BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 1043 (Allen) - Biogas and biomethane ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 25, 2016 |Policy Vote: E., U., & C. 7 - | | | 0, E.Q. 5 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 23, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary:1) SB 1043 directs the Air Resources Board to consider and adopt policies, as appropriate, to significantly increase the sustainable production and use of "renewable gas," and outlines specific requirements. Fiscal Impact: One-time costs of $316,000 (Cost of Implementation Fund) to the ARB for staffing necessary to develop quantification methods, conduct public and technical workshops, and coordinate with other State agencies. Ongoing costs of $187,000 annually (Cost of Implementation Fund) to the ARB for program administration. Minor costs to CalFIRE, CalRecycle, and the CEC for consultation. Background: SB 1043 (Allen) Page 1 of ? Biogas, methane, and biomethane. Through a series of steps involving the bacterial breakdown of organics, carbon-based 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. 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 SB 1043 (Allen) Page 2 of ? by 2030. Additionally, the cap-and-trade regulation allows covered 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 Office of Environmental Health Hazard Assessment and ARB. AB 1900 also required 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). Proposed Law: 1) 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: SB 1043 (Allen) Page 3 of ? 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 pollutants 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. 3) Modifies the definition of "biogas" and "biomethane" as currently used in statute concerning biogas injection into SB 1043 (Allen) Page 4 of ? 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. -- END -- SB 1043 (Allen) Page 5 of ?