Senate Bill No. 687

Introduced by Senator Allen

February 27, 2015

An act to add Section 39735 to the Health and Safety Code, relating to energy.

LEGISLATIVE COUNSEL’S DIGEST

SB 687, as introduced, Allen. Renewable gas standard.

The California Global Warming Solutions Act of 2006, establishes the State Air Resources Board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases. The act requires the state board to adopt regulations to require the reporting and verification of statewide greenhouse gas emissions and to monitor and enforce compliance with this program. The act requires the state board to adopt a statewide greenhouse gas emissions limit, as defined, to be achieved by 2020, equivalent to the statewide greenhouse gas emissions level in 1990. The state board is required to adopt rules and regulations in an open public process to achieve the maximum technologically feasible and cost-effective greenhouse gas emission reductions. The act authorizes the state board to adopt market-based compliance mechanisms, as defined, meeting specified requirements. Existing law requires the state board to complete a comprehensive strategy to reduce emissions of short-lived climate pollutants, as defined, in the state.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, that facilitate the development of a variety of sources of in-state biomethane. Existing law requires the commission to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory open access to its gas pipeline system to any party for the purposes of physically interconnecting with the gas pipeline system and effectuating the delivery of gas.

The Warren-Alquist State Energy Resources Conservation and Development Act establishes the State Energy Resources Conservation and Development Commission and requires it to prepare an integrated energy policy report on or before November 1, 2003, and every 2 years thereafter. The act requires the report to contain an overview of major energy trends and issues facing the state, including, but not limited to, supply, demand, pricing, reliability, efficiency, and impacts on public health and safety, the economy, resources, and the environment. Existing law requires the State Energy Resources Conservation and Development Commission to hold public hearings to identify impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection and to offer solutions to those impediments as part of the integrated energy policy report.

This bill would require the state board, on or before June 30, 2016, in consultation with the State Energy Resources Conservation and Development Commission and the Public Utilities Commission, to adopt a carbon-based renewable gas standard, as defined and specified, that requires all gas sellers, as defined, to provide specified percentages of renewable gas meeting certain deliverability requirements, to retail end-use customers for use in California, that increases over specified compliance periods. The bill would require the state board, on or before January 1, 2017, to issue an analysis of the lifecycle emissions of greenhouse gases and reductions for different biogas types and end uses.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) California has enacted numerous policies to reduce emissions
of greenhouse gases and to increase the use of renewable energy
resources and renewable fuels, including the California Global
Warming Solutions Act of 2006 (Division 25.5 (commencing with
Section 38500) of the Health and Safety Code), the California
Renewables Portfolio Standard Program (Article 16 (commencing
with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the
Public Utilities Code), the low carbon fuel standard (Executive
Order S-01-07 (January 19, 2007); Title 17 California Code of
Regulations Sections 95480 to 95490, inclusive), and the state’s
comprehensive strategy to reduce emissions of short-lived climate
pollutants (Section 39730 of the Health and Safety Code).

(b) Use of natural gas causes more than one-quarter of all
emissions of greenhouse gases in California. Wildfires cause more
than one-half of all black carbon emissions, and organic waste is
responsible for three of the state’s five largest sources of methane
emissions.

(c) Capturing and using methane gas from renewable sources
(renewable gas) can significantly reduce emissions of greenhouse
gases from fossil fuel use, organic waste, wildfires, and
petroleum-based fertilizers. Using renewable gas in place of just
10 percent of California’s fossil fuel derived gas supply would
reduce emissions of greenhouse gases by tens of millions of metric
tons of carbon dioxide equivalent emissions per year. Renewable
gas generated from organic waste provides the lowest carbon
transportation fuels in existence and can provide low carbon,
flexible fuel for the generation of electricity.

(d) Increasing use of renewable gas in California will protect
disadvantaged communities by reducing air and water pollution
from fossil fuel refining and combustion. Renewable gas used in
place of diesel in heavy-duty vehicles will protect public health
by reducing toxic air contaminants.

(e) Renewable gas provides significant economic benefits to
California, including job creation, an in-state source of gas,
increased energy security, revenue and energy for public agencies,
and revenue for dairies, farms, rural forest communities, and other
areas.

(f) It is in the interest of the state to establish a renewable gas
standard that will diversify and decarbonize California’s gas
supply, to provide lower carbon gas for electricity generation,
transportation fuels, heating, and industrial purposes.

(g) A renewable gas standard will reduce emissions of
greenhouse gases from the oil and gas sector and from the solid
waste, food and agriculture, water and wastewater, and forestry
sectors. It will increase in-state gas supplies and provide jobs and
increased energy security for California.

(h) A renewable gas standard will help California to meet the
waste diversion requirements of Section 41781.3, Article 1
(commencing with Section 41780) of Chapter 6 of Part 2 of, and
Chapter 12.9 (commencing with Section 42649.8) of Part 3 of,
Division 30 of the Public Resources Code, by using diverted
organic waste to produce renewable gas.

SEC. 2.  

Section 39735 is added to the Health and Safety Code,
to read:

39735.  

(a) For purposes of this section, the following terms
have the following meanings:

(1) “Biogas” means gas that is generated from organic waste or
other organic materials, through anaerobic digestion, gasification,
pyrolysis, or other technology that converts organic waste to gas.
Biogas may be produced from, but not limited to, any of the
following sources:

(A) Agricultural waste remaining after all reasonably usable
food content is extracted.

(B) Forest waste produced from sustainable forest management
practices.

(C) Landfill gas.

(D) Wastewater treatment gas and biosolids.

(E) Diverted organic waste, if the waste is separated and
processed to (i) enhance the recovery of recyclable materials and
(ii) minimize air emissions and residual wastes in accordance with
applicable standards.

(2) “Eligible feedstock” means organic waste or other
sustainably produced organic material and electricity generated
by an eligible renewable energy resource meeting the requirements
of the California Renewables Portfolio Standard Program (Article
16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of
Division 1 of the Public Utilities Code).

(3) “Gas seller” means a gas corporation, as defined by Section
222 of the Public Utilities Code, or another entity authorized to
sell natural gas pursuant to natural gas restructuring (Chapter 2.2
(commencing with Section 328) of Part 1 of Division 1 of the
Public Utilities Code), including sales to core and noncore
customers pursuant to natural gas restructuring.

(4) “Renewable gas” means gas that is generated from organic
waste or other renewable sources, including electricity generated
by an eligible renewable energy resource meeting the requirements
of the California Renewables Portfolio Standard Program (Article
16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of
Division 1 of the Public Utilities Code). Renewable gas includes
biogas and synthetic natural gas generated from an eligible
feedstock.

(5) “Renewable gas standard” means the quantity of renewable
gas that a gas seller is required to provide to retail end-use
customers for use in California for each compliance period set
forth in subdivision (b).

(b) (1) On or before June 30, 2016, the state board, in
consultation with the State Energy Resources Conservation and
Development Commission and the Public Utilities Commission,
shall adopt a carbon-based renewable gas standard that requires
all gas sellers to provide specified percentages of renewable gas
to retail end-use customers for use in California. Each gas seller
shall procure a minimum quantity of renewable gas for each of
the following compliance periods:

(A) January 1, 2016, to December 31, 2019, inclusive. The state
board shall require a gas seller to make reasonable progress
sufficient to ensure that by the end of the compliance period not
less than 1 percent of the gas supplied to retail end-use customers
for use in California is renewable gas.

(B) January 1, 2020, to December 31, 2022, inclusive. The state
board shall require a gas seller to make reasonable progress
sufficient to ensure that by the end of the compliance period not
less than 3 percent of the gas supplied to retail end-use customers
for use in California is renewable gas.

(C) January 1, 2023, to December 31, 2024, inclusive. The state
board shall require a gas seller to make reasonable progress
sufficient to ensure that by the end of the compliance period not
less than 5 percent of the gas supplied to retail end-use customers
for use in California is renewable gas.

(D) January 1, 2025, to December 31, 2029, inclusive. The state
board shall require a gas seller to make reasonable progress
sufficient to ensure that by the end of the compliance period not
less than 10 percent of the gas supplied to retail end-use customers
for use in California is renewable gas.

(E) January 1, 2030, and thereafter. The state board shall require
a gas seller to ensure that not less than 10 percent of the gas
supplied to retail end-use customers for use in California is
renewable gas.

(2) Gas sellers shall be obligated to procure no less than the
quantities associated with all intervening years by the end of each
compliance period.

(c) Only renewable gas that meets any of the following
conditions shall count toward meeting the procurement
requirements of the renewable gas standard:

(1) The renewable gas is used onsite by an end-use customer in
California.

(2) The renewable gas is used by an end-use customer in
California and delivered through a dedicated pipeline.

(3) The renewable gas is delivered to end-use customers in
California through a common carrier pipeline and meets all of the
following requirements:

(A) The source of renewable gas injects the renewable gas into
a common carrier pipeline that physically flows within California
or toward the end-use customers for which the renewable gas was
procured under the purchase contract.

(B) The source of renewable gas did not inject the renewable
gas into a common carrier pipeline prior to March 29, 2012, or the
source commenced injection of sufficient incremental quantities
of renewable gas after March 29, 2012, to satisfy the purchase
contract requirements.

(C) The seller or purchaser of the renewable gas demonstrates
that the capture and injection of renewable gas into a common
carrier pipeline directly results in at least one of the following
environmental benefits to California:

(i) The reduction or avoidance of the emission of any criteria
air pollutant in California.

(ii) The reduction or avoidance of pollutants that could have an
adverse impact on waters of the state.

(iii) The alleviation of a local nuisance within California that
is associated with the emission of odors.

(d) In adopting the renewable gas standard, the state board shall
do all of the following:

(1) Notify all gas sellers in California of, and how to comply
with, the renewable gas standard procurement requirements. The
State Board of Equalization may supply the state board with
information obtained as a result of its collection of the natural gas
surcharge pursuant to Article 10 (commencing with Section 890)
of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code,
to assist the state board in identifying those gas sellers that are not
gas corporations, as defined in Section 222 of the Public Utilities
Code. The Public Utilities Commission shall notify the state board
of each gas corporation that provides gas service to end-use
customers in California.

(2) Maintain and publicize a list of eligible renewable gas
providers. For these purposes, an eligible renewable gas provider
means any person or corporation that is able to supply renewable
gas meeting the deliverability requirements of subdivision (c).

(3) Adopt a flexible compliance mechanism, such as tradable
renewable gas credits, to increase market flexibility and reduce
costs of compliance. If the state board adopts tradable renewable
gas credits, those credits shall be based on the carbon intensity of
the renewable gas and shall give equal value to renewable gas that
is used onsite and renewable gas that is injected into a common
carrier pipeline. The flexible compliance mechanism shall also
allow for credit banking and borrowing. The state board shall
consult with the State Energy Resources Conservation and
Development Commission in developing any system for tradeable
renewable gas credits.

(4) The state board shall consult with the Public Utilities
Commission in the development of regulations to implement the
renewable gas standard as they affect gas corporations, subject to
regulation as public utilities by the commission, in order to
minimize duplicative reporting or regulatory requirements.

(5) In consultation with the State Energy Resources
Conservation and Development Commission and the Public
Utilities Commission, adopt a coordinated investment plan to
ensure that moneys made available from revenues derived through
adoption of a market-based compliance mechanism or through the
Alternative and Renewable Fuel and Vehicle Technology Program
or Air Quality Improvement Program, are used to reduce the costs
to implement the renewable gas standard, including the costs of
pipeline injection.

(e) On or before January 1, 2017, the state board shall issue an
analysis of the lifecycle emissions of greenhouse gases and
reductions for different biogas types and end uses, including, but
not limited to, electricity generation, transportation fuels, heating
and industrial uses, and as a source of renewable hydrogen for fuel
cells. The analysis shall include an assessment of other public
health and environmental benefits, including benefits to
disadvantaged communities, air and water quality, soil
improvement, and wildfire reduction.