BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 400 (Lara) - California Global Warming Solutions Act of 2006:  
          Greenhouse Gas Reduction Fund.
          
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          |Version: April 23, 2015         |Policy Vote: T. & H. 7 - 0,     |
          |                                |          E.Q. 7 - 0            |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 18, 2015      |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 


          Bill  
          Summary:  SB 400 would require the High Speed Rail Authority  
          (HSRA) to spend at least 25% of the money it receives from the  
          Greenhouse Gas Reduction Fund (GGRF) on environmental mitigation  
          measures and projects that reduce GHG emissions from  
          transportation sources.


          Fiscal  
          Impact:  Unknown costs pressures to the GGRF (special) as a  
          result of expanding the eligible uses of the GGRF funds that are  
          continuously appropriated for the project.


          Background:  Under the California Global Warming Act of 2006 (also known as  
          AB 32), the California Air Resources Board (ARB) is required to  
          establish a statewide greenhouse gas (GHG) emissions limit such  
          that by 2020 California reduces its GHG emissions to the level  







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          they were in 1990. The act authorizes the ARB to include the use  
          of market-based mechanisms to comply with these regulations.  
          Under that authority, the ARB established the Cap-and-Trade  
          Program in which ARB establishes an overall limit,  or "cap," on  
          GHG emissions from specified industries.  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. 
          Revenues from Cap-and-Trade are deposited into the GGRF and must  
          be expended in furtherance of AB 32 and result in reduction of  
          GHG emissions. In 2014, the Legislature enacted SB 862  
          (Committee on Budget and Fiscal Review) Chapter 36, Statutes of  
          2014, 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.  One  
          of these purposes is the initial operating segment and Phase I  
          Blended System of the High Speed Rail project, to which SB 862  
          commits 25% of annual revenues to the GGRF. 


          The HSRA must use these funds for the following:
                 Acquisition and construction of the project 


                 Environmental review and design costs of the project.


                 Other Capital costs of the project


                 Repayment of any loans made to the HSRA to fund the  
               project.




          Proposed Law:  
           This bill would expand the eligible uses of the continuously  
          appropriated GGRF funds to the HSRA to also include  
          environmental mitigation projects that reduce GHG emissions from  
          transportation sources and provide a cobenefit of improving air  
          quality. The HSRA must use at least 25% of the continuously  
          appropriated GGRF funds for this purpose. Eligible projects may  
          include, but are not limited to, the following:








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                 Public transit improvements that reduce congestion by  
               improving service 


                 Transportation improvements that reduce congestion,  
               including network improvements and roadway modifications


                 Alternative transportation options including  
               infrastructure improvements


                 Natural systems that reduce GHG emissions or increase  
               the sequestration of carbon


                 Reduction of emissions directly associated with  
               construction of the HSR project including the use of low  
               and zero-emission equipment.




          Staff  
          Comments:  By expanding the eligible uses of the GGRF funds  
          dedicated to the HSRA, this bill creates a cost pressure on the  
          GGRF. At this time it unknown how large this cost pressure is  
          because according to the HSRA, a consolidated budget for  
          mitigation has not yet been determined. However, staff believes  
          it's reasonable to assume that the cost pressures could be in  
          the millions of dollars.
          Staff notes that the High Speed Rail (HSR) project may have no  
          legally required mitigations since the federal Surface  
          Transportation Board has declared that CEQA is preempted, though  
          this is being challenged in the courts. The HSR will have to  
          comply with NEPA, though NEPA only requires a lead agency to  
          identify potential environmental impacts, not to mitigate them.  
          The HSRA however has made a public commitment to make all stages  
          of construction GHG emission neutral. If the HSRA follows  
          through with this commitment and has considered these  
          mitigations as part of the project budget for the initial  
          operating segment and Phase I Blended system, this bill would  
          ultimately have no costs, so long as the mitigation budget is  
          larger than 25% of the GGRF funds. 








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          On the other hand, if the mitigation projects planned by the  
          HSRA do not exceed 25% of the GGRF funds, then this bill will  
          effectively increase the overall costs for the early phases of  
          HSR.


          The HSRA authority believes that this bill can also have  
          indirect costs. They note that to the extent that its funding is  
          restricted for specific purposes, it makes it more difficult to  
          leverage the funds to draw down other potential funding sources.  
          The cost of the effect is undeterminable and potentially  
          speculative.




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