BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 513| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 SB 513 Page 2 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 SB 513 Page 3 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. SB 513 Page 4 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 SB 513 Page 5 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. SB 513 Page 6 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 SB 513 Page 7 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 SB 513 Page 8 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 **** END ****