BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SB 513 Hearing Date: 4/21/2015 ----------------------------------------------------------------- |Author: |Beall | |----------+------------------------------------------------------| |Version: |4/6/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Erin Riches | |: | | ----------------------------------------------------------------- SUBJECT: Carl Moyer Memorial Air Quality Standards Attainment Program DIGEST: This bill makes a number of changes to the Carl Moyer Memorial Air Quality Standards Attainment Program (Carl Moyer Program). ANALYSIS: Existing law establishes the Carl Moyer Memorial Air Quality Standards Attainment Program (Carl Moyer Program) under the state Air Resources Board (ARB). This program provides grants through the state's 35 local air quality management and air pollution control districts (air districts) for deployment of engines, equipment, and emission-reduction technologies that are cleaner than required by current laws or regulations. AB 923 (Firebaugh), Chapter 707, Statutes of 2004, expanded the Carl Moyer Program and authorized air districts to collect a surcharge on vehicle registration fees to fund emission reduction projects. The AB 923 program funds Carl Moyer Program-eligible projects and agricultural equipment, school bus, and vehicle scrap programs. AB 8 (Perea), Chapter 401, Statutes of 2013, included a provision extending the fees to fund the Carl Moyer Program until January 1, 2024. AB 8 also required ARB to convene a workgroup to evaluate the program. ARB and the air districts convened two public meetings of the workgroup, in June and October 2014, to solicit input from stakeholders. ARB and the SB 513 (Beall) Page 2 of ? air districts then worked together to develop statutory language to implement the program improvements identified by the workgroup. This bill is the result of those efforts. This bill makes multiple changes to the Carl Moyer and AB 923 programs, including the following. Leveraging of other funding sources One of the primary objectives of the Carl Moyer Program is to obtain cost-effective emission reductions. In order to be eligible for funding, a project must meet a cost-effectiveness test. The air district reviewing the project application calculates the project's cost-effectiveness by dividing the annualized cost of the potential project (dollars per year) by the annual weighted surplus emission reductions the project will achieve (tons per year). Initially, other public funds had to be deducted from the cost-effectiveness calculation. The intent of this requirement was to help ensure the program did not overpay for projects receiving funds from other sources, as well as to ensure that participants provide a meaningful financial commitment to the project. AB 1507 (Lieu), Chapter 571, Statutes of 2010, required ARB to revise program guidelines to exclude from the calculation, funds from federal greenhouse gas (GHG) emission reduction programs and the California Energy Commission's Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP). AB 1507 aimed to address the unintended consequence of discouraging projects that accomplish multiple goals. This bill requires ARB, by July 1, 2017, to revise the guidelines to exclude funds from federal, state, and local programs, or other funding sources, from the cost-effectiveness calculation. These funding sources include, but are not limited to, the Greenhouse Gas Reduction Fund (commonly known as cap-and-trade), energy diversity programs, and programs that are intended to provide emissions reductions but do not require those reductions to count toward federal air quality standards. Cost-effectiveness calculation The Carl Moyer Program prohibits grants for projects with a cost-effectiveness of more than $13,600 per ton of NOx reduced in the state or a higher value that reflects CPI adjustments as SB 513 (Beall) Page 3 of ? determined by ARB. For projects obtaining reactive organic gas and particulate matter (PM) reductions, ARB shall determine appropriate adjustment factors to calculate a weighted cost-effectiveness. This bill requires ARB, in collaboration with air districts, to establish cost-effectiveness values that consider factors including, but not limited, to: the ability of a project to provide ancillary benefits (see below); the cost of emission control technologies; and the cost-effectiveness values for NOx, PM, or reactive organic gases for any adopted rule or control measure in any district's approved state implementation plan or ARB rule. This bill also authorizes an air district to recognize the ancillary benefit when determining the grant amount. Ancillary benefits Under the Carl Moyer Program, covered emissions include only NOx, reactive organic gases, and PM. GHG emissions reductions do not increase the cost-effectiveness calculation or the amount of funding for a project. This bill defines ancillary benefits as reductions in GHG and short-lived climate pollutants; benefits to communities with the most significant exposure to pollution, including but not limited to communities of minority populations or low-income populations; fuel efficiency improvements; and the deployment of advanced technology. Expanding project categories Under the AB 923 program, the following projects are eligible: purchase of new school buses or retrofit of existing school buses; vehicle retirement ("scrap") or repair; replacement of natural gas fuel tanks on school buses owned by a school district that are 14 years or older, not to exceed $20,000 per bus; and enhancement of deteriorating natural gas fueling dispensers of fueling infrastructure operated by a school district with a one-time funding amount of not more than $500 per dispenser. The air district may not use more than 5% of funds collected for administrative expenses. SB 513 (Beall) Page 4 of ? This bill: adds repowering of school buses as an eligible project; removes the $20,000 cap on replacement of natural gas fuel tanks on school buses; removes the requirement that the bus be owned by a school district; removes the $500 cap on enhancement of deteriorating natural gas fueling dispensers; adds funding of alternative fuel and electric infrastructure projects solicited and selected through a competitive bid process; and increases the administrative set-aside to 6.25%. Under the Carl Moyer Program, the following projects are eligible: purchase of new very low or zero-emission vehicles or heavy-duty engines; retrofit of engines or replacement of old engines with engines certified to more stringent emissions standards or with electric motors and drives; purchase and use of emission-reducing add-on equipment; and light- and medium-duty vehicle projects. The program may fund installation of fueling or electrification infrastructure. This bill changes "fueling or electrification infrastructure" to "fueling or energy infrastructure to fuel or power covered sources." COMMENTS: 1.Purpose. The author states that ARB and the state's local air districts, with public and stakeholder input, have identified several limitations of the Carl Moyer Program. These include the inability to provide meaningful grant amounts to the cleanest, most advanced technologies; the inability to recognize GHG emission reductions and other project benefits; and the inability to combine Carl Moyer Program funding with other funding sources. This bill addresses these limitations by establishing a process to adjust the cost-effectiveness limit; acknowledging ancillary benefits such as GHG emission reductions, benefits to environmental justice communities, and fuel efficiency; allowing greater leveraging of funds from multiple sources; expanding eligible project categories; and further streamlining the program. This bill is sponsored by the California Air Pollution Control Officers Association (CAPCOA), which represents the state's 35 local air districts. 2.Time for an update. The Carl Moyer Program and the AB 923 SB 513 (Beall) Page 5 of ? program have enjoyed significant success: Since 1998, these programs have cleaned up more than 46,000 engines and eliminated 174,600 tons of ozone precursors and 6,400 tons of PM. CAPCOA notes that the project types originally identified in the Carl Moyer Program and AB 923 program were based on technology ideas available at that time. This bill will update project categories and provide flexibility to better allow for both current and future technology opportunities. CAPCOA also notes that for many years, virtually all mobile emission reductions were surplus; however, as the Legislature and ARB have enacted more laws and regulations, the bar has moved much higher for achieving surplus reductions. In addition, the cleanest technology to achieve air quality standards has gotten more expensive, making it more difficult for business owners to clean up their equipment. This bill provides needed updates to the Carl Moyer and AB 923 programs to help them more effectively address the state's air quality concerns. 3.Double referred. This bill has also been referred to the Environmental Quality Committee. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, April 15, 2015.) SUPPORT: California Air Pollution Control Officers Association (sponsor) American Lung Association Bay Area Air Quality Management District California Electric Transportation Coalition California Natural Gas Vehicle Coalition CALSTART Imperial County Air Pollution Control District Sacramento Metropolitan Air Quality Management District SB 513 (Beall) Page 6 of ? San Joaquin Valley Air Pollution Control District Santa Barbara County Air Pollution Control District South Coast Air Quality Management District U.S. Hybrid Yolo-Solano Air Quality Management District OPPOSITION: None received. -- END --