BILL NUMBER: SBX2 87 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 12, 2001
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: 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 California transportation fuel. The bill
would require the commission to provide producers of ethanol 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 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
California transportation fuel.
(b) The program shall provide producers of qualifying ethanol 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, 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 shall be
produced from agricultural products or forestry, agricultural, or
urban biomass waste, of which at least 50 percent originated in
California and is produced 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 section.
(d) The commission shall award production incentives to producers
of qualifying ethanol 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
facility's initial online operation.
(3) For any qualifying ethanol that was sold at rates equal to or
greater than a target price as determined by the commission.
(4) For any qualifying ethanol produced that was used onsite by
the facility and not available for use as California transportation
fuel.
(5) For any qualifying ethanol produced on or after January 1,
2011, from products originating in California, or for qualifying
ethanol produced on or after January 1, 2007
2008 , from products not originating in California.
(6) If the commission receives eligible bids, comparable for costs
and other pertinent terms as determined by the commission, from a
producer using products originating entirely in California and a
producer using products not originating entirely in California, the
commission shall first award the production incentive to the producer
using products originating entirely in California.
(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.
(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.
(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.
(i) Funds to further the purposes of this section may be committed
for multiple years.
(j) Grants or loans made pursuant to this section are, 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.
(k) In awarding grants, the commission shall structure the
production incentive to eliminate the continued need for the
incentive by producers at the end of the contracted term of the
production incentive.
25660.2. (a) The Ethanol Production Incentive Account is hereby
created in the General Fund for the purpose of funding the 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 program
established by Section 25660.1 of the Public Resources Code.