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. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 23, 2015 |Policy Vote: T. & H. 7 - 0, | | | E.Q. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- 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 SB 400 (Lara) Page 1 of ? 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: SB 400 (Lara) Page 2 of ? 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. SB 400 (Lara) Page 3 of ? 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. -- END --