BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 1455
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Kehoe
VERSION: 8/24/12
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: August 31, 2012
SUBJECT:
Alternative fuels and vehicle technology programs: funding
DESCRIPTION:
This bill extends until December 31, 2023 extra fees on vehicle
registrations, boat registrations, and tire sales in order to
fund the AB 118, Carl Moyer, and AB 923 programs that support
the production, distribution, and sale of alternative fuels and
vehicle technologies, as well as air emissions reduction
efforts. This bill suspends until 2024 the Air Resources
Board's (ARB) regulation requiring gasoline refiners to provide
hydrogen fueling stations and instead allocates up to $220
million of these fee funds to construct and operate retail
hydrogen fueling stations.
ANALYSIS:
AB 118 Programs
AB 118 (N��ez), Chapter 750, Statutes of 2007, creates three
programs:
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.
The Air Quality Improvement Program , which the ARB administers
in consultation with local air districts to provide competitive
grants to fund projects to reduce criteria air pollutants,
improve air quality, and support research to improve the air
quality impacts of alternative fuels and vehicles, vessels, and
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equipment technologies.
The Enhanced Fleet Modernization Program , under which ARB, in
consultation with the Bureau of Automotive Repair (BAR),
provides for the voluntary retirement of passenger vehicles and
light and medium duty trucks that are high polluters.
AB 118 provides, upon appropriation by the Legislature,
approximately $180 million annually until 2016 for these
programs. These funds come from additional fees on vehicle
registrations 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 to fund research. Specifically, AB 118 raised the
following fees on vehicle and vessel registrations from July 1,
2008 until January 1, 2016:
A $3 additional fee on the annual vehicle registration
fee.
An $8 increase in the Smog Abatement Fee, paid to register
vehicles that are less than six model years old and
therefore exempt from smog check.
A $10 increase (from $10 to $20) of the fee to originally
register a vessel in California.
A $5 increase of the fee for special identification plates
for construction equipment, farm trailers, cotton trailers,
logging vehicles, and cemetery equipment.
This bill :
1.Extends for eight additional years the fees on vehicles and
boats that AB 118 imposed so that they continue until December
31, 2023.
2.Mandates that the CEC allocate funds each year from its AB 118
program to construct and operate a hydrogen fueling network
that is sufficient to provide convenient fueling to vehicle
owners and that expands as the market for hydrogen-powered
vehicles grows. Pursuant to this requirement, the CEC;
Must fund a network that includes at least 100 fueling
stations;
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Must allocate $20 million for the first three years and
then up to $20 million each year thereafter to meet this
requirement:
May defer its allocation for this purpose if hydrogen
vehicles are not coming to market quickly enough to warrant
these fueling stations; and
May cease to provide funding for this network of
hydrogen fueling stations only if it determines, in
consultation with the ARB, that the private sector is
establishing hydrogen fueling stations without the need for
government subsidy.
Carl Moyer and AB 923 Programs
AB 1571 (Villaraigosa), Chapter 923, Statutes of 1999,
established the Carl Moyer Memorial Air Quality Standards
Attainment Program through which ARB provides grants to offset
the incremental costs of purchasing or retrofitting engines in
order to reduce specified air emissions. The Carl Moyer program
originally received General Fund appropriations.
In 2004, AB 923, Chapter 707, expanded the Carl Moyer program to
cover additional pollutants and engines, imposed a 75-cent fee
on tire sales to fund the Moyer Program, and established a
related program through local air districts. All of its
provisions will sunset on January 1, 2015.
Existing law imposes a basic vehicle registration fee of $46,
plus a $23 surcharge for additional personnel for the California
Highway Patrol, and authorizes local agencies to impose separate
vehicle registration fee surcharges in their respective
jurisdictions for a variety of special programs, including the
AB 923 program. AB 923 specifically authorizes local air
districts, until January 1, 2015, to levy a surcharge of up to
$6 on registration fees of motor vehicles registered within that
district. After January 1, 2015, the maximum surcharge that an
air district may levy is reduced to $4 per registered vehicle.
Under AB 923, revenue from the first $4 of the $6 surcharge must
be used to reduce air pollution from motor vehicles and to carry
out related planning, monitoring, enforcement, and technical
studies necessary to implement the California Clean Air Act of
1988. Revenue from the next $2 may only be used to implement
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the specified programs that the district determines remediate
air pollution harms created by motor vehicles.
This bill :
1.Extends the Carl Moyer Program, as amended by AB 923, until
December 31, 2023, including the fee on tire sales to fund the
program.
2.Extends the AB 923 vehicle registration surcharges until
December 31, 2023.
3.Requires ARB, no later than July 1, 2013, to convene a working
group to evaluate the policies and goals contained within the
Carl Moyer and AB 923 programs.
Clean Fuels Outlet
ARB adopted its Clean Fuels Outlet (CFO) Regulation to provide
fueling stations for fuel to meet the needs of those driving
clean, alternative fuel vehicles. When it first began work on
the regulation in 1990, ARB planned to use it as a tool to
provide methanol, ethanol, and compressed natural gas fueling
stations once a certain number of vehicles using those fuels
were certified in California. Those vehicles were not
forthcoming, and ARB last updated the regulation in 2000.
In January of this year, however, ARB considered and passed
amendments to the regulation to require major refiners and
importers of gasoline to provide alternative fuel fueling
stations when the number of vehicles using a particular
alternative fuel reaches 10,000 within an air basin or 20,000
statewide with specified adjustments. Refiners and importers of
gasoline would provide these alternative fueling stations in
proportion to their market share but would not provide fueling
stations for electric vehicles. This update to the Clean Fuels
Outlet Regulation arose as part of ARB's work to meet
California's air quality and greenhouse gas emission reduction
goals but not has been finalized by the Office of Administrative
Law as required by state law.
This bill prohibits ARB, until 2024, from finalizing the January
amendments to its Clean Fuels Outlet Regulation or to enforce
any regulation that has the effect of requiring any person to
construct, operate, or provide funding for the construction or
operation of any publicly available hydrogen fueling station.
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Alternative fuels goal
In 2005, the Legislature passed and Governor signed AB 1007
(Pavley), Chapter 371, which required the CEC, in partnership
with ARB and other specified state agencies, to develop and
adopt a state plan to increase the use of alternative
transportation fuels by June 30, 2007. The CEC adopted the
State Alternative Fuels Plan at its December 5, 2007 meeting.
The plan outlined specific strategies and targets to increase
the use of alternative fuels.
This bill requires, beginning November 1, 2015, and every two
years thereafter, the CEC and ARB to report on the status of the
state's alternative transportation fuel use and directs the CEC
and ARB to update the economic analysis used to develop and
review ARB's regulations to more accurately assess the future
costs of petroleum-based and alternative fuels.
COMMENTS:
1.Purpose . Proponents note that California suffers from some of
the worst air quality in the nation, with over 70% of our air
pollution coming from cars, trucks, trains, and other mobile
sources. Proponents further note that the state's three major
clean transportation programs -- AB 118, the Carl Moyer
Program, and the AB 923 Program -- are set to expire or to
lose their current funding source in the next few years. To
address this air pollution problem and help achieve the
state's climate change goal, the author has joined together in
a single bill the extension of these three programs and the
fees that support them.
Fuel suppliers writing in support of the bill note that while
this is a late-amended measure, it deals with a variety of
ongoing, contentious issues on funding and state support for
regulatory burdens placed on businesses. They state that
businesses struggling to deal with a sour economy will
continue to receive support for a wide array of regulatory
mandates including diesel retrofits, alternative energy and
fuels mandates, stationary source emission controls, and other
requirements. This bill provides seed money to develop
alternative fuel infrastructure that supporters note is
especially important to small businesses.
2.Abrogating a regulation . Typically state agencies object
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strenuously when the Legislature considers passing a bill to
override a regulation that agency has or is working on
adopting. This bill is unusual in that the ARB strongly
supports the bill and appears to have negotiated its contents,
which include proscribing ARBs current efforts to amend its
Clean Fuels Outlet Regulation and prohibiting it from adopting
a similar regulation for the next 12 years.
3.How much money ? The extension of the vehicle registration
fees, trailer fees, tire fees, and boat registration fees in
this bill will result in approximately $180 million per year
for an additional eight years for the AB 118-related fees and
approximately $30 million per year for an additional nine
years for the Carl Moyer Program and the state's waste tire
program. In addition, this bill extends the $2 surcharge that
some air districts, including the South Coast and Sacramento,
have imposed on vehicles registered in their jurisdiction.
This bill, therefore, will result in about $2 billion in
additional fees on California vehicle and boat owners.
4.Choosing hydrogen . This bill directs up to $220 million ($20
million per year for three years plus up to $20 million per
year for another eight years) of AB 118 revenues to the
construction and operation of hydrogen fueling stations. When
the Legislature adopted AB 118 in 2007, it included
language stating that its funds would be spent to develop and
deploy fuels "without adopting any one preferred fuel or
technology." This bill makes a major change to that intent,
choosing hydrogen as a clear winner in the competition for the
CEC's AB 118 funds.
This bill requires the CEC to fund enough hydrogen stations to
make fueling convenient to the owners of hydrogen vehicles or
until the private sector takes over building and operating
stations. According to the CEC, it currently costs about $1.5
million to construct a hydrogen fueling station. Currently,
the CEC requires a match of non-state funds, so it provides
about $1 million per station. The committee may wish to
consider if it is appropriate to reserve such a large
proportion, or any proportion, of AB 118 funds for the
construction and operation of hydrogen fueling stations.
5.What if the Hydrogen Highway is a dead end ? Under this bill,
if the number of hydrogen vehicles does not increase, then ARB
and the CEC may determine there is not a need for all of the
bill's annual $20 million allocation for hydrogen fueling
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stations. In such a case, the bill allows the CEC to defer
the allocation of funds. The AB 118 funds that the bill
reserves for hydrogen would then, presumably, remain unspent.
It is unclear under the bill what happens if the number of
hydrogen vehicles in the state never grows to a level needing
a fueling network. The committee may wish to consider whether
it is appropriate to allocate up to $220 million for hydrogen
fueling stations without a plan to return those funds if the
stations are not built and also whether the bill adequately
guards against building stations that only a small number of
vehicles will ever use.
6.Opposition . Opponents object to shifting the burden of
installing hydrogen fueling stations, as required under ARB's
proposed rules, to consumers who own conventional
gasoline-powered vehicles. They assert that this is a tax on
many to pay for hydrogen fueling stations for few. They note
that with the poor economic climate in our state, there is no
reason to increase the costs of vehicle ownership.
Further, while noting the importance of the Carl Moyer Program
to many different industries in California, they oppose tying
the continuance of this program to the lengthy extension of
various fees and programs without thorough review of the
existing programs or cost benefit analysis. These fee
extensions have been introduced in the last days of session
without public review or comment, yet they will have millions
of dollars of impact on Californians who will pay them.
Opponents also wonder why in the last week of a two-year
session the Legislature is considering a bill to extend well
over $1 billion in vehicle fees that will not expire for two
to three years in order to build hydrogen fueling stations.
7.Proposition 26 . Proposition 26, which passed in November
2010, requires that any "change in statute which results in a
taxpayer paying a higher tax must be imposed by an act passed
by not less than two-thirds of all members elected to each of
the two houses of the Legislature." Because this bill extends
the additional fees on vehicle and boat registrations and a
portion of the tire fee, and because these fees are deemed
taxes under Prop. 26, this bill requires a two-thirds vote.
8.Concurrence hearing . This bill is back in the Senate on
concurrence and has been referred to this committee pursuant
to rule 29.10 because Assembly amendments add the provisions
that relate to AB 118, the Carl Moyer and AB 923 programs, and
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the Clean Fuels Outlet Regulation. As passed by the Senate,
the bill included only the provisions related to implementing
the state's alternative fuels goal. At today's 29.10 hearing,
the committee may not amend the bill further and may only hold
the bill or return the bill as approved by the committee to
the Senate floor.
Assembly Votes:
Floor: >
Appr: 10 - 4
Nat Res: 6 - 3
POSITIONS: (Communicated to the committee before 5 PM on
Thursday, August 30,
2012)
SUPPORT: Air Resources Board
Bay Area Air Quality Management District
California Energy Commission
California Independent Oil Marketers Associaton
California Service Station and Auto Repair
Assocation
South Coast Air Quality Management District
Western States Petroleum Association
One individual
OPPOSED: Auto Nation
California New Car Dealers Association