BILL ANALYSIS SB 757 Page 1 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. SB 757 Page 2 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 SB 757 Page 3 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 SB 757 Page 4 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 SB 757 Page 5 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 FN: 0016493