BILL ANALYSIS �
AB 1992
Page 1
Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1992 (Quirk) - As Amended: April 21, 2014
Policy Committee: Natural
ResourcesVote:5-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the Air Resources Board (ARB) to require
fuel suppliers subject to the Low Carbon Fuel Standard (LCFS) to
include specified minimum percentages of "very low carbon fuel"
as part of its transportation fuel sales in the state.
Specifically, this bill:
1)Authorizes ARB to require transportation fuel suppliers to
include minimum percentages, ranging from one-quarter of 1% to
2%, of very low carbon transportation fuel, as defined.
2)Defines "very low carbon transportation fuel" as fuel having a
carbon-intensity (CI) no greater than 50% of the closest
comparable petroleum fuel for that year, as measured by the
LCFS methodology.
3)Requires CI to include the indirect land use change emission,
as defined, if a food crop is used as a feedstock.
4)Provides the bill shall become inoperative five years after
ARB determines, and notifies the Secretary of State, that very
low carbon fuels reach 2% of state transportation fuel sales.
FISCAL EFFECT
Increased costs in the $150,000 to $200,000 range if ARB choses
to include very low-carbon fuel requirements in the LCFS (Cost
of Implementation Account). This bill is permissive.
COMMENTS
AB 1992
Page 2
1)Purpose. According to the author, Very low-carbon fuels will
be necessary to meet long term GHG reduction and LCFS goals.
Current alternative transportation fuels, including corn
ethanol and sugar cane ethanol provide only 5% to 25% fewer
GHG emissions than the petroleum fuels they seek to displace.
The status quo has not seen the advanced low-carbon fuel
industry develop at a sufficient rate to provide the volume of
low-carbon fuels necessary to meet future targets.
2)Background. In 2007, Governor Schwarzenegger issued Executive
Order S-1-07, which among other things, directed ARB to
consider initiating regulatory proceedings to establish and
implement the LCFS. In response, ARB adopted the LCFS
regulation in 2009, to be implemented in 2010. 2010 was a
reporting year and the first CI reduction requirement of 0.25%
began in 2011. The target increased to 0.5% in 2012 and 1% in
2013. To date, fuel suppliers have over-complied,
predominantly by blending ethanol with gasoline because
ethanol blending is required by the federal Renewable Fuel
Standard and does not require significant changes in fueling
and vehicle infrastructure. However, natural gas, biodiesel
and electricity have also been used in significant amounts to
comply with the LCFS.
3)Legal Challenges. In 2009 and 2010, three lawsuits were filed
against the LCFS by ethanol interests, two in federal court
and one in state court.
The federal lawsuits were brought by trade associations of
ethanol producers and refiners who claim the LCFS is preempted
under the Energy Independence and Security Act of 2007 and
violates the Commerce Clause of the U.S. Constitution by
assigning corn ethanol from the Midwest a CI value above that
of corn ethanol made in California.
The combined federal lawsuit (Rocky Mountain Farmers Union v.
Goldstene) was heard by the Ninth Circuit Court of Appeals,
which considered ARB's appeal of several adverse rulings and a
preliminary injunction that were issued by the lower federal
court in Fresno in December 2011. In April 2012, the Ninth
Circuit granted ARB's request for a stay of the preliminary
injunction, which allowed ARB to resume enforcement of the
LCFS during the pendency of the lawsuit.
In September 2013, the Ninth Circuit ruled the LCFS provisions
AB 1992
Page 3
were not facially discriminatory, leaving the LCFS in place
while the plaintiffs petition for review by the U.S. Supreme
Court.
The state lawsuit (Poet, LLC v. California Air Resources
Board), brought by a major ethanol producer, alleges ARB did
not fully comply with the Administrative Procedure Act (APA)
and the California Environmental Quality Act (CEQA) when
adopting the LCFS regulation. In November 2011, the Fresno
Superior Court ruled in favor of ARB on all 14 causes of
action raised by the plaintiffs.
Plaintiffs then appealed the case to the Court of Appeal in
Fresno, which found both APA and CEQA defects with ARB's
process of adopting the LCFS. As a result, ARB has proposed
adopting an alternative regulation for diesel and readopting
the LCFS regulation to comply with the court's instructions.
Meanwhile, the LCFS is frozen at its 2013 (1% CI reduction)
level.
In addition to revising the regulation to comply with the
Court of Appeal ruling, ARB has proposed several other
modifications related to adjusting compliance schedules,
determining CI, cost containment in the credit market, and
other assorted issues.
4)Existing commercial fuels are available to meet the mandate
proposed by the bill . According to ARB, the following fuels
would meet the definition set by AB 1992:
a) Biodiesel produced from used cooking oil, corn oil
by-product, or tallow.
b) Renewable diesel produced from used cooking oil, corn
oil by-product, tallow, or fish oil.
c) Biomethane from landfills, dairy digesters, and food and
green waste digesters.
d) Ethanol produced from molasses by-product.
It is estimated that fuels meeting the very low carbon fuel
definition in this bill made up 0.95% of the total volume of
fuels produced in 2013.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081
AB 1992
Page 4