BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        SB 970|
          |Office of Senate Floor Analyses   |                              |
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                                UNFINISHED BUSINESS 

          Bill No:  SB 970
          Author:   Leyva (D) 
          Amended:  6/29/16  
          Vote:     21 

           AYES:  Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley


           SENATE FLOOR:  27-4, 5/31/16
           AYES:  Allen, Beall, Block, De León, Galgiani, Glazer, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,  
            Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,  
            Pan, Pavley, Roth, Wieckowski, Wolk
           NOES:  Anderson, Moorlach, Morrell, Vidak
           NO VOTE RECORDED:  Bates, Berryhill, Cannella, Fuller, Gaines,  
            Nguyen, Nielsen, Runner, Stone

           ASSEMBLY FLOOR:  77-0, 8/23/16 - See last page for vote

           SUBJECT:   Greenhouse Gas Reduction Fund:  grant program:   
                     recyclable materials

          SOURCE:    Inland Empire Utilities Agency

          DIGEST:  This bill requires the Department of Resources  
          Recycling and Recovery (CalRecycle), in awarding a grant for  
          organics composting or anaerobic digestion projects funded with  
          AB 32 cap-and-trade revenues (Greenhouse Gas Reduction Fund) and  
          authorizes CalRecycle to provide larger grant awards for  
          large-scale regional projects.


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                                                                     Page 2

          Assembly Amendments add a provision authorizing CalRecycle to  
          provide bigger grant awards for large-scale regional integrated  
          projects that provide cost-effective organic waste diversion and  
          maximize environmental benefits.


          Existing law:  
          1) Enacts, pursuant to the Integrated Waste Management Act of  
             1989 (Public Resources Code (PRC) §40000 et seq.), which:

             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,  
             to develop, as specified, a three-year investment plan for  
             the moneys deposited in the GGRF.  (Government Code  


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                                                                     Page 3

          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 greenhouse gas (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)Requires CalRecycle, in awarding a grant for organics  
            composting or anaerobic digestion to reduce GHG emissions  
            using GGRF funding, to consider the following: 

             a)   The amount of GHG emissions reductions that may result  
               from the project; 

             b)   The amount of organic material that may be diverted from  
               landfills as a result of the project; 

             c)   If, and how, the project may benefit disadvantaged  

             d)   For anaerobic digestion projects, if, and how, the  
               project maximizes resource recovery, including the  
               production of clean energy or low-carbon or carbon negative  
               transportation fuels; 


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                                                                     Page 4

             e)   Project readiness and permitting that the project may  
               require; and, 

             f)   Air and water quality benefits that the project may  

          1)To the extent funds are available, authorizes CalRecycle to  
            provide larger grant awards for large-scale regional  
            integrated projects that provide cost-effective organic waste  
            diversion and maximize environmental benefits. 


          1)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.  

          2)Waste reduction and GHGs.  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  


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            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  

          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.  

          3)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  


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                                                                     Page 6

            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.  

          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  
             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.  

             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  
             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.



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          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."

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Assembly Appropriations Committee, "No  
          additional state costs.  According to CalRecycle, this bill  
          codifies criteria that are already part of grant award  
          consideration for anaerobic digestion and composting projects.   
          Further, CalRecycle contends they have the ability to award  
          larger grants for large-scale projects under current law."

          SUPPORT:   (Verified8/15/16)

          California Association of Sanitation Agencies
          Carbon Cycle Institute
          County Sanitation Districts of Los Angeles County
          Inland Empire Utilities Agency
          Sonoma County Water Agency
          Southern California Gas Company

          OPPOSITION:   (Verified8/15/16)

          None received

           ASSEMBLY FLOOR:  77-0, 8/23/16


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                                                                     Page 8

           AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,  
            Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Dababneh,  
            Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher,  
            Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gordon,  
            Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin,  
            Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark  
            Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,  
            Wood, Rendon
           NO VOTE RECORDED: Burke, Cooper, Gonzalez

          Prepared by:  Joanne Roy / E.Q. / (916) 651-4108
          8/29/16 10:34:45

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