BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 970
-----------------------------------------------------------------
|Author: |Leyva |
-----------------------------------------------------------------
|-----------+-----------------------+-------------+----------------|
|Version: |3/28/2016 |Hearing |4/20/2016 |
| | |Date: | |
|-----------+-----------------------+-------------+----------------|
|Urgency: |No |Fiscal: |Yes |
------------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Joanne Roy |
| | |
-----------------------------------------------------------------
SUBJECT: Organic food waste diversion
ANALYSIS:
Existing law:
1) Existing law, pursuant to the Integrated Waste Management Act
of 1989 (Public Resources Code (PRC) §40000 et seq.):
a) Establishes a statewide diversion goal of 75% by 2020.
b) Requires local agencies to divert, through source
reduction, recycling, and composting, 50% of solid waste
disposed by their jurisdictions.
c) Requires a commercial waste generator, including
multi-family dwellings, to arrange for recycling services
and requires local governments to implement commercial solid
waste recycling programs designed to divert solid waste from
businesses.
d) Requires generators of specified amounts of organic waste
to arrange for recycling services for that material.
2) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the
State Treasury, requires all moneys, except for fines and
penalties, collected pursuant to a market-based mechanism be
deposited in the fund and requires the Department of Finance,
in consultation with ARB and any other relevant state agency,
SB 970 (Leyva) Page 2 of
?
to develop, as specified, a three-year investment plan for the
moneys deposited in the GGRF. (Government Code §16428.8).
3) Prohibits the state from approving allocations for a measure or
program using GGRF moneys except after determining that the use
of those moneys furthers the regulatory purposes of AB 32, and
requires moneys from the GGRF be used to facilitate the
achievement of reductions of GHG emissions in California.
(Health and Safety Code §39712).
4) Requires the Department of Resources Recycling and Recovery
(CalRecycle) to administer a grant program to provide financial
assistance to reduce GHG emissions by promoting in-state
development and infrastructure to process organics and other
recyclable materials into new value-added products, using
funding from GGRF. Specifies that the funding may be used for
projects including organics composting, anaerobic digestion, or
recyclable material manufacturing infrastructure projects or
other related activities that reduce GHG emissions. (PRC
§42999).
This bill:
1) By June 1, 2017, requires CalRecycle, in consultation with the
State Air Resources Board (ARB) and the State Energy Resources
Conservation and Development Commission (CEC), to develop a
pilot demonstration program to award matching funding for cost
effective and efficient integrated food waste diversion
projects at existing wastewater treatment facilities (WWTF).
2) Prioritizes projects that provide various benefits, such as:
a) Maximizing food waste diversion in a cost-effective
manner that uses existing facilities and infrastructure;
b) Maximizing resource recovery of diverted waste, including
production of clean energy, or low or negative carbon
transportation fuels.
3) Requires CalRecycle to identify three to five regional projects
for matching grant funds.
4) Authorizes CalRecycle to award matching grants of up to $10
million for each project.
SB 970 (Leyva) Page 3 of
?
5) Funds this proposed grant program using moneys from GGRF.
6) Makes several findings and declarations.
Background
1) Statewide waste diversion goals.
CalRecycle is tasked with diverting at least 75% of solid waste
statewide by 2020. Currently, an estimated 31 million tons of
waste are disposed of in California's landfills annually, of
which 37% is compostable organic materials, 20% is inert and
other construction and demolition debris, and 17% is paper and
paperboard, 10% plastics, 3% metal, with the remaining 12%
consisting of various materials such as glass and other waste.
In addition, CalRecycle is charged with implementing Strategic
Directive 6.1, which calls for reducing organic waste disposal
by 50% by 2020. According to CalRecycle, significant gains in
organic waste diversion (through recycling technologies or
organic waste, including composting and anaerobic digestion)
are necessary to meet the 75% goal and to implement Strategic
Directive 6.1.
2) Recycling organic waste.
For purposes of recycling, "organic waste" is defined as food
waste, green waste, landscape and pruning waste, nonhazardous
wood waste, and food-soiled paper waste that is mixed in with
food waste. Organic material represents over one-third of the
solid waste sent to landfills even though a large percentage
can be recycled or composted - Approximately 6 million tons of
food scraps are thrown away each year.
Recycling technologies for organic waste include anaerobic
digestion, composting, and other types of processing that
generate renewable fuels, energy, soil amendments, and mulch.
Anaerobic digestion, which produces biogas that can be
processed into biomethane fuel, is particularly suited to
handle food waste.
3) Waste reduction and GHGs.
SB 970 (Leyva) Page 4 of
?
According to the California Air Resources Board (ARB), a total
reduction of 80 million metric tons (MMT), or 16% compared to
business as usual, is necessary to reduce statewide GHG
emissions to 1990 levels by 2020. ARB intends to achieve
approximately 78% of the reductions through direct regulations.
ARB proposes to achieve the balance of reductions necessary to
meet the 2020 limit (approximately 18 MMT) through its
cap-and-trade program.
Landfill gas is generated by the anaerobic decomposition of
organic materials such as food, paper, wood, and green
material. 50% of landfill gas is methane, a GHG with a much
shorter life (also known as a short-lived climate pollutant),
but much higher global warming potential than carbon dioxide
(methane is approximately 25 times more efficient at trapping
heat than carbon dioxide over a 100-year time span). Depending
on the types of solid waste, the chemical makeup of landfill
biogas can vary greatly from the biogas produced from dairy
farms, municipal solid waste, and wastewater treatment
facilities. While most modern landfills have systems in place
to capture methane, significant amounts continue to escape into
the atmosphere. According to ARB's GHG inventory,
approximately 7 million tons of carbon dioxide equivalent are
released annually by landfills. That number is expected to
increase to 8.5 million tons of carbon dioxide equivalent by
2020.
Composting and other organics processing technologies, including
anaerobic digestion, reduce GHGs by avoiding the emissions that
would be generated by the material's decomposition in a
landfill. For example, in the case of anaerobic digestion, the
process produces methane from the organic waste in a controlled
environment for use as a renewable fuel, and results in climate
benefits by both reducing GHGs from landfills, and displacing
fossil fuels. Recycling organic waste provides significant GHG
reductions over landfilling.
4) Cap-and-trade auction revenue.
Since November 2012, ARB has conducted 14 cap-and-trade auctions,
generating over $4 billion in proceeds to the state.
State law specifies that the auction revenues must be used to
SB 970 (Leyva) Page 5 of
?
facilitate the achievement of GHG emissions reductions and
outlines various categories of allowable expenditures. Statute
further requires the Department of Finance, in consultation
with ARB and any other relevant state agency, to develop a
three-year investment plan for the auction proceeds, which are
deposited in the GGRF.
Disadvantaged communities.
SB 535 (de León, Chapter 830, Statutes of 2012) requires the
Department of Finance, in the investment plan, to allocate at
least 25% of available moneys in the GGRF to projects that
provide benefits to disadvantaged communities, and at least 10%
to projects located within disadvantaged communities.
To meet the SB 535 mandate, the Office of Environmental Health
Hazard Assessment, under CalEPA's guidance, developed a tool
(termed CalEnviroScreen) to assess and rank census tracts
across the state that are disproportionately affected by
multiple types of pollution and areas with vulnerable
populations. CalEPA has designated 25% of census tracts in
California as disadvantaged communities for the purpose of
investing cap-and-trade proceeds.
Additionally, SB 862 (Committee on Budget and Fiscal Review,
Chapter 36, Statutes of 2014) requires ARB to develop
guidelines on maximizing benefits for disadvantaged communities
by agencies administering GGRF funds.
Legal consideration of cap-and-trade auction revenues.
The 2012-13 Budget analysis of cap-and-trade auction revenue by
the Legislative Analyst's Office noted that, based on an
opinion from the Office of Legislative Counsel, the auction
revenues should be considered mitigation fee revenues, and
their use requires that a clear nexus exist between an activity
for which a mitigation fee is used and the adverse effects
related to the activity on which that fee is levied.
Therefore, in order for their use to be valid as mitigation
fees, revenues from the cap-and-trade auction must be used to
mitigate GHG emissions or the harms caused by GHG emissions.
In 2012, the California Chamber of Commerce filed a lawsuit
against the ARB claiming that cap-and-trade auction revenues
SB 970 (Leyva) Page 6 of
?
constitute illegal tax revenue. In November 2013, the superior
court ruling declined to hold the auction a tax, concluding
that it is more akin to a regulatory fee. In February of 2014,
the plaintiffs filed an appeal with the 3rd District Court of
Appeal in Sacramento. That case is currently pending.
Budget allocations.
SB 862 (Committee on Budget and Fiscal Review, Chapter 36,
Statutes of 2014) established a long-term cap-and-trade
expenditure plan by continuously appropriating portions of the
funds for designated programs or purposes. The legislation
appropriates 25% for the state's high-speed rail project, 20%
for affordable housing and sustainable communities grants, 10%
to the Transit and Intercity Rail Capital Program, and 5% for
low-carbon transit operations. The remaining 40% is available
for annual appropriation by the Legislature.
The Governor's proposed 2016-17 budget allocates $3.1 billion
GGRF revenues to a variety of transportation, energy, and
resources programs aimed at reducing GHG emissions.
Comments
1) Purpose of Bill.
According to the author:
California must achieve deep reductions in short-lived
climate pollutants by 2030 in order to meet future greenhouse
gas emission targets and air quality goals. Short lived
climate pollutants (SLCP), also known as "Super Pollutants,"
have a much greater warming effect than CO2. This means that
reducing SLCPs such as methane will have a significant impact
on reducing our greenhouse gas emissions. Cutting methane
emissions from solid waste disposal is a key state strategy
to slow global warming and reduce the impacts of climate
change.
SB 970 will help California achieve its world-leading climate
change goals by demonstrating effective and efficient food
waste diversion through utilizing existing anaerobic
digestion capacity at publicly owned treatment works (POTWs).
This bill would create a program that demonstrates regional
SB 970 (Leyva) Page 7 of
?
cooperation between POTWs, local governments, waste haulers,
and local businesses to divert food waste and other organics
to centralized digesters. The demonstration projects will be
designed to maximize resource recovery and better position
the state to achieve its organic waste diversion and GHG
reduction goals.
2) Anaerobic digestion project grant funding opportunities
available now.
For the types of projects that this bill targets, multiple
funding programs currently exist, such as the following:
a) Organics Grant Program (OGP).
OGP includes a competitive grant program created for the
purpose of lowering overall GHG emissions by expanding
existing capacity or establishing new facilities in the
state to reduce the amount of California-generated green
materials, food materials, or alternative daily cover being
sent to landfills. Eligible projects include construction,
renovation or expansion of facilities in California that
compost, anaerobically digest, or use other related
digestion or fermentation processes to turn green or food
materials into value-added projects. The projects must
result in permanent, annual, and measurable: i) reductions
in GHG emissions from the handling and landfilling of
California-generated green and food materials; and, ii)
increases in quantity (tons) of California-generated green
materials, food materials, or alternative daily cover
diverted from landfills and composted, digested or diverted
to other fermentation processes. The parameters for
eligibility to receive moneys through OGP overlap with this
bill.
In FY 2014-15, OGP allocated approximately $14.521 million in
grants to five projects. Among the grants awarded, $3
million was awarded to Recology to help increase the tonnage
of organic wastes diverted from landfills to anaerobic
digestion at the East Bay Municipal Utility District (EBMUD)
WWTF.
CalRecycle has proposed to increase the total amount of
organics grants awarded for FY 2016-17 to $86 million as
SB 970 (Leyva) Page 8 of
?
well as $6 million for demonstration projects and $5 million
for loans.
OGP guidelines provide a maximum of $3 million per grant. The
author has stated concern that the projects subject to this
bill cost more than the grants awarded in OGP. However, the
$3 million maximum per grant is not set in statute.
Perhaps, CalRecycle may consider adjusting the maximum
project grant in the guidelines given the potential and
substantial increase from $14.5 million to $86 million for
grants in OGP.
b) The Alternative and Renewable Fuel and Vehicle Technology
Program (AB 118).
AB 118 (Núñez, Chapter 750, Statutes of 2007), created the
Alternative and Renewable Fuel and Vehicle Technology
Program. Among the provisions of the statute, which was
subsequently amended and reauthorized, AB 118 allows CEC to
develop and deploy alternative and renewable fuels and
advanced transportation technologies to help meet the
state's goals for reducing GHG emissions and petroleum
dependence in the transportation sector. CEC has an annual
program budget of approximately $100 million to support
projects such as the ones proposed in SB 970.
For example, as of March 22, 2016, EBMUD was awarded $1,000,000
to develop a process to convert fats, oil, and grease to
biodiesel at WWTFs; the City of San Mateo was awarded
$2,450,000 to produce low carbon vehicle fuel from the
unused digester gas generated at the city's WWTF; and,
Environ IEUA, received $2,442,740 for a 200 tons per day
(TPD) foodwaste anaerobic digester in Chino.
c) Electric Program Investment Charge (EPIC) Program.
EPIC Program supports investments in clean energy technologies
and provides approximately $162 million annually from
2012-2020 to address policy and funding gaps related to the
development, deployment, and commercialization of next
generation clean energy technologies. For example, Organic
Energy Solutions was awarded $5,000,000 to install and
operate an innovative anaerobic digestion system using a
high-rate biodigester technology that will process
SB 970 (Leyva) Page 9 of
?
approximately 50 TPD of organic waste from a large
supermarket distribution center and 50 TPD of high-strength
slurry created by recovering and concentrating organics in
wastewater streams.
As shown above, a substantial amount of state grant funding is
available for projects such as the WWTF projects for which this
bill seeks to provide grants. It may be noted that in some
cases, even though a WWTF may not be the applicant for a grant,
it may still benefit from grants awarded to organizations that
utilize its facilities. For example, the sponsor states that
it was not the lead agency in an AB 118 grant awarded to
Burrtec for a small fueling station, but that its food waste
operation is operated by Burrtec at IEUA facilities - and
although the station would not be sufficient to handle all
biogas with an expanded facility, the station could help the
sponsor work out potential issues and better understand the
conversion to fuel process as they consider increasing biogas
production.
The sponsor contends that the point of this bill is to create a
program that looks at a project as a whole - from processing
through to creation of renewable biomethane for pipeline
injection or transportation fuel. However, a question arises
as to whether this particular type of project - organic food
waste diversion projects at existing WWTFs - is sufficient to
distinguish it from other types of eligible projects in order
to warrant a narrowly tailored grant program when they are
already eligible for hundreds of millions of dollars of
existing funding opportunities.
3) Big money, small pool.
As mentioned above, OGP is very similar to this bill. The primary
difference is that that this bill limits the pool of potential
applicants to WWTFs. Furthermore, the sponsor of this bill
states that it anticipates about eight agencies throughout the
entire state that would possibly be interested in applying to
the proposed grant program, which would provide matching funds
of up to $10 million/project for three to five projects. A
question arises as to whether a new and separate funding
mechanism needs to be created for eight agencies that are
already eligible for, and some of which have already benefitted
from, grants provided by multiple, existing grant programs.
SB 970 (Leyva) Page 10 of
?
4) Creating another grant program?
Establishing a new program takes effort and money to administer.
For example, public engagement/outreach and workshops are
necessary to create the program; staff time is required to
review proposals and process funds. For FY 2016-17, CalRecycle
expects OGP administration costs of $3 million. Also, anytime
a new program is created, and funded through GGRF, there are
various requirements that need to be met by the agency
administering the program as well as ARB. ARB must provide new
program guidance on how to report and quantify GHG reductions
and on how to maximize benefits to disadvantaged communities.
Each administering agency has to do an expenditure report to
document how the program will reduce GHG emissions. Creating
new programs that overlap with existing programs that serve the
same purpose may create governmental inefficiencies and
avoidable expenses.
The committee may wish to consider whether it would be prudent to
create another grant program funded by GGRF considering the
staff time, cost, and effort in establishing a new program when
food waste diversion WWTF projects are already eligible for
multiple funding opportunities, including GGRF, already in
existence.
5) Piece by piece.
GGRF investments must facilitate the achievement of GHG emissions
reductions. However, after that requirement is fulfilled,
there are a number of other policy goals that should be
considered, including benefits to environmental quality,
resource protection, public health and the economy, as well as
benefits to disadvantaged communities. Various policy
committees have been referred proposals for investing GGRF
moneys, and these committees will likely consider whether
proposals meet basic statutory requirements and align with
legislative priorities. However, in order to create an
optimized investment strategy from GGRF moneys, proposals
should not be considered in isolation, but be assessed in
aggregate to evaluate which set of proposals best meets the
requirements of the fund, uses resources most efficiently, and
maximizes policy objectives. As the budget committees are
considering the Governor's proposal of GGRF expenditures, the
SB 970 (Leyva) Page 11 of
?
budget process may be an ideal way to comprehensively consider
the numerous policy bills, including SB 970, that propose new
programs funded through the GGRF.
6) Work with what we already have.
As mentioned above, the grant program proposed in SB 970 is
substantively similar to OGP, which is expected to increase the
amount of grants allocated from $14.5 million in FY 2014-15 to
$86 million in FY 2016-17. PRC §42999 provides the types of
projects eligible for OGP funding. However, the statute does
not include guiding principles for granting the money.
Rather than creating another GGRF funded program, the committee
may wish to replace the contents of this bill with amendments
to PRC §42999 requiring CalRecycle, when awarding OGP grants,
to consider the following:
a) The amount of GHG emissions reductions that may result;
b) The amount of organic material that may be diverted from
landfills;
c) If, and how, the project may benefit disadvantaged
communities;
d) Project readiness and permitting required; and,
e) Air and water quality benefits.
SOURCE: Inland Empire Utilities Agency
SUPPORT:
California Association of Sanitation Agencies
OPPOSITION:
None received
SB 970 (Leyva) Page 12 of
?
-- END --