BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 1043 Hearing Date: 4/5/2016
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|Author: |Allen |
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|Version: |3/30/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Renewable gas: biogas and biomethane
DIGEST: This bill requires the California Air Resources Board
(ARB) to consider and adopt policies to significantly increase
the sustainable production and use of "renewable gas."
ANALYSIS:
Existing law:
1.Directs the ARB to monitor and regulate sources of emissions
of greenhouse gases (GHG) that cause global warming in order
to reduce GHG emissions to 1990 levels by 2020. (Health &
Safety Code §38510 et seq.) ARB instituted a low-carbon fuel
standard as one element of achieving the GHG emission
reduction goal.
2.Requires retail sellers of electricity - investor-owned
utilities (IOU), community choice aggregators (CCAs), and
energy service providers (ESPs) - and publicly-owned utilities
(POU) to increase purchases of renewable energy, such that at
least 50 percent of retail sales are procured from renewable
energy resources by December 31, 2030. This is known as the
Renewable Portfolio Standard (RPS). (Public Utilities Code
§399.11 et seq.)
3.Declares electricity produced by certain renewable energy
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resources, including natural gas produced from biomass,
digester gas or landfill gas, as potentially eligible for
credit under the RPS. (Public Utilities Code §399.12, Public
Resources Code §25741)
4.Defines "biogas" as gas that is produced from the anaerobic
decomposition of organic material and "biomethane" as biogas
that meets the standards adopted by California Public
Utilities Commission (CPUC) for injection into a common
carrier pipeline. (Health and Safety Code §25420)
5.Requires the CPUC to adopt standards that specify the
concentrations of constituents of concern that are found in
biomethane, and to adopt monitoring, testing, reporting, and
recordkeeping protocols, to ensure the protection of human
health and the integrity and safety of pipelines and pipeline
facilities. (Health & Safety Code §25421 et seq.)
6.Requires CPUC to adopt policies and programs that promote the
in-state production and distribution of biomethane. (Public
Utilities Code §399.24 )
7.Requires the CPUC 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. (Public
Utilities Code §784.)
8.Requires the California Energy Commission (CEC) to hold public
hearings to identify in its Integrated Energy Policy Report
impediments that limit procurement of biomethane in
California, including, but not limited to, impediments to
interconnection, and to offer solutions. (Public Resources
Code §25326.)
This bill:
1.Directs ARB to consider and adopt policies to significantly
increase the sustainable production and use of "renewable
gas."
2.Modifies the definition of "biogas" and "biomethane" as
currently used in statute concerning biogas injection into
common carrier pipelines. (Health and Safety Code §25420)
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3.Newly defines "biogas," for purposes of the work required of
ARB by this bill, to have the same meaning in Health and
Safety Code §25420 as amended by this bill, except that it
does not include gas produced from forest biomass unless it is
produced from forest waste remaining after all other
reasonable forest products have been produced and it meets at
least one of several specified conditions.
4.Newly defines "renewable gas," for purposes of the work
required of ARB by this bill, to mean biogas or synthetic gas
generated by an eligible renewable energy resource meeting the
requirements of the California Renewables Portfolio Standard
Program, but not including organic waste.
5.Amends the definition of "biomass conversion" as currently
used in statute governing waste disposal.
Background
Biogas, biomethane and natural gas by other names. Bioenergy is
renewable energy produced from biomass wastes including forest
and other wood waste, agriculture and food processing wastes,
organic urban waste, waste and emissions from water treatment
facilities, landfill gas and other organic waste sources.
Biomass waste can be used to generate renewable electricity,
liquid fuels and biogas.
Statute defines "biogas" as a gas produced from the anaerobic
decomposition of organic material. The result is a gaseous
mixture of carbon dioxide and methane. Depending on where it is
produced, biogas can be categorized as landfill gas or digester
gas. Landfill gas is produced by decomposition of organic waste
in a municipal solid waste landfill. Digester gas is typically
produced from livestock manure, sewage treatment or food waste.
Biogas can be used directly to produce electricity or can be
converted to biomethane by removing carbon dioxide and other
impurities.
Statute defines "biomethane" as biogas that meets the standards,
adopted by the CPUC in keeping with statute, for injection into
a common carrier pipeline. Biomethane can replace fossil
sources of natural gas in homes and factories and compressed or
liquefied as natural gas used in vehicles. Biomethane can also
be used to produce renewable hydrogen in fuel cells.<1>
Biogas, is odorless, colorless and green. Combustion of biogas
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<1> 2012 Bioenergy Action Plan
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produces carbon dioxide (CO2), just like the combustion of
natural gas. However, the combustion of biogas destroys
methane, a gas which is a much more potent GHG than is CO2.
And, for CO2 accounting purposes, biogas is considered carbon
neutral because the carbon in biogas was so recently present in
the atmosphere. In addition, biogas can be used to displace the
use of fossil fuels, such as conventional natural gas, thereby
further decreasing its carbon intensity.
Statute requires California to reduce emissions of greenhouse
gases. The Global Warming Solutions Act (aka "AB 32") requires
a reduction in California GHG emissions to 1990 levels by the
year 2020. Statute provides ARB broad authority to achieve
statewide GHG reductions. In keeping with that authority,
statute requires ARB to adopt a "scoping plan" of measures that
will, collectively, reduce California GHG emissions, as required
by law.
ARB adopted its latest update to the scoping plan in 2014. The
plan includes a "cap-and-trade" program for the state's largest
GHG emitters. The plan also includes dozens of sector-specific
measures, including measures to promote the development and use
of natural gas derived from renewable sources. For Fiscal Year
2016-17, the administration has proposed the following ARB
biogas programs, both to be funded from the Greenhouse Gas
Reduction Fund (GGRF):
Very Low Carbon Fuels Incentives Project. The proposed
Governor's Budget for 2016-17 would set aside $40 million
in Fiscal Year 2016-17. The funding would pay for the
production of very low-carbon transportation fuels to
encourage their production in California. ARB staff is
still developing the incentive mechanisms. In any case,
biomethane producers would likely qualify for program
funding.
Low NOx Engine Incentives. ARB proposes to provide $23
million in funding for trucks with certified low-NOx
(oxides of nitrogen) engines. ARB recommends requiring
such trucks to operate on renewable fuel, such as
biomethane, to maximize GHG emission reductions. The ARB
describes the low-NOx engine incentives as complementary of
the Very Low Carbon Fuels Incentives Project, described in
the preceding bullet.
Statute requires California to procure half its electricity from
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renewable resources. Since early in the century, state law has
required electric utilities to procure increasing amounts of
electricity generated by renewable resources, a requirement
known as the RPS (Renewable Portfolio Standard). As of this
year, each of California's electric utilities is required to
procure at least 50 percent of its electricity from renewable
resources. Statute lists numerous goals of the RPS program,
each of which, according to statute independently justifies the
program.
Statute declares a facility that uses natural gas produced from
biomass, digester gas or landfill gas as a renewable energy
resource, the electricity produced by which is eligible for
credit under the RPS.
Statute explicitly requires state to identify and address
barriers to instate biogas development and use. Statute directs
the CEC to hold public hearings to identify in its IEPR
impediments that limit procurement of biomethane in California,
including, but not limited to, impediments to interconnection,
and to offer solutions. Accordingly, in 2006, 2011 and 2012,
the CEC released editions of its bioenergy action plan, which it
describes as strategies, goals, objectives, and actions that
California state agencies will take to increase bioenergy
development in California. The 2012 Bioenergy Action Plan made
the following recommendations relative to biogas:
Increase research and development of diverse bioenergy
technologies and applications, as well as their costs,
benefits, and impacts.
Continue to develop and make accessible information
about the availability of organic wastes and opportunities
for bioenergy development.
Streamline and consolidate permitting of bioenergy
facilities and reconcile conflicting regulatory
requirements to the extent possible.
Assess and monetize the economic, energy, safety,
environmental, and other benefits of biomass.
Facilitate access to transmission, pipelines, and other
distribution networks.
Similarly, statute directs the CPUC to adopt policies and
programs that promote the in-state production and distribution
of biomethane. In response to statutory mandate, the CPUC, in
2014, adopted health and safety standards that limit the amounts
of certain constituents determined to be harmful to either human
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health or pipeline integrity in pipeline injected biomethane.
The standards are to address the reluctance of energy utilities
to inject biomethane into natural gas pipelines. In addition,
the CPUC, in 2015, found that gas producers should bear all
costs relating to the processing and pipeline injection of
biomethane. As part of that decision, the CPUC adopted a $40
million ratepayer-funded program to offset a portion of the
costs to gas producers of connecting to utility pipelines.
Program funding will pay up to 50 percent of a biomethane
project's interconnection cost, up to $1.5 million per project.
Bill provides ARB with no new authority but directs it into new
regulatory areas. Similar to existing law, this bill requires
ARB to consider and adopt policies to significantly increase the
sustainable production and use of renewable gas. One could
argue that ARB, under the authority given to it by the Global
Warming Solutions Act and other laws, has the authority to
consider and adopt such policies today. This, in fact, is ARB's
conclusion. The bill, however, that ARB to act, not only to
"consider" policies, but to "adopt" them, as well. In addition,
the bill requires ARB to complete a number of specified actions
as part of its mandatory consideration and adoption of policies.
Among those actions, the bill requires ARB to:
Consider adopting a low-carbon gas standard, a renewable
gas portfolio standard, public utility purchase
requirements, purchase requirements by end-use sectors,
including transportation, electrical generation, fuels
refining, and public utility purchasing, and other policies
to increase the production and use of renewable gas and to
reduce the carbon intensity of the state's gas supply.
The programs listed above might be effective and appropriate
mechanisms to significantly increase the sustainable production
and use of renewable gas. But not each of these programs is an
appropriate regulatory activity for ARB. For example, it is
outside of ARB's generally recognized statutory authority to
adopt public utility purchase requirements or purchase
requirements by end-use sectors, including public utilities.
The author and committee may want to strike the bill language
cited above (Health and Safety Code §39735((b)(1) added by the
latest version of the bill) in its entirety to allow ARB to
identify appropriate programs and mechanisms to increase the use
of renewable gas.
Similarly, it seems strange to obligate ARB to adopt
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biogas-related policies before ARB has considered the
appropriateness of such policies. Therefore, the author and
committee may want to amend the bill to require ARB to consider
and, as appropriate, adopt policies to significantly increase
the sustainable production and use of renewable gas.
Bill redefines "biogas;" effect is somewhat unclear. This bill
modifies the existing statutory definition of "biogas." Current
statute - Section 25420 of the Health and Safety Code - defines
"biogas" as gas that is produced from the anaerobic
decomposition of organic material. Proponents contend this
definition is not ideal and offer, instead, the following
definition of "biogas:" gas that is produced from organic waste
through anaerobic digestion or eligible conversion technologies,
consistent with Section 40106 of the Public Resources Code."
Relatedly, the bill modifies existing statute - Section 40106 of
the Public Resources Code - to include "byproducts or residues
from composting" among the source material eligible to be used
by technologies included in the definition of "biomass
conversion.
Part of the effect of this modified definition of "biogas" is
clear: inclusion of energy produced by technologies using
composting byproducts within the biomass conversion program.
However, it is unclear if the change in definition has any other
effect.
Bill also redefines "biomethane;" possibly jeopardizes CPUC
biomethane standards. Relatedly, current statute - again,
Section 25420 of the Health and Safety Code-defines "biomethane"
as "biogas that meets the standards adopted pursuant to
subdivisions (c) and (d) of Section 25421 for injection into a
common carrier pipeline." Section 25421 of the Health and
Safety Code directs the CPUC to adopt standards for the
injection of biomethane into common carrier pipelines.
Recently, the CPUC, in keeping with statute, adopted standards
for injection of biomethane into a pipeline.<2> The CPUC
expresses concern that the changes made by this bill to the
definition of "biomethane" could render pipeline injection
standards adopted by the CPUC in R.13-02-008 inapplicable or
subject to a high degree of uncertainty.
Bill sponsors indicate that the bill's reference to "biomethane"
is meant to indicate biogas that has been purified, leaving
nearly exclusively methane, which has many applications aside
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<2> See R. 13-02-008.
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from pipeline injection. The author distinguishes such uses of
"biomethane" from the use of "biomethane" in current law, which
is applicable to biomethane to be injected into a common carrier
pipeline. Given the potential of the definition of "biomethane"
proposed in this bill to jeopardize CPUC biomethane standards,
the author and committee may want to amend the bill to state
that nothing in the bill is intended to affect standards adopted
pursuant to Section 25421 for injection into a common carrier
pipeline.
Bill provides another, limited definition of "biogas" and of
"renewable gas." Only for purposes of the requirements of ARB
created by this bill, the bill defines "biogas" as having the
same meaning as in Health and Safety Code Section 25420, except
that it includes gas produced from forest biomass only if
produced from forest waste remaining after all other reasonable
forest products have been produced and meets several specified
conditions. In addition, only for purposes of the requirements
of ARB created by this bill, the bill defines "renewable gas" as
biogas or synthetic gas generated by a renewable energy resource
eligible for credit under the RPS statute.
This analysis has no concern with either definition, which, as
mentioned, are limited to the requirements of this bill on ARB.
However, several organizations representing various agricultural
interests express concern, contending that synthetic gas creates
additional methane in the environment and, for this reason,
should not be given status equal to biogas.
Double-referred. Should this bill be approved by this
committee, it has been referred to the Senate Committee on
Environmental Quality.
Prior/Related Legislation
SB 687 (Allen, 2015) would have established the renewable gas
standard (RGS), requiring all sellers of natural gas to provide
to retail end-use customers in California increasing amounts of
"renewable gas," so that, by January 1, 2030, at least ten
percent of the natural gas supplied is "renewable gas." The
bill passed this committee on a vote of 7 to 3 and was held on
suspense by the Senate Committee on Appropriations.
AB 577 (Bonilla, 2015) would have required the CEC to develop
and implement a grant program for projects related to biomethane
production. The bill was held on suspense by the Senate
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Committee on Appropriations.
AB 2206 (Williams) requests that the California Council on
Science and Technology undertake and complete a study analyzing
the regional and gas corporation specific issues relating to
minimum heating value and maximum siloxane specifications for
biomethane before it can be injected into common carrier gas
pipelines. The bill is pending consideration by the Assembly
Committee on Utilities and Commerce.
AB 2313 (Williams) requires the CPUC to modify its monetary
incentive program for biomethane projects. The bill is pending
consideration by the Assembly Committee on Natural Resources.
AB 2773 (Quirk) requires the CPUC to modify its technical
standards applicable to biomethane to be injected into a common
carrier pipeline. The bill is pending consideration by the
Assembly Committee on Utilities and Commerce.
AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC
to identify landfill gas constituents, develop testing protocols
for landfill gas injected into common carrier pipelines, adopt
standards for biomethane to ensure pipeline safety and
integrity, and adopt rules to ensure open access to the gas
pipeline system.
AB 2196 (Chesbro, Chapter 605, Statutes of 2012) ensured that
biogas qualifies for RPS credit, provided its production,
delivery and use meet certain conditions.
SB 1122 (Rubio, Chapter 612, Statutes of 2012) required IOUs to
collectively procure at least 250 MW of generation eligible for
the RPS from bioenergy generation project, including biogas
projects.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
Bioenergy Association of California (Source)
Anaergia
CC&R
City of Fresno
Clean Energy
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Climate Resolve
Environmental Defense Fund
Inland Empire Disposal Association
Kern Refuse Disposal, Inc.
Los Angeles County Waste Management Association
Pacific Forest Trust
Solid Waste Association of Orange County
TSS Consultants
Victor Valley Wastewater Reclamation Authority
West Biofuels
OPPOSITION:
Agricultural Energy Consumers Association
Agricultural Council of California
Association of California Egg Farmers
California Dairies Inc.
California Farm Bureau Federation
California Forestry Association, unless amended
California Grain & Feed Association
California Municipal Utilities Association
California Poultry Federation
Dairy Farmers of America
Dairy Institute of California
Milk Producers Council
Western United Dairymen
ARGUMENTS IN SUPPORT: According to the author:
California uses more than 2 trillion cubic feet of natural
gas per year and that amount is going up. Natural gas from
fossil sources is used to generate more than half of the
state's electricity, the majority of its home heating and
hot water, and a growing share of transportation fuels.
Although cleaner and cheaper than other fossil fuels,
natural gas is a major source of GHG emissions, and air and
water pollution. In addition, California imports 91
percent of its gas, making the state vulnerable to supply
and price fluctuations.
Renewable gas made from organic waste can significantly cut
GHG emissions and landfilling. Increasing the use of
renewable gas will create jobs and economic productivity,
and strengthen California's energy security. Renewable gas
can improve forest health and prevent wildfires by
providing a cost-effective end use for thinned forest
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material. Replacing just 10 percent of California's
natural gas with renewable gas would reduce GHG emissions
by 12.6 million metric tons from fossil fuel displacement
alone. The actual emissions reduction would be much
greater due to upstream reductions in black carbon (from
reduced wildfire) and methane emissions from dairies and
other uncapped sources.
The State has adopted several policies to promote biogas
development, reduce landfilling of organic waste and
increase renewable fuels. To date, these policies have
achieved mixed results. Recent funding programs are
helping to spur new biogas projects, but many of the recent
regulatory policies have yet to be implemented, are
prohibitively expensive, or do not provide enough certainty
to attract the investment necessary to expand the biogas
market.
SB 1043 requires ARB to consider and adopt policies to
increase the use and production of in-state renewable gas
and requires ARB to identify barriers to increased use and
production of renewable gas and potential sources of
funding to incentivize the renewable gas market in
California.
ARGUMENTS IN OPPOSITION: A coalition of agricultural interests
oppose this bill, contending it better policy to encourage
biogas production and use through financial incentives, as
opposed to new mandates. The coalition notes that conventional
natural gas cost significantly less than renewable gas, and that
the bill could cost users considerable amounts of money. The
coalition also complains it inappropriate to put biogas and
synthetic gas on equal footing since, the coalition contends,
the latter releases methane into the atmosphere.
The California Forestry Association also writes in opposition to
the introduced version of this bill, arguing this bill's
provisions regarding biomass should allow use of forest material
that meets all requirements of the law. It is unclear if the
association is opposed to the most-recent version of this bill.
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