BILL ANALYSIS Ó AB 590 Page 1 ASSEMBLY THIRD READING AB 590 (Dahle and Salas) As Amended May 28, 2015 Majority vote ----------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+--------------------+--------------------| |Natural |9-0 |Williams, Dahle, | | |Resources | | | | | | | | | | | |Cristina Garcia, | | | | |Hadley, Harper, | | | | |McCarty, Rendon, | | | | |Mark Stone, Wood | | | | | | | |----------------+------+--------------------+--------------------| |Utilities |15-0 |Rendon, Patterson, | | | | |Achadjian, Bonilla, | | | | |Burke, Dahle, | | | | |Eggman, | | | | | | | | | | | | | | |Cristina Garcia, | | | | |Hadley, Roger | | | | |Hernández, | | | | |Obernolte, Quirk, | | | | |Santiago, Ting, | | | | |Williams | | AB 590 Page 2 | | | | | |----------------+------+--------------------+--------------------| |Appropriations |17-0 |Gomez, Bigelow, | | | | |Bonta, Calderon, | | | | |Chang, Daly, | | | | |Eggman, Gallagher, | | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Gordon, Holden, | | | | |Jones, Quirk, | | | | |Rendon, Wagner, | | | | |Weber, Wood | | | | | | | | | | | | ----------------------------------------------------------------- SUMMARY: Provides that moneys in the Greenhouse Gas Reduction Fund (GGRF) may be made available, upon appropriation by the Legislature, to the California Energy Commission (CEC) for purposes of maintaining the current level of biomass power generation in the state and revitalizing currently idle facilities in strategically located regions. EXISTING LAW: 1)Requires the Air Resources Board (ARB), pursuant to California Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter 488, Statutes of 2006], to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. 2)Authorizes ARB to permit the use of market-based compliance mechanisms to comply with GHG reduction regulations, once specified conditions are met. AB 590 Page 3 3)Establishes the GGRF and requires all moneys, except for fines and penalties, collected by ARB from the auction or sale of allowances pursuant to a market-based compliance mechanism (i.e., the cap-and-trade program adopted by ARB under AB 32) to be deposited in the Fund and available for appropriation by the Legislature. 4)Establishes the GGRF Investment Plan and Communities Revitalization Act [AB 1532 (John A. Pérez), Chapter 807, Statutes of 2012] to set procedures for the investment of GHG allowance auction revenues. AB 1532 authorizes a range of GHG reduction investments and establishes several additional policy objectives. 5)Requires the investment plan to allocate: 1) a minimum of 25% of the available moneys in the fund to projects that provide benefits to identified disadvantaged communities; and, 2) a minimum of 10% of the available moneys in the fund to projects located within identified disadvantaged communities [SB 535 (De León), Chapter 830, Statutes of 2012]. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)Unknown cost pressures (GGRF). 2)Annual CEC administrative costs between $1.8 and $2.3 million (GGRF) for the duration of the program. 3)Annual costs between $175,000 and $316,000 (GGRF) for ARB to coordinate with CEC on program development, implementation and the quantification of GHG reductions to establish the legal AB 590 Page 4 nexus for the use of cap and trade revenue funds. COMMENTS: Biomass is a waste and byproduct consisting of organic residues from plants and animals which are obtained primarily from harvesting and processing agricultural and forestry crops, and can be utilized as fuels for producing energy. Examples of biomass include, forest slash, urban wood waste, lumber waste, agricultural wastes, etc. At its peak, California's biomass industry produced 800 megawatts (MW) of electricity from 66 direct combustion biomass facilities. By 1996, the energy production from biomass had dwindled to about 590 MW. Currently there are still about 30 direct combustion biomass facility operations with a capacity of 640 MW. The reduction in biomass energy produced was a result of the expiration of price support and incentives provided to the biomass industry from the state. According to the author, California is in danger of losing the one asset it has to divert forest fuel reduction residues and other wood waste materials today. In the last 12 months alone California has closed five biomass facilities due to expired contracts and poor economics. This bill provides cost sharing strategies essential for resolving this problem. The 2014-15 Budget Act allocates cap-and-trade revenues for the 2014-15 Fiscal Fear and establishes a long-term plan for the allocation of cap-and-trade revenues beginning in Fiscal Year 2015-16. The Budget continuously appropriates 35% of cap-and-trade funds for investments in transit, affordable housing, and sustainable communities. Twenty-five percent of the revenues are continuously appropriated to continue the construction of high-speed rail. The remaining 40% will be appropriated annually by the Legislature for investments in programs that include low-carbon transportation, energy efficiency AB 590 Page 5 and renewable energy, and natural resources and waste diversion. No funds have been specifically appropriated for biomass power generation. Analysis Prepared by: Lawrence Lingbloom / NAT. RES. / (916) 319-2092 FN: 0000870