BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 1043 (Allen) - Biogas and biomethane
          
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          |Version: April 25, 2016         |Policy Vote: E., U., & C. 7 -   |
          |                                |          0, E.Q. 5 - 1         |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 23, 2016      |Consultant: Narisha Bonakdar    |
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          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:  







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          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  








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          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:









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             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  








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             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. 




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