BILL NUMBER: SBX2 87 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 7, 2001
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 add Chapter 7.6 (commencing with Section 25660) to
Division 15 of , and to repeal Chapter 7.7 (commencing with
Section 25678) of, the Public Resources Code, relating to
energy resources, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 87, as amended, Costa. Ethanol: biomass resources
production incentives .
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 would repeal that grant program and instead 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 originating in California . The
bill would also require the commission to establish production
incentives for ethanol produced from agricultural products not
originating in California. 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
the production incentive program .
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. 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 ,
sugar, or alcohol products originating in California may not
exceed twenty cents ($0.20) per gallon, and the incentive for
producing ethanol from cellulose biomass originating in
California may not exceed forty cents ($0.40) per gallon.
The commission shall also establish production incentives for
ethanol produced from agricultural products not originating in the
state. The commission, to the extent it determines feasible, shall
allocate a percentage of production incentives awarded pursuant to
this section to ethanol produced from cellulose biomass, consistent
with the intent of the Legislature to encourage in-state ethanol
production that achieves air quality and waste reduction benefits.
(c) To qualify for production incentives, the ethanol or
other liquid fuel shall be produced from agricultural
products as well as or forestry,
agricultural, and or urban biomass
waste, of which at least 50 percent originated in California and is
produced in new or enhanced at new facilities
or by new production capacity at existing facilities located
in this state and placed in operation on or after the effective date
of this statute section .
(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 facility's 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 , from
products originating in California, or for qualifying ethanol
produced on or after January 1, 2007, from products not originating
in California .
(6) For ethanol used as a California transportation fuel.
(e) The commission may award production incentives in the
form of either loans or grants, upon making a determination as to the
mechanism that will produce and sustain the greatest public benefit.
(f) The commission shall limit the amount of funding
available for any single bidder or production facility.
(f)
(g) 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)
(h) 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)
(i) Funds to further the purposes of this section may be
committed for multiple years.
(i) Awards
(j) Grants or loans 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. Chapter 7.7 (commencing with Section 25678) of
Division 15 of the Public Resources Code is repealed.
SEC. 3. 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. ____
CORRECTIONS Text -- Pages 4 and 5. ____