BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1387|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 1387
Author: De León (D), Lara (D) and Allen (D)
Amended: 4/7/16
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-2, 4/20/16
AYES: Wieckowski, Hill, Jackson, Leno, Pavley
NOES: Gaines, Bates
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
SUBJECT: Nonvehicular air pollution: market-based incentive
programs: South Coast Air Quality Management
District board
SOURCE: Author
DIGEST: This bill adds three members to the South Coast Air
Quality Management District (SCAQMD) Governing Board, as
specified, and creates a process by which the California Air
Resources Board (ARB) is required to either 1) approve, or 2)
disapprove, revise, and then approve, any plan for, changes to,
or rules implementing, a local air district's market-based
incentive program.
ANALYSIS:
SB 1387
Page 2
Existing law:
1) Provides ARB with primary responsibility for control of
mobile source air pollution and provides that air pollution
control districts (APCDs) and air quality management
districts (AQMDs) have primary responsibility for controlling
air pollution from all sources, other than emissions from
mobile sources, and establishes certain powers, duties, and
requirements for those districts.
2) Creates certain AQMDs, with related authority, including the
SCAQMD under the Lewis-Presley Air Quality Management Act.
SCAQMD covers portions of Los Angeles, Orange, Riverside, and
San Bernardino counties within the South Coast Air Basin.
3) Establishes the SCAQMD Governing Board, and specifies the
Board consist of 13 members, where one member each is
appointed by the Governor, Senate Rules Committee, and the
Speaker of the Assembly, and the other 10 members are
appointed by regional government entities in the South Coast
Air Basin, as specified.
4) Requires SCAQMD adopt a plan to achieve and maintain the
state and federal ambient air quality standards for the South
Coast Air Basin, and requires that plan and subsequent
revisions contain deadlines for compliance with federal air
quality standards and schedules and deadlines to achieve the
state ambient air quality standards by the earliest date
achievable, including by use of best available retrofit
control technology (BARCT).
5) Makes findings and declarations that other options for air
quality improvement, including market-based incentive
programs, should be explored, provided those programs provide
equivalent emission reductions.
SB 1387
Page 3
6) Authorizes a district to adopt a market-based incentive
program as an element of the district's plan for attainment
of state or federal ambient air quality standards, if that
plan meets specified requirements.
7) Requires a district's plan for attainment or plan revision
submitted to the state prior to January 1, 1993, be designed
to achieve equivalent emission reductions and reduced cost
and job impacts compared to current command and control
regulations and future air quality measures that would
otherwise have been adopted as part of the district's plan
for attainment.
8) Prohibits a district from implementing a market-based
incentive program unless the state board determines the above
requirements are met.
9) Requires a district's plan or plan revision submitted on or
after January 1, 1993, be designed to allow the trading of
reductions among a variety of sources and requires ARB to
approve the above plan or plan revision prior to program
implementation and make their determination no later than 90
days from the date of plan or plan revision submission.
10)Requires the district, upon adoption of rules and regulations
to implement the market-based program, to submit the rules
and regulations to ARB, and requires ARB, within 90 days, to
determine whether the rules and regulations meet specified
requirements.
This bill:
1) Makes findings and declarations that other options for air
quality improvement, including market-based incentive
programs, may be explored, provided those programs provide
greater emission reductions and ensure disadvantaged
SB 1387
Page 4
populations are not disproportionately impacted.
2) Strikes the January 1, 1993 date for plan or plan revision
submission, and requires any district plan or plan revision
achieve equivalent emission reductions and reduced cost and
job impacts compared to current command and control
regulations and future air quality measures that would
otherwise have been adopted as part of the district's plan
for attainment.
3) Prohibits a district from implementing any revisions to an
adopted market-based incentive program, unless ARB determines
the plan or plan revision complies with the above
requirements.
4) Requires, if ARB determines a plan or plan revision does not
meet the specified requirements for a market-based incentive
program, that ARB notify the district, revise the plan or
plan revision so that it complies with specified
requirements, and approve the plan or plan revision.
5) Specifies that the above plan or plan revision approved by
ARB shall take effect immediately and is binding on the
district.
6) Requires, if ARB determines a district rule does not meet
the specified requirements for a market-based incentive
program, ARB notify the district, revise the rule so that it
complies with specified requirements, and adopt the rule.
7) Specifies that the above rule approved by ARB shall take
effect immediately and have the same legal force and effect
as a district rule.
8) Expands the SCAQMD Governing board by three to increase the
SB 1387
Page 5
membership to 16, with the additional members appointed by
the Governor, the Senate Committee on Rules, and the Speaker
of the Assembly.
9) Requires the above appointees be representatives of a bona
fide nonprofit environmental justice organization that
advocates for clean air and pollution reductions in one or
more communities within the South Coast Air Basin.
Background
1) SCAQMD Governing Board. Local air districts and their
governing boards have primary jurisdiction over air pollution
from all sources in their air basin, other than emissions
from mobile sources.
As prescribed by state law, the SCAQMD board is made up of 13
members, where three are appointed by the state (one each by
the Senate Rules Committee, the Speaker of the Assembly, and
the Governor) and 10 are appointed by local governments. The
members of the board serve four-year terms. Currently, Dr.
William Burke, appointed by the Speaker of the Assembly,
serves as the Chairman of the SCAQMD Board.
2) Air quality in the South Coast Air Basin and public health
effects. Under the federal Clean Air Act, the United States
Environmental Protection Agency (US EPA) establishes National
Ambient Air Quality Standards that apply for outdoor air
throughout the country. These federal standards exist for
several air pollutants due to their negative impact on public
health above specified concentrations, including ozone and
particulate matter, among others. Nonattainment areas are
regions that do not meet the national ambient air quality
standard for one of those pollutants.
SB 1387
Page 6
South Coast has some of the worst air quality in the nation,
and is in serious nonattainment for particulate matter (<2.5
microns, or PM 2.5) and extreme nonattainment for ozone.
Air Quality Management Plan. As SCAQMD is a nonattainment
region for particulate matter and ozone, state law requires
the district to adopt a plan, termed the Air Quality
Management Plan (AQMP), to achieve and maintain the state and
federal ambient air quality standards for the South Coast Air
Basin and submit this plan, subject to approval, to the ARB
for inclusion into the state implementation plan
(SIP--comprehensive state plans required by the federal law,
detailing how regions of the state will achieve and maintain
attainment). The AQMP was originally adopted in 1982, and is
formally reviewed every two years. The SCAQMD is currently
working on the 2016 AQMP.
3) RECLAIM. AB 1054 (Sher, Chapter 1160, Statutes of 1992)
authorizes local air districts to adopt a market-based
incentive program as an element of a local air district's air
quality management plan for attainment of the state or
federal ambient air quality standards and is authorized as a
substitute for command and control regulations and future air
quality measures that would otherwise have been adopted as
part of the district's plan for attainment.
Pursuant to AB 1054, the SCAQMD adopted the Regional Clean
Air Incentives Market, or RECLAIM in 1993, which went into
effect January 1994. RECLAIM was designed and adopted amidst
an economic recession in the region with widespread industry
and electrical utility support. The program replaced a series
of existing command and control rules and was intended to
allow for the most efficient emission reduction projects
within the sector to achieve the desired emissions reductions
with the lowest economic cost to industry.
Instead of permitting individual equipment and devices, the
SB 1387
Page 7
program sets individual emissions limits on nitrogen oxide
(NOx) and sulfur oxide (SOx) for facilities as a whole.
Credits, (called RECLAIM Trading Credits, or RTCs) are
provided to the facility in an amount equivalent to their
emissions limit assigned under the program. RTCs may be
traded or sold. RECLAIM sources may choose to install
emission control equipment that enables them to operate
within their allocation, or they may exceed emissions
allocations as long as they acquire sufficient RTCs from
other sources. In 2013, there were 275 facilities in the
program, including refineries, power plants, and other
industrial sources.
Overallocation of credits. RECLAIM has been criticized over
the years for an oversupply of credits, starting from the
original allocation of credits where the initial distribution
of RTCs in 1994 exceeded actual NOx emissions by 60%. This
significant overallocation was due in part to incorrect
economic growth assumptions for the region. Other than a few
notable exceptions, the oversupply of credits have kept
credit prices relatively low compared to costs associated
with installing pollution control equipment. As a result, the
largest polluters in the region have primarily chosen to
comply by purchasing RTCs to exceed their NOx emissions cap
under the program, instead of by reducing NOx through
installation of readily available pollution control
equipment.
In March of this year, the US EPA disapproved portions of the
2012 AQMP related to the achievement of the 2006 PM 2.5
standard, citing deficiencies in the 2010 version of the
RECLAIM program that allowed for excess of pollution trading
credits and delay of pollution controls for some facilities.
According to the SCAQMD Web site, district staff expect that
recent RECLAIM amendments last December will address the
disapproval and ensure compliance with federal Clean Air Act
requirements.
RECLAIM amendments. Despite the initial excess allocation of
SB 1387
Page 8
credits, RECLAIM has only been amended twice to reduce excess
RTCs for NOx (called a credit "shave") - once in 2004, and
recently in December of 2015.
According the December 4, 2012 staff report, amendments to
the program were needed to address BARCT requirements in
state law. BARCT evaluation is required by California law to
assess the advancement in control technology to ensure that
RECLAIM facilities achieve the same emission reductions that
would have occurred under a command-and-control approach and
that emissions reduction from the program fully contribute to
the efforts in the Basin to achieve federal ambient air
quality standards.
Specifically, SCAQMD staff proposal recommended amendments to
shave NOx RTC credits from 26.5 tons/day (tpd) to 14 tpd with
a front loaded implementation schedule. The proposal notes
that the 14 tpd day value represents the emissions reductions
necessary to comply with state law BARCT requirements, with a
10% compliance margin, adjustments for projected growth, and
uncertainties in the BARCT analysis. The staff proposal also
recommended amendments to retire RTCs from larger NOx
emitting facilities that have shut down to help address
oversupply of credits.
During the public comment portion of the hearing, support was
expressed among industry representatives for a reduced shave
of 12 tpd, a back loaded implementation schedule, and a
removal of the proposal to retire credits from facility shut
downs from consideration at the hearing. A motion to approve
these amendments, in lieu of the staff-proposed amendments,
passed by a vote of 7-5 at the December 4, 2015 SCAQMD
Governing Board meeting.
ARB letter. In January, Richard Corey, Executive Officer of
ARB, wrote a letter to Dr. Barry Wallerstein, the former
executive officer of the SCAQMD, expressing significant
concerns over the December SCAQMD Board vote, including
SB 1387
Page 9
whether the RECLAIM amendments meet requirements in state
law.
On February 6, 2016, Dr. Wallerstein replied to Mr. Corey's
letter, stating, "We believe that several of CARB staff's
conclusions are incorrect and do not accurately reflect the
public process for the referenced rulemaking." The letter
also noted that SCAQMD would be submitting the December 4th
RECLAIM amendments to ARB for inclusion into the SIP in late
February of this year.
Comments
Purpose of this bill. According to the author, "The SCAQMD is
one of the leading voices for clean air and climate pollution
reductions in the southern California region. In the past six
months, with its recent changes in governance, it has voted to
dismiss its longstanding executive officer and weaken clean air
regulations over its expert staff's recommendations. Outside
parties have worked to reduce diversity on the board and to
install a majority that is more concerned with polluters than
with public health. SB 1387 seeks to modernize the membership
of the governing board and to ensure the ARB can conduct speedy
oversight of any amendments to smoke stack regulations made by
the new board."
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee, unknown,
likely significant, costs to ARB (Air Pollution Control Fund).
SUPPORT: (Verified5/27/16)
SB 1387
Page 10
American Lung Association in California
Clean Power Campaign
Coalition for Clean Air
Physicians for Social Responsibility- Los Angeles
OPPOSITION: (Verified5/27/16)
California Building Industry Association
California Council for Environmental and Economic Balance
American Coatings Association
American Forest & Paper Association
Associated Builders and Contractors of California
Automotive Specialty Products Alliance
Building Industry Association of Southern California
Building Owners & Managers Association of California
California Asphalt Pavement Association
California Association of Realtors
California Auto Body Association
California Business Properties Association
California Chamber of Commerce
California Construction and Industrial Materials Association
California Cotton Ginners and Growers Association
California Independent Oil Marketers Association
California Independent Petroleum Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
California Paint Council
California Railroad Industry
California Small Business Alliance
California Small Business Association
California Taxpayers' Association
California Trucking Association
Chemical Industry Council of California
Coalition of Energy Users
Commercial Real Estate Development Association
Construction Industry Air Quality Coalition
Consumer Specialty Products Association
El Monte/South El Monte Chamber of Commerce
SB 1387
Page 11
Engineering Contractor's Association
Fullerton Association of Concerned Taxpayers
Future Port
Grocery Manufacturers Association
Harbor Trucking Association
Heraeus
Howard Jarvis Taxpayers Association
Hyatt Die Cast & Engineering Corporation
Independent Oil Producers Agency
Industrial Association of Contra Costa County
Industrial Environmental Association
Inland Empire Economic Partnership
International Council of Shopping Centers
International Warehouse Logistics Association
Kern Country Taxpayers Association
Long Beach Chamber of Commerce
Los Angeles Area Chamber of Commerce
Metal Finishing Association of Northern California
Metal Finishing Association of Southern California
National Federation of Independent Business, California
Printing Industries Association of Southern California
Redondo Beach Chamber of Commerce
Regional Hispanic Chamber of Commerce
Santa Barbara Taxpayers Association
Santa Barbara Technology and Industry Association
Small Business Action Committee
South Bay Association of Chambers of Commerce
Torrance Area Chamber of Commerce
Valley Industry & Commerce Association
Western Agricultural Processors Association
Western States Petroleum Association
Western States Trucking Association
ARGUMENTS IN SUPPORT: Supporters state that SB 1387, by adding
three additional environmental justice representatives to the
SCAQMD Board, will ensure a Board that better represents its
constituency. Coalition for Clean Air also notes that creating
an expedited review process for market-based programs would
bring more certainty and urgency for determining whether RECLAIM
and similar programs meet state and federal air quality
requirements.
SB 1387
Page 12
ARGUMENTS IN OPPOSITION:Opponents state that this bill
substantially and adversely modifies the use of market-based
incentive programs, including limiting their ability to achieve
cost-effective emissions reductions in Southern California, and
adds state-level appointed positions to the SCAQMD, effectively
shifting local control over critical regional air quality
planning to state lawmakers.
Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108
5/31/16 9:39:29
**** END ****