BILL ANALYSIS
Appropriations Committee Fiscal Summary
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| |87(Costa) |
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|Hearing Date: 9/10/01 |Amended: 9/7/01 |
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|Consultant: Lisa Matocq |Policy Vote: E, U & C |
| |6-2 |
| | |
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BILL SUMMARY: SB 87xx appropriates $25 million from the
General Fund to the California Energy Commission (CEC) to
implement the Ethanol Production Incentive (EPI) program,
as specified.
Fiscal Impact (in thousands)
Major Provisions 2001-02 2002-03
2003-04 Fund
EPI program $25,000* Potential unknown cost
General
pressures in outyears
*Appropriated in the bill.
STAFF COMMENTS: This bill meets the criteria for referral
to the Suspense File. Current law requires the CEC to
administer an incentive program to encourage in-state
production of liquid fuels, including ethanol, however, the
program has never been funded. According to a recent
report by the CEC, California may need 700 million gallons
of ethanol per year beginning in 2003 to replace MTBE.
Currently, two facilities in the state produce a combined
total of about 5-7 million gallons annually.
Existing federal law provides a partial excise tax
exemption of $0.053/gal. on ethanol. In addition, small
ethanol producers are eligible for a production credit of
$0.10 per gallon, up to 15 million gallons per year. From
1981 to 1984, California had a $0.03/gal. gasoline excise
tax exemption on ethanol blends. This bill specifies that
the incentive payments may be based on the difference
between the market price of ethanol and a target price to
be established by the CEC, subject to the following
conditions: the payment for ethanol produced from starch,
sugar, or alcohol products originating in California shall
be up to $0.20/gal., up to $0.40/gal for ethanol produced
from cellulose biomass originating in the state, and an
unspecified amount for ethanol produced from agricultural
products not originating in the state. The bill also
specifies that in order to be eligible for the production
incentives, the ethanol must be produced from agricultural,
forestry, or urban biomass waste of which at least 50%
originated in the state. In addition, the bill:
creates the EPI Account, a continuously appropriated
fund,
requires incentive payments to be awarded to lowest
bidders in a competitive solicitation process,
specifies that incentive payments may be made for up to
eight years from the date of the facility's initial
online operation,
authorizes CEC to award production incentives in the form
of loans or grants,
allows CEC to use up to 2% of the funds appropriated for
administration,
states legislative intent that the program be fully
funded through 2010-11,
SB 87xx (Costa)
Page Two
requires the CEC to report to the Legislature and
Governor annually.
STAFF RECOMMENDS that the bill be amended to require the
CEC to take into consideration, in establishing the amount
of the incentive payment, the producer's actual costs, and
to include a provision for periodically reviewing, and
updating, if necessary, the amount of the incentive payment
based on changes in production costs, market price, and
related factors.
According to the author's staff, although this is intended
to be a one-time appropriation, additional funding could be
needed in outyears. Given the intent language in the bill
to "fully fund" the program through 2010-11, there could be
unknown, potentially significant, cost pressures in
subsequent years.