BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  June 30, 2016


                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES


                                 Das Williams, Chair


          SB  
          20 (Pavley) - As Amended June 20, 2016


          SENATE VOTE:  (Not Relevant)


          SUBJECT:  Low Carbon Fuels Council


          SUMMARY:  Establishes the Low Carbon Fuels Council (Council) and  
          requires the Council to have five members, including state  
          agencies and appointees, with expertise and background on the  
          production of low carbon fuels.


          EXISTING LAW:   


          1)Pursuant to the California Global Warming Solutions Act (AB  
            32), requires ARB to adopt a statewide greenhouse gas (GHG)  
            emissions limit equivalent to 1990 levels by 2020 and to adopt  
            rules and regulations to achieve maximum technologically  
            feasible and cost-effective GHG emission reductions.

          2)Establishes the California Alternative and Renewable Fuel,  
            Vehicle Technology, Clean Air, and Carbon Reduction Act of  
            2007 [AB 118 (Nunez), Chapter 750, Statutes of 2007].  AB 118  
            is funded through temporary increases in vehicle registration  
            fees ($3), smog abatement fees ($8), boat registration fees  








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            ($10/20), and special identification plate fees ($5).   
            Collection of these fees is authorized until 2024 pursuant to  
            AB 8 (Perea), Chapter 401, Statutes of 2013.  The fees support  
            three major programs:

             a)   The Air Quality Improvement Program (AQIP), administered  
               by the Air Resources Board (ARB) in consultation with local  
               air districts, 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 Program  
               (CVRP) and the Hybrid and Zero Emissions Truck and Bus  
               Voucher Incentive Program (HVIP).  AQIP is funded by smog  
               abatement fees, boat registration fees, and special  
               identification plate fees and receives between $30-36  
               million per year from these sources.

             b)   The Enhanced Fleet Modernization Program (EFMP), under  
               which ARB, in consultation with the Bureau of Automotive  
               Repair (BAR), pays to permanently remove cars and small  
               trucks from operation through voluntary retirement by their  
               owners.  EFMP is funded by $1 of the vehicle registration  
               fee and receives approximately $30 million per year.

             c)   The Alternative and Renewable Fuel and Vehicle  
               Technology Program (ARFVTP), administered by California  
               Energy Commission (CEC), 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 $2 of the  
               vehicle registration fee and receives approximately $100  
               million per year.

          3)Pursuant to Governor Schwarzenegger's Executive Order S-01-07,  
            sets a statewide goal to reduce the carbon intensity (CI) of  
            California's transportation fuels by at least 10% by 2020.   
            The order required ARB to consider adopting a Low Carbon Fuel  
            Standards (LCFS) to implement this goal.  In 2009, ARB adopted  








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            the LCFS as a regulation.  The LCFS attributes CI values to a  
            variety of fuels based on direct and indirect GHG emissions,  
            including land use changes caused by production of biofuels.   
            The LCFS permits producers of certain low CI fuels to opt in  
            to LCFS regulation for the purpose of generating credits,  
            which can be banked and used for compliance, sold to regulated  
            parties, and purchased and retired by regulated parties.  In  
            addition, LCFS credits can be exported to other GHG emission  
            reduction programs.

          4)Defines "very low carbon transportation fuel" to mean a liquid  
            or gaseous transportation fuel having no greater than 40% of  
            the carbon intensity of the closest comparable petroleum fuel  
            for that year, as measured by the methodology in the LCFS  
            regulation.  Requires the carbon intensity for the  
            transportation fuel to include the indirect land use change  
            emission if an agricultural commodity that is a food product  
            is used as a feedstock for the production of the  
            transportation fuel.

          THIS BILL:


          1)Establishes the Council and requires Council to have five  
            members and specifies the following members:


             a)   Chair of ARB;


             b)   Chair of the CEC;


             c)   Two members with scientific, economic, or industry  
               professional backgrounds in the production of low carbon  
               fuels, one appointed by the Speaker of the Assembly and one  
               by the Senate Committee on Rules; and,










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             d)   One member with educational and professional  
               qualifications and general knowledge and interest in the  
               production of low carbon fuels appointed by the Governor.


          2)Requires members to serve a term of four years and allows  
            reappointment.


          3)Requires members to be reimbursed for actual and necessary  
            expenses and requires members to be compensated a $100 each  
            day per diem.


          4)Requires Council meetings to comply with Bagley-Keene Open  
            Meeting Act.


          5)Requires the Council to do the following:


             a)   Coordinate state agencies' activities that are related  
               to acceleration and development of instate production of  
               low carbon fuels;


             b)   Identify and address gaps in existing programs, polices,  
               or activities that could impede the instate construction of  
               new or the expansion of existing, low carbon fuel  
               production facilities; and,


             c)   Provide recommendations to the Legislature for changes  
               in the law needed to achieve the goals of the Council.


          6)Authorizes the Council to sponsor conferences, symposia, and  
            other public forums to seek a broad range of public advice.









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          FISCAL EFFECT:  Unknown


          COMMENTS:  


          1)Author's statement:


               CEC allocates approximately $40 million dollars every  
               two years


               for grants (ranging from $3-5 M) for capital  
               expenditures related to the construction or  
               retrofitting of a low carbon fuels facilities located  
               in-state.  ARB is proposing to allocate $40 million  
               for a low carbon fuels production incentive program.  
               At this time the ARB is proposing to do a per gallon  
               incentive based on the carbon intensity and whether  
               the fuel provides benefits to the disadvantaged  
               communities.  Currently, there are no discussions  
               about how the CEC and ARB programs will coordinate,  
               whether those facilities that receive a grant from the  
               CEC would be eligible for an ARB production incentive,  
               or whether there is a process to streamline the  
               application process.  Low carbon fuel facilities are a  
               large capital investment, and in order to convince a  
               facility to come to California, the state needs to do  
               everything it can to maximize funding opportunities  
               and ensure they two programs are coordinating.





          2)Low Carbon Fuels.  In 2011, the state began implementing the  
            LCFS, which requires the oil industry to gradually reduce the  








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            CI of gasoline and diesel by 10% by 2020 by phasing in lower  
            carbon fuels.  The regulations were adopted pursuant to  
            Executive Order S-01-07 and were readopted in September 2015.   
            ARB rates the CI of transportation fuels and establishes the  
            level of credits generated by production of the fuel.  Fuel  
            producers can reduce the carbon intensity of their fuels or  
            purchase credits to comply with the LCFS.  According to ARB,  
            the carbon-intensity of California's transportation fuel pool  
            has been reduced by just over 2%.

            In 2007, AB 118 established three new programs intended to  
            promote vehicle and fuel technology that reduces air pollution  
            and GHG emissions statewide.  These programs are the ARFVTP,  
            the AQIP and EFMP.  ARFVTP funds projects by various public  
            and private groups that "develop and deploy innovative  
            technologies that transform California's fuel and vehicle  
            types to help attain the state's climate change policies."   
            The CEC prepares an investment plan, in coordination with a  
            stakeholder advisory committee, which outlines the ARFVTP's  
            funding priorities.  AB 118 requires the advisory committee to  
            include representatives from state agencies; fuel and vehicle  
            technology consortia; labor, environmental, and  
            community-based justice and health organizations; academic  
            groups; consumer advocates; workforce training groups; and  
            private industry.  Once an investment plan is completed, CEC  
            receives and solicits bids for projects, awarding funds based  
            on eligibility criteria.  Monies appropriated to the ARFVTP  
            come from temporary increases in smog abatement fees, vehicle  
            registration fees, vessel registration fees and certain other  
            vehicle fees.  According to the CEC, as of December 31, 2015,  
            it has awarded over $600 million to advance the goals of the  
            program.  Alternative fuel production and infrastructure has  
            received over half of that funding.  

            In addition to the ARFVTP, AB 118 also created the AQIP, to be  
            administered by the ARB.   According to CEC, while the ARFVTP  
            focuses primarily on achieving state GHG reduction goals  
            within the transportation sector, the AQIP is primarily  
            responsible for reducing air pollutants from the  








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            transportation sector.   Also, according to CEC, the two  
            programs have worked in concert to maximize the benefits to  
            the state and avoid duplication of efforts.  For instance, the  
            ARFVTP has invested in light-duty electric vehicle charging  
            infrastructure, regional planning, and manufacturing projects,  
            while the AQIP has provided deployment incentives for  
            light-duty electric vehicles through the CVRP.   ARFVTP has  
            supported the demonstration of early hybrid and electric truck  
            and bus models, while the AQIP has provided deployment  
            incentives for such vehicles through the Hybrid and  
            Zero-Emission Truck and Bus Voucher Incentive Project and  
            other planned larger-scale pilot deployment projects.   
            Finally, AQIP has also provided loans to assist fleets in  
            modernizing their diesel trucks.  Prior to the availability of  
            GGRF, the ARFVTP provided $49.1 million in funding to backfill  
            CVRP needs, as well as an additional $4 million in HVIP  
            incentives.  Beginning with fiscal year 2014-2015, ARB  
            combined the AQIP and the Greenhouse Gas Reduction Fund (GGRF)  
            Low-Carbon Transportation Investments into one funding plan.   
            In AQIP's fiscal year 2016-17 funding plan ARB proposed a new  
            program to allocate $40 million to very low carbon fuel  
            production.  This funding will be limited to renewable fuels  
            that are produced in California and would be further limited  
            to those fuels which meet a designated carbon intensity  
            threshold.

            California Governor's Office of Business and Economic  
            Development (GO-Biz) has appointed a Zero Emission Vehicle  
            (ZEV) infrastructure deputy to assist in the development of  
            ZEV infrastructure including the development of hydrogen  
            production and fueling stations.  The ZEV infrastructure  
            deputy has worked with local governments and various companies  
            to remove barriers to developing ZEV infrastructure. 

            The Council established by this bill is designed to coordinate  
            these different efforts and identify gaps and make  
            recommendations to the legislature to address those gaps.   
            However, the council lacks any environmental justice (EJ)  
            voices to provide the perspective of Californians most  








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            impacted by pollution from transportation fuels.  In addition,  
            the bill requires the Council to address gaps in existing  
            programs, polices, or activities but does not provide the  
            Council authority over those programs.  Finally, the bill  
            fails to define low carbon fuels.  This may be problematic  
            because there is no definition of that term in statue.  

          4)Amendments. The author and Committee may wish to consider the  
            following amendments:
          
             a)   Ensure there is EJ representation on the Council;

             b)   Add a representative from GO-Biz;

             c)   Define low carbon fuels;

             d)   Clarify the council's authority; and,

             e)   Put an additional focus on very low carbon fuels. 
                 
          REGISTERED SUPPORT / OPPOSITION:




          Support


          Coalition for Renewable Natural Gas




          Opposition


          None on file










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          Analysis Prepared by:Michael Jarred / NAT. RES. / (916)  
          319-2092