may increase the minimum percentage of
renewable fuel required for the appropriation of moneys
pursuant to this subparagraph in subsequent years if the
state board makes a finding that a higher percentage is
commercially feasible and the State Energy Resources
Conservation and Development Commission makes a finding
that there is a sufficient supply of renewable energy fuel
available. An increase adopted pursuant to this subclause
shall apply prospectively to moneys awarded after the
increase is adopted by the state board.
To assure the renewable fuel requirement actually results in
additional renewable fuel and associated GHG benefits, the
author and the committee may wish to consider restoring the
provision above and clarifying that incentives must achieve
GHG emission reductions not otherwise required by statute or
regulation, similar to Moyer, Proposition 1B, and other
incentive programs.
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7)Truck weight argument. The bill excludes buses and redefines
"heavy-duty" for its purposes so that funds are limited to
trucks over 26,000 pounds GVWR. The current statutory
definition of "heavy-duty" applicable to SB 1204 is over 6,000
pounds GVWR (Health and Safety Code Section 39033), although
ARB regulations specify over 14,000 pounds GVWR. This
provision may have the effect of steering funds away from
investments that have the greatest GHG emission reduction
potential. According to ARB, initial deployments often start
with medium heavy-duty trucks (14,001-26,000 pounds GVWR).
For example, approximately 68% of all HVIP vouchers have gone
to trucks that are 26,000 pounds GVWR or less. Medium
heavy-duty trucks are ubiquitous and contribute significantly
to statewide GHG, NOx, and PM emissions. The author and the
committee may wish to consider eliminating the redefinition of
"heavy-duty" so that a broader range of trucks can qualify
based on GHG emission reduction value, rather than an
arbitrary weight limit.
8)A windfall for one manufacturer? Among this bill's unusually
specific eligibility criteria is a requirement that trucks
must meet ARB's optional low NOx (0.02 grams per brake
horsepower-hour) emission standards. According to ARB, only
one engine has been certified to meet the low NOx standard to
date - an 8.9 liter natural gas engine manufactured by Cummins
Westport in North Carolina. To preserve the principle that SB
1204 funds will be allocated on a competitive basis for a
broad range of purposes, the author and the committee may wish
to consider limiting the amount of funds that can be awarded
for engines or vehicles from any one manufacturer to 25%.
9)Prior legislation. This bill is similar to AB 857 (Perea),
which passed this Committee on April 27, 2015 and was later
held in the Senate Appropriations Committee.
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10)Double referral. This bill passed the Assembly
Transportation Committee by a vote of 15-0 on April 4, 2016.
11)Suggested amendments:
a) Eliminate the "one hundred million dollars
($100,000,000)" annual funding commitment, leaving 50% of
available SB 1204 funds, and authorize ARB to reallocate
any unused funds to other SB 1204 programs.
b) Require ARB to ensure incentives are allocated on a
competitive basis for projects that are shown to achieve
the greatest GHG emissions reductions not otherwise
required by statute or regulation.
c) Authorize incentives for "buses" as well as trucks
and eliminate the redefinition of heavy-duty so that the
full range of heavy-duty vehicles may qualify for
incentives.
d) Limit the amount of incentives that may be awarded
for any one vehicle or engine manufacturer to 25% of
total program funds each year.
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e) Restore provisions from AB 857 authorizing ARB to
increase the renewable fuel requirement based on an
assessment of available supplies.
REGISTERED SUPPORT / OPPOSITION:
Support
Agility Fuel Systems
Antelope Valley Boys and Girls Club
Bioenergy Association of California
Brotherhood Crusade
California Natural Gas Vehicle Coalition
Charter Oak Unified School
City of Buena Park
City of Los Alamitos
City of Monterey Park
City of Murrieta
City of Tulare
City of South Gate
Clean Energy
Congress of California Seniors
County of Kings
County of Tulare
Cummins Westport Inc.
Dignity Health
Duarte Chamber of Commerce
El Concilio
Foothill Workforce Development Board
Industry Manufacturers Council
Kern Economic Development Foundation
Kheir Clinics
Los Angeles County Business Federation
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Los Angeles County Chamber of Commerce
Los Angeles County Economic Development Corporation
Mojave Desert Air Quality Management District
Mothers of East Los Angeles
Orange County Business Council
Southern California Association of Governments
Southern California Gas Company
The East Los Angeles Community Union
The Valley Economic Alliance
United Chambers of Commerce
UPS
Valley Family Center
Ventura Hillsides Conservancy
VNG.co, LLC
One Individual
Opposition
Alameda-Contra Costa Transit District
American Lung Association in California
Center for Transportation and the Environment
Environment California
First Priority Global GreenFleet
Motiv Power Systems
Natural Resources Defense Council
Physicians for Social Responsibility - Los Angeles
Proterra
Regional Asthma Management & Prevention
Sierra Club California
Union of Concerned Scientists
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Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)
319-2092