BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 1213
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|Author: |Wieckowski |
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|Version: |3/31/2016 |Hearing |4/6/2016 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: Renewable energy: biosolids: matching grants
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) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the
State Treasury, requires all moneys, except for fines and
penalties, collected pursuant to a market-based mechanism be
deposited in the fund. (Government Code §16428.8)
3) Prohibits the state from approving allocations for a measure
or program using GGRF moneys except after determining that
the use of those moneys furthers the regulatory purposes of
AB 32, and requires moneys from the GGRF be used to
facilitate the achievement of reductions of GHG emissions in
California. (HSC §39712)
4) Requires the ARB to develop guidance on reporting and
quantification methods for all state agencies that receive
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appropriations from the GGRF. (GOV §16428.9)
This bill:
1) Establishes the Biosolids to Clean Energy Grant Program, to
be developed and implemented by the State Energy Resources
Conservation and Development Commission (CEC) to award grants
to local wastewater agencies providing 50% matching funds for
biosolids to clean energy capital projects.
2) Defines "biosolids to clean energy capital project" for
purposes of the program 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 or location that also
reduces the emissions of GHGs as compared to biosolids
management practices in use at the time of bill enactment.
3) Requires grant applications to be submitted on forms
prescribed by the CEC, and requires the applicant specify the
source of the matching funds for the project.
4) Requires CEC to consider the cost-effectiveness of the
project, and any other factors deemed appropriate by the CEC
when awarding grants.
5) Requires CEC to implement the program through the GGRF and
any other moneys appropriated for the program.
6) Continuously appropriates $20 million from the GGRF for the
program beginning in the 2016-17 fiscal year.
7) Specifies that the CEC shall not award grants to fund capital
projects for a facility that has a compliance obligation
under ARB's cap-and-trade regulation.
Background
1) Biosolids treatment and disposal. According to the US
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Environmental Protection Agency (US EPA), "biosolids" refers
to treated sewage sludge that meets the US EPA pollutant and
pathogen requirements for land application and surface
disposal.
Biosolids are classified into either "Class A" or "Class B."
Class A biosolids have had sufficient treatment to
essentially eliminate all pathogens, while Class B biosolids
have been treated for pathogens reduction, but may still have
low levels of pathogens which are expected to rapidly die-off
when applied to soils. The most common treatment of sewage
sludge in the western region of the US is by anaerobic
digestion (biological degradation in the absence of oxygen).
About a third of Class B biosolids receive further treatment
to "Class A" pathogen reduction levels, by means such as
composting, solar air-drying, alkali treatment, thermophilic
digestion, pasteurization, or heat drying.
According to the Department of Resources Recycling and
Recovery (CalRecycle), California generated 723,000 dry
metric tons of biosolids in 2013. At 56% of biosolids in the
state land applied, land application is the primary use for
biosolids in California, with composting the second largest
use. Biosolids used as alternative daily cover (ADC) or
final cover at some landfills account for 19%, and
approximately 13% of the biosolids generated in California
are disposed of at landfills. Surface disposal methods
account for 3% of the biosolids and about 2.5% of the
biosolids generated in state are incinerated.
Biosolids may contain a variety of trace compounds, including
pharmaceuticals, pesticides, detergent additives, PCBs, and
other organic compounds that end up in the waste stream.
Although no causal evidence to indicate otherwise,
controversy surrounding the safety of biosolids as a soil
amendment has led numerous jurisdictions to enact regulations
placing restrictions on biosolids application.
2) Non-incineration processes to create energy. A variety of
technologies exist that process organic and inorganic
materials through chemical, biological, or other
"non-incineration", or "non-combustion," thermal technologies
to produce energy or renewable fuels. These processes are
known as conversion technologies.
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Thermochemical conversion technologies. Gasification and
pyrolysis are high-heat thermochemical technologies that use
very little (or no oxygen in the case of pyrolysis) to
produce a mixture of combustible gases that can be used to
generate electricity. These technologies are considered
"non-incineration" or "non-combustion" because they primarily
exclude oxygen during the conversion process. The CEC notes
that air emissions may be easier to control than with
combustion or incineration, because gas produced by pyrolysis
or gasification can be scrubbed to remove contaminant prior
to combustion.
Both of these technologies are in the development stage, with
a limited number of small-scale units operating in
California, primarily using green waste biomass as feedstock.
Biochemical conversion. Biochemical conversion processes
include aerobic conversion (i.e., composting), anaerobic
digestion, and anaerobic fermentation (for example, the
conversion of sugars from cellulose to ethanol). Biochemical
conversion processes use lower temperatures and lower
reaction rates. Higher moisture feedstocks are generally good
candidates for biochemical processes.
As noted earlier, sewage sludge is frequently treated using
anaerobic digestion to generate biosolids, with the resulting
biosolids frequently composted by waste water treatment
facilities.
3) Biosolids to energy project funded through PIER. In 2011,
The CEC awarded $1 million, funded through the CEC's Public
Interest Energy Research (PIER) fund, to the Delta Diablo
Sanitation District to lead the implementation of a regional
biosolids to energy facility using steam and carbon dioxide
reforming technology. This technology heats the biosolids at
high temperatures in an airlock vessel, vaporizing the
liquids and gasifying the organic solids and then adds steam
and carbon dioxide to produce a hydrogen-rich gaseous fuel
known as syngas, used to power a fuel cell to generate
electricity.
4) Cap-and-trade auction revenue. Since November 2012, ARB has
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conducted 14 cap-and-trade auctions, generating over $4
billion in proceeds to the state.
State law specifies that the auction revenues must be used to
facilitate the achievement of GHG emissions reductions and
outlines various categories of allowable expenditures.
Statute further requires the Department of Finance, in
consultation with ARB and any other relevant state agency, to
develop a three-year investment plan for the auction
proceeds, which are deposited in the GGRF.
Disadvantaged communities. SB 535 (de León, Chapter 830,
Statutes of 2012) requires the Department of Finance, in the
investment plan, to allocate at least 25% of available moneys
in the GGRF to projects that provide benefits to
disadvantaged communities, and at least 10% to projects
located within disadvantaged communities.
To meet the SB 535 mandate, the Office of Environmental
Health Hazard Assessment, under CalEPA's guidance, developed
a tool (termed CalEnviroScreen) to assess and rank census
tracts across the state that are disproportionately affected
by multiple types of pollution and areas with vulnerable
populations. CalEPA has designated 25% of census tracts in
California as disadvantaged communities for the purpose of
investing cap-and-trade proceeds.
Additionally, SB 862 (Committee on Budget and Fiscal Review,
Chapter 36, Statutes of 2014) requires ARB to develop
guidelines on maximizing benefits for disadvantaged
communities by agencies administering GGRF funds.
Legal consideration of cap-and-trade auction revenues. The
2012-13 Budget analysis of cap-and-trade auction revenue by
the Legislative Analyst's Office noted that, based on an
opinion from the Office of Legislative Counsel, the auction
revenues should be considered mitigation fee revenues, and
their use requires that a clear nexus exist between an
activity for which a mitigation fee is used and the adverse
effects related to the activity on which that fee is levied.
Therefore, in order for their use to be valid as mitigation
fees, revenues from the cap-and-trade auction must be used to
mitigate GHG emissions or the harms caused by GHG emissions.
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In 2012, the California Chamber of Commerce filed a lawsuit
against the ARB claiming that cap-and-trade auction revenues
constitute illegal tax revenue. In November 2013, the
superior court ruling declined to hold the auction a tax,
concluding that it is more akin to a regulatory fee. In
February of 2014, the plaintiffs filed an appeal with the 3rd
District Court of Appeal in Sacramento. That case is
currently pending.
Budget allocations. SB 862 (Committee on Budget and Fiscal
Review, Chapter 36, Statutes of 2014) established a long-term
cap-and-trade expenditure plan by continuously appropriating
portions of the funds for designated programs or purposes.
The legislation appropriates 25% for the state's high-speed
rail project, 20% for affordable housing and sustainable
communities grants, 10% to the Transit and Intercity Rail
Capital Program, and 5% for low-carbon transit operations.
The remaining 40% is available for annual appropriation by
the Legislature.
The Governor's 2016-17 proposed budget appropriates over $3
billion to a variety of programs and projects in the
transportation, energy, natural resources, and waste
diversion sectors.
Comments
1) Purpose of Bill. According to the author, "SB 1213 is an
important bill to the Bay Area region and eventually to the
state. It will help fund forward-thinking, environmentally
beneficial alternatives to biosolids management, while
reducing GHG emissions, creating renewable energy, and
increasing landfill capacity. The initial regional project
partially funded in this bill will serve as the initial
building block upon which the Energy Commission can build an
ongoing program to make California a world-leader in
developing biosolids as [a] clean energy source."
2) Waste or fuel? Currently, the Department of Resources
Recycling and Recovery (CalRecycle) has regulatory authority
over the final use of biosolids in California, since
CalRecycle regulates the handling, processing, transfer, and
disposal of solid waste in the state. However, SB 1213,
through the Biosolids to Clean Energy Program creates a new
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pathway for biosolids to be used as fuel. It is unclear
whether biosolids for projects funded under the program will
continue to be regulated by CalRecycle as solid waste, or
instead be regulated by the CEC, or another agency, as a
feedstock for energy production.
3) Piece by piece. GGRF investments must facilitate the
achievement of GHG emissions reductions. However, after that
requirement is fulfilled, there are a number of other policy
goals that should be considered, including benefits to
environmental quality, resource protection, public health and
the economy, as well as benefits to disadvantaged
communities. Various policy committees have been referred
proposals for investing GGRF moneys, and these committees
will likely consider whether proposals meet basic statutory
requirements and align with legislative priorities. However,
in order to create an optimized investment strategy from GGRF
moneys, proposals should not be considered in isolation, but
be assessed in aggregate to evaluate which set of proposals
best meets the requirements of the fund, uses resources most
efficiently, and maximizes policy objectives. As the budget
committees are considering the Governor's proposal of GGRF
expenditures, the budget process may be an ideal way to
comprehensively consider the numerous policy bills, including
SB 1213, that propose new programs funded through the GGRF.
4) Continuous appropriation. SB 1213 potentially provides up to
$100 million for the competitive Biosolids to Clean Energy
Program, since the bill provides a continuous annual
appropriation of $20 million, and cap-and-trade auctions will
most likely continue through 2020.
As noted earlier, 60% of the GGRF is continuously
appropriated for high-speed rail, public transportation
infrastructure, and affordable housing programs. The
remaining 40% is available for appropriation by the
Legislature on an annual basis.
The annual budget process provides the Legislature an
opportunity to review programs funded through GGRF to ensure
that the program is providing significant GHG emissions
reductions and cobenefits, and does not result in unintended
consequences. Additionally, annual appropriations provide
the Legislature with the flexibility to evaluate, on a yearly
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basis, the mix of GGRF-funded proposals that results in a
coordinated and comprehensive GGRF investment strategy that
best prioritizes competing policy goals.
To ensure the Biosolids to Clean Energy Grant Program be part
of that comprehensive annual review by the Legislature, the
Committee may wish to consider whether the continuous
appropriation should be amended to instead specify an annual
appropriation of $20 million for the program in the current
fiscal year.
5) Many projects could qualify, and GHG reductions will vary.
Applicants seeking funding through the Biosolids to Clean
Energy Grant Program could potentially use a variety of
technologies and processes to convert biosolids to heat
energy, electricity, liquid or gaseous fuels, or useful
byproducts. However, depending on the technology and energy
product they develop, as well as their current carbon
intensity for processing and transporting biosolids, the GHG
emissions reductions for the projects may differ greatly.
However, the bill does not specify that the CEC consider, in
awarding the grant, the level of GHG emissions reductions
achieved for competing projects.
An amendment is needed to require CEC consider the extent of
GHG emissions reductions in awarding grants under the
Biosolids to Clean Energy Grant Program.
DOUBLE REFERRAL:
This measure was heard in Senate Energy, Utilities, and
Communications Committee on March 29, 2016, and passed out of
committee with a vote of 9-0.
SOURCE: Bay Area Biosolids to Energy Coalition
SUPPORT:
Central Marin Sanitation Agency
City of Richmond
Delta Diablo
Dublin San Ramon Services District
Ironhouse Sanitary District
North San Mateo County Sanitation District
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San Francisco Public Utilities Commission
Union Sanitary District
OPPOSITION:
California Chamber of Commerce
ARGUMENTS IN
SUPPORT: Supporters state that they are developing a first-
in-the nation project to convert biosolids to clean-energy, but
note that this cutting-
edge, new technology project, in the short-term, will be more
expensive to their
ratepayers than current disposal practice and that the $12
million directed to
the Bay Area Biosolids to Energy Coalition is needed to offset
the financial impact
on the region's ratepayers. They also state that the $20
million to the CEC to
develop and manage a grant program to convert biosolids to clean
energy is a
worthy public policy goal that ought to be expanded and
replicated at wastewater
agencies throughout the state.
ARGUMENTS IN
OPPOSITION: The California Chamber of Commerce
contends that ARB lacks authority to raise revenues through the
auction of
allowances and that given the substantial legal uncertainties
surrounding ARBs
authority to impose an auction, expending the proceeds is
premature.
DOUBLE REFERRAL:
This measure was heard in the Senate Energy, Utilities, and
Communications Committee on March 29, 2016, and passed out of
committee with a vote of 9-0.
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