BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            SB 1294
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          |Author:    |Pavley                                               |
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          |-----------+-----------------------+-------------+----------------|
          |Version:   |4/4/2016               |Hearing      | 4/20/2016      |
          |           |                       |Date:        |                |
          |-----------+-----------------------+-------------+----------------|
          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Joanne Roy                                           |
          |           |                                                     |
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          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  







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                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. 









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          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.










































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            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.  








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          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,  








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                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  








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             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.









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          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  








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             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.  






















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            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  








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             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.









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          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  








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             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. 









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          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  


           
                                          








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