BILL ANALYSIS Ó SB 367 Page 1 Date of Hearing: July 1, 2015 ASSEMBLY COMMITTEE ON AGRICULTURE Henry Perea, Chair SB 367 (Wolk) - As Amended June 24, 2015 SENATE VOTE: 35-3 SUBJECT: Agricultural lands: greenhouse gases. SUMMARY: This bill recasts and expands the membership and duties of the California Department of Food and Agriculture's (CDFA) Environmental Farming Act Science Advisory Panel (Advisory Panel) to include on-farm practices to reduce greenhouse gas emissions and increase carbon storage in soil. This bill appropriates $25 million from the Greenhouse Gas (GHG) Reduction Fund (GGRF) to CDFA for the establishment of a new grant program to support these activities. This bill also appropriates 2% of the proceeds from this fund to the Strategic Growth Council's Sustainable Agricultural Lands Conservation Program (SALC) to also address on-farm reductions of greenhouse gas and increased carbon storage. Specifically, this bill: 1) Makes findings and declarations in regard to California agricultural productivity and agriculture's contribution to the environment and reduction of GHGs. SB 367 Page 2 2) Adds the definition of "fund" to mean the GGRF. 3) Renames CDFA's Scientific Advisory Panel on Environmental Farming to the Environmental Farming Act Advisory Panel (Panel). 4) Expands the duties of CDFA's Environmental Farming program (program) to specifically include activities related to the reduction of on-farm GHG emissions and increases carbon storage in agricultural soils and woody biomass, and allows for the program to provide incentives, as specified. 5) Authorizes CDFA to support these on-farm practices and activities by providing permit assistance and coordination and the funding of on-farm demonstration projects, which further the goals of the program. 6) Adds "climate change" to the list of issues that may be addressed by CDFA's newly termed Panel when providing advice and assistance to government agencies. 7) Expands the Panel from five to nine members; modifies the background requirements of the appointees, as specified; and, establishes term of appointments. 8) Provides $25 million, upon appropriation by the Legislature, to CDFA to support on-farm projects to demonstrate agricultural management practices and activities that reduce GHG emissions and increase carbon storage in soils and woody biomass. Projects may include, but are not limited to, soil-building and carbon-sequestration practices, irrigation efficiency and water conservation measures, alternative-energy production from agricultural waste from a farm or at a processing facility and improve on-farm efficiency, and wildlife habitat conservation. 9) Requires CDFA, in consultation with the Advisory Panel, to SB 367 Page 3 develop and implement a grant program to support the activities listed above. 10)Requires the Secretaries of CDFA and the Natural Resources Agency to enter into a memorandum of agreement, including other relevant state agencies, to ensure the greatest possible coordination and collaboration in implementing these programs and projects. 11)Requires that no less than 2% of GGRF proceeds be appropriated to the Strategic Growth Council (Council) to be expended for agricultural land protection within the grant program described in item 12, below. 12)Requires the Council to establish and administer a grant program, as part of the SALC Program, to provide incentives for the adoption and use of land management practices that would reduce GHG emissions and sequester carbon in soils and woody biomass. EXISTING LAW: 1)Requires the CDFA, through the Cannella Environmental Farming Act of 1995, (ACT) to establish and oversee an environmental farming program that provides incentives to farmers whose practices promote the well-being of ecosystems, air quality, and wildlife and their habitat. 2)Establishes the Scientific Advisory Panel on Environmental Farming to assist in the compilation and depository of scientific data from public and private sources, identifying the net environmental impacts of agriculture on the environment; to advise and assist government agencies on the above issues by conducting scientific data reviews and SB 367 Page 4 approving and recommending scientifically valid data. 3)Establishes the Council as a cabinet-level committee that is tasked with coordinating the activities of member state agencies to, among other things, improve air and water quality, protect natural resources and agricultural lands, and assist state and local entities in the planning of sustainable communities and meeting the California Global Warming Solutions Act of 2006 (AB 32), goals. 4)Establishes the Affordable Housing and Sustainable Communities (AHSC) Program, administered by the Council, to GHG emissions though projects that implement land use, housing, transportation, and agricultural land preservation practices. 5)Establishes SALC as one component of AHSC and is implemented by the California Department of Conservation (DOC). The council is responsible for overseeing SALC and coordinating DOC with other agencies to develop program guidelines. 6)Requires the California Air Resources Board (ARB), through AB 32, to determine the 1990 statewide GHG emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. All monies, except for fines and penalties collected pursuant to a market-based mechanism, are deposited in the GGRF. 7)Requires that the GGRF only be used to facilitate the achievement of reductions of GHG emissions consistent with AB 32. To this end, the Department of Finance, in consultation with ARB and any other relevant state agencies, is required to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. The investment plan must SB 367 Page 5 allocate a minimum of 25% of the funds to projects that benefit disadvantaged communities and to allocate 10% of the funds to projects located within disadvantaged communities. Additionally, ARB, in consultation with the California Environmental Protection Agency (CalEPA), is required to develop funding guidelines for administering agencies receiving allocations of the GGRF funds that include a component for how agencies should maximize benefits to disadvantaged communities. FISCAL EFFECT: According to the Senate Appropriations Committee, this bill would specify that $25 million shall be available, upon appropriation by the Legislature, to support three specific programs at CDFA. COMMENTS: According to the author, SB 367 provides an update to the 20 year-old Cannella Environmental Farming Act by adding current issues, terms and research needs that expand and direct newly available funds to the needs of California's ever changing environment. This bill is intended to provide California agriculture opportunities to deal with and participate in the AB 32 goal of addressing climate change. Supporters of SB 367 state that California agriculture is uniquely positioned to provide climate benefits by reducing greenhouse gas emissions. Research suggests some agricultural practices will not only reduce greenhouse gas emissions, but can also help to store atmospheric carbon in soils, trees, and other plants. They further state: "Growers around the state have already begun to see the effects of drought, decreased chilling hours and extreme heat on their productivity and profitability. At the SB 367 Page 6 same time, growers and scientists recognize the tremendous potential for agriculture and agricultural lands to not only reduce existing greenhouse gas emissions, but also to draw down atmospheric carbon into soils and woody biomass." The opposition states that they have long held that CARB lacks the authority to raise revenues by the auctioning of "allowances" to meet the goals of AB 32." Further, they "support the cost- effective implementation of AB 32 and that "auctioning runs contrary to the expressed goals of AB 32 for maximizing the benefits and minimizing leakage risks and costs." When the Act was created in 1995, agriculture was beginning to realize the impacts of various regulations from non-CDFA agencies. It was the intent of Assembly Member Cannella to give CDFA and agriculture the ability to better inform other state agencies and departments about how agriculture operates and the impacts of new regulations on them. Prior administrations have not used this tool but with the implementation of AB 32, new funding sources, and the changes provided by SB 367, CDFA can use the Act to assist agriculture and processors in meeting the challenges of change and compliance. The requirements of two appointees having been engaged in research related to "environmentally sustainable agriculture raises several questions. There is no statutory definition for "environmentally sustainable agriculture," making the selection of these appointees potentially difficult. The intent of the Cannella Environmental Farming Act is clearly stated in Food and Agriculture Code Section 566 of current law and with that section's expansion within SB 367. The committee may wish to consider deleting the term "environmentally sustainable agriculture" from the two references for appointees research background, (page 5, lines 38, and page 6, line 9), and replace SB 367 Page 7 it with a reference to section 566, which reflects the intent of the Act. It would read: "... member who is engaged in the conduct of scientific research related to the purpose or purposes described in Section 566 of this chapter." This would clearly provide the type of research background needed to qualify for Panel appointees. SB 367 is in conflict with SB 400 (Lara); both bills make changes to Health and Safety Code Section 39719 in a different manner. The committee may wish to ask the author how this conflict will be resolved. Background: The Act requires CDFA to establish and oversee an environmental farming program that provides incentives to farmers whose practices promote the well-being of ecosystems, air quality, and wildlife and their habitat. The Act also created the Science Panel to, among other responsibilities, advise and assist government agencies on these issues by conducting scientific data reviews and approving and recommending scientifically valid data. The Science Panel is also authorized to research, review, and comment on data used as the base for proposed environmental policies and regulatory programs so that agricultural activities are accurately portrayed and to identify incentives to encourage agricultural practices with environmental benefits. The Council was created in 2008 as a cabinet-level committee that is tasked with coordinating the activities of member state agencies to improve air and water quality, protect natural SB 367 Page 8 resources and agricultural lands, increase the availability of affordable housing, promote public health, improve transportation, encourage greater infill and compact development, revitalize community and urban centers, and assist state and local entities in the planning of sustainable communities and meeting AB 32 goals. The AHSC Program, administered by the Council, was created in 2014 to reduce greenhouse gas (GHG) emissions though projects that implement land use, housing, transportation, and agricultural land preservation practices. The AHSC Program receives 20% of the annual proceeds from the Greenhouse Gas Reduction Fund to achieve these goals (SB 862 of 2014; Health and Safety Code § 39719). The SALC Program is one component of AHSC and is implemented by DOC. The Council is responsible for overseeing SALC and coordinating DOC with other agencies to develop program guidelines. Guidelines for the SALC Program were approved by the Council on January 20, 2015, and include three major elements: 1) sustainable agricultural land strategy plans, which would provide grants to develop local strategies to ensure long-term protection of highly productive and critically threatened agricultural land; 2) agricultural conservation easements; and 3) financial incentives for adoption and use of land management practices. The guidelines specifically state that the third element is not included in the 2014 request for grant applications, but will be addressed in future years. Background on Cap-and-Trade Funds. ARB has conducted ten cap-and-trade auctions, generating almost $1.6 billion in SB 367 Page 9 proceeds to the state. Budget allocations. The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resource programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state's high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature. (According to the Senate Environmental Quality Committee analysis). Related Legislation: AB 761 (Levine), currently in the Senate Committee on Agriculture, requires, upon appropriation of funding by the Legislature, CDFA to establish a grant program to fund projects that increase carbon sequestration and GHG emissions reduction on agricultural lands, ranches and rangelands. SB 862 (Committee on Budget and Fiscal Review), Chapter 36, Statutes of 2014. Among other provisions, establishes the Affordable Housing and Sustainable Communities Program, administered by the Council, to reduce GHG emissions though projects that implement land use, housing, transportation, and agricultural land preservation practices. SB 367 Page 10 SB 732 (Steinberg), Chapter 729, Statutes of 2008. Establishes the Council to coordinate member state agencies implementing projects to improve air and water quality, affordable housing, natural resource protection, transportation, and sustainable land use planning; and to meet the goals of AB 32. REGISTERED SUPPORT / OPPOSITION: Support California Climate & Agriculture Network (Co-Sponsor) Community Alliance with Family Farmers (Co-Sponsor) Alameda County Resource Conservation District SB 367 Page 11 American Farmland Trust Association of Compost Producers Big Sur Land Trust California Association of Resource Conservation Districts California Certified Organic Farmers California Compost Coalition California Farm Bureau Federation California Farm Link Californians Against Waste Community Environmental Council Ecological Farming Association Environmental Defense Center SB 367 Page 12 Land Trust of Santa Cruz County Marin Resource Conservation District National Hmong American Farmers Open Space Authority Santa Clara County Pacific Coast Farmers' Market Association Peninsula Open Space Trust Resource Conservation District of Santa Cruz County Roots of Change Sonoma Resource Conservation District Sustainable Agriculture Education Sustainable Conservation SB 367 Page 13 Valley Land Alliance Wild Farm Alliance 1 individual Opposition California Chamber of Commerce Analysis Prepared by:Jim Collin / AGRI. / (916) 319-2084