BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        SB 513|
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                                   THIRD READING 


          Bill No:  SB 513
          Author:   Beall (D)
          Amended:  6/2/15  
          Vote:     21  

           SENATE TRANS. & HOUSING COMMITTEE:  10-0, 4/21/15
           AYES:  Beall, Cannella, Allen, Bates, Galgiani, Leyva, McGuire,  
            Mendoza, Roth, Wieckowski
           NO VOTE RECORDED:  Gaines

           SENATE ENVIRONMENTAL QUALITY COMMITTEE:  7-0, 4/29/15
           AYES:  Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/28/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SUBJECT:   Carl Moyer Memorial Air Quality Standards Attainment  
                     Program  


          SOURCE:    California Air Pollution Control Officers Association

          DIGEST:   This bill makes a number of changes to the Carl Moyer  
          Memorial Air Quality Standards Attainment Program.

          ANALYSIS:   


          Existing law:

          1)Establishes, pursuant to AB 1571 (Villaraigosa, Chapter 923,  
            Statutes of 1999), 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  








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            pollution control districts (air districts) for deployment of  
            engines, equipment, and emission-reduction technologies that  
            are cleaner than required by current laws or regulations.  The  
            Program provides approximately $60 million for projects each  
            year throughout the state.  The Carl Moyer Program was  
            initially funded primarily through General Fund  
            appropriations.

          2)Expands the Carl Moyer Program, pursuant to AB 923 (Firebaugh,  
            Chapter 707, Statutes of 2004), to address particulate matter  
            (PM) and reactive organic gases (ROG) emissions in addition to  
            nitrogen oxide (NOx) emissions.  It established ongoing  
            funding by authorizing air districts to collect an additional  
            $2 surcharge on vehicle registration fees to fund emission  
            reduction projects and by establishing a fee of 75 cents per  
            tire.  The AB 923 program funds Carl Moyer Program-eligible  
            projects as well as agricultural equipment, school bus, and  
            vehicle scrap programs.  

          3)Includes a provision, pursuant to AB 8 (Perea, Chapter 401,  
            Statutes of 2013), extending the tire fees and the AB 923  
            program until January 1, 2024.  (The vehicle registration  
            surcharge does not have a sunset.)  AB 8 also required ARB to  
            convene a workgroup to evaluate the Carl Moyer 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 air districts then worked together  
            to develop statutory language to implement the Program  
            improvements identified by the workgroup.  

          4)Requires a project to meet a cost-effectiveness test in order  
            to be eligible for funding.  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, to help ensure the Program  
            did not overpay for projects receiving funds from other  
            sources.  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  








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            reduction programs, and the California Energy Commission's  
            Alternative and Renewable Fuel and Vehicle Technology Program.  
             AB 1507 aimed to address the unintended consequence of  
            discouraging projects that accomplish multiple goals.

          5)Prohibits the Carl Moyer Program from providing grants to  
            projects with a cost-effectiveness of more than $13,600 per  
            ton of NOx reduced in the state or a higher value that  
            reflects Consumer Price Index adjustments as determined by  
            ARB.  For projects obtaining ROG and PM reductions, ARB shall  
            determine appropriate adjustment factors to calculate a  
            weighted cost-effectiveness.  


          6)Provides that the Carl Moyer Program shall only fund the  
            "incremental cost" of a project, defined as the cost of the  
            project minus a baseline cost that would otherwise be incurred  
            by the applicant in the normal course of business (e.g., to  
            meet existing federal, state, or local requirements).  States  
            that incremental cost may include added lease or fuel costs as  
            well as incremental capital costs.

          7)Provides that the following projects are eligible under the AB  
            923 program:  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.

          8)Provides that the following projects are eligible under the  
            Carl Moyer Program:  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.  








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          9)Provides that funds not expended by an air district within a  
            two-year period shall revert back to ARB within 60 days for  
            further allocation.  

          This bill makes multiple changes to the Carl Moyer and AB 923  
          programs, including the following.  

          1)Requires, relative to leveraging of other funding sources,  
            ARB, by July 1, 2017, to revise the guidelines to exclude  
            funds from federal, state, and local programs, or other public  
            funding sources, from the cost-effectiveness calculation.   
            These public funding sources include, but are not limited to,  
            the Greenhouse Gas Reduction Fund, 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.   


          2)Requires, relative to cost-effectiveness calculation, ARB, in  
            collaboration with air districts, to establish  
            cost-effectiveness values that consider factors including, but  
            not limited, to, the cost of emission control technologies and  
            the cost-effectiveness values for NOx, PM, or ROG for any  
            adopted rule or control measure in any district's approved  
            state implementation plan or ARB rule.  

          3)Adds energy costs to the definition of incremental cost.

          4)Adds, relative to expansion of project categories, 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%.  Also changes "fueling or  
            electrification infrastructure" to "fueling or energy  
            infrastructure to fuel or power covered sources."  

          5)Provides, relative to liquidation, return, and recapture of  








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            funds, that funds not liquidated by an air district within a  
            four-year period shall be returned to ARB within 90 days for  
            further allocation and makes provisions for recaptured funds.   

            
          Comments

          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 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; allowing greater  
          leveraging of funds from multiple sources; expanding eligible  
          project categories; and further streamlining the Program.  The  
          sponsor of this bill is the California Air Pollution Control  
          Officers Association (CAPCOA), which represents the state's 35  
          local air districts.

          Time for an update.  The Carl Moyer Program and the AB 923  
          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 and AB 923 programs were based on technology ideas  
          available at that time.  This bill will 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  
          updates the Carl Moyer and AB 923 programs to help them more  
          effectively address the state's air quality concerns.

          Issues raised in the Senate Environmental Quality Committee.   
          The Senate Environmental Quality Committee (EQ) analysis raised  
          a number of issues with this bill.  








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          1)Ancillary benefits.  Existing law requires the Carl Moyer  
            Program to address reductions in NOx, ROGs, and PM emissions.   
            GHG emissions reductions do not increase the  
            cost-effectiveness calculation, or the amount of funding, for  
            a project.  The prior version of this bill allowed air  
            districts to consider "ancillary benefits" in the  
            cost-effectiveness calculation for a project.  The EQ analysis  
            noted that the definition of ancillary benefits was overly  
            broad and expressed concerns that ancillary benefits might  
            take precedence over the Program's primary goals.  This bill  
            was amended in the Senate Appropriations Committee to remove  
            the ancillary benefits provision.

          2)Incremental cost.  For purposes of determining the amount of  
            funding for a project, existing law defines the incremental  
            cost of a project as the cost of the project minus a baseline  
            cost that would otherwise be incurred by the applicant (e.g.,  
            to meet existing federal, state, or local requirements).  The  
            prior version of this bill expanded the definition by removing  
            the baseline provision.  The EQ analysis noted that "Without a  
            baseline, the defined term is inconsistent with the plain  
            meaning of the term 'increment.'"  The author amended this  
            bill in the Senate Appropriations Committee to re-insert  
            baseline cost.

          3)Other economic factors.  Existing law requires ARB to adjust  
            the maximum per-project cost-effectiveness amount to account  
            for inflation.  The prior version of this bill authorized ARB  
            to adjust the cost-effectiveness amount to account for  
            inflation and "other economic factors," a term that the EQ  
            analysis noted was overly broad.  The author amended this bill  
            in the Senate Appropriations Committee to replace the term  
            "other economic factors" with "other factors authorized in  
            this section" in order to narrow and clarify the scope of  
            factors that may be considered.
          4)Multidistrict projects.  Existing law authorizes ARB to  
            reserve up to 10% of Carl Moyer Program funds each year to  
            directly fund a project that is multidistrict in nature.  The  
            prior version of this bill additionally authorized ARB to fund  
            any project that ARB "determines contributes toward the  
            achievement of state air quality goals."  The EQ analysis  








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            noted that the term "state air quality goals" was overly  
            broad.  The author amended this bill in the Senate  
            Appropriations Committee to remove that language and instead  
            clarify that ARB may fund any project authorized by the Carl  
            Moyer Program statutes.

          5)Liquidation, return, and recapture of funds.  The EQ analysis  
            noted that this bill should define the terms "liquidate,"  
            "return," and "recapture."  The author amended this bill in  
            the Senate Appropriations Committee to define those terms.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:
           
          1)Minor and absorbable costs to the Air Pollution Control Fund  
            (special fund) to ARB to update regulations in accordance with  
            this bill. 

          2)Unknown cost pressures, at least in the millions of dollars,  
            from the Air Pollution Control Fund for increased uses of the  
            AB 923 program.

          3)Unknown cost pressures, at least in the millions of dollars,  
            to the Greenhouse Gas Reduction Fund (special fund) for  
            projects that may seek funding from both the Greenhouse Gas  
            Reduction Fund and the Carl Moyer Program.

          SUPPORT:   (Verified5/29/15)

          California Air Pollution Control Officers Association (source)
          American Lung Association
          Bay Area Air Quality Management District
          Butte County Air Quality Management District
          California Electric Transportation Coalition
          California Natural Gas Vehicle Coalition
          CALSTART
          Clean Energy and Clean Energy Renewable Fuels
          Imperial County Air Pollution Control District
          Imperial County Board of Supervisors
          Rural County Representatives of California








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          Sacramento Metropolitan Air Quality Management District
          San Joaquin Valley Air Pollution Control District 
          Santa Barbara County Air Pollution Control District
          South Coast Air Quality Management District
          Tehama County Board of Supervisors
          U.S. Hybrid
          Yolo-Solano Air Quality Management District


          OPPOSITION:   (Verified5/29/15)


          None received




          Prepared by: Erin Riches / T. & H. / (916) 651-4121
          6/2/15 20:15:13


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