BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            SB 1328
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          |Author:    |Lara                                                 |
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          |Version:   |3/28/2016              |Hearing      |4/20/2016       |
          |           |                       |Date:        |                |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Joanne Roy                                           |
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          SUBJECT:  Stormwater capture and treatment projects:  funding

            ANALYSIS:
          
          Existing law:  
          
          1) 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 California Air Resources Board (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).

          2) 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).

          3) Establishes the Stormwater Resource Planning Act, which  
             authorizes one or more public agencies to develop a  
             stormwater resource plan that meets specified standards to  
             address the capture, treatment, and storage of stormwater and  
             dry weather runoff.  (Water Code §10560 et seq.).

          This bill:  








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          1) Authorizes the State Water Resources Control Board (SWRCB) to  
             provide grants to public agencies to implement stormwater and  
             dry runoff collection and treatment projects that are  
             intended to reduce GHG emissions by decreasing demand for  
             electricity needs to pump, transport, and deliver water from  
             natural resources to consumers. 

          2) Authorizes SWRCB to expend moneys from GGRF, upon  
             appropriation of the Legislature for these grants.

          3) Provides that eligible projects for funding include, but not  
             be limited to, green infrastructure, rainwater, stormwater,  
             and dry weather runoff capture projects, and stormwater  
             treatment facilities.

          4) Specifies that grant funds may be used for all phases of  
             planning, design, and project construction and  
             implementation.

          5) Requires SWRCB to establish criteria for funding projects  
             based on demonstration of GHG emissions reductions and  
             geographic conditions that facilitate stormwater and dry  
             weather runoff collection.

          6) Requires SWRCB to give preference to projects located in, and  
             provide benefits to, disadvantaged communities.

            Background
          
          1) Water and energy use.

          According to the California Energy Resources Conservation and  
             Development Commission (CEC), water-related energy use in the  
             state consumes approximately 20% of the state's electricity  
             and 30% of the state's non-power plant natural gas (natural  
             gas not used to produce electricity).  The water sector uses  
             electricity to pump, treat, transport, deliver, and heat  
             water.  CEC also found that the most energy-intensive uses of  
             water in California are associated with end uses by the  
             customer (e.g. heating, processing, and pressurizing water),  
             and 75% of the electricity and nearly all of the natural gas  
             use related to water in California is associated with water  
             heating.  Additionally, expected increases in groundwater  
             pumping, water treatment, and water recycling, due to drought  








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             conditions in the state, mean the energy intensity of water  
             will likely increase.

          According to the U.S. Environmental Protection Agency, energy is  
             used in five stages in the water cycle:

             a)    Extracting and conveying:  Extracting water from rivers  
                and streams or pumping it from aquifers, and then  
                conveying it over hills and into storage facilities is a  
                highly energy intensive process.  In California, the State  
                Water Project (SWP) pumps water almost 2,000 feet over the  
                Tehachapi Mountains.  The SWP is the largest single user  
                of energy in the state and consumes an average of 5  
                billion kWh/yr, accounting for about 2-3% of all  
                electricity consumed in California.

             b)    Treating water:  Water treatment facilities use energy  
                to pump and process water.

             c)    Distributing water:  Energy is needed to transport  
                water.

             d)    Using water:  End users consume energy to treat water  
                with softeners or filters, to circulate and pressurize  
                water with circulation pumps and irrigation systems, and  
                to heat and cool water.

             e)    Collecting and treating wastewater:  Energy is used to  
                pump wastewater to the treatment plant, and to aerate and  
                filter it at the plant.  On average, wastewater treatment  
                in California uses 500 to 1,500 kilowatt-hours per  
                acre-foot.

             By reducing the amount of water we use, we lessen our demand  
             on the energy-intensive systems that deliver and treat water.

          2) Stormwater.

          According to the U.S. Environmental Protection Agency,  
             stormwater runoff is a major cause of water pollution in  
             urban areas.  When rain falls on roofs, streets, and parking  
             lots in cities and their suburbs, the water cannot soak into  
             the ground as it should.  Stormwater drains through gutters,  
             storm sewers, and other engineered collection systems and is  








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             discharged into nearby water bodies.  The stormwater runoff  
             carries trash, bacteria, heavy metals, and other pollutants  
             from the urban landscape.  Higher flows resulting from heavy  
             rains also can cause erosion and flooding in urban streams,  
             damaging habitat property and infrastructure.  When rain  
             falls in natural, undeveloped areas, the water is absorbed  
             and filtered by soil and plants - Stormwater runoff is  
             cleaner and less of a problem.

          According to SWRCB, past approaches to stormwater management  
             have focused on limited treatment prior to conveyance  
             off-site and ultimately into receiving waters.  The municipal  
             separate storm sewer systems and flood control infrastructure  
             used for this purpose may have been successful in terms of  
             flood control and some degree of treatment; however many past  
             approaches have not been adequate to fully address the water  
             quality impacts of stormwater discharges while providing  
             multiple benefits such as water supply augmentation and  
             ecological enhancement of the local watershed.  In general,  
             the transport of stormwater from the location of rainfall via  
             constructed municipal storm drain systems (pipelines,  
             reinforced channels, outfalls, etc.) has caused downstream  
             hydromodification (unnatural alteration of natural drainage  
             features) and destabilization of water bodies, and impacted  
             beneficial uses of those receiving surface water bodies.

          More recent approaches to stormwater management seek to  
             replicate natural hydrology and watershed processes by  
             managing stormwater and dry weather runoff onsite or within  
             the watershed where rainfall occurs - and the pollutants it  
             contains - delivered to receiving waters.

          3) Storm Water Grant Program (SWGP).

          According to SWRCB, the purpose of SWGP is to fund stormwater  
             and dry weather runoff projects that best advance SWRCB's  
             policy goals of improving water quality and realizing  
             multiple benefits from the use of stormwater and dry weather  
             runoff as a resources.  The SWGP Unit was established after  
             the passage of Proposition 84, the Safe Drinking Water, Water  
             Quality and Supply, Flood Control, River and Coastal  
             Protection Bond Act of 2006.  In November 2014, California  
             voters approved Proposition 1 (Prop. 1), Water Quality,  
             Supply and Infrastructure Improvement Act of 2014 (AB 1471,  








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             Rendon).  Of the $7.545 billion in general obligation bonds  
             for water projects, Prop. 1 provides $200 million in grants  
             for multi-benefit stormwater management projects.  

          4) Executive Order B-29-15.

          Executive Order B-29-15 (Brown), issued April 1, 2015, directed  
             state agencies to perform various actions regarding saving  
             water to respond to severe drought conditions in the state,  
             including directing CEC, jointly with DWR, to implement a  
             Water Energy Technology (WET) program to deploy innovative  
             water management technologies that achieve water and energy  
             savings and GHG emissions reductions - projects must have  
             direct water savings, direct energy savings, and reduce GHG  
             emissions.  In addition, projects must reduce water use or  
             improve water production.  The Executive Order also directed  
             CEC, jointly with DWR, to implement a limited statewide  
             appliance rebate program for inefficient appliances.

          5) Water-Energy Grant Program.

          The Water-Energy Grant Program provides funds to implement water  
             efficiency programs or projects that reduce GHG emissions,  
             and reduce water and energy use.  The funding for this  
             program is appropriated from GGRF to DWR to establish a grant  
             program; available funding is $19 million (with an additional  
             $10 million that may be available).  Eligible applicants  
             include local agencies, joint power authorities, and  
             nonprofit organizations.  DWR is proposing to focus the 2016  
             solicitation on the following eligible programs/projects:

                       Commercial Water Efficiency or Institutional Water  
                  Efficiency Programs.
                       Projects that reduce GHG, reduce water and energy  
                  use.
                       Only projects with water conservation measures  
                  that also save energy.

          1) 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.  









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             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. 

             In 2012, the California Chamber of Commerce filed a lawsuit  








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             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. 
            
          Comments
          
          1) Purpose of Bill.  

          According to the author:

               SB 1328 provides much needed assistance for the increased  
               deployment of stormwater capture and groundwater recharge  
               facilities.  Groundwater, which is located in geologic  
               formations called aquifers, is an important piece of  
               California's water supply, and is utilized for urban and  
               rural cities' water systems, agricultural irrigation, and  
               industry uses.

               Aquifers recharged naturally over time via the percolation  
               of stormwater through the soil, in addition to seepage from  
               rivers and creeks.  Disruption of the natural recharge  
               cycle of aquifers has been caused by overdrafting, which  
               occurs when water is extracted beyond the safe yield of an  








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               aquifer.  

               Reduced groundwater levels impact communities in urban and  
               rural areas in regards to water access, quality, and  
               affordability, as the reliance on water imports, either by  
               conveyance system or transported by trucks, is increased.

               Despite the availability of Water Bond funds for stormwater  
               infrastructure there are still significant barriers to  
               increased implementation of stormwater projects.  Access to  
               funding is a key component to increased deployment, as  
               projects at various stages of development may require  
               assistance with startup and/or backfill expenses.  In  
               addition, some projects may have limited access to  
               technical assistance to prove project feasibility, which in  
               turn if proven successful would prompt further assistance  
               to prove project feasibility, which in turn if proven  
               successful would prompt further community investment.   
               Current funds, available for stormwater infrastructure  
               require a 50% match, which can be difficult to reach for  
               some projects, depending on the level of access to capital  
               or stage of development.  All of these barriers are  
               compounded when applied to disadvantaged communities, along  
               with the negative impacts of aquifer overdrafting.

               SB 1328 would create an appropriation from [GGRF] to  
               facilitate the increased deployment of stormwater capture  
               projects and groundwater recharge facilities, while also  
               prioritizing projects located in disadvantaged communities  
               as defined by Section 39711 of the Health and Safety Code.   
               By increasing incentives for stormwater capture  
               infrastructure all communities can benefit from increased  
               resiliency in local water supplies, providing better access  
               and water quality.

          2) Stormwater capture and reuse.

          Improving and increasing stormwater capture and reuse may be  
             especially beneficial in southern California, which imports a  
             significant amount of its water supply from northern  
             California.  As noted above, SWP is the largest single user  
             of energy in the state and consumes an average of 5 billion  
             kWh/yr, accounting for about 2-3% of all electricity consumed  
             in California.  Stormwater capture and reuse may create net  








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             benefits in reductions of GHG emissions and energy use by  
             supplying and delivering water more locally.

          3) Green infrastructure.

          According to the U.S. Environmental Protection Agency, green  
             infrastructure uses vegetation, soils, and other elements and  
             practices to restore some of the natural processes required  
             to manage water and create healthier urban environments.  At  
             the city or county scale, green infrastructure is a patchwork  
             of natural areas that provide habitat, flood protection,  
             cleaner air, and cleaner water.  At the neighborhood or site  
             scale, stormwater management systems that mimic nature soak  
             up and store water.  Green infrastructure is a  
             cost-effective, resilient approach to managing wet weather  
             impacts that provides community benefits.  While  
             single-purpose gray stormwater infrastructure - conventional  
             piped drainage and water treatment systems - is designed to  
             move urban stormwater away from the built environment, green  
             infrastructure reduces and treats stormwater at its source  
             while delivering environmental, social, and economic  
             benefits.

          This bill provides that eligible projects include green  
             infrastructure.  "Green infrastructure" can encompass a wide  
             array of specific practices, and a number of definitions  
             exist.  However, the term, "green infrastructure" is not  
             defined in statute.  In order to ensure that the intent of  
             the author is met when considering "green infrastructure"  
             projects for funding, a question arises as to whether it  
             would be prudent to define "green infrastructure" in this  
             bill.

          4) Creating another funding program?

          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.  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  








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             communities.  Each administering agency has to do an  
             expenditure report to document how the program will reduce  
             GHG emissions.  Creating new programs that may share the same  
             purpose with existing programs could result in governmental  
             inefficiencies and avoidable expenses.

          5) 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.

          Storm Water Grant Program (SWGP).

          As noted above, the purpose of SWGP is to fund stormwater and  
          dry weather runoff projects that best advance SWRCB's policy  
          goals of improving water quality and realizing multiple benefits  
          from the use of stormwater and dry weather runoff as a  
          resources.  The vision of the program is to change the  
          perception of stormwater and dry weather runoff as a contaminant  
          source to a valuable resource, to recharge groundwater aquifers,  
          reuse for domestic purposes, support watershed processes, and  
          beautify communities creating habitat and open spaces.

          In November 2014, California voters approved Prop. 1, which  
                                                                                   provides $200 million in grants for multi-benefit stormwater  
          management projects.  Water Code §79747 identifies funds  
          available for multibenefit stormwater management projects, which  








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          may include, but are not limited to:  green infrastructure,  
          rainwater and stormwater capture projects, and stormwater  
          treatment facilities.  

          SB 1328 authorizes SWRCB to provide grants to public agencies to  
          implement stormwater and dry weather runoff collection and  
          treatment projects that are intended to reduce GHG emissions by  
          decreasing demand for electricity needs to pump, transport, and  
          deliver water.  SB 1328 specifies that eligible projects  
          include, but are not limited to, green infrastructure,  
          rainwater, stormwater, and dry weather runoff capture projects,  
          and stormwater treatment facilities. 

          It seems that the goals and eligible projects of SB 1328 are  
          very similar to the SWGP.  Rather than creating a new program  
          that seems to overlap with an existing program, and in order to  
          reduce governmental inefficiencies and avoid unnecessary  
          expenses, the Committee may wish to consider adding a  
          subdivision to state that in implementing this section, the  
          board may use its existing guidelines developed to implement the  
          Storm Water Grant Program.

            
          Related/Prior Legislation

          SB 1425 (Pavley, 2016), which requires ARB, in consultation with  
          other relevant state agencies, and the Climate Registry, to  
          develop and administer a registry of GHG emissions resulting  
          from the water-energy nexus using the best available data.  SB  
          1425 is currently in Senate Appropriations Committee.

          SB 471 (Pavley, 2015), which specifies that reductions in GHG  
          emissions associated with the water sector are eligible  
          investments for GGRF, requires CEC to study water-related energy  
          use in California, and requires SWRCB to develop a grant and  
          loan program to fund projects that result in water-related GHG  
          reductions.  (Held in Assembly Appropriations Committee).

          AB 1471 (Rendon, Chapter 188, Statutes of 2014) which  
          establishes Water Quality, Supply and Infrastructure Improvement  
          Act of 2014 and authorizes $7.545 billion in new general  
          obligation bonds (Proposition 1).

          SOURCE:                    Author  








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           SUPPORT:               

          California League of Conservation Voters  

           OPPOSITION:    

          CalTax  


           
                                          
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