BILL ANALYSIS Ó SB 513 Page 1 SENATE THIRD READING SB 513 (Beall) As Amended August 31, 2015 Majority vote SENATE VOTE: 40-0 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Transportation |12-3 |Frazier, Achadjian, |Baker, Linder, | | | |Bloom, Campos, Chu, |Melendez | | | |Daly, Dodd, Eduardo | | | | |Garcia, Gomez, | | | | |Medina, Nazarian, | | | | |O'Donnell | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |12-5 |Gomez, Bloom, Bonta, |Bigelow, Chang, | | | |Calderon, Nazarian, |Gallagher, Jones, | | | |Eggman, Eduardo |Wagner | | | |Garcia, Holden, | | | | |Quirk, Rendon, Weber, | | | | |Wood | | | | | | | | | | | | ------------------------------------------------------------------ SB 513 Page 2 SUMMARY: Updates the Carl Moyer Air Quality Standards Attainment Program (Moyer Program) and local incentive programs (AB 923 Program). Specifically, this bill: 1)Clarifies that local air districts can continue to levy program fees, even after they come into compliance with National and California Ambient Air Quality Standards (attainment), in order to maintain compliance with the standards. 2)Adjusts the cost-effectiveness formula for projects to more effectively incentivize the statewide deployment of cleaner technologies. 3)Encourages leveraging of other public funding sources to more readily accomplish program goals. 4)Recognizes greenhouse gas (GHG) reductions so that funded projects can achieve both criteria pollutant and GHG emissions reductions. 5)Streamlines and updates program administrative requirements. 6)Deletes references to obsolete and redundant code sections, revises and recasts a number of provisions, defines a variety of terms, and makes related, clarifying amendments. 7)Defines a variety of terms. 8)Makes related, clarifying amendments. SB 513 Page 3 EXISTING LAW: 1)Established the Moyer Program [AB 1571 (Villaraigosa), Chapter 923, Statutes of 1999], administered by the Air Resources Board (ARB) and local air districts, to fund the incremental cost of cleaner-than-required vehicles, engines, and equipment. The primary objective of the program is to achieve air quality improvements that would not otherwise occur through regulations or other legal mandates. The Moyer Program is funded by vehicle registration surcharges adopted by local air districts in non-attainment areas. 2)Expanded the Moyer Program [AB 923 (Firebaugh), Chapter 707, Statutes of 2004] to cover additional pollutants and engines, imposes a $1 fee on tire sales to fund the Moyer Program and CalRecycle, and established air quality improvement programs through local air districts. 3)Extended the date for each of the various fees and surcharges that support the Moyer Program and the AB 923 Program [AB 8 (Perea), Chapter 401, Statutes of 2013] until January 1, 2024, and requires ARB to convene a workgroup to evaluate the Moyer and AB 923 Programs and make recommendations for updates. FISCAL EFFECT: According to the Assembly Appropriations Committee, the ARB indicates that it will not require additional administrative resources to implement the provisions of this bill. The increase in the cap on administrative costs will allow ARB to spend an additional $350,000 on administration and $350,000 on outreach annually from current program revenues. The local districts together would be allowed to spend at least an additional $860,000 from current Moyer Program revenues on administration. For the AB 923 program, local districts together would be allowed to spend an additional $625,000 from SB 513 Page 4 current program revenues on administration annually. COMMENTS: The Moyer Program provides grants through the state's 35 local air districts for deployment of engines, equipment, and emission-reduction technologies that are cleaner-than-required by current laws or regulations. The Moyer Program was expanded upon in 2004 with the passage of AB 923 which authorized, among other things, an increase in the surcharge local air districts are allowed to levy on motor vehicle registrations within their jurisdictions from $4 to $6, expanded the types of emissions covered by the Moyer Program and increased the tire fee by $0.75 to fund programs under ARB and local air districts to mitigate or remediate air pollution caused by tires. AB 8 included a provision extending the fees to fund the Moyer Program until January 1, 2024, and required ARB to convene a workgroup to evaluate the program. To satisfy this requirement, ARB and the California Air Pollution Control Officers Association, the sponsor of this bill, held two public workgroup meetings to solicit input from stakeholders. Specifically, stakeholders were asked to identify program limitations and identify program improvements. The workgroup identified a number of program improvements and many were addressed by ARB through updates to the Moyer Program Guidelines in 2014. The remaining recommendations, those that required specific statutory changes, are addressed in this bill. Specifically, this bill addresses a number of issues to make the Moyer Program and AB 923 Program more effective by, among other things, clarifying that local air districts can continue to levy program fees even after they achieve attainment, making adjustments to cost-effectiveness calculations to incentivize the statewide deployment of cleaner technologies, encouraging leveraging of other public funding sources, recognizing GHG reductions so that funded projects can achieve both criteria pollutant and GHG emissions reductions, and streamlining and SB 513 Page 5 creating efficiencies in the administration of the program. Leveraging Funding Sources: One of the primary objectives of the 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 is to help ensure the program does 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 GHG emission 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. 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 including, but not limited to, the GGRF, 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. With this change, multiple project sources can be used cumulatively for projects that achieve multiple goals. Changing Cost-Effectiveness Calculations: The Moyer Program prohibits grants for projects with a cost-effectiveness of more than $13,600 per ton of nitrogen oxide (NOx) reduced in the state. For projects obtaining reactive organic gas and particulate matter (PM) reductions, ARB determines appropriate adjustment factors to calculate a weighted cost-effectiveness. SB 513 Page 6 This bill removes the requirement that grants not be made for projects with a cost-effectiveness calculation of more than $13,600 per ton of NOx and instead requires ARB, in collaboration with air districts, to establish cost-effectiveness values that considers additional factors such as 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 originally included provisions allowing ARB and air districts to consider "ancillary benefits" when calculating the cost-effectiveness of projects and for project selection; however, in response to concerns voiced by the Senate Environmental Quality Committee about the definition of ancillary benefits being too broad, the author amended this bill in the Senate Appropriations Committee to narrow the definition. The Senate Appropriations Committee felt the definition was still too broad and removed the ancillary benefits provisions altogether. The author has indicated his intention to continue to work on the ancillary benefits language and reinsert the language at a later date, pending approval by Senate and Assembly policy committees. Expanding Project Categories: Under the AB 923 Program, eligible projects include the purchase of new school buses or retrofit of existing school buses; vehicle retirement 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. Additionally, air districts are prohibited from using more than 5% of funds collected for administrative expenses. Eligible projects under the Moyer Program include the purchase of new very low or zero-emission vehicles or heavy-duty engines; retrofit of engines or replacement of old engines with SB 513 Page 7 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. This bill would add repowering of school buses as an eligible project and remove the $20,000 cap on replacement of natural gas fuel tanks on school buses. This bill also 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%. Additionally, this bill changes "fueling or electrification infrastructure" to "fueling or energy infrastructure to fuel or power covered sources" to allow funding to go toward a variety of alternative energy fueling programs. Committee comments: The Moyer and AB 923 Programs have been widely successful and have helped private businesses and public agencies voluntarily clean up older, dirtier engines and improve air quality. The programs have resulted in the retrofit or replacement of an estimated 48,000 engines and reduced 146,000 tons of ozone precursors and 6,000 tons of diesel particulates through the investment of over $980 million in state and local funds. While the Moyer Program is intended to fund "surplus" improvements, the sponsor correctly notes that for many years, virtually all mobile emission reductions were surplus; however, as the Legislature and ARB have enacted more laws and regulations in this arena, the bar has moved higher for achieving surplus reductions. Also, cleaner technology is more costly - making it more expensive for business owners to clean up their equipment. This bill provides opportunities for ARB SB 513 Page 8 and local air districts to take on more sophisticated, advanced technology projects and leverage additional funds, where needed. This bill also broadens the scope of the programs to help them continue to achieve their stated goals. Analysis Prepared by: Victoria Alvarez / TRANS. / (916) 319-2093 FN: 0001787