BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 1328 ----------------------------------------------------------------- |Author: |Lara | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |3/28/2016 |Hearing |4/20/2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Joanne Roy | | | | ----------------------------------------------------------------- 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: SB 1328 (Lara) Page 2 of ? 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 SB 1328 (Lara) Page 3 of ? 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 SB 1328 (Lara) Page 4 of ? 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, SB 1328 (Lara) Page 5 of ? 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. SB 1328 (Lara) Page 6 of ? 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 SB 1328 (Lara) Page 7 of ? 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 SB 1328 (Lara) Page 8 of ? 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 SB 1328 (Lara) Page 9 of ? 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 SB 1328 (Lara) Page 10 of ? 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 SB 1328 (Lara) Page 11 of ? 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 SB 1328 (Lara) Page 12 of ? SUPPORT: California League of Conservation Voters OPPOSITION: CalTax -- END --