BILL ANALYSIS �
AB 638
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Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 638 (Skinner) - As Amended: April 13, 2011
SUBJECT : Fuel resources: State Energy Resources Conservation
and Development Commission and State Air Resources Board
SUMMARY : Establishes statewide targets for reducing petroleum
and increasing alternative fuels and requires the Air Resources
Board (ARB) and the California Energy Commission (CEC) to take
specified steps to attain the targets.
EXISTING LAW :
1)Requires CEC and ARB to adopt recommendations for the Governor
and Legislature to reduce petroleum dependence (AB 2076
(Shelley), Chapter 936, Statutes of 2000). The 2076 report,
"Reducing California's Petroleum Dependence" (August 2003),
recommended the Governor and Legislature (1) adopt a statewide
goal of reducing onroad gasoline and diesel consumption by 15
percent below 2003 levels by 2020, (2) work with the
California delegation and other states to establish national
fuel economy standards that double fuel efficiency, and (3)
establish a goal to increase the use of nonpetroleum fuels to
20 percent by 2020 and 30 percent by 2030.
2)Requires CEC and ARB to adopt a state plan to increase the use
of alternative transportation fuels, including setting
alternative fuel goals for 2012, 2017 and 2022 (AB 1007
(Pavley), Chapter 371, Statutes of 2005). The AB 1007 "State
Alternative Fuels Plan" (December 2007) recommended goals for
alternative fuel use of 9 percent by 2012, 11 percent by 2017
and 26 percent by 2022.
3)Requires ARB to adopt regulations that achieve the maximum
feasible and cost-effective reduction of greenhouse gas (GHG)
emissions from motor vehicles (AB 1493 (Pavley), Chapter 200,
Statutes of 2002).
4)Requires ARB to adopt a statewide GHG emissions limit
equivalent to 1990 levels by 2020 and to adopt rules and
regulations to achieve maximum technologically feasible and
cost-effective GHG emission reductions (AB 32 (Nunez), Chapter
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488, Statutes of 2006). In 2009, ARB adopted a low carbon
fuel standard (LCFS) regulation pursuant to AB 32. The LCFS
requires a reduction in the carbon intensity of California's
transportation fuels by at least 10% by 2020.
5)Establishes the Alternative and Renewable Fuel and Vehicle
Technology Program (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 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.
6)Requires metropolitan planning organizations to include
sustainable communities strategies, as defined, in their
regional transportation plans for the purpose of reducing GHG
emissions from transportation (SB 375 (Steinberg), Chapter
728, Statutes of 2008).
THIS BILL requires ARB and CEC to:
1)Adopt policies and regulations to attain the following
targets:
a) Reduce onroad petroleum fuel use by at least 15 percent
below the 2003 level by 2020, and maintain that level into
the foreseeable future.
b) Increase alternative fuel use to at least 26 percent of
total onroad and offroad vehicle fuel use by 2022.
2)Coordinate implementation efforts and consider synergies
between new or existing programs, projects, investments, or
regulations that may accelerate attainment or maintenance of
these targets.
3)Assess how future guidelines, regulations, and investments,
where appropriate, affect these targets.
4)On or before January 1, 2013:
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a) Update the economic analysis used in developing and
reviewing state regulations to include a range of petroleum
fuel prices to more accurately assess the future cost of
petroleum-based fuels.
b) Develop a specific strategy and target for petroleum
fuel use reduction in light, medium, heavy-duty, and
off-road vehicles.
c) Identify regulatory and statutory barriers to reaching
the petroleum reduction and alternative fuel use targets
and take any necessary regulatory steps to overcome
barriers on which ARB and CEC have the authority to act.
5)On or before January 1, 2014, and triennially thereafter,
submit a report to the Legislature on progress in reaching the
targets including:
a) Details as to the quantities of petroleum and
alternative fuels used in the state during the preceding
year in absolute terms and as a percent of the state's
overall fuel mix.
b) An analysis of the effects on the state economy of
increasing alternative fuel usage and reducing petroleum
usage, including costs to the state economy if petroleum
prices remain at current levels, or rise to higher levels.
c) Identification of any new regulatory or statutory
barriers to reaching the targets.
d) An assessment of the effect of proposed regulations or
guidelines on petroleum reduction and alternative fuel use
in the state.
FISCAL EFFECT : Unknown
COMMENTS : This bill codifies the petroleum reduction target
from AB 2076 and the alternative fuel target from AB 1007, and
further directs ARB and CEC to adopt regulations to attain the
targets. The particular additional measures that might be
necessary, if any, beyond those undertaken under current law,
are not specified. However, the bill gives broad direction and
authority to both agencies to focus their regulatory efforts on
achieving the targets. The targets are measured by absolute
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fuel use, which is comparable to the state's Renewables
Portfolio Standard (33 percent by 2020, based on retail
electricity sales). Although the environmental and other
benefits of reduced petroleum consumption are self-evident, the
targets stand in contrast to existing measures such as LCFS and
AB 1493 in that they are not correlated directly to emission
reductions or other environmental performance.
How do the two targets relate to each other and existing
programs? The two targets set by the bill are likely to require
similar measures to achieve, however they may not be consistent
with each other. For example, achieving 26 percent alternative
(i.e. non-petroleum) fuel use appears to represent a reduction
in petroleum use greater than 15 percent, based on current
figures where alternative fuels account for less than 10 percent
of consumption. The 15 percent petroleum reduction target could
be achieved via fuel demand reduction as well as alternative
supply, but combining it with a 26 percent alternative fuel
mandate would appear to value supply over efficiency as the twin
goals are pursued. In addition, existing programs (e.g. AB
32/LCFS reductions in fuel carbon intensity, AB 118 funding for
alternative fuels and vehicles, AB 1493 vehicle efficiency
standards, and SB 375 reduction in vehicle miles traveled) are
expected to deliver petroleum reductions between now and the
2020/2022 target years, but it's not clear if these existing
measures will exceed or fall short of the targets, or how ARB
and CEC will account for them to know whether they have to
pursue other measures. The author and the committee may wish to
consider establishing a single, consistent target and requiring
existing measures to be accounted for as ARB and CEC determine
what measures may be necessary to achieve the target.
All alternative fuels are not created equal. Over the past
several years, policies increasingly have recognized varying,
and in some cases surprising, environmental impacts of fuels
based on life-cycle analysis. Most recently and
comprehensively, the LCFS regulation has applied a life-cycle
analysis to rate the carbon intensity of transportation fuels.
Not only do different alternative fuels (e.g. electricity,
natural gas, hydrogen, ethanol) score differently, there are
also wide variations within the same fuel type depending on
production factors. On its face, the alternative fuel target in
this bill does not recognize these variations, suggesting that
any alternative fuel would count the same. Ethanol is the
dominant alternative fuel in California. It is readily
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available, requires little or no infrastructure changes, and is
relatively low cost. However, it also has a higher overall
environmental impact than less developed alternatives. To avoid
the bill resulting in a de facto ethanol mandate, the author and
the committee may wish to consider whether the alternative fuel
target should be revised to account for life-cycle emissions.
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REGISTERED SUPPORT / OPPOSITION :
Support
American Lung Association
better place
California Natural Gas Vehicle Coalition
CALSTART
Clean Energy
Codexis, Inc.
Coulomb Technologies
CR&R
Dow Kokam
Electric Vehicles International
Mohr Davidow
Motiv Power Systems
Pacific Ethanol, Inc.
Propel
Quallion
Simbol Materials
Solazyme
South Coast Air Quality Management District
Tesla Motors, Inc.
US Hybrid
Waste Management
Opposition
California Dump Truck Owners Association
Western State Petroleum Association
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092