BILL ANALYSIS Ķ
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: SB 400 Hearing Date: 4/21/2015
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|Author: |Lara |
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|Version: |4/6/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Eric Thronson |
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SUBJECT: California Global Warming Solutions Act of 2006:
Greenhouse Gas Reduction Fund
DIGEST: This bill requires the California High-Speed Rail
Authority (HSRA) to allocate at least 25% of the appropriated
cap-and-trade funds to measures and projects that reduce
greenhouse gas (GHG) emissions from transportation sources, and
also provide a cobenefit of improving air quality.
ANALYSIS:
Existing law created the HSRA in 1996 to direct development and
implementation of intercity high-speed rail service that is
fully coordinated with other public transportation services. In
2008, voters approved Proposition 1A authorizing $9.95 billion
in general obligation bonds for the high-speed rail program.
Prop 1A authorizes HSRA to use bond funds for, among other
things, acquisition of rights-of-way, environmental mitigation,
and capital construction of the proposed rail system. In
addition to bond funds, HSRA has also received some federal
grants to partially fund the construction of the system.
In 2006, the Legislature enacted AB 32 (Nuņez), Chapter 488, the
Global Warming Act of 2006, which requires the California Air
Resources Board (ARB) to establish a statewide GHG emissions
limit such that by 2020 California reduces its GHG emissions to
the level they were in 1990. Thereafter, ARB must adopt the
maximum feasible and cost-effective reductions in GHG emissions
for sources subject to AB 32.
SB 400 (Lara) Page 2 of ?
As one of its key AB 32 implementation programs, ARB has adopted
the Cap-and-Trade Program. Under this program, ARB establishes
an overall limit - or "cap" - on GHG emissions from specified
industries. Facilities subject to the cap may reduce their own
emissions or purchase allowances from others to emit GHGs,
including from facilities that have reduced emissions more than
required. In essence, the Cap-and-Trade Program uses market
forces in an attempt to reduce GHG emissions in the most
economically efficient manner.
As part of the Cap-and-Trade Program, ARB auctions off GHG
emission allowances as mitigation fees. To date, ARB has
completed 10 auctions, taking in a total of $1.6 billion in
proceeds. These funds may only be used to facilitate the
achievement of GHG emission reductions in California consistent
with AB 32. The Department of Finance, in consultation with ARB
and other relevant state agencies, must develop a three-year
investment plan for these funds, but ultimately the Legislature
and governor appropriate the funds through the annual budget
process.
SB 535 (De Leon), Chapter 830, Statutes of 2012 requires the
Department of Finance, when developing the three-year investment
plan for cap-and-trade monies, to allocate 25% of these funds to
projects that provide benefits to disadvantaged communities, and
to allocate a minimum of 10% of available cap-and-trade monies
to projects located within disadvantaged communities. The bill
outlines a process to identify these communities and allows for
periodic modification as necessary.
In 2014, the Legislature enacted SB 862 (Committee on Budget and
Fiscal Review), Chapter 36, a budget trailer bill which
establishes a long-term cap-and-trade expenditure plan by
continuously appropriating portions of the funds for designated
programs or purposes. Among other things, SB 862 continuously
appropriates 25% of the annual proceeds from cap-and-trade to
HSRA for various project components of the high-speed rail
program, including:
Acquisition and construction costs
Environmental review and design costs
Other capital costs
Repayment of any loans made to the authority
SB 400 (Lara) Page 3 of ?
This bill requires HSRA to allocate at least 25% of the
appropriated cap-and-trade funds to measures and projects that:
Reduce GHG emissions from transportation sources
Provide a cobenefit of improving air quality
In addition, this bill requires HSRA to prioritize allocating
this funding for measures and projects in communities that are
located in areas designated as extreme nonattainment.
COMMENTS:
1.Purpose. According to the author, many of the communities
along the proposed high-speed rail route are in regions that
are disproportionately impacted by poor air quality.
Residents living in close proximity to heavily congested
transportation corridors, for example, already suffer adverse
health effects from increased emissions. While the high-speed
train might reduce future emissions once operational, there is
an opportunity for HSRA to use some of the cap-and-trade funds
to help impacted communities today. This bill prioritizes
projects that reduce GHG emission in these affected regions,
consistent with promises HSRA has made throughout the course
of the system's development.
2.Cap-and-trade funding. As previously stated, cap-and trade
revenues may only be used to facilitate the achievement of GHG
emission reductions in California consistent with AB 32. In
fact, the Constitution requires that a clear nexus exist
between an activity for which a mitigation fee is used and the
adverse effects related to the activity on which that fee is
levied. Therefore, in order for the state's use of
cap-and-trade funds to be valid as mitigation fees, revenues
from the cap-and-trade auction must be used to mitigate GHG
emissions or the harms caused by GHG emissions. A pending
lawsuit challenges the state's use of these revenues on these
grounds.
With that in mind, it is important that legislation allocating
cap-and-trade revenues ensure that the funds are being used to
reduce GHG emissions. If opponents of the program can
convince the courts that the revenues are not being used
appropriately, the entire cap-and-trade program could be
jeopardized.
SB 400 (Lara) Page 4 of ?
In June 2013, HSRA submitted to the Legislature a report
outlining the high-speed rail program's contribution to the
state's goal of reducing GHG emissions. The report declares
that by 2022, the first year the state plans to operate
high-speed trains along the initial operating segment, the
direct emissions reduction will be the equivalent of taking
31,000 passenger vehicles off the road. Before operation,
however, the construction of the system will produce some
significant, yet-to-be-determined, amount of GHG emissions.
HSRA states in its report that it will fully offset these
emissions through mitigation efforts such as planting trees in
the Central Valley and providing funds to local air districts
for other emission-reduction projects.
The 2013 report was submitted prior to the Legislature
enacting SB 862 and committing 25% of all future cap-and-trade
revenues to the high-speed rail program. Undoubtedly HSRA has
updated its plans to reduce GHG emissions before operation of
the system begins in order to ensure that expenditure of any
cap-and-trade funds are meeting the program's intended
purpose. This bill greatly contributes to that aim by
requiring HSRA to spend at least 25% of any cap-and-trade
revenue on the reduction of GHG emissions.
To further clarify that these funds are to be spent on GHG
emission reduction measures, the committee may wish to amend
the bill to include a list of example projects eligible for
this funding, such as:
Transit projects that reduce congestion by improving
public transportation service or frequency of service
Transportation improvements that reduce congestion,
including network improvements and roadway modifications
Alternative transportation options, including
infrastructure projects that support clean transportation,
facilitate increased bicycle and pedestrian use, and
improvements that connect bicycle and pedestrian routes to
transit facilities
Natural systems, including forests and urban forests,
that reduce greenhouse gas emissions or increase the
sequestration of carbon to mitigate the impacts of GHG
emissions and create greater climate resiliency
Measures or projects that reduce emissions directly
associated with construction of the product, including the
use of low- and zero-emission equipment for transportation
SB 400 (Lara) Page 5 of ?
and construction
1.State and federal environmental laws. Typical transportation
projects in California are vetted through an environmental
process in which both state and federal environmental laws
apply. It is generally considered more challenging to comply
with state environmental laws than the federal laws, primarily
because California often requires project sponsors to not only
identify environmental impacts but also to develop a plan to
mitigate those impacts.
The projects comprising the high-speed rail program are not
typical state transportation projects in this case. In 2013,
the U.S. Surface Transportation Board, a federal adjudicatory
body with regulatory oversight of the nation's railroads,
ruled that it has superior jurisdiction over the California
high-speed rail program's environmental clearance process.
This ruling exempts HSRA from state environmental laws because
federal law supersedes state requirements. Despite this
ruling, HSRA has committed to following the state's
environmental processes as if it were still subject to them.
Unfortunately, the Legislature appears to have overlooked this
commitment with the drafting of SB 862, as it does not make
mitigation of environmental impacts an eligible use of
cap-and-trade funds for the high-speed rail system. This bill
takes steps to resolve this inconsistency, but it is not
perfectly clear in its present form whether these funds are
specifically for environmental mitigation. In light of this,
the committee may wish to amend the bill to clarify that the
cap-and-trade funds appropriated to HSRA can be spent on,
among the existing project components, environmental
mitigation of the project.
2.Double referral. The Rules Committee has referred this bill
to both this committee and the Environmental Quality
Committee. Therefore, if the bill passes this committee, it
will be referred to the Committee on Environmental Quality.
Related Legislation:
SB 535 (De Leon, 2012) - requires the three-year investment plan
for cap-and-trade monies to allocate 25% of these funds to
projects that provide benefits to disadvantaged communities, and
to allocate a minimum of 10% of available cap-and-trade monies
SB 400 (Lara) Page 6 of ?
to projects located within disadvantaged communities.
SB 862 (Committee on Budget and Fiscal Review, 2014) -
establishes a long-term cap-and-trade expenditure plan by
continuously appropriating portions of the funds for designated
programs or purposes.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Wednesday,
April 15, 2015.)
SUPPORT:
None received.
OPPOSITION:
None received.
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