BILL ANALYSIS �
AB 523
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Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 523 (Valadao) - As Amended: March 31, 2011
SUBJECT : Ethanol: Alternative and Renewable Fuel and Vehicle
Technology Program
SUMMARY : Makes ethanol derived from corn ineligible for funding
from the Alternative and Renewable Fuel and Vehicle Technology
Program (ARFVTP).
EXISTING LAW :
1)Establishes the ARFVTP to support alternative vehicle
technologies and fuels as part of the California Alternative
and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon
Reduction Act of 2007 (AB 118 (Nunez), Chapter 750, Statutes
of 2007). The ARFVTP is administered by the California Energy
Commission (CEC) and receives approximately $100 million per
year from temporary surcharges on vehicle and vessel fees.
Collection of these fees currently is authorized until 2016.
Projects to improve alternative and renewable low-carbon fuels
are eligible for funding, specifically including ethanol.
Pursuant to AB 118, the CEC has established the California
Ethanol Producer Incentive Program (CEPIP).
2)Imposes specific requirements and deadlines on recipients of
CEPIP loans to assure that producers achieve additional
reductions in the carbon intensity of their fuels.
THIS BILL makes ethanol derived from corn ineligible for funding
from the ARFVTP and repeals related requirements.
FISCAL EFFECT : Unknown
COMMENTS :
AB 118 authorizes the CEC to develop and deploy alternative and
renewable fuels and advanced transportation technologies to help
attain the state's climate change policies. The CEC has an
annual program budget of approximately $100 million and provides
financial support for a range of eligible projects, including
California ethanol production. The statute requires the CEC to
AB 523
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adopt and update annually an investment plan to determine
funding priorities and opportunities.
Pursuant to AB 118, CEPIP provides payments to California
ethanol producers under specific unfavorable market conditions
and, in return requires reimbursement by participants to the
California Alternative Energy and Advanced Transportation
Financing Authority (CAEATFA) of any outstanding CEPIP payment
balances under specifically identified favorable market
conditions.
The incentive paid is based on calculation of the "ethanol crush
spread" (ECS) - the average monthly difference between ethanol
prices and corn prices. If the monthly average ECS value is
less than 55 cents per gallon, eligible producers receive up to
25 cents per gallon. CEPIP participants are required to
reimburse the CAEATFA up to 20 cents per gallon when the ECS
value is greater than $1.00 per gallon.
To participate in CEPIP, ethanol producers must commit to reduce
the carbon intensity of their fuel by 10 percent or displace at
least 20 percent of the current corn feedstock with waste-based
materials. These enhancement goals were enshrined in statute in
2010 by SB 855, a budget trailer bill. $6 million is currently
allocated to fund CEPIP.
This bill would repeal CEPIP and prevent future AB 118 funding
for California corn-ethanol projects. However, state and
federal ethanol use requirements, as well as federal tax
incentives, would remain. This bill would not affect ethanol
demand, so it seems unlikely to have a significant effect on
corn prices. The more significant effect likely would be
shifting ethanol production from California to the Midwest.
Double referral . This bill is double-referred to the
Transportation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Agricultural Council of California
Alliance of Western Milk Producers
California Cattlemen's Association
California Dairies
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California Dairy Campaign
California Farmers Union
California Poultry Federation
Central Coast Fryers/Fulton Valley Farms
Dairy Farmers of America, Western Area Council
Diestel Turkey Ranch
Foster Farms
Hilmar Cheese Company
Land O' Lakes
Milk Producers Council
Pacific Egg and Poultry Association
Pittman Farms
Sierra Club California
Squab Producers of California
United Food and Commercial Workers Union 8
Western United Dairymen
Zacky Farms
Opposition
Aebiofuels
BlueFire Renewables
California State Pipe Trades Council
Calgren Renewable Fuels
International Brotherhood of Electrical Workers
Lignol
Pacific Ethanol
Propel
State Building and Construction Trades Council
Western States Council of Sheet Metal Workers
Zymetis
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092