BILL ANALYSIS �
AB 1992
Page 1
ASSEMBLY THIRD READING
AB 1992 (Quirk)
As Amended April 21, 2014
Majority vote
NATURAL RESOURCES 5-3 APPROPRIATIONS 12-5
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|Ayes:|Chesbro, Garcia, |Ayes:|Gatto, Bocanegra, |
| |Muratsuchi, Stone, | |Bradford, |
| |Williams | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Holden, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Dahle, Bigelow, Patterson |Nays:|Bigelow, Donnelly, Jones, |
| | | |Linder, Wagner |
| | | | |
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SUMMARY : 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 defined. 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."
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. Examples of currently eligible fuels are
biogas from dairy or landfill sources, biodiesel from used
cooking oil or tallow, and ethanol from molasses by-products.
3)Requires CI to include the indirect land use change (iLUC)
emission, as defined, if a food crop is used as a feedstock.
4)Provides that 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.
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5)Makes related findings.
EXISTING LAW :
1)Pursuant to the California Global Warming Solutions Act (AB 32
(N��ez), Chapter 488, Statutes of 2006), requires ARB to adopt
a statewide greenhouse gas (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.
2)Pursuant to Executive Order S-01-07, sets a statewide goal to
reduce the CI of California's transportation fuels by at least
10% by 2020. The order required ARB to consider adopting a
LCFS to implement this goal. In 2009, ARB adopted the LCFS as
a regulation. The LCFS attributes CI values to a variety of
fuels based on direct and indirect GHG emissions, including
land use changes caused by production of biofuels. The LCFS
permits producers of certain low-CI fuels to opt in to LCFS
regulation for the purpose of generating credits, which can be
banked and used for compliance, sold to regulated parties, and
purchased and retired by regulated parties. In addition, LCFS
credits can be exported to other GHG emission reduction
programs.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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).
COMMENTS : In 2007, Governor Schwarzenegger issued Executive
Order S-1-07, calling for a reduction of at least 10% in the CI
of California's transportation fuels by 2020. The order
instructed the California Environmental Protection Agency to
coordinate activities between the University of California, the
California Energy Commission and other state agencies to develop
and propose a draft compliance schedule to meet the 2020 target.
The Order further 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
beginning 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
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suppliers have over-complied, predominantly by blending ethanol
with gasoline, which is preferred in the near term 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.
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 that the LCFS is
preempted under the Energy Independence and Security Act of 2007
and violates the Commerce Clause of the U.S. Constitution (e.g.,
by assigning corn ethanol from the Midwest a CI value above that
of corn ethanol made in California). Plaintiffs claimed that
corn ethanol will eventually be excluded from the California
market in favor of more advanced biofuels that have a lower CI
value. ARB contended that many corn ethanol producers from the
Midwest have in fact registered with ARB with CI values that are
well below gasoline and, indeed, even less than California corn
ethanol. Plaintiffs also claimed that California is
impermissibly regulating interstate commerce beyond its borders
by regulating aspects of a fuel's lifecycle that occur outside
of the state's borders. The combined federal lawsuit (Rocky
Mountain Farmers Union v. Corey) 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 that the LCFS provisions 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 that 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
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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.
According to ARB, the following fuels would meet the definition
set by this bill:
1) Biodiesel produced from used cooking oil, corn oil
by-product, or tallow.
2) Renewable diesel produced from used cooking oil, corn
oil by-product, tallow, or fish oil.
3) Biomethane from landfills, dairy digesters, and food and
green waste digesters.
4) Ethanol produced from molasses by-product.
Fuels meeting this bill's definition made up 0.95% of the total
volume of fuels produced in 2013. It's not clear the bill would
achieve the author's intent, because a purchase mandate, even at
2%, might be met by these existing waste-based fuels, which tend
to come from sources out of state and abroad, including Central
and South America and Asia.
The existing LCFS program seems to create a stronger incentive
to produce very low-carbon fuels by placing the highest market
value on fuels that achieve the lowest CI (and therefore
generate the most credits). Of course, this incentive depends
on the LCFS remaining in effect, with increasing targets.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0003657
AB 1992
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