BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 523
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Valadao
VERSION: 6/6/12
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: June 12, 2012
SUBJECT:
AB 118: Alternative and Renewable Fuels and Vehicle Technology
Program
DESCRIPTION:
This bill prohibits the California Energy Commission, beginning
on July 1, 2013, from funding corn ethanol production projects
under its Alternative and Renewable Fuels and Vehicle Technology
Program.
ANALYSIS:
AB 118 (N��ez), Chapter 750, Statutes of 2007, created the
Alternative and Renewable Fuel and Vehicle Technology Program,
which the California Energy Commission (CEC) administers to
provide grants, revolving loans, loan guarantees, loans, or
other appropriate funding measures to public agencies, vehicle
consortia, businesses, consumers, recreational boaters, and
academic institutions to develop and deploy innovative
technologies that transform California fuel and vehicle types to
help attain the state's climate change policies.
Existing law provides, upon appropriation by the Legislature,
approximately $100 million annually through 2015 for this
program. These funds comes from additional fees on vehicle
registrations, special identification plates for various
vehicles, and vessel registrations, plus $10 million annually
from the Public Interest Research, Development, and
Demonstration Fund, which is derived from a portion of electric
utility rates.
The CEC, through a competitive process, allocates these funds to
alternative fuel and vehicle technology projects. To set
priorities for the allocation of funds, the CEC must develop an
investment plan in consultation with a wide array of
stakeholders. The CEC adopted its first investment plan at its
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April 22, 2009 meeting and adopted its most recent plan for the
2012-13 fiscal year on May 9.
Existing law makes the following projects eligible for funding
under the Alternative and Renewable Fuel and Vehicle Technology
Program:
Alternative and renewable fuel projects to develop, improve,
demonstrate, deploy, produce, and commercialize alternative
and renewable fuels, plus reduce the overall carbon footprint
of these fuels.
Alternative and renewable fuel infrastructure, fueling
stations, and equipment.
Projects to develop and improve vehicle technology that
provide for better fuel efficiency and lower greenhouse gas
emissions.
Vehicle retrofit projects to create higher fuel efficiencies.
Programs and projects to accelerate the commercialization of
vehicles and alternative fuels.
Infrastructure projects that promote alternative and renewable
fuel infrastructure development for existing fleets, public
transit, and existing transportation corridors.
Workforce training programs related to alternative fuels and
vehicle technology.
Block grants administered by not-for-profit technology
consortia for specified purposes.
Analyses and assessments performed by state agencies to
determine the impacts of increasing the use of low-carbon
transportation fuels and technologies.
Homeowner modification of electrical sources to include a
plug-in electric vehicle charging station.
This bill prohibits the CEC, beginning on July 1, 2013, from
providing Alternative and Renewable Fuels and Vehicle Technology
Program funding to projects that produce ethanol from corn,
excluding that derived from corn stover (i.e., stubble left
after harvesting the grain), leaves, cobs, or other non-edible
plant portions.
COMMENTS:
1.Purpose . The author asserts that close to 40 percent of corn
in the United States is used to produce ethanol, which causes
the price of food and animal feed to increase. He introduced
this bill because as California families and businesses
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continue to struggle with the ongoing economic downturn, he
considers it fiscally irresponsible to subsidize an industry
that negatively impacts food supplies and prices and other
employers in this state while providing little or no
environmental benefit.
2.California Ethanol Producers Incentive Program . In 2010, the
CEC adopted the California Ethanol Producers Incentive Program
(CEPIP) that provides a production incentive for commercial
scale ethanol producers in California. The CEC designed the
CEPIP to provide an incentive for ethanol producers to improve
the environmental footprint of their production facilities
while providing a temporary financial safety net during
periods of unfavorable market conditions. The CEPIP requires
participants to repay incentives they receive when market
conditions are favorable.
Through the CEPIP, the CEC provided nearly $6 million of
Alternative and Renewable Fuels and Vehicle Technology Program
funds to three eligible companies. These three ethanol
producers received payments during 2011 at amounts the CEC
determined based on the difference between the price of corn
and the price of ethanol, and they must begin to repay when
ethanol prices rise relative to the price of corn, again in
increments the CEC determines. The obligation to repay CEPIP
incentives continues for five years past the initial incentive
payment date. It should be noted that no CEPIP participant
has repaid any funds to date.
In response to the CEPIP, the Legislature passed SB 855
(Committee on Budget and Fiscal Review), Chapter 718, as part
of the 2010-11 budget, which placed various requirements on
ethanol producers receiving CEPIP loans, including that
producers must repay all funds received if they fail to adhere
to a prescribed schedule to enhance their facility operations
or convert to non-corn feed stocks.
This bill would effectively end the existing CEPIP as of July
1, 2013.
The CEC itself acknowledges potential harm associated with
corn-based ethanol resulting from land use changes, commodity
price increases, and greater water use. The CEC indicates
that it intends to make no more AB 118 awards to corn-based
ethanol producers. Some are now advocating to the CEC that it
keep the CEPIP program but restrict it to funding ethanol
production from the non-edible portions of the corn plant, as
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the latest amendments to this bill clearly allow. The CEC is
holding a workshop this summer to examine using funds that the
current investment plan allocates to the production of
gasoline and diesel substitutes for such purposes.
3.Double-referral . The Rules Committee referred this bill to
both the Transportation and Housing Committee and to the
Environmental Quality Committee. Therefore, if this bill
passes this committee, it will be referred to the Committee on
Environmental Quality.
Assembly Votes:
Floor: 73 - 2
Appr: 16 - 1
Trans: 14 - 0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 6,
2012)
SUPPORT: Agricultural Council of California
Alliance of Western Milk Producers
California Cattlemen's Association
California Dairy Campaign
California Poultry Federation
Dairy Farmers of America, Western Area Council
Diestel Turkey Ranch
Foster Farms
Hilmar Cheese Company
Land O' Lakes
Milk Producers Council
Sierra Club
Western United Dairymen
Zacky Farms
OPPOSED: None received.