BILL NUMBER: SB 687 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 16, 2015
INTRODUCED BY Senator Allen
FEBRUARY 27, 2015
An act to add Section 39735 to the Health and Safety Code,
and to add and repeal Section 25327 of the Public Resources Code,
relating to energy.
LEGISLATIVE COUNSEL'S DIGEST
SB 687, as amended, Allen. Renewable gas standard.
The California Global Warming Solutions Act of 2006,
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
authorize the state board to waive enforcement of the renewable gas
standard upon certain showings being made by a gas seller. 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.
The bill would require the State Energy Resources Conservation and
Development Commission to provide the state board and the
Legislature with an assessment of specified matter pertaining to
renewable gas by January 1, 2018.
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) The state board shall waive enforcement of this section if it
finds that the gas seller has demonstrated either of the following
conditions are beyond the control of the gas seller and will prevent
compliance:
(1) Permitting or other circumstances that delay renewable gas
projects, or there is an insufficient supply of renewable gas
resources available to the gas seller. In making a finding that this
condition prevents timely compliance, the state board shall consider
whether the gas seller has done all of the following:
(A) Prudently managed portfolio risks, including relying on a
sufficient number of viable projects.
(B) Sought to develop its own renewable gas resources, pipelines,
or pipeline interconnections to secure renewable gas resources.
(C) Procured an appropriate minimum margin of procurement above
the minimum procurement level necessary to comply with the renewables
gas standard to compensate for foreseeable delays or insufficient
supply.
(D) Taken reasonable measures, under the control of the gas
seller, to procure allowable tradable renewable gas credits.
(2) There is a disproportionate impact on commodity rates. The
state board, in consultation with the Public Utilities Commission,
shall establish a limitation for each gas seller on the expenditures
for all renewable gas used to comply with the renewable gas standard.
This limitation shall be set at a level that prevents
disproportionate commodity rate impacts. In determining whether
commodity rate impacts are disproportionate, the state board may
consider the extent to which procurement required under this section
results in a reduction in compliance costs for any other state
obligation and may consider the availability of other incentives and
credits that reduce the costs to ratepayers and noncore customers. If
the cost limitation is insufficient to support the projected costs
of meeting the renewable gas standard requirements, the gas seller
may refrain from procuring quantities in excess of those that can be
procured within the limitation.
(f) (1) If the state board waives any compliance requirements of
this section, the state board shall establish additional reporting
requirements on the gas seller to demonstrate that all reasonable
actions under the control of the gas seller are taken in each of the
intervening years sufficient to satisfy future procurement
requirements.
(2) The board shall not waive enforcement pursuant to this
section, unless the gas seller demonstrates that it has taken all
reasonable actions under its control, as set forth in subdivision
(e), to achieve full compliance.
(e)
(g) 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.
SEC. 3. Section 25327 is added to the
Public Resources Code , to read:
25327. (a) For purposes of this section, "renewable gas" has the
same meaning as defined in Section 39735 of the Health and Safety
Code.
(b) On or before January 1, 2018, the commission shall provide an
assessment of the following to the State Air Resources Board and the
Legislature:
(1) Opportunities to colocate renewable gas production with
existing vehicle fleets and other transportation fueling
opportunities.
(2) Renewable energy production sites that can use the renewable
gas onsite to reduce fossil fuel gas consumption for generation of
electricity, heating, cooling, or other purposes.
(3) Renewable energy production sites that can cost-effectively
interconnect to common carrier gas pipelines.
(4) Recommendations to reduce the costs of pipeline
interconnection for renewable gas projects in California.
(c) The assessment to be submitted to the Legislature pursuant to
subdivision (b) shall be submitted in compliance with Section 9795 of
the Government Code.
(d) Consistent with Section 10231.5 of the Government Code, this
Section is repealed on January 1, 2020.