BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 1294 ----------------------------------------------------------------- |Author: |Pavley | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |4/4/2016 |Hearing | 4/20/2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Joanne Roy | | | | ----------------------------------------------------------------- SUBJECT: The Community Climate and Drought Resilience Program of 2016 ANALYSIS: Existing law: 1) Requires the California Environmental Protection Agency (CalEPA), in coordination with the State Water Resources Control Board (SWRCB), the Air Resources Board (ARB), and the Department of Food and Agriculture (CDFA), to establish policies to encourage recycling of organic waste and coordinate oversight and regulation of organic waste recycling facilities. (Public Resources Code (PRC) §422649.87 et seq.) a) Requires CalEPA, in coordination with specified agencies, to develop and implement policies to aid in diverting organic waste from landfills by promoting the use of agricultural, forestry, and urban organic waste as a feedstock for compost and by promoting the appropriate use of that compost throughout the state. b) Requires CalEPA to promote a goal of reducing at least 5 million metric tons of greenhouse gas emissions (GHGs) annually through the development of working lands, such as agricultural lands, land used for forestry, and rangeland. c) Requires specified agencies to assess the state's progress towards developing the organic waste processing SB 1294 (Pavley) Page 2 of ? and recycling infrastructure necessary to meet the specified state goals, such as the May 2015 Short-Lived Climate Pollutant Reduction Strategy and the Healthy Soils Initiative. d) Requires specified agencies to develop recommendations for promoting organic waste processing and recycling infrastructure statewide no later than January 1, 2017, and update annually thereafter. 2) Establishes the California Urban Forestry Act of 1978 to expand and improve the management of trees and related vegetation in communities throughout the state. (PRC §4799.06 et seq.). 3) 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 and requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8). 4) 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. (Health and Safety Code §39712). This bill: 1) Enacts the Community Climate and Drought Resilience Program of 2016. 2) Makes several findings and declarations. 3) Requires the Department of Forestry and Fire Protection (CalFire) to review urban forestry program implementation and revise the program, if necessary, to provide funding priority to multibenefit carbon sequestration projects and to establish local or regional targets for urban tree canopy. SB 1294 (Pavley) Page 3 of ? 4) By July 1, 2017, requires CalRecycle, in consultation with relevant state agencies, to establish an incentives program for the use of compost from organic waste in farming and landscaping practices that increase drought resiliency and result in GHG emission reductions through increased carbon sequestration in urban and rural areas. 5) Requires CalRecycle to contract with state-certified conservation corps to assist in community outreach, compost delivery and application, and other urban greening projects. SB 1294 (Pavley) Page 4 of ? Background 1) Carbon sequestration. According to the U.S. Geological Survey (USGS), carbon sequestration is used to describe both natural and deliberate processes by which CO2 is either removed from the atmosphere or diverted from emission sources and stored in the ocean, terrestrial environments (vegetation, soils, and sediments), and geologic formations. Terrestrial sequestration (sometimes referred to as "biological sequestration") is typically through forest and soil conservation practices that enhance the storage of carbon (such as restoring and establishing new forests, wetlands, and grasslands) or reduce CO2 emissions (such as reducing agricultural tillage and suppressing wildfires). 2) Carbon storage in soils. According to the U.S. Environmental Protection Agency (US EPA), the stock of carbon in soils is the result of a balance between inputs (usually plant matter) and outputs (primarily CO2 flux during decomposition of organic matter). The entire portion of carbon held in the soil and undergoing decomposition is collectively referred to as "soil organic matter" (SOM) or "soil organic carbon". According to Dr. Jeff Creque of the Carbon Cycle Institute, to a large degree, soil productivity is linked to the amount of carbon it contains. Carbon improves the tilth and water retention capabilities of soil and it is a central element in SOM, that component of dirt that contains all the biological residues and byproducts that make plants grow. Soils act as a sink for carbon, storing exponentially more carbon than persists in the atmosphere as CO2 along with more potent GHGs such as methane and nitrous oxide. By increasing soil carbon, soil fertility and water retention capacity is increased. This results in more robust vegetation, which captures more carbon from the atmosphere. The carbon is stored underground in the roots, residual dry matter (on the surface) and in enhanced populations of microorganisms in the soil. SB 1294 (Pavley) Page 5 of ? 3) Compost. According to CalRecycle, compost is the controlled decomposition of organic material such as leaves, twigs, grass clippings, and food scraps. A wide range of materials may be composted, but they must consist of principally organic components (i.e. carbon-containing remnants or residues of life processes). Compost products may vary since the properties of any given compost depend on the nature of the original feedstock and the conditions under which it was decomposed. However, mature compost is normally dark brown in color and should have an even texture and a pleasant, earthy aroma. Composting is a means of controlling and accelerating the decomposition process. An overabundance of soil organisms is responsible for transforming the organic matter in compost into carbon dioxide, water, humic substances (components of soil that affect physical and chemical properties and improve soil fertility) and energy in the form of heat. Composting diverts organic materials out of landfills and turns it into a product that is useful for soil restoration. In addition to improving the quality of the soil, compost prevents soil erosion, reduces the need for chemical fertilizers, herbicides, and pesticides, and enables better soil water retention. 4) Regulating compost. a) A coordinated effort. Multiple state agencies are involved with regulating composting. CalRecycle permits compostable material handling operations and facilities. ARB is charged with monitoring and regulating sources of emissions of GHGs that cause global warming in order to reduce GHG emissions. CDFA annually inspects compost facilities selling to organic food producers for adherence to National Organic Program regulations. SWRCB and the regional water quality control boards issue individual waste discharge permits for larger composting facilities. Last year, the Legislature passed, and the Governor signed, SB 1294 (Pavley) Page 6 of ? AB 1045 (Irwin, Chapter 596, Statutes of 2015) which requires CalEPA, in coordination with relevant agencies, to develop and implement policies to aid in diverting organic waste from landfills by promoting the use of agricultural, forestry, and urban organic waste as feedstock for compost and by promoting the appropriate use of that compost throughout the state. In addition, AB 1045 requires the group of agencies to develop recommendations for promoting organic waste processing and recycling infrastructure statewide and update annually thereafter. b) Healthy Soils Initiative. The term "healthy soils" refers to ensuring that agricultural soils have adequate soil organic matter or soil carbon content. Increasing the amount of soil organic matter can provide multiple benefits, such as: being a source of nutrients for plants, water retention, effect on the persistence and biodegradability of pesticides, carbon sink that prevents the escape of CO2 and methane GHG to the atmosphere, soil structure stability and reduced erosion. In his 2015-16 budget proposal, Governor Brown directed $10 million from GGRF toward a new "Healthy Soils Initiative" to increase carbon in soil to improve soil health, agricultural productivity, soil water-holding capacity, and decreased sediment erosion. Governor Brown directed the California Department of Food and Agriculture (CDFA), under its existing authority provided by the Canella Environmental Farming Act, to coordinate with other key agencies to work on several new initiatives. CDFA has since developed five action measures: protect and restore soil carbon; identify funding opportunities, including market development; provide research, education and technical support; increase governmental efficiencies to enhance soil health on public and private lands; and ensure interagency coordination and collaboration. 5) Farming and GHG reductions. Various agricultural practices can significantly reduce GHG emissions, and sequester carbon. GHG reduction and SB 1294 (Pavley) Page 7 of ? sequestration strategies in the agricultural sector include reduced energy usage through more efficient watering systems, such as drip irrigation; reduced nitrogen fertilizer usage; shifting tilling practices to improve soil carbon retention; changing livestock feed and practices to reduce livestock enteric rumination, manure management where manure is converted to alternative fuels; and establishing perennial vegetation on land retired from agriculture production to sequester carbon in plants and soil. In addition, recent research also suggests that applications of compost may result in greater carbon sequestration in soils. Many of these land management practices to reduce or sequester GHGs also result in significant environmental cobenefits, such as improved water efficiency, improved air and water quality, and greater resiliency of agricultural land to climate change. 6) Safeguarding California. According to the Senate Natural Resources & Water Committee's analysis on this bill, Safeguarding California is a climate adaptation strategy, which was released in early 2016, provides an integrated climate adaptation and resiliency program. The report highlights that many effective climate adaptation strategies cross "sectoral and jurisdictional boundaries" and responding to climate risks requires coordination across agencies and political boundaries. Later versions of Safeguarding California are expected to continue the emphasis on cross-sector integration and complementarity of approaches to promote climate resiliency and adaptation. 7) Urban forestry program. According to the Senate Committee on Natural Resources & Water's analysis on this bill, CalFire's urban forestry program leads the effort to advance the development of sustainable urban and community forests in California and CalFire works closely with numerous groups to achieve these aims. Existing law recognizes that urban forestry projects may provide multiple benefits to the community including, for example, increasing water supply, promoting energy conservation, reducing GHG emissions and improving public health, among others. SB 1294 (Pavley) Page 8 of ? 8) Cap-and-trade auction revenue. Since November 2012, ARB has 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 SB 1294 (Pavley) Page 9 of ? 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. 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 proposed 2016-17 budget allocates $3.1 billion GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. SB 1294 (Pavley) Page 10 of ? Comments 1) Purpose of Bill. According to the author: As part of his 2015 inaugural address, the Governor outlined six key pillars needed to achieve long term climate change inducing pollutant reductions, including the reduction of short-lived climate pollutants, increased carbon sequestration in the land and safeguarding California by maximizing climate resilience and adaptation strategies. This year, the Department of Finance and ARB finalized California's latest climate investment blueprint; the plan outlined a multitude of sound investment opportunities for California's climate investments built on the Governor's key strategies to address climate change. The plan further noted that to achieve our long term climate pollutant emissions goals, the state will need to accelerate current programs and projects, pursue innovative strategies across sectors and maximize environmental, economic and health co-benefits. SB 1294 integrates the concepts outlined in Governor Brown's inaugural address and the Second Investment Plan and provides an opportunity for the state to approach several key climate pollution and reduction strategies (trees and urban greening, landscape resiliency, water conservation and efficiency, and organic waste and compost) via a set of complementary and innovative programs. 2) What's the funding source? This bill requires CalRecycle to create a new program to provide incentives for the use of compost from organic waste in farming and landscaping practices that increase drought resilience and result in GHG emissions reductions through carbon sequestration in urban and rural areas. This bill does not identify a funding source. However, the background information provided by the author states that SB 1294 (Pavley) Page 11 of ? this bill "[e]stablishes a program that prioritizes investment in projects that maximize GHG emissions, climate resiliency benefits and co-benefits across multiple sectors (e.g. stormwater capture and reuse for an urban forestry project not only potentially reduces net carbon from the water system but also ensures the tree does not die (ensures GGRF investment produces carbon reduction benefits) and increases urban canopy (also potential to reduce carbon) while also reducing the chance the tree is drought stressed and ultimately succumbs to bark beetle (climate resiliency benefits)." It appears that a likely funding source for this bill may be GGRF. 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 that propose new programs funded through the GGRF. 4) Creating another funding program? This bill requires CalRecycle, by July 1, 2017, in consultation with relevant state agencies, to develop and implement a program that provides incentives for compost-related projects that increase drought resilience and result in quantifiable reductions in GHG emissions through increased carbon sequestration in urban and rural areas. SB 1294 (Pavley) Page 12 of ? Establishing a new program takes effort and money to administer. For example, public engagement/outreach and workshops are necessary to create the program; staff time is required to review proposals and process funds. For FY 2016-17, CalRecycle expects the administration costs alone for the Organics Grant Program to be $3 million. Also, anytime a new program is created, and funded through GGRF, there are various requirements that need to be met by the agency administering the program as well as ARB. ARB must provide new program guidance on how to report and quantify GHG reductions and on how to maximize benefits to disadvantaged communities. Each administering agency must prepare an expenditure report to document how the program will reduce GHG emissions. Creating disparate programs that have the same goals and purpose as existing state efforts may create governmental inefficiencies and avoidable expenses. 5) Work with what we already have. Last year, the Legislature passed, and the Governor signed, AB 1045 (Irwin, Chapter 596, Statutes of 2015) which, among other things, requires CalEPA, in coordination with relevant state agencies, to develop and implement policies to aid in diverting organic waste from landfills by promoting the use of agricultural, forestry, and urban organic waste as feedstock for compost and by promoting the appropriate use of that compost throughout the state. The first set of recommendations from these efforts is due January 1, 2017, and must be annually updated thereafter. SB 1294, by July 1, 2017, would require CalRecycle, in consultation with relevant state agencies, to create a program that provides incentives for the use of compost in certain projects that increase carbon sequestration in urban and rural areas. The first set of compost recommendations mandated by AB 1045 is due when SB 1294 would go into effect. What if the agencies' recommendations, which were mandated by the Legislature less than a year ago, differ in direction, scope, or proposed actions than the program in SB 1294? It may be more prudent to work within the existing statutory structure that officially began four months ago and is expected to provide the first annual set of recommendations eight months from SB 1294 (Pavley) Page 13 of ? now. A question arises as to whether the purpose of the program proposed in SB 1294 may best fit within the AB 1045 framework of the relevant agencies working to develop and implement policies to promote the appropriate use of compost throughout the state. In order to ensure that CalEPA's coordinated efforts with relevant agencies, pursuant to AB 1045, consider ways to use compost as a means of increasing carbon sequestration in urban and rural areas, the Committee may wish to consider amending SB1294 by replacing Chapter 3 on Page 6, lines 11-26 with the following: a) An amendment to add a paragraph to PRC §42649.87(c) mandating the assessment of the state's programs on how they may increase the use of compost in order to increase carbon sequestration in urban and rural areas. b) An amendment to add promotion to the use of compost throughout the state to PRC §42649.87(c)(4), which currently pertains to the development of recommendations for promoting organic waste and recycling infrastructure. c) An amendment to add a section to PRC Chapter 12.9, pertaining to organic waste, to require the appropriate agency to develop a program that implements policies to promote the use of compost, if recommended to do so pursuant to PRC §42649.87(c)(4). 6) State-certified conservation corps. The local conservation corps program was established in 1993 with the purpose of supporting the success of disadvantaged youth through a structured program of natural resources conservation and related activities. There are approximately 13 certified local corps in the state. This bill requires CalRecycle to enter into an agreement with state-certified conservation corps to assist with community outreach, compost delivery and application, and other urban greening projects. A question arises as to whether it is prudent to limit such an opportunity to only 13 corps considering other local organizations exist around the state that also provide workforce training to youth in disadvantaged communities. SB 1294 (Pavley) Page 14 of ? In conjunction with the proposed committee amendments in Comment #5, the committee may wish to consider amending the bill to add a paragraph to PRC §42649.87(c) mandating the assessment of the state's programs on how they may incorporate workforce training to youth in disadvantaged communities when feasible. Related/Prior Legislation AB 1045 (Irwin, Chapter 596, Statutes of 2015) requires CalEPA in coordination with specified agencies, to among other things, develop and implement policies to aid in diverting organic waste from landfills by promoting the use of agricultural, forestry, and urban organic waste as a feedstock for compost and by promoting the appropriate use of that compost throughout the state. DOUBLE REFERRAL: This measure was heard in the Senate Natural Resources & Water Committee on March 29, 2016, and passed out of committee with a vote of 7-2. SOURCE: TreePeople, Los Angeles Conservation Corps, and Los Angeles Neighborhood Land Trust SUPPORT: California Association of Local Conservation Corps California League of Conservation Voters Clean Water Action Earth Watch Institute From Lot to Spot, Inc. Los Angeles Beautification Team The Trust For Public Land OPPOSITION: None received SB 1294 (Pavley) Page 15 of ? -- END --