BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      SB 20


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          SENATE THIRD READING


          SB  
          20 (Pavley)


          As Amended  August 15, 2016


          Majority vote


          SENATE VOTE:  (Not Relevant)


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                   |Noes               |
          |                |     |                       |                   |
          |                |     |                       |                   |
          |                |     |                       |                   |
          |----------------+-----+-----------------------+-------------------|
          |Natural         |5-2  |Williams, Cristina     |Jones, Harper      |
          |Resources       |     |Garcia, Hadley, Mark   |                   |
          |                |     |Stone, Wood            |                   |
          |                |     |                       |                   |
          |----------------+-----+-----------------------+-------------------|
          |Appropriations  |11-3 |Gonzalez, Bloom,       |Bigelow, Chang,    |
          |                |     |Bonilla, Bonta,        |Obernolte          |
          |                |     |Eggman, Eduardo        |                   |
          |                |     |Garcia, Quirk,         |                   |
          |                |     |Santiago, Weber, Wood, |                   |
          |                |     |McCarty                |                   |
          |                |     |                       |                   |
          |                |     |                       |                   |
           ------------------------------------------------------------------ 


          SUMMARY:  Establishes the Low Carbon Fuels Council (Council) and  








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          requires the Council to have six members with the Chair of the  
          California Energy Commission (CEC), or his or her designee,  
          serving as the chair of the Council. Specifically, this bill:


          1)Specifies the following membership of the Council:


             a)   Chair of Air Resources Board (ARB) or designee;


             b)   Chair of the CEC or designee;


             c)   Director of the Governor's Office of Business and  
               Economic Development (GO-BIZ) or designee;


             d)   Two members with scientific, economic, or industry  
               professional backgrounds with expertise in the production,  
               financing, distribution, or marketing development of low  
               carbon fuels and very low carbon fuels, one appointed by  
               the Speaker of the Assembly and one by the Senate Committee  
               on Rules; and,


             e)   One member that is a representative of a bona fide  
               nonprofit environmental justice organization that advocates  
               for clean air and pollution reduction appointed by the  
               Governor.


          2)Requires members appointed by Assembly, Senate, and Governor  
            to be reimbursed for actual and necessary expenses and  
            requires members to be compensated a $100 each day per diem.   
            Prohibits the Council from meeting more than four times a  
            year.










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          EXISTING LAW:   


          1)Pursuant to the California Global Warming Solutions Act (AB 32  
            (Núñez), Chapter 488, Statutes of 2006), requires the 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 (Núñez), Chapter 750, Statutes of 2007].  AB 118  
            is funded through temporary increases in vehicle registration  
            fees ($3), smog abatement fees ($8), boat registration fees  
            ($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.  


          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  
            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  








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            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.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, this bill likely increases state costs, potentially  
          in the $250,000 to $500,000 range.  While some of the costs may  
          be absorbed by the state agencies represented on the Council, it  
          is unclear what entity will pay the additional costs of the  
          public members, the coordination of state activities, the  
          sponsorship of other public activities, and the information  
          required to prepare the report to the Legislature. 


          COMMENTS:  In 2011, the state began implementing the LCFS, which  
          requires the oil industry to gradually reduce the 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 Alternative  
          and Renewable Fuel and Vehicle Technology Program (ARFVTP), the  
          Air Quality Improvement Program (AQIP) and Enhanced Fleet  
          Modernization Program.  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  








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          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 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 Clean  
          Vehicle Rebate Program (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 Greenhouse Gas Reduction Fund (GGRF), the ARFVTP  
          provided $49.1 million in funding to backfill CVRP needs, as  
          well as an additional $4 million in Hybrid and Zero-Emission  
          Truck and Bus Voucher Incentive Project (HVIP) incentives.   








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          Beginning with fiscal year 2014-2015, ARB combined the AQIP and  
          the 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 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, identify gaps in these efforts and make  
          recommendations to the legislature to address those gaps.   


          Analysis Prepared by:                                             
                          Michael Jarred / NAT. RES. / (916) 319-2092  FN:  
          0004083