BILL ANALYSIS                                                                                                                                                                                                    



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          SENATE THIRD READING
          SB 757 (Kehoe)
          As Amended August 21, 2006
          Majority vote 

           SENATE VOTE  :21-15  
           
           TRANSPORTATION      8-4         APPROPRIATIONS      12-5        
           
           ----------------------------------------------------------------- 
          |Ayes:|Oropeza, Chan, Karnette,  |Ayes:|Chu, Bass, Berg, De La    |
          |     |Liu, Pavley,              |     |Torre, Karnette, Klehs,   |
          |     |Ridley-Thomas, Salinas,   |     |Leno, Nation, Laird,      |
          |     |Torrico                   |     |Ridley-Thomas, Saldana,   |
          |     |                          |     |Yee                       |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |Nays:|Sharon Runner, Emmerson,  |
          |     |                          |     |Haynes,                   |
          |     |                          |     |Nakanishi, Walters        |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Requires state agencies to reduce the growth of  
          petroleum demand, increase vehicle energy efficiency, and  
          increase the use of alternative fuels.  Specifically,  this bill  :  
           

          1)Makes legislative findings and declarations regarding the need  
            to reduce the state's dependency on unstable global oil  
            supplies.  

          2)Establishes a policy that state agencies must take every  
            cost-effective and technologically feasible action to reduce  
            the growth of petroleum demand and increase transportation  
            energy conservation and efficiency and the use of alternative  
            fuels.  

          3)Requires state agencies to take the state's transportation  
            energy goals into account in adopting rules and regulations.  

          4)Defines "technologically feasible," for the purposes of this  
            bill, as meaning capable of being successfully accomplished  
            taking into account environmental, economic, social, and  
            technological factors.  








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          5)Requires the California Environmental Protection Agency  
            (CalEPA), not later than January 1, 2008, and every third year  
            thereafter, with the assistance of other specified public  
            agencies, to submit to the Legislature an assessment of the  
            transportation policies adopted pursuant to #2 above.  

          6)Requires that assessment to include information on the status  
            of adopted policies, the Integrated Energy Policy Report  
            implementation, and alternative fuel fleet procurement and  
            infrastructure funding needs.  

          7)Requires any actions taken pursuant to #2 above to integrate  
            existing air quality standards.  

          8)Requires the Air Resources Board (ARB), in adopting rules and  
            regulations to reduce air pollution and toxic air contaminants  
            from motor vehicle fuels, to develop requirements, incentives,  
            and partnerships for publicly administered fleets to purchase  
            and install alternative fuel vehicles and advanced  
            transportation technologies, as specified.  


          9)Requires the California Energy Commission (CEC) to expand the  
            scope of its oil industry price and supply reporting,  
            monitoring, and analysis to include trends in world oil demand  
            growth, including known and proven oil reserves.  CEC would be  
            required to refer to the Attorney General information it  
            believes may reflect market abuse or unfair competition.  

          10)  Specifies that this bill does not authorize the imposition  
            of any tax or fee or on petroleum refiners or suppliers nor  
            does it confer or reduce the existing authority of ARB, CEC,  
            or any other regulatory agency to order the production, sale,  
            or offering for sale of any specific fuel.  

          11)  Requires the Secretary of the Business, Transportation and  
            Housing Agency to submit recommendations to the Governor and  
            Legislature by March 31, 2008, regarding alternative revenue  
            sources to supplement or replace lost gasoline and diesel fuel  
            tax revenues that would otherwise fund state transportation  
            infrastructure investments.  

          12)  Requires CalEPA to take action to influence Congress and  








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            the U.S. Department of Transportation to double the combined  
            fuel economy of cars and light trucks by 2020.  That action  
            must include, but not be limited to, performing analyses and  
            participating in forums that the secretary deems useful.  

           EXISTING LAW  requires CEC to implement and administer various  
          generation and conservation programs.  Additionally, CEC is  
          responsible for monitoring transportation fuel supplies and  
          prices in the state and is required to develop biennially an  
          integrated energy policy report that looks at issues of supply,  
          demand, and supply reliability for transportation fuel.  

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, this bill will result in ongoing annual costs of  
          $300,000 starting in 2006-07, to state agencies to integrate  
          transportation energy goals into their adoption of rules and  
          regulations.  There will also be ongoing annual costs, probably  
          less than $150,000 starting in 2006-07, for ARB to consider  
          alternative fuel vehicle programs and advanced transportation  
          technology when adopting air pollution rules and regulations  
          applicable to motor vehicles.  Finally, there will be ongoing  
          annual costs of about $100,000 starting in 2006-07, for CEC to  
          expand its reporting, monitoring and analysis of oil market  
          pricing and supply.  

           COMMENTS  :  According to supporters "California faces a future of  
          increasing petroleum dependence, supply disruptions, and  
          transportation fuel price volatility.  As a consequence, the  
          state has become a significant importer of oil from foreign  
          countries often plagued with military and political instability.  
           If this import trend continues, the state's economy, oil supply  
          and price fluctuations, will be vulnerable to external  
          disruptions and geopolitical instability, making the reduction  
          of petroleum consumption a matter of energy dependence."  

          The author notes that California is in a constant gasoline  
          crisis and is dependent upon imported fuel to meet and keep up  
          with consumer demand.  The state has already reached the point  
          where it can no longer refine enough fuel in state to meet the  
          needs of its consumers.  The state must import 57% of its oil by  
          tanker ship in order to be refined into gasoline and diesel, but  
          it also imports 10% of its gasoline to keep up with current  
          demand.  The price of oil has almost doubled in the past two  
          years and almost tripled in the past three: current oil prices  








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          are over $70 per barrel, compared to a $37 per barrel average in  
          2004 and $27 per barrel average in 2003.  

          According to CEC, demand for gasoline will outstrip refined  
          supply by almost 2 billion gallons by 2008 and each year after.   
          Without state policies to examine alternative sources for fuel,  
          increased fuel efficiency and conservation measures, the author  
          contends that California's consumers will experience with higher  
          and higher prices at the pump.  She also argues that continued  
          reliance on foreign oil places the state at the mercy of  
          geopolitical influences beyond our control and that instability  
          abroad, along with the increasing need for oil by other growing  
          industrialized nations, will add to the volatility of oil  
          prices.  

          This bill addresses improvement of oil refinery safety and  
          pollution prevention, alternatives to petroleum-based  
          transportation fuels, and monitoring global petroleum adequacy.   
          The author believes that petroleum reduction would strengthen  
          national security, support energy independence, create jobs and  
          business opportunities, and reduce air, water, and soil  
          pollution while improving public health and worker safety, and  
          increase the economic competitiveness of alternative fuels and  
          energy resources.  

          AB 2076 (Shelley), Chapter 936, Statutes of 2000, required CEC  
          and ARB to present recommendations for the Governor and the  
          Legislature by January 31, 2002, on a strategy to reduce  
          petroleum dependence.  The CEC report, "Reducing California's  
          Petroleum Dependence" recommended that the state adopt a policy  
          to reduce gasoline and diesel fuel demand to 15 percent below  
          2003 demand levels by 2020 and to maintain that level after that  
          date.  The report included specific recommendations such as  
          using more fuel efficient tires, improving vehicle maintenance,  
          doubling light duty vehicle fuel efficiency, and developing fuel  
          cell-powered vehicles.  It also recommended adopting a general  
          goal of increasing the use of non-petroleum fuels to 20% of  
          on-road fuel consumption by 2020 and 30% by 2030.  

          The oil industry argues that investment in oil refineries will  
          suffer if California establishes a goal of reducing gasoline  
          demand by 2020.  It contends that, while this bill explicitly  
          states that it does not authorize the imposition of any taxes or  
          fees, there is nothing in it to prevent state agencies from  








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          using their existing authority "to impose a wide range of fees  
          and other draconian measures to reduce consumption."  The  
          industry also fears that this bill will give regulators "broad  
          authority to pick favored technologies.  There are no  
          requirements of the agencies to weigh costs and benefits, to  
          consider economic impacts, to pick winners that truly are  
          feasible, or to assure that the state's consumers and businesses  
          will not be harmed by state policies and proposed actions."  


           Analysis Prepared by :    Howard Posner / TRANS. / (916) 319-2093  





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