BILL ANALYSIS �
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2011-2012 Regular Session |
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BILL NO: AB 642 HEARING DATE: June 26, 2012
AUTHOR: Charles Calderon URGENCY: No
VERSION: June 4, 2012 CONSULTANT: Dennis O'Connor
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: Renewable Energy: Biomass: Algae
BACKGROUND AND EXISTING LAW
As a part of the Quantification Settlement Agreement in 2003,
the legislature directed the Secretary of Resources to develop a
Salton Sea restoration plan with a preferred alternative for the
restoration of the sea. That plan, which recommended an
investment of nearly $9 billion, was submitted to the
Legislature in May, 2007. To date, the Legislature has not
acted on the preferred alternative for the Salton Sea
Restoration; however, it has appropriated funding to the Species
Conservation Habitat (SCH) Project.
The SCH Project is being developed as a conservation measure for
the protection of the fish and wildlife species dependent on the
Salton Sea. The Project would be located at the southern end of
the Salton Sea. Alternative sites for implementing the SCH
Project are located near the mouths of the New and Alamo rivers.
The project is intended to serve as a proof of concept for the
restoration of shallow water habitat that currently supports
fish and wildlife dependent upon the Salton Sea.
The Draft Environmental Impact Statement/Environmental Impact
Report was issued August 2011. The state expects a final
certification within the next month or so.
Management of the restoration effort of the Sea is currently in
limbo. In 2010, the Legislature established the Salton Sea
Restoration Council as a state agency in the Natural Resources
Agency to oversee the restoration of the Salton Sea. For the
purpose of developing a restoration plan, the council was to
evaluate Salton Sea restoration plans and, by June 30, 2013,
report to the Governor and the Legislature with a recommended
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Salton Sea restoration plan. The council never met and is set
to be eliminated in this year's budget.
Assemblymember V. Manuel Perez has a bill, AB 939, that proposes
to assign most of the responsibilities for restoring the Salton
Sea to the Salton Sea Authority, a joint powers authority
comprised of the Counties of Imperial and Riverside, the
Imperial Irrigation District, the Coachella Valley Water
District, and the Torrez Martinez Desert Cahuilla Indian Tribe.
It remains to be seen whether or not that effort will be
successful.
PROPOSED LAW
This bill would authorize, but not require, the Secretary of the
Natural Resources Agency (Secretary) to establish an Algae
Production Program (APP) in the Imperial Valley. The purpose of
the APP is "to meet high-priority economic and environmental
goals, expedite regulatory application and review processes, and
provide grants to facilitate research and the commercial
development of algae for fuels, foods, medicines, and clean
water within the state."
If the Secretary decides to establish an APP, the bill would
require the Secretary to:
Publish a report no later than May 1, 2013, that enumerates
the environmental and economic benefits of the algae industry
and provides recommendations on all of the following:
Creation of algae production zones.
Expedited application and review of state and local
regulatory and permitting requirements including imposed by
the California Environmental Quality Act (CEQA).
Use of state lands for facilities.
Access to infrastructure including roads, electricity,
water delivery, and carbon dioxide.
Use of water and waste products.
Tax incentives.
Loan guarantees.
State procurement of commercial algae products.
Insurance underwriting.
Waivers of liability for seismic, flooding, and other
natural events.
Revenue and royalty sharing for commercial production.
Publish a rule, no later than May 1, 2013, establishing an APP
and a process for the application, review, and issuance of
grants.
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Publish a final rule to implement recommendations of the
report no later than July 1, 2013.
This bill would authorize, but no require, the Secretary to
provide grants to eligible research institutions and commercial
enterprises for research and development projects and
demonstration projects intended to lead to the commercial
development of algae.
The demonstration projects would be required to be sited
within the Agricultural Algae Cultivation District, as
designated by the secretary, at the Salton Sea, and do all of
the following:
Improve air quality by reducing fine particulates
originating in the dry sea bed.
Improve water quality in the Salton Sea that will, in
turn, stabilize marine habitats for fish and migratory
birds.
Reduce use of potable water for crop farming.
Present new options for the state's restoration plan of
the Salton Sea.
Demonstrate the scalability of agricultural algae
cultivation and production and the revenue potential to the
state.
To be eligible for a grant, an organization would have to meet
all of the following requirements:
Be incorporated as a business authorized to do business
in the state.
Provide matching funds for the proposed project.
Certify use of state funds solely for the proposed
project sited with the state.
Demonstrate the proposed project will have substantial
environmental and economic benefits to the state.
Identify a customer or customers for the product to be
developed.
Agree to a royalty or other revenue arrangement ensuring
the state's ongoing financial participation in commercially
viable operations in the Agricultural Algae Cultivation
District.
This bill also makes numerous findings and declarations
regarding the challenges at the Salton Sea and the potential
benefits of this bill in addressing some of those challenges.
ARGUMENTS IN SUPPORT
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According to the author, "AB 642 introduces new options for
clean water and clean air in the Salton Sea while developing a
commercial enterprise for algae which could be used for fuels,
foods, and medicines. The Imperial Valley presents ideal
conditions for algae cultivation and production because of its
weather, access to land, academic and commercial synergies, and
a ready workforce. The bill encourages public-private
collaboration and cost sharing, and authorizes the state to
explore revenue sharing models which could provide a significant
source of future revenue in the form of royalties or other
revenue sharing. With many states such as Texas, Arizona,
Nevada, New Mexico, and others accepting and developing an algae
market, now is the time for California to provide for a
comprehensive and aggressive algae production program to
facilitate algae investment in the state before private
investment capital is committed to other locations."
ARGUMENTS IN OPPOSITION
According to the County of Imperial, "While the county is
interested in finding solutions to the perplexing problems
associated with cleaning up and restoring the Salton Sea, this
bill appears to conflict with many of the programs we are trying
to implement at the local level. Furthermore, your bill seeks
to the Secretary of Natural Resources the authority to designate
certain areas for algae production and provides no mechanism for
local input. The bill also seems to be handing back to the
Secretary the lead role in developing efforts to clean up the
Sea."
"We see some things in your bill that we could support. The
Salton Sea certainly has some sites that could become very
successful producers of commercial scale algae for energy and
industrial purposes. However, the Counties of Imperial and
Riverside continue to have land use authority over the
permitting for any such facilities and relinquishing that
authority to the Secretary of Natural Resources or any other
state agency is not something we can support."
COMMENTS
Algae - The New Oil? Much research has been done exploring the
potential use of algae as a feedstock for biofuels and other
uses. The potential for algae farming in the Imperial Valley
could be large. Algae can produce high oil yields under a wide
range of conditions. Algae can grow in saline and brackish
water, on salt impaired soils, and use far less space than other
crop-based feedstocks. The National Renewable Energy Laboratory
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has estimated that the annual sustainable diesel potential from
algae is 1,200-10,000 gallons per acre (gpa), depending on algae
concentrations. This compares to 18 gpa for corn, 48gpa for soy
beans, and 124 gpa for rapeseed/canola.
Where Would The Projects Be Located? Under the terms of this
bill, this question would ultimately be answered by the
Secretary. However, background materials provided to committee
staff suggest that the projects would likely be located at the
south end of the Salton Sea, near the mouths of the Alamo and
New Rivers.
Who Owns Those Lands? Not the State of California. When
California became a state in 1850, it acquired approximately
four million acres of land underlying the State's navigable and
tidal waterways. Known as sovereign lands, these lands include
the beds of California's navigable rivers, lakes and streams, as
well as the state's tide and submerged lands along the State's
more than 1,100 miles of coastline and offshore islands from the
mean high tide line to three nautical miles offshore. The State
Lands Commission holds these sovereign lands for the benefit of
all the people of the State, subject to the Public Trust for
water related commerce, navigation, fisheries, recreation, open
space and other recognized Public Trust uses.
However, the Salton Sea was created after California became a
State; when Colorado River floodwater breached an irrigation
canal being constructed in the Imperial Valley in 1905 and
flowed into the Salton Sink. What is now lake-bottom was then
mostly owned by predecessors to the Imperial Irrigation District
(IID). Current ownership in the southern part of the Salton Sea
is now mostly IID and the federal government, with some tribal
lands in the more northern part of the Sea.
What Are The Secretary's Authorities Regarding The Sea? It is
not entirely clear, but the Secretary's authority over the use
of the Salton Sea's lands appears fairly limited.
The state plainly has statutory, contractual, and common law
responsibilities regarding restoring the Salton Sea (though
there may be some dispute as to the precise nature of those
responsibilities). As a part of the QSA, the Legislature
directed the Secretary to develop a Salton Sea restoration plan,
which resulted in the $9 billion preferred alternative. The
Natural Resources Agency is the lead state agency on the Species
Conservation Habitat Project. However, as noted above,
management of the restoration effort of the Sea is currently
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unresolved.
Should this bill ultimately become enacted, and should the
Secretary decide to establish an APP pursuant to this bill, one
of the issues the Secretary should address in the report to the
legislature is whether the Secretary has sufficient authorities
to implement the APP and if not, how to address that lack of
authorities. (See Amendment 1)
Relation To Salton Sea Restoration Efforts. As noted above,
there is a $9 billion restoration plan and a soon to be
certified Species Conservation Habitat Project. While lead
responsibly for restoring the Salton Sea is currently
unresolved, at some point the legislature will need to act and
clearly assign that responsibility to someone or some entity.
Without weighing in on how that should ultimately be resolved,
this bill needs to work in harmony with the ultimate restoration
strategy. (See Amendment 2).
Timing. Should the Legislature pass and the governor sign this
bill, it would go into effect on January 1, 2013. Given that
start date, this bill includes some very aggressive timelines.
The Secretary would have only four months to decide whether to
implement an algae production program, and if so:
Produce a report detailing its benefits and make
recommendations for implementation, and
Publish a rule establishing an Algae Production Program and a
process for the application, review, and issuance of grants.
The Secretary would then have two months to publish a final
rule.
Four months would be an extraordinarily quick time to produce
the report envisioned by this bill, even without any requirement
to allow public input or comment. Incidentally, it is hard to
believe that recommendations from any report regarding the
Salton Sea that didn't allow for public input would have much of
a shelf life. Moreover, rulemaking under the Administrative
Practices Act takes about a year from start to finish. A still
aggressive but more realistic timeline would provide the
Secretary six months to develop the report, and one year to
promulgate regulations. (See Amendment 3)
Funding Part I - Where Would The Money Come From? This bill
proposes to provide grants for research and development projects
and demonstration projects intended to lead to the commercial
development of algae for fuels, foods, medicines, and clean
water. However, it is not at all clear what funding source may
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be available to provide such grants.
Funding Part II - Who & What Should Be Eligible For Funding?
The bill's language is somewhat ambiguous on who should be
eligible for grants authorized by this bill and for what types
of projects. �25752.2 (b) states the secretary may give grants
to "eligible research institutions and commercial enterprises
for research and development projects and demonstration projects
intended to lead to the commercial development of algae ?" This
sentence can be read a couple of different ways.
It might mean that the grants are for two types of grantees
uniquely working on two types of projects:
Research institutions working on research and development
projects, and
Commercial enterprises working on demonstration projects
intended to lead to the commercial development of algae.
Presuming that is the intended interpretation, then the language
should more clearly reflect that intent. The language should
also more clearly delineate the requirements for each set of
projects/grantee. (See Amendment 4)
Funding Part III - Where Would The Funds Go? One requirement
for receiving grants under this bill is that the grant receiving
entity agrees to some sort of royalty or other revenue
arrangement. It is not clear where such funds would be
deposited or what they would be used for. Given that one of the
stated purposes of this bill is to improve conditions at the
Salton Sea, it might make sense to restrict the use of the
royalties or revenues to projects and programs that would aid in
restoration of the Sea. (See Amendment 5)
Other Issues.
Hyperbole - It's the Best! Algae production in the Imperial
Valley clearly has much promise, and may play an integral role
in addressing the problems at the Salton Sea, but it is by no
means a sure thing. The findings language could easily be
refined to extoll the potential benefits of this bill without
running the risk of over promising. (See Amendment 6)
Who Is Doing The Research? Research on algae for biofuels is
all the rage, and academic consortia focusing on the topic
abound. The San Diego Center for Algae Biotechnology includes
UC San Diego, San Diego State University, and Scripps
Institution of Oceanography. The National Alliance for
Advanced Biofuels and Bioproducts includes UC Davis, UCLA, UC
San Diego, and UOP. And numerous other California public and
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private institutes of higher education are also doing cutting
edge research on these issues. Instead of calling out just
the San Diego contingent, and without weighing in on who are
the leading academic institutions, the findings language could
easily be enhance to extoll the virtues of California's
intellectual prowess without picking favorites. (See Amendment
7)
Technical Issues. While we do use water for agriculture, that
water is not "potable". (See Amendment 8)
SUGGESTED AMENDMENTS
AMENDMENT 1
On page 5, between lines 16 and 17, insert:
(12) The sufficiency of the secretary's authorities
to implement an algae production program and how to address
any deficiencies in those authorities.
AMENDMENT 2
On page 5, between lines 16 and 17, and after
Amendment 1, insert:
(13) How to ensure consistency with any Salton Sea
restoration program authorized by the California
Legislature.
AMENDMENT 3
On page 5, line 18, delete "publish a rule
establishing an" and insert:
initiate the rulemaking process for the
On page 5, line 21, delete "May 1, 2013" and insert:
July 1, 2013
On page 5, line 23, delete "July 1, 2013" and insert:
July 1, 2014
AMENDMENT 4
On page 4, line 20, delete "demonstration"
On page 4, line 22, delete "and" and insert:
. Demonstration projects by commercial enterprises
On page 4, line 22, after "following" insert:
; the secretary shall give preference to research and
development projects by research institutions that would do
one or more of the following
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On page 5, line 24, delete "An organization eligible"
and insert:
A commercial enterprise, to be eligible
On page 5, line 25, delete "shall" and insert:
for a demonstration project, must
On page 5, after line 37, insert:
(f) A research institution, to be eligible for a
grant under subdivision (b) for a research and development
project, must meet all of the following requirements:
(1) Be a nonprofit or educational research
institution or consortia.
(2) Provide matching funds for the proposed project.
(3) Certify use of state funds solely for the
proposed project sited with the state.
(4) Demonstrate how the proposed project will help
lead to the commercial development of algae for fuels,
foods, medicines, and clean water within the state.
AMENDMENT 5
On page 5, after line 37, and after Amendment 4,
insert:
(g) Royalties and revenues derived pursuant to
paragraph (6) of subdivision (e) shall be deposited in the
Algae Production Program Fund, which is hereby created.
Moneys deposited in the fund shall be available, upon
appropriation by the Legislature, for programs and projects
that will aid in restoration of the Salton Sea.
AMENDMENT 6
On page 3, line 5, delete "is" and insert:
may be
On page 3, line 25, delete "will" and insert:
may
On page 4, line 4, delete "will" and insert:
should
AMENDMENT 7
On page 3, delete lines 33 and 34, on line 35, delete
"Biofuels at the University of California, San Diego, and
insert:
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(j) Many of California's public and private colleges
and universities
AMENDMENT 8
On page 4, line 27, delete "potable"
SUPPORT
Synthetic Genomics
OPPOSITION
County of Imperial
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