BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 471|
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THIRD READING
Bill No: SB 471
Author: Pavley (D)
Amended: 6/2/15
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 4/29/15
AYES: Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley
SENATE APPROPRIATIONS COMMITTEE: 6-1, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza
NOES: Nielsen
SUBJECT: Greenhouse Gas Reduction Fund: water sector
emissions
SOURCE: Author
DIGEST: This bill specifies that reductions of greenhouse gas
(GHG) emissions associated with the water sector, including
water use, supply, and treatment, are eligible investments from
the Greenhouse Gas Reduction Fund (GGRF).
ANALYSIS:
Existing law:
1)Requires, under the California Global Warming Solutions Act of
2006 (also known as AB 32) (Health and Safety Code §38500 et
seq.), the California Air Resources Board (ARB) to determine
the 1990 statewide GHG emissions level and approve a statewide
GHG emissions limit that is equivalent to that level, to be
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achieved by 2020. AB 32 authorizes ARB to adopt a regulation
that establishes a market-based mechanism with declining
annual aggregate emission limits for sources that emit GHGs.
2)Establishes the GGRF in the State Treasury, requires all
moneys, except for fines and penalties, collected pursuant to
a market-based mechanism be deposited in the fund, and
requires the Department of Finance (DOF), in consultation with
the state board and any other relevant state agency, to
develop, as specified, a three-year investment plan for the
moneys deposited in the GGRF. (Government Code §16428.8)
3) Requires moneys from the GGRF be used to facilitate the
achievement of reductions of GHG emissions in this state
consistent with AB 32, and authorizes the use of GGRF moneys
for, among other things, funding to reduce GHG emissions
associated with water use and supply, land and natural
resource conservation and management, forestry, and
sustainable agriculture. (HSC §39712)
This bill:
1)Includes intent language pertaining to the nexus between
water, energy, and GHG emissions reductions.
2)Specifies that reductions of GHG emissions associated with the
water sector, including water use, supply, and treatment, are
eligible investments from the GGRF.
Background
Water and energy use. According to the California Energy
Resources Conservation and Development Commission (CEC),
water-related energy use in California consumes approximately 20%
of the state's electricity, and 30% of the state's non-power plant
natural gas (natural gas not used to produce electricity). The
water sector uses electricity to pump, treat, transport, deliver,
and heat water. The CEC also found that the most energy-intensive
uses of water in California are associated with end uses by the
customer (e.g. heating, processing, and pressurizing water). To
this point, the CEC states that 75% of the electricity and nearly
all of the natural gas use related to water in California is
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associated with the end use of water, primarily for water heating.
Additionally, expected increases in groundwater pumping, water
treatment, and water recycling, due to drought conditions in the
state, mean the energy intensity of water will likely increase.
Cap-and-trade auction revenue. ARB has conducted eleven
cap-and-trade auctions. The first 10 have generated almost $1.6
billion in proceeds to the state.
Several bills in 2012 provided legislative direction for the
expenditure of auction proceeds including SB 535 (de León,
Chapter 830, Statutes of 2012) and AB 1532 (J. Pérez, Chapter
807, Statutes of 2012).
SB 535 requires that 25% of auction revenue be used to benefit
disadvantaged communities and requires that 10% of auction
revenue be invested in disadvantaged communities.
AB 1532 directs DOF develop and periodically update a
three-year investment plan that identifies feasible and
cost-effective GHG emission reduction investments to be funded
with cap-and-trade auction revenues. AB 1532 specifies that
the reduction of GHG emissions associated with water use and
supply are eligible investments of GGRF.
Legal consideration of cap-and-trade auction revenues. The
2012-13 budget analysis of cap-and-trade auction revenue by the
Legislative Analyst's Office noted that, based on an opinion
from the Office of Legislative Counsel, the auction revenues
should be considered mitigation fee revenues, and their use
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, according to
the report, in order for their use 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.
In 2012, the California Chamber of Commerce and Morning Star
Packing Company filed a lawsuit against the ARB claiming that
cap-and-trade auction revenues constitute illegal tax revenue.
In November 2013, the superior court ruling declined to hold the
auction a tax, concluding that it's more akin to a regulatory
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fee. The plaintiffs filed an appeal with the 3rd District Court
of Appeal in Sacramento in February of last year.
Executive Order. Executive Order B-29-15, issued April 1, 2015,
directed state agencies to perform various actions regarding
saving water to respond to severe drought conditions in the state,
including directing the CEC, jointly with the Department of Water
Resources (DWR), to implement a Water Energy Technology program to
deploy innovative water management technologies that achieve water
and energy savings, and GHG emissions reductions. The Executive
Order also directed the CEC, jointly with DWR, to implement a
limited statewide appliance rebate program for inefficient
appliances.
Budget allocations. Emergency drought relief legislation, SB 103
(Budget Committee, Chapter 2, Statutes of 2014) appropriated $10
million to the California Department of Food and Agriculture
(CDFA) for water and energy efficiency projects in the
agricultural sector, and $30 million to DWR to implement a grant
program to support local water-use efficiency projects and energy
efficiency projects at State Water Project facilities.
The 2014-15 Budget allocates $832 million in GGRF revenues to a
variety of transportation, energy, and resources 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.
Of that 40% available for annual appropriation, the Governor's
proposed 2015-16 cap-and-trade expenditures appropriates $60
million to DWR and CDFA for water and energy efficiency projects,
$30 million to the CEC and DWR for rebates to replace inefficient
appliances, and $30 million to the CEC and DWR for the Water and
Energy Technology Program, as described in the Executive Order.
Comments
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Purpose of bill. According to the author, "SB 471 will ensure
that project types that reduce emissions in furtherance of our
state climate goals qualify for funding from the GGRF. Project
types could include, but are not limited to precision
agriculture, local water solutions that reduce energy-intensive
water imports, clean energy generation at wastewater treatment
facilities, leak detection, and water appliance efficiency."
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Unknown possible cost pressures, likely in the hundreds of
thousands to millions of dollars, to the GGRF for the addition
of water treatment as an eligible use.
SUPPORT: (Verified5/28/15)
California Association of Sanitation Agencies
California League of Conservation Voters
Clean Water Action
Coastal Environment Rights Foundation
Environmental Entrepreneurs
LA River Revitalization Corporation
Las Virgenes Municipal Water District
Mono Lake Committee
Nexus eWater
Sonoma County Water Agency
Southern California Edison
The Climate Registry
The Energy Coalition
The River Project
TreePeople
Union of Concerned Scientists
US Green Buildings Council
Water and Power Department, City of Pasadena
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OPPOSITION: (Verified5/28/15)
None received
Prepared by: Rebecca Newhouse / E.Q. / (916) 651-4108
6/2/15 20:04:42
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