BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1086 - Alarcon Hearing
Date: May 15, 2001 S
As Amended: May 2, 2001 FISCAL/URGENCY
B
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0
8
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DESCRIPTION
Current law establishes the Agricultural Industry Energy
Program (AIEP), which 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.
Current law requires the CEC to operate a renewable energy
program to fund landfill gas-to-electricity projects funded
by a public purpose surcharge on each electricity user's
bill.
This bill finds that:
1. The use of alternative fuel such as natural gas offers
an immediate opportunity to reduce emissions from heavy
trucks;
2. The recent increase in natural gas prices, coupled with
increased demand from energy generators, present serious
obstacles for fleet operators that have been required or
encouraged to convert to natural gas;
3. There is a critical need to expand natural gas supplies
both for electrical energy generation and for use as a
clean transportation fuel;
4. California's solid waste landfills offer an immediate
and significant source of affordable methane that can be
converted to liquefied natural gas (LNG);
5. New demand for methane-produced fuel will encourage
improvements in the recovery of landfill gas and may
significantly reduce greenhouse gas emissions;
6. Grants to fund pilot projects will advance the
commercialization of landfill gas treatment equipment
and accelerate the production of LNG from the state's
solid waste landfills.
This bill provides $15 million from the General Fund to the
CEC to be spent on projects the commission determines are
related to the research, development, and demonstration of
equipment needed to produce LNG from solid waste landfills
for use as a transportation fuel.
This bill states that the administrative and contract
provisions of Sections 5 and 6 of Chapter 7 of the Statutes
of the 2001 First Extraordinary Session that are applicable
to the commission are applicable to this act. These
provisions:
q Exempt the CEC guidelines from review by the Office of
Administrative Law (OAL);
q Cap the CEC's administrative costs at 2.5% of the amount
of money spent;
q Exempt contracts related to consulting, service,
architectural and engineering, and advertising from the
Public Contract Code sections of law.
q Require the CEC to establish cost-effectiveness criteria
for programs funded;
q Require the commission to provide a copy of the criteria
to the chairperson of the Legislative Budget Committee,
to the chairpersons of the appropriate policy and fiscal
committees of both houses of the Legislature, and to the
Governor.
q Require the CEC to establish tracking and auditing
procedures to ensure that funds are expended in a manner
consistent with this act.
BACKGROUND
Methane is a byproduct of garbage decomposition that's
naturally produced at solid waste landfills and has, in
some instances, been used to power electric generators.
According to information provided by the author, the
average solid waste landfill is capable of producing
between 5,000 and 30,000 gallons of LNG each day.
The existing CEC renewable energy program, paid for by a
surcharge on each electricity user's bill, funds landfill
gas-to-electricity projects. Last year, 23 new landfill
gas projects with a capacity of 70 megawatts (MW) were
awarded grants averaging $0.014 per kilowatt hour (kwh).
Funding is also available for existing landfill gas
projects. The staff of the CEC believes the landfill
gas-to-electricity projects have successfully provided
relatively low-cost electricity and reduced greenhouse gas
emissions.
This bill proposes a grant program for new landfill gas
projects which specifically convert the methane to LNG, a
transportation fuel that's used to power a large number of
heavy duty vehicles. Substituting LNG for diesel or other
fuels greatly reduces NOx and particulate emissions.
Converting landfill gas to LNG requires the installation of
equipment that removes impurities from the gas, then chills
the gas to convert it to a liquid state. LNG is natural
gas that's been condensed to a liquid, typically by
cryogenically cooling it to -327.2 degrees Fahrenheit. A
truck operating on LNG has to use, on average, twice as
much LNG by volume in order to operate than a truck running
on diesel fuel would have to use.
The author believes the $15 million set aside by this bill
will allow the CEC to fund projects that can produce over
36 million gallons of LNG per year, providing fuel for
2,800 heavy duty vehicles. An added benefit is NOx
reductions of 1,800 tons per year, which can offset NOx
increases from other sources, such as powerplants. Not
included in those calculations is the cost of retrofitting
the heavy duty vehicles so they can run on LNG.
COMMENTS
1.Projects Already Underway . According to material
provided by the author, there are already a number of
projects already underway to convert landfill gas into
LNG. One of these is a pilot project funded by the CEC
to examine technology created by CryoFuel System of
Monroe, Washington. The pilot project is designed to
produce 5,000 gallons of LNG from the South Chollos
Landfill in San Diego. Given the fact that the CEC is
already funding a pilot project, the author and committee
may wish to consider whether it's appropriate to set
aside $15 million for similar projects before the CEC has
been able to deem the existing pilot project a success or
a failure.
2.Are Exemptions Appropriate? This bill waives the
administrative and contract provisions of law that were
waived by SB 5X (Sher), Chapter 7, Statutes of 2001,
including the requirement that the regulations developed
by the CEC be approved by the Office of Administrative
Law (OAL). The rationale for waiving those laws as a
part of SB 5X was to get energy conservation money into
programs as soon as possible so people could begin
reducing their energy usage as soon as possible. The
programs envisioned by this bill are vastly different in
that the money will be awarded to research, develop, and
demonstrate untested technologies that may not result in
the production of LNG for a year or more. Therefore, the
author and committee may wish to consider whether the OAL
and contract exemptions provided in this bill are
appropriate.
3.Should Any Legislative Strings Be Attached? The bill
redirects $15 million from the General Fund to the CEC to
be "expended on projects that the commission determines
are related to the research, development, and
demonstration of equipment" needed to produce LNG from
solid waste landfills for use as a transportation fuel.
However, while the CEC is required to establish
cost-effectiveness criteria for projects to be funded,
it's unclear exactly how the CEC is expected to spend the
money. Is it supposed to conduct the research,
development, and demonstrations envisioned by this bill
itself? Is it supposed to contract with other public or
private entities to do this work? Can/Should the money
be awarded in the form of grants or loans? Should a
limit be placed on the size of the grant and/or loan?
Should the grant/loan recipient be required to provide
any of its own money to match the grant/loan? The author
and committee may wish to consider answering those
questions as a part of this legislation to provide the
CEC with some further direction.
4.Technical Amendment . As noted above in the description
of this bill, SB 1086 states that the administrative and
contract provisions of Sections 5 and 6 of Chapter 7 of
the Statutes of the 2001 First Extraordinary Session that
are applicable to the commission are applicable to this
act. The author and committee may wish to consider
simply listing those administrative and/or contract laws
that it would like the CEC to comply with and/or be
exempt from instead of referencing the sections of a
prior bill that was enacted into law.
POSITIONS
Sponsor:
Author
Support:
Coalition for Clean Air
Planning and Conservation League
Oppose:
None on file
Randy Chinn
SB 1086 Analysis
Hearing Date: May 15, 2001