BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 768
                                                                  Page  1

          Date of Hearing:   May 18, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 768 (Gatto) - As Amended:  April 25, 2011 

          Policy Committee:                              Natural 
          ResourcesVote:6-0
                        Transportation                        14-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              No

           SUMMARY  

          This bill requires the Air Resources Board (ARB) to allow an 
          out-of-state producer of biomethane to generate Low-Carbon Fuel 
          Standard (LCFS) credits through the sale of biomethane 
          distributed to California consumers through gas swaps if the 
          producer can demonstrate a physical pathway to California 
          through the use of pipelines. 

           FISCAL EFFECT  

          Minor annual costs to ARB, no more than tens of thousands of 
          dollars, to review producer demonstrations of its use of 
          pipelines connected to California.  (Air Pollution Control 
          Fund.)

           COMMENTS  

           1)Rationale  .  The author finds it appropriate to allow 
            biomethane producers the flexibility to use gas swaps for 
            purposes of LCFS credit because, the author contends, such 
            swaps result in the use of biogas in California despite the 
            lack of physical delivery OF a given unit of biogas to the 
            state.

           2)Background.  ARB adopted in 2009 the LCFS regulation as an 
            early action measure to achieve greenhouse gas reductions 
            required by AB 32 (N��ez, Chapter 488, Statutes of 2006).  The 
            regulation allows producers of certain alternative fuels, 
            including biogas, to generate tradable LCFS credits, provided 
            the producer can demonstrate a physical pathway by which the 
            fuel enters the state for use by California consumers.  The 
            regulation does not allow gas swaps, also known as 






                                                                  AB 768
                                                                  Page  2

            displacement trade contracts, in which the producer 
            demonstrates that gas injected into a pipeline outside of 
            California is credited for an equal amount of gas removed from 
            the pipeline for use in California, even though the actual gas 
            subject to the credit is never delivered to California. ARB is 
            required to review the LCFS regulation in 2012 and 2015, which 
            will include public participation and benefit from an ARB 
            staff review to be completed this year.  Changes to the 
            regulation such as that required by this bill could be 
            considered during the review and adopted by the board.  
             
           3)Support  .  This bill is supported by Clean Energy and Cambrian 
            Energy, both of whom could make use of the bill's gas swap 
            provisions, and the Coalition for Clean Air.

           4)Opposition.   There is no formal opposition registered to this 
            bill.

           Analysis Prepared by  :    Jay Dickenson / APPR. / (916) 319-2081