BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 625 - Costa Hearing
Date: April 24, 2001 S
As Amended: April 23, 2001 FISCAL B
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DESCRIPTION
Current law , the Agricultural Industry Energy Program
(AIEP), permits loans to be made for the purchase of
equipment and services for energy efficiency and
development demonstration projects including, but not
limited to, the production of methane or ethanol, the use
of wind, photovoltaics, and other sources of power.
Current law allocates $15 million to the California Energy
Commission (CEC) in grants to be used for pilot projects
designed to encourage the development of bio-gas digestion
power production technologies. Of the $15 million, $10
million shall be used to provide grants to encourage the
development of manure methane power production projects on
California dairies. The remaining $5 million must be used
to provide grants to reduce peak usage in southern
California to produce replacement energy as a byproduct of
the anaerobic digestion of bio-solids and animal waste.
This bill requires the CEC to award the $10 million noted
above to "maximize, in a cost-effective manner," the
development of manure methane power production projects on
California dairies.
BACKGROUND
Agricultural Industry Energy Program . The AIEP was created
in 1987 and was funded with $3 million from the Petroleum
Violation Escrow Account (PVEA). The goal of the program
was to create a revolving loan fund to pay for equipment
and services for agriculture energy conservation and
development demonstration projects.
The AIEP provides for a repayment period of not more than
seven years at a rate that is not less than two percent
below the rate earned by monies in the Pooled Money
Investment Account (PMIA).
Since its inception, the AIEP has issued over 110 loans in
the amount of $6.2 million to fund various energy
efficiency projects related to agriculture. According to
the CEC, applicants often repay the loans within the
seven-year deadline and the program has had no defaults.
Loans under the AIEP have been issued at a rate not less
than two percent below the rate earned by the Pooled Money
Investment Account.
Prior to this year, loan repayments under the AIEP went
directly to the PVEA account, which required the CEC to go
through the budget change proposal process each year to
request money from the PVEA in order to have money to make
new loans under the AIEP. AB 2705 (Committee on
Agriculture), Chapter 1046, Statutes of 2000, codified the
Energy Technologies Research, Development and Demonstration
Account, allowing the AIEP loan repayments to go directly
to the CEC, allowing it to loan money for new projects
without having to get money from the PVEA.
Methane & Digestor Gas . SB 5X (Sher), Chapter 7, Statutes
of 2001, provided $15 million to the CEC in grant funds to
be used to encourage the development of bio-gas digestion
power production technologies. Of the $15 million, $10
million will be used to provide grants to encourage the
development of manure methane power production projects on
California dairies. The remaining $5 million must be used
to provide grants to reduce peak usage in southern
California to produce replacement energy as a byproduct of
the anaerobic digestion of bio-solids and animal waste.
Using methane from landfill gas to generate electricity
isn't a new idea. Last month, the city of Mountain View
decided to begin analyzing the potential benefits of
hooking microturbines to an existing system that burns off
the methane from three closed landfills. Each turbine
would be capable of producing 30 to 75 kilowatts of
electricity - enough to power 30 to 75 homes.
The Inland Empire Utilities Agency is looking at creating
three dairy digester pilot projects. According to the
agency, the first would use an anaerobic digestion of dairy
manure, biosolids, and green material to make methane gas
to produce 0.25 MW of electricity. The project is
scheduled to go on line in June 2001 at a cost of $500,000.
The second project will use manure from about 4,800 cows
(about 280 tons per day) to provide fuel to gas-fired
turbines to generate 1.5 MW of power. It will be completed
in 13 to 15 months at an estimated cost of $8.5 million.
The third project uses three million gallons of dairy wash
water (125 tons of manure) per day to supply a mixture of
sewage biosolids, dairy manure, and green material to
provide fuel to gas-fired microturbines and fuel cells,
generating 1 MW of power. It will be on line in May 2003
at an estimated cost of $15 million.
What Is Anaerobic Digestion? According to the CEC's web
site, anaerobic digestion is a biological process that
produces a gas principally composed of methane (CH4) and
carbon dioxide (CO2) otherwise known as biogas. These
gases are produced from organic wastes such as livestock
manure, food processing waste, etc.
Anaerobic processes could either occur naturally or in a
controlled environment such as a biogas plant. Organic
waste such as livestock manure and various types of
bacteria are put in an airtight container called a digester
so the process could occur. Depending on the waste
feedstock and the system design, biogas is typically 55 to
75% pure methane. State-of-the-art systems report producing
biogas that is more than 95% pure methane.
The process of anaerobic digestion consists of three steps.
The first step is the decomposition (hydrolysis) of plant
or animal matter to break down the organic material to
usable-sized molecules such as sugar. The second step is
the conversion of decomposed matter to organic acids. And
third, the acids are converted to methane gas.
Many anaerobic digestion technologies are commercially
available and have been demonstrated for use with
agricultural wastes and for treating municipal and
industrial wastewater.
COMMENTS
1)Purpose of the Bill . According to information provided
by the author, this bill is a work in progress that's
designed to provide incentives and focus the grants
provided in SB 5X in the most efficient and
cost-effective manner.
With that goal in mind, the author and committee may wish
to consider simply amending the bill to route the $15
million set aside in SB 5X for grants for bio-gas
digestion power production technologies through the CEC's
existing Agricultural Industry Energy Program and
amending that program to permit it to award grants
(currently, the AIEP is solely a loan program).
2)Should The State Get Something In Return For The Grant?
Under the existing loan program, the state, obviously,
gets the money it loans out returned to it and there are
a number of detailed monitoring requirements associated
with the AIEP's demonstration program. However, under
the grant program, other than having a particular group
or agency become more energy independent, the state gets
little tangible return on its investment. As such, the
author and committee may wish to consider whether a grant
recipient should be required to offer any electricity it
creates to the state on a cost-plus basis. At a minimum,
the author and committee may wish to consider requiring
grant recipients to provide quarterly or annual updates
relative to how the grant money is being spent, the
project status, how much electricity is being produced
and at what cost, how much money is being saved relative
to the redirection of agricultural waste, etc.
3)Should The AIEP Be Expanded? As introduced, this bill
sought to do a number of other things, including create
an Agricultural Waste to Energy Financing Account in the
General Fund to provide loans to, among other entities,
biomass to ethanol facilities. That language was removed
in the April 23 amendments to the bill.
However, the author and committee may wish to consider
amending the bill to expand the AIEP - which loans money
for the purchase of equipment and services for
agriculture energy efficiency and development
demonstration projects - by giving it the ability to
provide loans to agricultural waste-to-energy facilities.
The Governor issued Executive Order D-5-99 on March 26,
1999, directing the CEC to phase out the use of methyl
tertiary butyl ether (MTBE) in gasoline sold in
California by no later than December 31, 2002. Many
people believe the most likely replacement for MTBE,
barring action by the federal government to remove the
requirement that gasoline contain an oxygenate, is
ethanol. Allowing the state to provide low interest
loans to facilities interested in converting biomass to
ethanol or other fuels may help such facilities come on
line sooner and ease the transition away from a reliance
on MTBE.
4)Technical Amendment . As drafted, the bill currently has
two Section Twos. On Page 2, Line 12, "SEC. 2." should
be changed to "SEC. 3."
5)Related Legislation . SB 5X (Sher), Chapter 7, Statutes
of 2001, allocated several hundred million dollars in
conservation program funding, including $15 million in
grant money to the CEC to be used for pilot projects
designed to encourage the development of bio-gas
digestion power production technologies. This bill was
signed into law on April 11, 2001.
SB 29X (Soto) appropriates $25 million to the CEC to
provide grants to public and private agencies to operate
pilot projects to demonstrate the feasibility and
practical application of anaerobic digestion
technologies. This bill is pending before the Senate
Energy, Utilities & Communications Committee.
SB 1009 (Costa) creates the Dairy Environmental Working
Group within the California Department of Food and
Agriculture (CDFA) to develop a list of economically
feasible measures to mitigate the environmental impact of
dairy farming on water and air quality. The bill
appropriates $500 million to the State Water Resources
Control Board to provide low interest loans to local
public agencies to finance projects designed to manage
nutrients from animal feeding operations. This bill
passed the Senate Agriculture & Water Resources Committee
on April 17, 2001 and is scheduled to be heard in the
Senate Environmental Quality Committee on April 25, 2001.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Evan Goldberg
SB 625 Analysis
Hearing Date: April 24, 2001