Amended in Senate May 5, 2015

Amended in Senate April 16, 2015

Senate BillNo. 687


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 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,begin delete 2016,end deletebegin insert 2017,end insert 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:

P3    1

SECTION 1.  

The Legislature finds and declares all of the
2following:

3(a) California has enacted numerous policies to reduce emissions
4of greenhouse gases and to increase the use of renewable energy
5resources and renewable fuels, including the California Global
6Warming Solutions Act of 2006 (Division 25.5 (commencing with
7Section 38500) of the Health and Safety Code), the California
8Renewables Portfolio Standard Program (Article 16 (commencing
9with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the
10Public Utilities Code), the low carbon fuel standard (Executive
11Order S-01-07 (January 19, 2007); Title 17 California Code of
12Regulations Sections 95480 to 95490, inclusive), and the state’s
13comprehensive strategy to reduce emissions of short-lived climate
14pollutants (Section 39730 of the Health and Safety Code).

15(b) Use of natural gas causes more than one-quarter of all
16emissions of greenhouse gases in California. Wildfires cause more
17than one-half of all black carbon emissions, and organic waste is
18responsible for three of the state’s five largest sources of methane
19emissions.

20(c) Capturing and using methane gas from renewable sources
21(renewable gas) can significantly reduce emissions of greenhouse
22gases from fossil fuel use, organic waste, wildfires, and
23petroleum-based fertilizers. Using renewable gas in place of just
2410 percent of California’s fossil fuel derived gas supply would
25reduce emissions of greenhouse gases by tens of millions of metric
26tons of carbon dioxide equivalent emissions per year. Renewable
27gas generated from organic waste provides the lowest carbon
28transportation fuels in existence and can provide low carbon,
29flexible fuel for the generation of electricity.

30(d) Increasing use of renewable gas in California will protect
31disadvantaged communities by reducing air and water pollution
32from fossil fuel refining and combustion. Renewable gas used in
33place of diesel in heavy-duty vehicles will protect public health
34by reducing toxic air contaminants.

35(e) Renewable gas provides significant economic benefits to
36California, including job creation, an in-state source of gas,
37increased energy security, revenue and energy for public agencies,
P4    1and revenue for dairies, farms, rural forest communities, and other
2areas.

3(f) It is in the interest of the state to establish a renewable gas
4standard that will diversify and decarbonize California’s gas
5supply, to provide lower carbon gas for electricity generation,
6 transportation fuels, heating, and industrial purposes.

7(g) A renewable gas standard will reduce emissions of
8greenhouse gases from the oil and gas sector and from the solid
9waste, food and agriculture, water and wastewater, and forestry
10sectors. It will increase in-state gas supplies and provide jobs and
11increased energy security for California.

12(h) A renewable gas standard will help California to meet the
13waste diversion requirements of Section 41781.3, Article 1
14(commencing with Section 41780) of Chapter 6 of Part 2 of, and
15Chapter 12.9 (commencing with Section 42649.8) of Part 3 of,
16Division 30 of the Public Resources Code, by using diverted
17organic waste to produce renewable gas.

18

SEC. 2.  

Section 39735 is added to the Health and Safety Code,
19to read:

20

39735.  

(a) For purposes of this section, the following terms
21have the following meanings:

22(1) “Biogas” means gas that is generated from organic waste or
23other organic materials, through anaerobic digestion, gasification,
24pyrolysis, or other technology that converts organic waste to gas.
25Biogas may be produced from, but not limited to, any of the
26following sources:

27(A) Agricultural waste remaining after all reasonably usable
28food content is extracted.

29(B) Forest waste produced from sustainable forest management
30practices.

31(C) Landfill gas.

32(D) Wastewater treatment gas and biosolids.

33(E) Diverted organic waste, if the waste is separated and
34processed to (i) enhance the recovery of recyclable materials and
35(ii) minimize air emissions and residual wastes in accordance with
36applicable standards.

37(2) “Eligible feedstock” means organic waste or other
38sustainably produced organic material and electricity generated
39by an eligible renewable energy resource meeting the requirements
40of the California Renewables Portfolio Standard Program (Article
P5    116 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of
2Division 1 of the Public Utilities Code).

3(3) “Gas seller” means a gas corporation, as defined by Section
4222 of the Public Utilities Code, or another entity authorized to
5sell natural gas pursuant to natural gas restructuring (Chapter 2.2
6(commencing with Section 328) of Part 1 of Division 1 of the
7Public Utilities Code), including sales to core and noncore
8customers pursuant to natural gas restructuring.

9(4) “Renewable gas” means gas that is generated from organic
10waste or other renewable sources, including electricity generated
11by an eligible renewable energy resource meeting the requirements
12of the California Renewables Portfolio Standard Program (Article
1316 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of
14Division 1 of the Public Utilities Code). Renewable gas includes
15biogas and synthetic natural gas generated from an eligible
16feedstock.

17(5) “Renewable gas standard” means the quantity of renewable
18gas that a gas seller is required to provide to retail end-use
19customers for use in California for each compliance period set
20forth in subdivision (b).

21(b) (1) On or before June 30,begin delete 2016,end deletebegin insert 2017,end insert the state board, in
22consultation with the State Energy Resources Conservation and
23Development Commission and the Public Utilities Commission,
24shall adopt a carbon-based renewable gas standard that requires
25all gas sellers to provide specified percentages of renewable gas
26to retail end-use customers for use in California. Each gas seller
27shall procure a minimum quantity of renewable gas for each of
28the following compliance periods:

29(A) begin deleteJanuary 1, 2016, end deletebegin insertJune 30, 2017, end insertto December 31, 2019,
30inclusive. The state board shall require a gas seller to make
31reasonable progress sufficient to ensure that by the end of the
32compliance period not less than 1 percent of the gas supplied to
33retail end-use customers for use in California is renewable gas.

34(B) January 1, 2020, to December 31, 2022, inclusive. The state
35board shall require a gas seller to make reasonable progress
36sufficient to ensure that by the end of the compliance period not
37less than 3 percent of the gas supplied to retail end-use customers
38for use in California is renewable gas.

39(C) January 1, 2023, to December 31, 2024, inclusive. The state
40board shall require a gas seller to make reasonable progress
P6    1sufficient to ensure that by the end of the compliance period not
2less than 5 percent of the gas supplied to retail end-use customers
3for use in California is renewable gas.

4(D) January 1, 2025, to December 31, 2029, inclusive. The state
5board shall require a gas seller to make reasonable progress
6sufficient to ensure that by the end of the compliance period not
7less than 10 percent of the gas supplied to retail end-use customers
8for use in California is renewable gas.

9(E) January 1, 2030, and thereafter. The state board shall require
10a gas seller to ensure that not less than 10 percent of the gas
11supplied to retail end-use customers for use in California is
12renewable gas.

13(2) Gas sellers shall be obligated to procure no less than the
14quantities associated with all intervening years by the end of each
15compliance period.

16(c) Only renewable gas that meets any of the following
17conditions shall count toward meeting the procurement
18requirements of the renewable gas standard:

19(1) The renewable gas is used onsite by an end-use customer in
20California.

21(2) The renewable gas is used by an end-use customer in
22California and delivered through a dedicated pipeline.

23(3) The renewable gas is delivered to end-use customers in
24California through a common carrier pipeline and meets all of the
25following requirements:

26(A) The source of renewable gas injects the renewable gas into
27a common carrier pipeline that physically flows within California
28or toward the end-use customers for which the renewable gas was
29procured under the purchase contract.

30(B) The source of renewable gas did not inject the renewable
31gas into a common carrier pipeline prior to March 29, 2012, or the
32source commenced injection of sufficient incremental quantities
33of renewable gas after March 29, 2012, to satisfy the purchase
34contract requirements.

35(C) The seller or purchaser of the renewable gas demonstrates
36that the capture and injection of renewable gas into a common
37carrier pipeline directly results in at least one of the following
38environmental benefits to California:

39(i) The reduction or avoidance of the emission of any criteria
40air pollutant in California.

P7    1(ii) The reduction or avoidance of pollutants that could have an
2adverse impact on waters of the state.

3(iii) The alleviation of a local nuisance within California that
4is associated with the emission of odors.

5(d) In adopting the renewable gas standard, the state board shall
6do all of the following:

7(1) Notify all gas sellers in California of, and how to comply
8with, the renewable gas standard procurement requirements. The
9State Board of Equalization may supply the state board with
10information obtained as a result of its collection of the natural gas
11surcharge pursuant to Article 10 (commencing with Section 890)
12of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code,
13to assist the state board in identifying those gas sellers that are not
14gas corporations, as defined in Section 222 of the Public Utilities
15Code. The Public Utilities Commission shall notify the state board
16of each gas corporation that provides gas service to end-use
17customers in California.

18(2) Maintain and publicize a list of eligible renewable gas
19 providers. For these purposes, an eligible renewable gas provider
20means any person or corporation that is able to supply renewable
21gas meeting the deliverability requirements of subdivision (c).

22(3) Adopt a flexible compliance mechanism, such as tradable
23renewable gas credits, to increase market flexibility and reduce
24costs of compliance. If the state board adopts tradable renewable
25gas credits, those credits shall be based on the carbon intensity of
26the renewable gas and shall give equal value to renewable gas that
27is used onsite and renewable gas that is injected into a common
28carrier pipeline. The flexible compliance mechanism shall also
29allow for credit banking and borrowing. The state board shall
30consult with the State Energy Resources Conservation and
31Development Commission in developing any system for tradable
32renewable gas credits.

33(4) The state board shall consult with the Public Utilities
34Commission in the development of regulations to implement the
35renewable gas standard as they affect gas corporations, subject to
36regulation as public utilities by the commission, in order to
37minimize duplicative reporting or regulatory requirements.

38(5) In consultation with the State Energy Resources
39Conservation and Development Commission and the Public
40Utilities Commission, adopt a coordinated investment plan to
P8    1ensure that moneys made available from revenues derived through
2adoption of a market-based compliance mechanism or through the
3Alternative and Renewable Fuel and Vehicle Technology Program
4or Air Quality Improvement Program, are used to reduce the costs
5to implement the renewable gas standard, including the costs of
6pipeline injection.

7(e) The state board shall waive enforcement of this section if it
8finds that the gas seller has demonstrated either of the following
9conditions are beyond the control of the gas seller and will prevent
10compliance:

11(1) Permitting or other circumstances that delay renewable gas
12projects, or there is an insufficient supply of renewable gas
13resources available to the gas seller. In making a finding that this
14condition prevents timely compliance, the state board shall consider
15whether the gas seller has done all of the following:

16(A) Prudently managed portfolio risks, including relying on a
17sufficient number of viable projects.

18(B) Sought to develop its own renewable gas resources,
19pipelines, or pipeline interconnections to secure renewable gas
20resources.

21(C) Procured an appropriate minimum margin of procurement
22above the minimum procurement level necessary to comply with
23 the renewables gas standard to compensate for foreseeable delays
24or insufficient supply.

25(D) Taken reasonable measures, under the control of the gas
26seller, to procure allowable tradable renewable gas credits.

27(2) There is a disproportionate impact on commodity rates. The
28state board, in consultation with the Public Utilities Commission,
29shall establish a limitation for each gas seller on the expenditures
30for all renewable gas used to comply with the renewable gas
31standard. This limitation shall be set at a level that prevents
32disproportionate commodity rate impacts. In determining whether
33commodity rate impacts are disproportionate, the state board may
34consider the extent to which procurement required under this
35section results in a reduction in compliance costs for any other
36state obligation and may consider the availability of other
37incentives and credits that reduce the costs to ratepayers and
38noncore customers. If the cost limitation is insufficient to support
39the projected costs of meeting the renewable gas standard
P9    1requirements, the gas seller may refrain from procuring quantities
2in excess of those that can be procured within the limitation.

3(f) (1) If the state board waives any compliance requirements
4of this section, the state board shall establish additional reporting
5requirements on the gas seller to demonstrate that all reasonable
6actions under the control of the gas seller are taken in each of the
7intervening years sufficient to satisfy future procurement
8requirements.

9(2) The board shall not waive enforcement pursuant to this
10section, unless the gas seller demonstrates that it has taken all
11reasonable actions under its control, as set forth in subdivision (e),
12to achieve full compliance.

13(g) On or before January 1, 2017, the state board shall issue an
14analysis of the lifecycle emissions of greenhouse gases and
15reductions for different biogas types and end uses, including, but
16not limited to, electricity generation, transportation fuels, heating
17and industrial uses, and as a source of renewable hydrogen for fuel
18cells. The analysis shall include an assessment of other public
19health and environmental benefits, including benefits to
20disadvantaged communities, air and water quality, soil
21improvement, and wildfire reduction.

22

SEC. 3.  

Section 25327 is added to the Public Resources Code,
23to read:

24

25327.  

(a) For purposes of this section, “renewable gas” has
25the same meaning as defined in Section 39735 of the Health and
26Safety Code.

27(b) On or before January 1, 2018, the commission shall provide
28an assessment of the following to the State Air Resources Board
29and the Legislature:

30(1) Opportunities to colocate renewable gas production with
31existing vehicle fleets and other transportation fueling
32opportunities.

33(2) Renewable energy production sites that can use the
34renewable gas onsite to reduce fossil fuel gas consumption for
35generation of electricity, heating, cooling, or other purposes.

36(3) Renewable energy production sites that can cost effectively
37interconnect to common carrier gas pipelines.

38(4) Recommendations to reduce the costs of pipeline
39interconnection for renewable gas projects in California.

P10   1(c) The assessment to be submitted to the Legislature pursuant
2to subdivision (b) shall be submitted in compliance with Section
39795 of the Government Code.

4(d) Consistent with Section 10231.5 of the Government Code,
5thisbegin delete Sectionend deletebegin insert sectionend insert is repealed on January 1, 2020.



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