BILL NUMBER: SBX2 87 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 21, 2001
INTRODUCED BY Senator Costa
(Coauthor: Senator Ortiz)
(Coauthors: Assembly Members Alquist, Briggs, Dickerson,
Florez, and Matthews)
JUNE 18, 2001
An act to amend, repeal, and add Section 25678 of the
Public An act to add Chapter 7.6 (commencing with
Section 25660) to Division 15 of the Public Resources Code,
relating to energy resources, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 87, as amended, Costa. Biomass
Ethanol: biomass resources.
Existing law requires the State Energy Resources Conservation and
Development Commission to establish a grant program that provides a
$0.40 per gallon production incentive for liquid fuels fermented in
this state from biomass and biomass-derived resources produced in
this state.
This bill , until January 1, 2005, would make the $0.40
per gallon production incentive available for an unspecified amount
of fuel production and a $0.20 per gallon production incentive for
the next unspecified amount of fuel production, up to an unspecified
total amount would require the commission to adopt
guidelines to establish a program to foster the development of new
in-state production facilities to produce ethanol for use as an
additive in California transportation fuel. The bill would require
the commission to provide producers of ethanol and other liquid fuels
a market-based production incentive, including a greater production
incentive for the production of ethanol from cellulose biomass. The
bill would create the continuously appropriated Ethanol Production
Incentive Account in the General Fund .
This bill would appropriate $25,000,000 from the General Fund to
the Ethanol Production Incentive Account for use by the
commission for the purpose of funding grants pursuant to the bill.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares that
SECTION 1. Chapter 7.6 (commencing with Section 25660) is added to
Division 15 of the Public Resources Code, to read:
CHAPTER 7.6. ETHANOL PRODUCTION INCENTIVE PROGRAM
25660. The Legislature finds and declares all of the following:
(a) The Governor of the State of California has found that "on
balance, there is a significant risk to the environment from using
MTBE in gasoline in California" and signed Executive Order D-5-99
banning its use beginning on January 1, 2003.
(b) Ethanol is the only available oxygenate that has undergone
full environmental review and has been approved by the California
Environmental Policy Council as a substitute for MTBE in order to
meet federal oxygen and State Air Resources Board requirements
governing the use of California transportation fuel.
(c) United States ethanol production capacity is concentrated in
the Midwestern states and the planned expansion of that industry may
not be sufficient to meet the cumulative ethanol demand resulting
from the actions of California and other states.
(d) California currently has little in-state ethanol production
capability and is unable to supply the projected ethanol demand in
California gasoline in 2003. California must compete with other
states for Midwest ethanol supplies, creating the potential for
future supply and demand imbalances, ethanol price volatility, and
resultant gasoline price volatility in California.
(e) California produces 350 commercial agricultural commodities on
over nine million acres of irrigated cropland, many of which
commodities can serve as suitable sources for ethanol production,
such as wheat, corn, barley, sugar beets, sugar cane, sorghum, and
other high starch and sugar sources.
(f) California also has large biomass resources in the form of
forest, agricultural, and urban waste that create landfill disposal
and forest health and other environmental problems, which could be
alleviated by converting these biomass wastes to ethanol.
(g) An in-state ethanol production industry will create jobs,
stimulate rural economies, return billion of dollars in economic
activity to the state's economy, and provide forest health, air
quality, and water quality benefits.
(h) It is in the State of California's interest to create a
program to provide incentives for the in-state production of ethanol.
By creating this program, it is the goal of the State of California
to create an industry that can supply at least 50 percent of the
ethanol needed for use in California transportation fuel by 2010.
25660.1. (a) The commission shall establish the Ethanol
Production Incentive Program to foster the development of new
in-state production facilities to produce ethanol for use as an
additive in California transportation fuel.
(b) The program shall provide producers of qualifying ethanol and
other liquid fuels a market-based production incentive. Incentive
mechanisms may include a program that will pay for the difference
between the market price of fuel per gallon and a target price for
the fuel established by the commission in its guidelines to implement
the program, and a competitive solicitation process whereby
production incentives are awarded. The commission shall establish a
tiered incentive approach to account for various external factors,
including a greater production incentive for producing ethanol from
cellulose biomass. The incentive for producing ethanol from starch
products may not exceed twenty cents ($0.20) per gallon, and the
incentive for producing ethanol from cellulose biomass may not exceed
forty cents ($0.40) per gallon.
(c) To qualify for production incentives, the ethanol or other
liquid fuel shall be produced from agricultural products as well as
forestry, agricultural, and urban biomass waste, of which at least 50
percent originated in California and is produced in new or enhanced
facilities located in this state and placed in operation on or after
the effective date of this statute.
(d) The commission shall award production incentives to producers
of qualifying ethanol and other liquid fuels through an auction or
other competitive solicitation process whereby production incentives
are awarded to the lowest bidders, provided that no single bidder or
production facility shall receive production incentives under any of
the following circumstances:
(1) In excess of the maximum levels specified pursuant to
subdivision (b).
(2) For a period exceeding eight years from the date of the
facilities initial online operation.
(3) For any qualifying ethanol or other liquid fuel that was sold
at rates equal to or greater than a target price as determined by the
commission.
(4) For any qualifying ethanol or other liquid fuel produced that
was used onsite by the facility and not available for use as an
additive in California transportation fuel.
(5) For any qualifying ethanol or other liquid fuel that was
produced on or after January 1, 2011.
(6) For ethanol used as a California transportation fuel.
(e) The commission shall limit the amount of funding available for
any single bidder or production facility.
(f) The commission may require an applicant competing for funding
to place a forfeitable bid bond or other financial guarantee as an
assurance of the applicant's intent to move forward with the proposed
project. The amount of the bond or guarantee may not exceed 10
percent of the total amount of funding requested by the applicant.
(g) The commission shall develop and adopt guidelines governing
the grant program authorized under this section. The guidelines
shall be adopted at a publicly noticed meeting and all interested
parties shall be provided an opportunity to comment either orally or
in writing. The commission shall provide not less than 30 days
notice for the public meeting. Subsequent substantive changes to
adopted guidelines shall be adopted by the commission at a public
meeting upon written notice to the public of not less than 10 days.
Notwithstanding any other provision of law, the guidelines are exempt
from the requirements of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2 of the Government Code.
(h) Funds to further the purposes of this section may be committed
for multiple years.
(i) Awards made pursuant to this section are grants, subject to
appeal to the commission upon a showing that factors other than those
described in the guidelines adopted by the commission were applied
in making the awards and payments. Any actions taken by an applicant
to apply for, or become or remain eligible and certified to receive,
payments or awards, including satisfying conditions specified by the
commission, do not constitute the rendering of goods, services, or a
direct benefit to the commission.
(j) Awards made pursuant to this section are exempt from the
provisions, including the repayment provisions, specified in Chapter
7.4 (commencing with Section 25645).
25660.2. (a) The Ethanol Production Incentive Account is hereby
created in the General Fund for the purpose of funding the grant
program established in Section 25660.1.
(b) Notwithstanding Section 13340 of the Government Code, the
moneys deposited into the Ethanol Production Incentive Account shall
be continuously appropriated to the commission, without regard to
fiscal year, for the purposes of Section 25660.1.
(c) It is the intent of the Legislature to fully fund this program
through the 2010-11 fiscal year.
(d) The commission may use up to 2 percent of the funds
appropriated to the Ethanol Production Incentive Account to develop
guidelines and to implement the program.
(e) The commission shall provide the Governor and the Legislature
with an annual report that provides the status of the program and the
extent to which account funds have been used. The commission shall
produce a final report that describes the success of the program and
makes recommendations on additional steps to foster the waste-based
or other liquid transportation fuel production industry in
California.
SEC. 2. The sum of twenty-five million dollars ($25,000,000) is
hereby appropriated from the General Fund to the Ethanol Production
Incentive Account for use by the State Energy Resources Conservation
and Development Commission for purposes of implementing the grant
program established by Section 25660.1 of the Public Resources Code.
ethanol has multiple benefits for the citizens of
California, including assisting California in becoming more
self-sufficient for fuel, improving air and water quality, turning
domestic agricultural crops and byproducts into useable fuel,
reducing dependence on fossil fuels, meeting federal mandates,
creating in-state jobs, and assisting in strengthening local
economies.
(b) The Legislature further finds and declares that California is
home to over nine million acres of irrigated cropland and over 150
million acres of forest and wildland resources that are available to
create indigenous resources for use in ethanol production.
SEC. 2. Section 25678 of the Public Resources Code is amended to
read:
25678. (a) (1) The commission shall establish a grant program
that provides a forty cent ($0.40) per gallon production incentive
for liquid fuels fermented in this state from biomass and
biomass-derived resources produced in this state.
(2) The forty cent ($0.40) per gallon production incentive
described in paragraph (1) shall be available for the first ____
million gallons of liquid fuels produced per calendar year at any one
facility. An additional twenty cent ($0.20) per gallon production
incentive shall be available for the next ____ million gallons
produced per year up to a total of ____ million gallons per year.
(b) Eligible liquid fuels include, but are not limited to,
ethanol, methanol, and vegetable oils. Eligible biomass resources
include, but are not limited to, agricultural products and
byproducts, forestry products and byproducts, and industrial wastes.
(c) The commission shall adopt rules and regulations necessary to
implement the program.
(d) Prior to determining an applicant eligible for participation
in the production incentive program, the commission shall find, among
other things, that the production techniques employed will lead to a
net increase in the amount of energy available for consumption.
(e) This section shall remain in effect only until January 1, 2005,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2005, deletes or extends that date.
SEC. 3. Section 25678 is added to the Public Resources Code, to
read:
25678. (a) The commission shall establish a grant program that
provides a forty cent ($0.40) per gallon production incentive for
liquid fuels fermented in this state from biomass and biomass-derived
resources produced in this state.
(b) Eligible liquid fuels include, but are not limited to,
ethanol, methanol, and vegetable oils. Eligible biomass resources
include, but are not limited to, agricultural products and
byproducts, forestry products and byproducts, and industrial wastes.
(c) The commission shall adopt rules and regulations necessary to
implement the program.
(d) Prior to determining an applicant eligible for participation
in the production incentive program, the commission shall find, among
other things, that the production techniques employed will lead to a
net increase in the amount of energy available for consumption.
(e) This section shall become operative January 1, 2005.
SEC. 4. The sum of twenty-five million dollars ($25,000,000) is
hereby appropriated from the General Fund to the State Energy
Resources Conservation and Development Commission for the purpose of
funding grants for the production of liquid fuels derived from
biomass and biomass-derived resources pursuant to Chapter 7.7
(commencing with Section 25678) of Division 15 of the Public
Resources Code.