BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 1213 Hearing Date: 3/29/2016
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|Author: |Wieckowski |
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|Version: |2/18/2016 As Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Renewable energy: biosolids: matching grants
DIGEST: This bill makes a continuous annual appropriation of
$20 million from the Greenhouse Gas Reduction Fund (GGRF) to the
California Energy Commission (CEC) for a competitive grant
program. The program will make available grants for capital
projects that use biosolids to generate useful heat energy or
electricity, liquid or gaseous fuels, or useful byproducts.
This bill also makes a one-time appropriation from the GGRF to
fund a regional biosolids-to-energy project located in the San
Francisco Bay Area.
ANALYSIS:
Existing law:
1)Declares the policy goal of the state that not less than 75
percent of solid waste generated be source reduced, recycled,
or composted by the year 2020, and annually thereafter but
prohibits the Department of Resources Recycling and Recovery
from establishing or enforcing a diversion rate on a city or
county that is greater than the 50 percent diversion rate.
(Public Resources Code § 41780.01)
2)Requires the California Air Resources Board (ARB), pursuant to
the California Global Warming Solutions Act of 2006, to adopt
rules and regulations that would reduce greenhouse gas
emissions (GHGs) in the state to 1990 levels by 2020. (Health
and Safety Code §§38500 to 38599)
3)Establishes the GGRF, and requires all monies collected by ARB
SB 1213 (Wieckowski) PageB of?
from the auction or sales of allowances, pursuant to a
market-based compliance mechanism, be deposited in the fund
and made available for appropriation. (Government Code
§16428.8)
4)Establishes the GGRF Investment Plan and Communities
Revitalization Act to set procedures for the investment of
regulatory fee revenues derived from the auction of GHG
allowances, including the requirement that such revenue be
used to reduce emissions of GHGs. (Health and Safety Code
§§39710 to 39720)
5)Requires the GGRF Investment Plan to allocate: (a) at least
25 percent of the available monies in the fund to projects
that provide benefits to disadvantaged communities, and (b) at
least 10 percent of monies in the fund to projects located
within disadvantaged communities. (Health and Safety Code
§§39711 to 39723)
This bill:
1)Defines a "biosolids to clean energy capital project" as one
that uses biosolids to generate useful heat energy or
electricity, liquid or gaseous fuels, or useful byproducts
using nonincineration technology in a manner or location that
also reduces GHGs compared with other biosolids management
practices in use at the time of enactment of this bill.
2)Directs the CEC to establish the "Biosolids Clean Energy Grant
Program" of competitive grants available to local wastewater
agencies to provide 50-percent matching funds for "biosolid to
clean energy capital projects," based (a) cost-effectiveness
and (b) any other factors deemed appropriate by the CEC.
3)Continuously appropriates $20 million from the GGRF to the CEC
for the competitive grant program.
4)Makes a one-time appropriation in fiscal year 2016-17 from the
GGRF to provide a 50-percent matching grant to the Bay Area
Biosolids to Energy Coalition for the design and construction
of a regional "biosolids to clean energy project" located in
the San Francisco Bay Area.
Background
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Uses of AB 32 auction revenue must reduce GHGs. ARB, in
implementing The Global Warming Solutions Act (aka "AB 32),
established by regulation a cap-and-trade program for GHGs.
Under the program, ARB distributes tradable allowances to emit
specific quantities of GHGs. ARB has given away for free about
51 percent of the allowances, while it has auctioned most of the
remainder of the allowances each quarter since November 2012.
Incidental to the reduction of GHGs, the auctioning of
allowances has generated billions of dollars in state revenue.
The Legislative Analyst's Office (LAO) estimates ARB's allowance
auctions will generate $2.4 billion in fiscal year 2015-16 and
$2.3 billion in fiscal year 2016-17.
Existing statute provides thresholds and parameters for the use
of auction revenues, consistent with their status as proceeds of
a regulatory fee. Statute directs auction revenue to the GGRF,
available for appropriation by the Legislature. Statute further
requires that GGRF revenues be used for GHG reductions.
Finally, statute mandates that at least 25 percent of money in
the GGRF go to projects that provide benefits to disadvantaged
communities, and at least 10 percent of monies in the fund go to
projects located within disadvantaged communities.
Legislature allocates billions in GGRF revenues through the
budget. Through several annual budgets, the Legislature has
allocated GGRF revenues to a variety of projects anticipated to
reduce GHGs, in the nearer or longer term. 60 percent of the
expenditures represent continuous appropriations, meaning
defined portions of GGRF expenditures go to specific programs
each year: 25 percent for high-speed rail; 20 percent for
affordable housing and sustainable communities grants; 10
percent for intercity rail capital projects; and five percent
for low-carbon transit operations. The GGRF budget
appropriations for fiscal years 2013-14 through 2015-16 are
shown in the following figure.<1>
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| |
|Cap-and-trade Expenditures (in millions) |
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|----------------------------+-------+-------+-------|
|Program |2013-14|2014-15|2015-16|
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<1> See http://www.lao.ca.gov/Publications/Detail/3328 .
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SB 1213 (Wieckowski) PageE of?
| | | | <2> |
|----------------------------+-------+-------+-------|
| High-speed rail| -- | $250 | $600 |
|----------------------------+-------+-------+-------|
| Affordable housing and | -- | 130 | 480 |
| sustainable communities| | | |
|----------------------------+-------+-------+-------|
| Transit and intercity rail | -- | 25 | 240 |
| capital| | | |
|----------------------------+-------+-------+-------|
| Transit operations| -- | 25 | 120 |
|----------------------------+-------+-------+-------|
| Low-carbon transportation| $30 | 200 | 70 |
|----------------------------+-------+-------+-------|
| Low-income weatherization | -- | 75 | 70 |
| and solar| | | |
|----------------------------+-------+-------+-------|
| Agricultural energy and | 10 | 25 | 40 |
| operational efficiency| | | |
|----------------------------+-------+-------+-------|
| Urban water efficiency| 30 | 20 | 20 |
|----------------------------+-------+-------+-------|
| Sustainable forests and | - | 42 | - |
| urban forestry| | | |
|----------------------------+-------+-------+-------|
| Waste diversion| - | 25 | - |
|----------------------------+-------+-------+-------|
| Wetlands and watershed | - | 25 | - |
| restoration| | | |
|----------------------------+-------+-------+-------|
| Other administration| 2 | 10 | 31 |
|----------------------------+-------+-------+-------|
| Totals| $72 | $852 |$1,691 |
| | | | |
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If the LAO's estimates of cap-and-trade auction revenue hold
true, there will be a $1.6 billion balance in the GGRF at the
end of fiscal year 2015-16. In addition, auction revenues in
2016-17 should add billions more to the GGRF. It therefore
appears there is abundant room for the Legislature to express
its GHG reduction priorities through additional appropriations
from the GGRF, continuous appropriations notwithstanding.
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<2> Based on LAO projections.
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Bill creates new program, continuously appropriates $20 million.
This continuously appropriates $20 million from the GGRF. The
money will fund a competitive grant program, administered by the
CEC, available to local wastewater agencies that provide a
50-percent match for a "biosolids to clean energy capital
project." This bill defines such a project as a capital project
that uses biosolids to generate useful heat energy or
electricity, liquid or gaseous fuels, or useful byproducts using
nonincineration technology in a manner that or location that
also reduces GHGs as compared to current biosolids management
practices. Those current practices tend to be agricultural
application or use as cover at landfills. The bill directs the
CEC, in awarding grants, to consider the cost-effectiveness of a
project, as well as any other factors deemed appropriate by the
CEC, one of which, consistent with existing statute, must be
potential to reduce GHGs.
Proponents - a collection of Bay Area wastewater and sanitation
agencies - describe biosolids-to-energy projects as proven on a
small scale. Yet, the cost of such projects currently exceeds
the cost of conventional biosolids management techniques.
Proponents intend the competitive matching grant program to
facilitate large-scale development, which will lead to cost
reductions while reducing GHGs and criteria pollutants and
producing a small amount of useful energy.
Bill also makes one-time appropriation of $12 million for a
specific project. In addition to the ongoing $20 million
appropriation from the GGRF for a competitive grant program, the
bill appropriates $12 million one-time from the GGRF. The
one-time grant is to provide, via the CEC, a 50-percent matching
grant for the Bay Area Biosolids to Energy Coalition for the
design and construction of a regional biosolids-to-clean-energy
project in the San Francisco Bay Area. Not coincidentally,
proponents describe a planned biosolids-to-energy project in the
Dublin San Ramon Services District with a total estimated cost
of $24 million.
GGRF allocations better made in the budget; project-specific
awards better not made at all. As shown above, for the last
several years, the Legislature has appropriated GGRF monies
through the budget process. Currently, the Legislature, again
through the budget process, is considering the governor's
proposed $3 billion GGRF spending plan for 2016-17.
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The budget process seems the appropriate venue for considering
GGRF spending proposals, such as the biosolids proposal in this
bill. The budget allows the Legislature to consider GGRF
funding proposals comprehensively: eligible funding programs
can be compared; tradeoffs assessed; competing policy goals
prioritized. This bill makes unavailable for any other purpose
$12 million from the GGRF in the budget year and $20 million
from the GGRF, ongoing. There are other GGRF funding bills
currently under consideration by the Legislature. (There are
many - see below for a partial list.) Legislative one-offs,
such as this bill, do not provide lawmakers the opportunity to
balance competing priorities.
If the committee, nonetheless, decides to approve this bill, it
may wish to delete the one-time funding for the Bay Area
biosolids project. This bill establishes a program in which the
CEC makes out-year grants according to discrete, discernable
criteria. Curiously, this bill provides the CEC no such
gatekeeper role for the one-time award: if there is a
qualifying biosolids project in the Bay Area (and it seems there
is), the CEC gives it the money.
In addition to?Similarly, if the committee decides to approve
this bill, it may wish to limit funding eligibility to entities
not subject to the AB 32 cap. According to ARB, wastewater
treatment plants are included in the cap-and-trade program.
However, only two wastewater treatment plants had emissions
above the cap-and-trade program's 25,000 metric ton threshold in
2012: the Los Angeles County Sanitation District Joint Water
Pollution Control Plant and the San Jose and Santa Clara
Regional Wastewater Facility.
Recently, the LAO noted that spending auction revenue on GHG
reductions is likely not necessary to meet the state's GHG
reduction goals and likely increases the overall costs of
emission reduction activities.<3> According to the LAO, "this is
because, in certain cases, spending on GHG reductions interacts
with the regulation in a way that changes the types of emission
reduction activities, but not the overall level of emission
reductions." More specifically, entities covered by the AB 32
cap -such as some larger wastewater treatment plants - must
limit their GHGs to meet the cap. This is true regardless of
any GGRF funding received by the covered entity. The likely
effect of receipt of GGRF monies by a covered entity, therefore,
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<3> http://www.lao.ca.gov/Publications/Report/3328
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is reduced compliance costs for the covered entity, but not
increased GHG reduction, either by that covered entity or
overall. However, funding GHG-reducing projects undertaken by
entities not covered by the AB 32 cap may lead to additional GHG
reductions that would not have otherwise occurred.
Double-referred. Should this bill be approved by this
committee, it has been referred to the Senate Committee on
Environmental Quality.
Prior/Related Legislation
AB 1555 (Gomez, 2016) states the intent of the Legislature to
enact future legislation that would appropriate $1.7 billion
from the GGRF for a variety of programs to be allocated in
amounts to be determined in that future legislation. The bill
has been referred to the Assembly Committee on Natural
Resources.
AB 1657 (O'Donnell, 2016) creates two new programs - the Port
Building and Lighting Efficiency Greenhouse Gas Reduction Fund
Program the Zero- and Near-Zero-Emission Intermodal Terminals
Program - each of which the bill declares eligible to receive
money from the GGRF, upon appropriation. The bill has been
referred to the Assembly Committee on Natural Resources and the
Assembly Committee on Transportation.
AB 1982 (Bloom, 2016) specifies the characteristics of the
traffic signal synchronization that is eligible for GGRF funding
under current law. The bill has been referred to the Assembly
Committee on Natural Resources and the Assembly Committee on
Transportation.
AB 2146 (Patterson, 2016) makes available to CAL FIRE, upon
appropriation, $200 million from the GGRF for activities that
reduce GHG in the state caused by uncontrolled forest fires.
The bill has been referred to the Assembly Committee on Natural
Resources.
AB 2223 (Gray, 2016) continuously appropriates $100 million from
the GGRF to the ARB to make manure digester market development
payments of an unspecified dollar amount per kW of electricity
produced from California-generated manure by California-based
manure digesters. The bill has been referred to the Assembly
Committee on Natural Resources and the Assembly Committee on
Agriculture.
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AB 2343 (Garcia, C., 2016) recasts the requirement that 10
percent of GGRF funds be spent on projects located in
disadvantaged communities. The bill has been referred to the
Assembly Committee on Natural Resources.
AB 2576 (Gray, 2016) continuously appropriates $20 million from
the GGRF to the Department of Resources Recycling and Recovery
for market development payments to glass container manufacturers
of state-generated cullet utilized for manufacturing in the
state. The bill has been referred to the Assembly Committee on
Natural Resources.
AB 2715 (Garcia, E., 2016) establishes the Agricultural Working
Poor Energy Efficient Housing Program and states the intent of
the Legislature that not less than $25 million be appropriated
annually from the GGRF for the program. The bill has been
referred to the Assembly Committee on Natural Resources.
AB 2722 (Burke, 2016) appropriates $250 million from the GGRF to
the Strategic Growth Council to administer the Transformative
Climate Communities Program. The bill has been referred to the
Assembly Committee on Natural Resources.
SB 398 (Leyva, 2015) established the Green Assistance Program to
provide technical assistance to small businesses and small
nonprofits and disadvantaged communities in equitably applying
for an allocation of the monies deposited in the GGRF. The bill
passed the Senate 31-9 and was held in Assembly Committee on
Appropriations.
SB 471 (Pavley, 2015) directed the State Water Resources Control
Board, upon appropriation from the GGRF, to establish a grant
and loan program for water projects that result in the net
reduction of water-related GHGs. The bill passed the Senate
37-2 but was held in Assembly Committee on Appropriations.
SB 523 (McGuire, 2015) would have continuously appropriated $5
million from the GGRF to fund the purchase of new school buses
to replace existing school buses. The bill died in the Senate
Committee on Environmental Quality.
SB 590 (Dahle, 2015) allowed monies from the GGRF to be used by
the CEC to maintain the current level of biomass power
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generation and geothermal energy generation in the state and to
revitalize currently idle facilities in strategically located
regions. The bill was held in Senate Committee on
Appropriations.
SB 698 (Canella) would have continuously appropriated an
unspecified percent of the annual proceeds of the GGRF for
school zone safety projects within the Active Transportation
Program. The bill died in the Senate Committee on Environmental
Quality.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.: Yes Local: No
SUPPORT:
Bay Area Biosolids to Energy (Source)
Central Marin Sanitation Agency
City of Richmond
Delta Diablo
Dublin San Ramon Services District
Ironhouse Sanitary District
North San Mateo County Sanitation District
San Francisco Public Utilities Commission
OPPOSITION:
CalTax
ARGUMENTS IN SUPPORT: According to the author, proponents seek
to develop projects that convert biosolids into clean energy in
a manner that will result in GHG emissions reductions. The
technology for doing so is up to three times as expensive as the
current practice for biosolids disposal. This increased cost
would fall entirely on ratepayers without this bill. SB 1213
would have the state pay 50 percent of the cost of investing in
new cutting-edge green technology to help the ratepayers pay for
the highest and best use of biosolids. Over time the costs will
decline as the technology becomes more widespread and
technological advancements ensue. Current law does not devote
any money from the GGRF for biosolids conversion. SB 1213 would
change the law so that a very small percentage of GGRF funds are
invested in biosolids conversion.
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ARGUMENTS IN OPPOSITION: CalTax contends the use of
cap-and-trade revenue proposed by this bill is inconsistent with
the statutorily legitimate uses of a regulatory fee.
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