South Coast Air Quality Management District
South Coast Air Quality Management District
BOARD MEETING DATE: June 15, 2001 AGENDA NO. 30B
Legislative Committee
SYNOPSIS:
The Legislative Committee considered agenda items including the following legislation for which the Board will consider approving positions:
AB 554 (Campbell, John) – Tax Credit for Low-Emission Vehicles
ABX2 22 (Canciamilla) – Emission Reduction Credits for Peaking Power Plants
SBX2 79 (Knight) – Emission Reduction Credit Transfers for Power Plants
SB 1086 (Alarcon) – Liquefied Natural Gas
HR 978 (Manzullo) – Federal Tax Credit for Wet and Dry Cleaning Equipment
RECOMMENDED ACTION:
Approve the legislative positions recommended below.
Beatrice J.S. LaPisto-Kirtley, Chair
Legislative Committee
Attendance
The Legislative Committee met on June 8, 2001. Present were Committee Chair Beatrice LaPisto-Kirtley, Vice Chair Jane Carney, and Committee members Michael Antonovich, Cynthia Verdugo-Peralta and Roy Wilson (by videoconference). Pursuant to the Procedures for Standing Committees of the Governing Board, adopted March 8, 1996, Norma Glover, AQMD Vice-Chair, was appointed as an ad hoc member of the Legislative Committee for the June 8, 2001, meeting only.
Washington Update
Peter Robertson, AQMD Washington Legislative Representative, and David Robinson, Patton Boggs, updated the Committee on activities in Washington, D.C. [Attachment 2] Mr. Robertson reported that Barry Wallerstein, Executive Officer, and Norma Glover, AQMD Vice-Chair, are scheduled to travel to Washington, D.C., in early June to meet with members of both the House and Senate to discuss AQMD’s funding proposals. The visit is timely since the VA-HUD Subcommittee is tentatively expected to draft legislation for U.S. EPA funding on June 26.
Mr. Robinson updated the Committee on activities related to the Federal Energy Regulatory Commission (FERC). He reported that FERC established a "proxy price" for electricity that is available to everybody in the state during times of capacity shortage. Built into the proxy price are the fees from the AQMD’s RECLAIM Program. The proxy price is the price everybody receives, whether or not they actually incur the RECLAIM credit costs or the emissions fee offset cost. Mr. Robinson, AQMD Vice-Chair Glover, and District staff participated in a meeting with FERC to explain how the RECLAIM program works and that it only works in the South Coast Air Basin. AQMD asked FERC to remove any consideration of emissions fees or RECLAIM credits from setting of the proxy price and are currently awaiting response from FERC.
In the meantime, the California Independent System Operator (CaISO) has filed papers stating that, based on the AQMD’s filing, the implementation of their refund program will not include RECLAIM credits in the maximum price that is used to calculate the refunds. CaISO’s decision, however, has not yet been approved by FERC. Mr. Robinson added that U.S. EPA has been invited to comment on FERC’s pricing formula, but have not yet done so.
Sacramento Update
Allan Lind, AQMD Sacramento Legislative Representative, reported that it is budget deadline time in Sacramento. The subvention funding that air districts fought hard for last year has been sustained in the proposed budget. There is also $50 million for furthering the objectives of the zero-emission vehicle (ZEV) mandate, as well as $100 million for a NOx Reduction Program that will facilitate the installation of peaker power plants. Both of these funding levels are subject to changes by the Budget Conference Committee. The provisions for the use of the $50 million for the ZEV mandate will likely be contained in Assemblyman Firebaugh’s AB 1390, which is expected to be amended to divide expenditure of the $50 million to allow funding not only for ZEVs, but also for the Carl Moyer Program, the School Bus Replacement Program, and mitigation of impacts from backup generation facilities. Although there will be less funding for ZEVs, there is continued funding for other programs that have worked well and have had important air quality benefits. [Attachments 3 and 4]
AB 1390 may also be combined with the Governor’s $100 million NOx Reduction Proposal. The $100 million is aimed at facilitating the siting of peaker power plants, but a determination has now been made that the number of peaker power plants needed for this summer have been sited and all of the proposed funding for this effort may not be needed. The Senate and Assembly are now providing for the reallocation of some of those dollars towards the Carl Moyer Program, the School Bus Replacement Program, and the backup generation mitigation efforts. There will likely be a Budget Trailer bill to articulate how these funds are to be spent, what is eligible, the delivery mechanisms, and the allocation process. Mr. Lind added that there seems to be support from legislative leadership, as well as the environmental community, for continued funding of these programs.
Mr. Lind reported that the energy crisis seems to be calming down and there does not seem to be a rush to introduce more bills. In the regular legislative session, there are approximately 54 bills that staff is following and 32 of them have become two-year bills. The other bills seem to be constructive legislation or legislation that the AQMD is supporting.
Lastly, Mr. Lind stated that the Governor has been relatively quiet with respect to executive orders, but there has been talk of a possible executive order relating to backup generation. However, the price of energy is starting to come down, the supplies are starting to come up, conservation is having its effect, and it is beginning to look like there may be less reliance on backup generation than had originally been contemplated. The Governor is also concerned with the issue of why some natural gas power plants are not operating at full steam.
Dr. Barry Wallerstein, Executive Officer, added that this issue has arisen in discussions with the Los Angeles Department of Water and Power (LADWP). Under a Los Angeles City charter, LADWP is required to meet their native load. They are apprehensive, though, about the $7.50 mitigation fee they pay to the AQMD. If the AQMD successfully invests, then LADWP gets their full bank account back. Otherwise, there is a potential for future year deductions and, while they are putting on emission controls that will allow them to reduce their demand in future years, they are concerned that they may get caught in the interim. Discussions are continuing with LADWP and the AQMD will likely modify their settlement agreement to allow more flexibility.
Similarly, an agreement has been reached with the City of Glendale that allows them to increase their production above and beyond the command and control rule that they are subject to because they are not in the RECLAIM program. Under their agreement surplus profits from selling power must go to future emission controls that are not otherwise required by AQMD’s rule so that their community gets the benefit of further long-term air quality benefits. The other half goes to community projects such as asthma vans for children and schools. Dr. Wallerstein added that if other municipalities have concerns, they are welcome to sit down and work with AQMD staff.
Dr. Wallerstein briefed the Committee on a meeting facilitated by Supervisor Antonovich with Assemblyman Wyman, the author of AB 1528, which relates to emission reduction credit transfers between air districts. Under current state law the transfer of credits requires an approval by both the upwind and downwind air districts. AB 1528 would have eliminated Governing Board approval of such transfers. The AQMD Board previously took an Oppose position on AB 1528 based on economic impact and local self-determination concerns.
At Dr. Wallerstein’s suggestion, the Board recently placed a moratorium on transfers of emission reduction credits, but directed staff to inform the Board if credits were applied for. Currently, there are no applications pending before the AQMD, but the Mojave District AQMD believes that people do not want to apply because of the moratorium. There is an item on the June Board agenda to end the moratorium. Additionally, during the meeting with Supervisor Antonovich and Assemblyman Wyman, it was suggested that a set of criteria be developed that the Board could use when considering such requests. Dr. Wallerstein added that he believes the criteria needs to be multifaceted, with a supply and demand element and a price element.
Staff intends to develop the criteria in consultation with the Home Rule Working Group because they have been very active on this issue. The developed criteria would then be brought to the Board for consideration. Staff hopes that with Board action on this issue, Assemblyman Wyman may be inclined to withdraw AB 1528, which is now being held in the Assembly Natural Resources Committee. Supervisor Wilson added that South Coast helped out the Mojave Desert AQMD last year by allowing the Blythe Energy Company to use South Coast emission credits as offsets and the power plant is now under construction. This shows there has been cooperation in the past without this legislation.
Ms. Glover commented that she would like to see the moratorium lifted and stated that she would like to invite Jack Kyser, Chief Economist for the Los Angeles County Economic Development Corporation, to a Home Rule Working Group meeting to discuss how the transfer of these credits would affect the South Coast area economically.
Recommended Positions on Legislation
Staff provided analyses and recommendations on four bills and provided a brief description of each bill. [Attachment 5] Additionally, staff asked the Committee to add SBX2 79 (Knight) to the agenda for consideration. This bill came to the attention of staff after posting of the Committee agenda and there is a need for the Committee to take a position or to allow effective action during the extraordinary session on this bill. The Committee unanimously approved the addition of SBX2 79 to the agenda for consideration.
|
Bill/Title |
Recommended Position |
|
AB 554 (Campbell, John) – Tax Credit for Low-Emission Vehicles |
SUPPORT |
ABX2 22 (Canciamilla) – Emission Reduction Credits for Peaking Power Plants |
WATCH |
|
SBX2 79 (Knight) – Emission Reduction Credit Transfers for Power Plants |
OPPOSE |
|
SB 1086 (Alarcon) – Liquefied Natural Gas |
SUPPORT WITH SUGGESTED AMENDMENTS |
|
HR 978 (Manzullo) – Federal Tax Credit for Wet and Dry Cleaning Equipment |
SUPPORT |
AB 554, Campbell, John, would provide varying degrees of a partial tax exemption for the purchase of new, specifically identified low-emission vehicles. Dr. Wallerstein stated that Assemblyman Campbell is a new Assemblyman from the Irvine and Newport Beach area, and once owned a Saturn dealership and sold the EV1. Assemblyman Campbell is a strong proponent of cleaning up motor vehicle emissions. Staff recommends Support. The Legislative Committee concurred with staff’s recommendation to Support AB 554.
ABX2 22, Canciamilla, would authorize the ARB to establish, through January 1, 2004, an emission reduction credit bank in which emission reductions achieved as a result of ARB programs are deposited and used to offset emissions resulting from new peaking power plants. Dr. Wallerstein stated that an analysis was drafted for ABX2 22, but was not sent to Committee members because the bill is still in discussions.
Dr. Wallerstein added that ABX2 22 is sponsored by the ARB to codify the Governor’s Executive Order D-24-01 regarding peaking turbine emission offsets. There have been extensive discussions between the California Air Pollution Control Officers Association (CAPCOA) and the ARB. CAPCOA believed there was agreement with ARB to make the modifications necessary, but the amendments were not included when the bill was introduced. CAPCOA wants to ensure that the bill does not erode air district authority and that credits generated in an air district stay in that district.
Dr. Wallerstein recommended that if amendments are worked out between CAPCOA and ARB, staff would be recommending a support position. However, at this time staff recommends no position. The Legislative Committee adopted a Watch position on ABX2 22.
SB 1086, Alarcón, would appropriate $15 million from the General Fund to the California Energy Commission to fund grants or loans for projects that demonstrate the technological and economic viability of equipment that treats and converts gas collected from solid waste landfills into liquefied natural gas (LNG). Dr. Wallerstein stated that staff believes this is a good bill which seeks to increase LNG that could be made available to fuel alternative fuel vehicles and other sources. The Legislative Committee adopted a Support position on SB 1086.
HR 978, Manzullo, would create a federal income tax credit for dry and wet cleaning equipment that uses non-hazardous primary process solvents. Dr. Wallerstein stated that this is a federal bill that would provide tax credits for non-polluting alternative methods to the traditional perchloroethylene or solvent-based dry cleaning. This bill provides a 20 percent tax credit and a 40 percent credit if a cleaner is located in an empowerment zone. Staff recommends a Support position. The Legislative Committee adopted a Support position on HR 978.
SBX2 79, Knight, would eliminate the requirement for approval by an upwind air district’s Governing Board for emission reduction credit transfers between air districts for the purpose of siting an energy producing facility. Dr. Wallerstein stated that this bill is a parallel bill to Assemblyman Wyman’s AB 1528, except it is restricted specifically to power plants. Staff recommends an Oppose position, but staff’s desire is that Board action would suffice and the legislation would not be needed. Chair LaPisto-Kirtley clarified that she hopes the issue will be worked out during the AQMD’s development of criteria governing the transfer of credits to downwind air districts.. The Legislative Committee adopted an Oppose position on SBX2 79. Supervisors Michael Antonovich and Roy Wilson abstained.
Other Business
Ms. Carney asked about the status of AB 986 (Firebaugh), which is the bill sponsored by the California Trucking Association that seeks to change Proposition 65 noticing requirements, among other things. Mr. Lind responded that Assemblyman Firebaugh has decided to make the bill a two-year bill. Dr. Wallerstein added that staff has discussed the bill with Assemblyman Firebaugh and provided a series of suggestions that staff believes would overcome most of the Air Toxic and Proposition 65 concerns.
Ms. Verdugo-Peralta mentioned that the AQMD is sponsoring an Energy, Environmental and Economic Issues Conference on June 26. The conference is designed to give small- and medium-size businesses some solutions versus questions on how to approach the energy crisis, especially during the upcoming summer months.
Public Comment
No public comment received.
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