BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 1043 ----------------------------------------------------------------- |Author: |Allen | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |4/7/2016 |Hearing |4/20/2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Rebecca Newhouse | | | | ----------------------------------------------------------------- SUBJECT: Renewable gas: biogas and biomethane ANALYSIS: Existing law: 1)Under the California Global Warming Solutions Act of 2006, also known as AB 32, requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with these regulations. (Health and Safety Code §38500 et seq.) 2)Under the Renewable Portfolio Standard (RPS) requires investor-owned utilities (IOUs), publicly owned utilities (POUs) and certain other retail sellers of electricity to achieve 50% of their energy sales from an eligible renewable electrical generation facility by December 31, 2030, and establishes portfolio requirements and a timeline for procurement quantities of three product categories. (Public Utilities Code §399.11 et seq.) 3)Provides that electricity produced by certain renewable energy resources, including natural gas produced from biomass, digester gas or landfill gas, as potentially eligible for credit under the RPS (PUC §399.12, Public Resources Code SB 1043 (Allen) Page 2 of ? §25741) 4)Requires the Office of Environmental Health Hazard Assessment (OEHHA), in consultation with ARB, and other specified agencies, to compile a list of constituents of concern that could pose risks to human health and that are found in biogas at concentrations that significantly exceed the concentrations of those constituents in natural gas and requires OEHHA to determine the health protective levels for that list, and requires ARB to identify realistic exposure scenarios and the health risks associated with those scenarios to determine acceptable threshold concentrations of those constituents. (HSC §25421) 5)Requires the California Public Utilities Commission (CPUC) to adopt standards for biomethane to be injected into a common carrier pipeline that specify constituent concentrations that are reasonably necessary to ensure the protection of human health, giving due deference to the findings by OEHHA, ARB, and other specified agencies. (HSC §25421) 6)Requires California Energy Resources Development and Conservation Commission (CEC) to hold public hearings to identify impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection, and requires CEC to offer solutions to those impediments as part of the integrated energy policy report. (PRC §25326) 7)Defines "biogas" as gas that is produced from the anaerobic decomposition of organic material and "biomethane" as biogas that meets the standards adopted by CPUC for injection into a common carrier pipeline. (HSC §25420) 8)Requires PUC to adopt policies and programs that promote the in-state production and distribution of biomethane. (PUC §399.24 ) 9)Defines "biomass conversion" as the production of heat, fuels, or electricity by the controlled combustion or use of non-combustion thermal conversion technologies on specified organic materials, including specified agricultural crop residues, bark, wood chips, and other green wastes. SB 1043 (Allen) Page 3 of ? 10)Specifies that "biomass conversion" does not include controlled combustion of sewage sludge, among other materials. This bill: 1) Directs ARB to consider and adopt policies, as appropriate, to significantly increase the sustainable production and use of "renewable gas," and requires ARB to do the following: a) Ensure any policy is coordinated and consistent with state policies to promote renewable fuels and renewable resources, reduce life-cycle GHG and short-lived climate pollutant emissions, increase carbon sequestration, divert organic waste from landfills, reduce air and water pollution, reduce wildfires, promote resilient and sustainable forests, and protect the environmental quality of natural and working lands. b) Ensure in consultation with the Department of Resources Recovery and Recycling (CalRecycle) that any adopted policy recognizes declining landfill gas in future years. c) Ensure that the production and use of renewable gas provides direct benefits through helping the state meet landfill diversion goals, or avoiding or reducing criteria pollutants, short-lived climate pollutant and GHG emissions in the state, emissions that adversely affect the waters of the state, and nuisances associated with the emission of odors. d) Identify barriers to the rapid development and use of renewable gas and make specific recommendations to remove those barriers and identify potential sources of funding to provide incentives for renewable gas production and use. e) Coordinate with CPUC, CEC, POUs, CalRecycle and the Department of Forestry and Fire Protection. 2) Requires ARB to develop and adopt a life cycle GHG and short-lived climate pollutant accounting method associated with biogas produced from forest biomass, as specified. SB 1043 (Allen) Page 4 of ? 3) Modifies the definition of "biogas" and "biomethane" as currently used in statute concerning biogas injection into common carrier pipelines by defining "biogas" as a gas produced from organic waste through anaerobic digestion, or conversion technologies, as specified, and "biomethane" as methane derived from biogas. 4) Defines "biogas," for purposes of the work required of ARB by this bill, to have the same meaning as above, 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. 5) Defines "renewable gas" 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. 6) Amends the definition of "biomass conversion" to include byproducts or residue from composting as eligible organic feedstocks for combustion or non-combustion conversion technologies. 7) Strikes "sewage sludge" from the materials prohibited from being feedstocks under the definition of biomass conversion. 8) Specifies that the requirements for ARB to consider and adopt policies, as appropriate, to increase the production and use of renewable gas is not intended to affect health and safety standards adopted by CPUC prior to January 1, 2016 for biomethane that is to be injected into the pipeline. Background 1) Short-lived Climate Pollutants. Greenhouse gases or climate pollutants, such as CO2, work to warm the earth by trapping solar radiation in the earth's atmosphere. Depending on the molecule, these pollutants can vary greatly in their ability to trap heat and the length of time they remain in the atmosphere. CO2 remains in the atmosphere for centuries, which makes it the most critical greenhouse gas to reduce in order to limit long-term climate change. However, climate pollutants including methane, tropospheric ozone, SB 1043 (Allen) Page 5 of ? hydrofluorocarbons (HFCs), and soot (black carbon), are relatively short-lived (anywhere from a few days to a few decades), but when measured in terms of how they heat the atmosphere (known as global warming potential or GWP), can be tens, hundreds, or even thousands of times greater than that of CO2. These climate forcers are termed short-lived climate pollutants (SLCPs). Because SLCPs remain in the atmosphere for a relatively short period of time, but have a much higher global warming potential than CO2, efforts aimed at reducing their emissions in the near term would result in more immediate climate, air quality, and public health benefits, than a strategy focused solely on CO2. According to ARB's SLCP draft strategy, "while the climate impacts of CO2 reductions take decades or more to materialize, cutting emissions of SLCPs can immediately slow global warming and reduce the impacts of climate change." Recent research estimates that SCLPs are responsible for about 40% of global warming to date and that actions to reduce SLCP emissions could cut the amount of warming that would occur over the next few decades by half. According to ARB's 2015 updated Scoping Plan, methane is one of the three short-lived climate pollutants with the greatest implications for California. Methane (CH4) is the principal component of natural gas and is also produced biologically under anaerobic conditions in ruminants, landfills, and waste handling. Atmospheric methane concentrations have been increasing as a result of human activities related to agriculture, fossil fuel extraction and distribution, and waste generation and processing. A 2014 Stanford University study found that methane emissions may be 50% higher than official estimates from the US EPA. In 2010, ARB approved a regulatory measure as an AB 32 (Nuñez, Pavley, Chapter 488, Statutes of 2006) discrete early action measure that requires installation of landfill gas collection and control systems. ARB has also released draft regulations to reduce fugitive methane from the oil and gas sector. Methane is 84 times more powerful as a global warming pollutant than CO2 on a 20-year time scale. 2) Biogas, methane, and biomethane. Through a series of steps involving the bacterial breakdown of organics, carbon-based SB 1043 (Allen) Page 6 of ? material can be converted to methane in oxygen-deprived conditions. This process occurs naturally, and is often uncontrolled in landfills and dairies, contributing to significant GHG emissions. However, capturing and utilizing the gas is facilitated through the use of anaerobic digesters, which operate with various temperatures, pH and bacteria types. The digestion process dramatically speeds up the natural decomposition process for organic wastes to produce primarily methane, significant quantities of carbon dioxide, and trace amounts of other gasses including hydrogen, carbon monoxide, nitrogen, oxygen, and hydrogen sulfide, which, all together, is termed "biogas." The biogas can be processed further to produce high purity, or "pipeline" quality methane, and is termed biomethane to differentiate it from fossil fuel natural gas. In addition to production at landfills and dairies, biomethane can be generated from digestion processes at wastewater treatment plants. Biomethane is also termed renewable natural gas, or RNG. 3) Biomethane fuel supply, markets, and barriers to use. Because of the potential climate, waste reduction, and energy benefits of biomethane, a number of bills and programs have worked to increase the supply, expand the biomethane market, and overcome barriers for its use. Various incentive programs, funded through cap-and-trade auction revenue, and by vehicle registration surcharges, provide grants and loans for the production of renewable and alternative fuels, including biomethane. The state has also implemented several programs to create markets for low-carbon fuels, in furtherance of meeting GHG emission reduction goals. The Low-Carbon Fuel Standard (LCFS), established pursuant to authority under AB 32, requires a 10% reduction in the carbon intensity for transportation fuels used in the state by 2020. The state also has procurement requirements for "very-low carbon fuels," established through AB 692 (Quirk, Chapter 588, Statutes of 2015). Biomethane is also considered a renewable resource under the Renewable Portfolio Standard, which was recently amended by SB 350 (de León and Leno, Chapter 547, Statutes of 2015) to require 50% of total retail electricity sales to be from renewable energy resources by 2030. Additionally, the cap-and-trade regulation allows covered SB 1043 (Allen) Page 7 of ? entities to purchase up to 8% of their compliance obligation as offsets. To date, ARB has adopted offset protocols for four project types including dairy digesters to capture fugitive methane emissions. Overcoming barriers. Due to concern over toxic constituents in landfill biogas, California adopted strict requirements in 1988 regarding the allowable levels of vinyl chloride and the required testing protocols for the legal sale, supply or transport of landfill gas to a gas corporation in the state. In an effort to encourage the production and use of biomethane in California, including methane produced from landfill biogas, the Legislature passed AB 1900 (Gatto, Chapter 602, Statutes of 2012), which required the CPUC to adopt health and safety standards for biomethane pipeline injection based on recommendations from OEHHA and ARB. AB 1900 also requires CPUC to "adopt policies and programs that promote the in-state production and distribution of biomethane." On January 16, 2014, CPUC adopted health and safety standards for pipeline injected biomethane. In 2015, CPUC 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% of a biomethane project's interconnection cost, up to $1.5 million per project. AB 1900 also required CEC to hold public hearings to identify impediments that limit procurement of biomethane in California and offer solutions as part of the Integrated Energy Policy Report (IEPR). Comments 1) Purpose of Bill. According to the author, "California is a leader in efforts to combat climate change - one of the most daunting challenges facing humanity. Currently, California's gas sector causes one-quarter of the state's greenhouse gas emissions, and is a major contributor to global warming. "California uses more than 2 trillion cubic feet of natural gas per year and that amount is going up. Natural gas is SB 1043 (Allen) Page 8 of ? 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 greenhouse gas emissions and air and water pollution. In addition, California imports 91% of its gas, making the state vulnerable to supply and price fluctuations and costing more than $9 billion per year in lost revenues and jobs as those jobs are outsourced to other states and to Canada. "Renewable gas made from organic waste can significantly cut greenhouse gas emissions and landfilling. Increasing the use of renewable gas will create jobs and economic productivity, and strengthen California's energy security." 2) Confusing definitions. a) Definition of biogas and biomethane for CPUC standards. Under AB 1900 (Gatto, Chesbro and Hernández, Chapter 602, Statutes of 2012), CPUC was required to develop health and safety standards for biomethane for injection into the pipeline. AB 1900 defined biogas as gas produced from the anaerobic decomposition of organic material and defined "biomethane" as biogas that meets the health and safety standards developed by the CPUC for injection into the pipeline. SB 1043 amends both of these definitions. This bill defines biogas as gas that is produced from organic waste through anaerobic digestion or eligible conversion technologies, consistent with Section 40106 of the Public Resources Code. Section 40106 of the Public Resources Code specifies that "biomass conversion" is the production of energy through the combustion, or thermal non-combustion conversion, of green waste. The current statutory definition of biogas is very broad-gas produced when organic matter decomposes without oxygen. AB 1043 narrows the definition to specify technologies necessary for the production of biogas, namely anaerobic digestion, and conversion technologies. The new definition in the bill references a section of code that includes combustion as an eligible "conversion" technology. However, the gas produced when organic SB 1043 (Allen) Page 9 of ? material is burned is simply steam and CO2, and is not of any use as a fuel. An amendment is needed to specify that biogas means gas produced from organic waste through anaerobic digestion, or eligible noncombustion thermal conversion technologies, consistent with Section 40106 of the Public Resources Code. SB 1043 also strikes the current definition of biomethane as a biogas meeting CPUC health and safety standards for pipeline injection, and instead defines biomethane as methane derived from biogas. As noted in the Senate Energy, Utilities and Communications Committee's staff analysis for the bill, the effect of this change is unclear. The staff analysis states, "Recently, the CPUC, in keeping with statute, adopted standards for injection of biomethane into a pipeline. 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." As a result, that Committee amended the bill to state that nothing with regard to ARB adopting policies for renewable gas is intended to affect the health and safety standards adopted by the CPUC prior to January 1, 2016 for biomethane injection into a common carrier pipeline. b) Definition of biogas and renewable gas for ARB's program. SB 1043 requires ARB to consider and adopt, as appropriate, policies to increase production and use of "renewable gas." The bill defines renewable gas as either a) biogas or b) synthetic gas generated by an eligible renewable energy resource eligible for credit under the RPS. Author amendment. The author would like to amend the bill to strike the reference to synthetic gas in the bill to address concerns from several organizations representing various agricultural interests that argue synthetic gas SB 1043 (Allen) Page 10 of ? creates additional methane in the environment and, for this reason, should not be given status equal to biogas. If the author's amendment is taken, "renewable gas" will be defined as simply "biogas." For clarity, an additional amendment is needed with the author's amendment to strike all references to renewable gas in the bill and replace those references with "biogas." 3) Protecting health and safety for end users of biogas. Any policy adopted by ARB under SB 1043 is required to accomplish a number of goals, namely that the policy promote renewable fuels, reduce GHG emissions, divert organics from landfills, reduce pollution, promote forest health, and protect environmental quality of natural and working lands. An amendment is needed to require ARB also ensure the health and safety of any adopted biogas policy. 4) Biomass conversion, sewage sludge, and compost residue? Biomass conversion in state law means the production of energy (e.g., fuels, electricity, heat) by combustion, or the use of noncombustion thermal conversion technologies of specified biomass, including, agricultural crop residues, bark, lawn, yard, garden clippings, leaves, silvicultural residue, tree and brush pruning, wood, wood chips, and wood waste and nonrecyclable pulp or nonrecyclable paper materials, when those materials are separated from other solid waste. Current law requires jurisdictions to divert 50% of solid waste from landfill disposal or transformation (combustion of municipal solid waste) through source reduction, recycling, and composting activities. CalRecycle calculates whether this requirement is met by tracking disposal at transformation facilities and landfills. Biomass conversion is excluded from the definition of transformation, and therefore, biomass that is combusted or "converted" at a biomass conversion facility is not counted as disposal. SB 1043 strikes the prohibition for sewage sludge as an eligible biomass conversion feedstock. This change may allow SB 1043 (Allen) Page 11 of ? jurisdictions to receive diversion credit for burning sewage sludge. An amendment is needed to add back in to the bill sewage sludge as a material not eligible as a feedstock under the definition of "biomass conversion." SB 1043 also includes byproducts or residue from composting as an eligible biomass conversion feedstock. It is not clear what types of materials constitute byproducts or residue from composting. These materials could consist of anything left over after the composting process, and may include plastics, glass, and other residual wastes. Combustion of these wastes would not be "biomass" conversion, but instead would be combustion of materials typically designated as municipal solid waste. An amendment is needed to strike "byproducts and residue from composting" from the definition of biomass conversion. 5) Some overlap and potential timing issues with SB 1153 (Cannella). SB 1153 (Cannella), also being considered by the Committee at today's hearing, requires ARB, as a part of the update to the AB 32 Scoping Plan, to provide a comprehensive overview of state efforts to encourage the development of instate biomethane and renewable natural gas and evaluate policy options to overcoming barriers or challenges for its use. The Scoping Plan is currently being updated by ARB to incorporate the Governor's 2030 midterm target for GHG emissions in Executive Order (EO) B-30-15. However, it is not clear that the provisions of SB 1153, if approved, will be incorporated into the Scoping Plan before ARB finishes the update pursuant to the Governor's EO. In that case, the study outlined in SB 1153 may not be included in the Scoping Plan until the next update five years from now. SB 1043 requires ARB to consider, and adopt as appropriate, policies to significantly increase the sustainable production and use of renewable gas. If the bill is passed by the Legislature and signed by the Governor, SB 1043's provisions will go into effect January 1, 2017. SB 1043 (Allen) Page 12 of ? Should the Committee deem both bills necessary, the authors should work to address potential issues associated with the timing of the evaluation in the Scoping Plan in SB 1153 (Cannella) and the activities required under this bill. Related/Prior Legislation SB 1153 (Cannella) would require ARB, in consultation with other state entities, as part of the AB 32 Scoping Plan update, to perform an overview of state efforts to encourage the development of instate biomethane and renewable natural gas. The bill is pending consideration by this committee. SB 687 (Allen, 2015) would have established the renewable gas standard requiring all natural gas sellers to provide to California retail end-use customers increasing amounts of "renewable gas," so that, by January 1, 2030, at least 10% 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 2206 (Williams) requests that the California Council on Science and Technology study the heating value and siloxane specifications for biomethane to be injected into common carrier gas pipelines. The bill is pending consideration by the Assembly Natural Resources Committee on April 18, 2016. AB 2773 (Quirk) requires CPUC to modify its technical standards for biomethane injected into a common carrier pipeline. The bill is pending consideration by the Assembly Committee on Utilities and Commerce on April 13, 2016. 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 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 Committee on Appropriations. AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC to identify landfill gas constituents, develop testing protocols SB 1043 (Allen) Page 13 of ? 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) ensures 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. DOUBLE REFERRAL: This measure was heard in Senate Energy, Utilities and Communications Committee on April 5, 2015, and passed out of committee with a vote of 7-0. SOURCE: Bioenergy Association of California SUPPORT: American Biogas Council Atlas ReFuel Bioenergy Association of California City of Fresno Clean Energy Climate Resolve Coalition for Clean Air CR&R Environmental Defense Fund Inland Empire Disposal Association Kern Refuse Disposal, Inc. Los Angeles County Waste Management Association Pacific Forest Trust Sanitation Districts of Los Angeles County Solid Waste Association of Orange County TSS Consultants Victor Valley Wastewater Reclamation Authority West Biofuels OPPOSITION: SB 1043 (Allen) Page 14 of ? Agricultural Energy Consumers Association Agricultural Council of California Association of California Egg Farmers California Dairies Inc. California Farm Bureau Federation California Forestry Association California Grain & Feed Association California Poultry Federation Center for Biological Diversity Dairy Farmers of America Dairy Institute of California Milk Producers Council Western United Dairymen ARGUMENTS IN SUPPORT: Supporters state that the biogas industry offers cost-effective technologies and projects that convert resources to renewable electricity and renewable fuels to lessen dependence on foreign energy, increase renewable energy's contribution to meeting our nation's energy needs, and to build a home-grown bioenergy industry that creates jobs and wealth. They note that SB 1043 will fill an important gap in California' clean energy and climate policies by requiring the state to begin to diversify and decarbonize the gas sector. 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 costs significantly less than renewable gas, and that the bill could cost users considerable amounts of money. The coalition also states it is 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, arguing this bill's provisions regarding biomass should allow use of forest material that meets all requirements of the law. SB 1043 (Allen) Page 15 of ? -- END --