BOARD MEETING DATE: April 3, 2009
AGENDA NO. 22A

REPORT:

Legislative Committee

SYNOPSIS:

The Legislative Committee held its regular meeting on Friday, March 13, 2009 and a Special Meeting on Wednesday, March 25, 2009. The next Legislative Committee meeting is scheduled for Friday, April 10, 2009 at 8:00 a.m. in Conference Room CC8. The Committee deliberated agenda items for Board consideration

RECOMMENDED ACTION:

Receive, file report, and adopt Committee recommendations specified in this letter.
 

Jane W. Carney, Chair
Legislative Committee

Regular Meeting of March 13, 2009
 

Attendance [Attachment 1]

The Legislative Committee met on March 13, 2009. Committee Members Jane Carney (Chair) and Dr. Joseph Lyou were present. Committee Members Michael Antonovich, Jan Perry, Tonia Reyes Uranga, and Dr. S. Roy Wilson were present via videoconference.
 

Update on Federal Legislative Issues

Mr. Mark Kadesh, AQMD federal legislative consultant, reported that the President signed the 2009 Omnibus bill which included $7.5 million for AQMD under the Diesel Emissions Reduction Act (DERA) program. This was a 50% increase from what we received last year as an allocation.

Mr. Kadesh reported that following the visits with the Senate Environment and Public Works Committee there have been several meetings on how to address marine vessel emission concerns beyond the International Maritime Organization (IMO) agreement. Mr. Kadesh further reported the issue continues to be of importance and, mentioned that two members of Congress have offered to carry legislation for AQMD if needed.

Mr. Kadesh stated that the transportation reauthorization bill is beginning to move in the House and will also in the Senate. Regarding climate change, Congressman Waxman, Chair of the Energy and Commerce Committee, would like to have a bill out of his Committee by Memorial Day.
 

Update on State Legislative Issues

Mr. Paul Gonsalves, AQMD state legislative consultant, reported that on Thursday, February 19^th the state passed the budget. Subsequently, between February 23^rd and February 27^th, 2,387 bills were introduced of which about 70% were spot bills. No amendment or any other action may occur on these bills until 30 days after their introduction. Mr. Gonsalves stated that on May 19^th a special election will be held and after that date the state may still be facing an $8 to $10 billion dollar budget deficit. Mr. Gonsalves reported that the federal stimulus package should bring about $31 billion to California, a portion of which could be used to address budget shortfalls and supplement existing state spending through grant programs.

Mr. Will Gonzalez, AQMD state legislative consultant, informed the Committee that CARB’s vapor recovery rule requirements may be at issue. He reported that there is a letter signed by approximately 35 legislators asking CARB and the districts to review the gas stations vapor recovery requirement on a case-by-case basis and not penalize those that are trying to do “the right thing.”

Chair Jane Carney wanted to clarify that staff has not taken and is not proposing to take a position on any vapor recovery bill. Mr. Oscar Abarca, Deputy Executive Officer, replied that presently there is only spot bill language and there is really no substance in the bill. Mr. Abarca further added that when the bill has more specificity an analysis will be conducted and brought to the Committee.

Dr. Wallerstein stated that Mr. Mohsen Nazemi, Deputy Executive Officer, along with AQMD’s new District Prosecutor has been putting together a tiered approach regarding penalties. Dr. Wallerstein informed the Committee that with the tiered approach, a more minimal penalty would be enforced if the circumstances are clear that the gas station operation is ready to move forward versus those that made no attempt to comply. Dr. Lyou asked if there are any problems with the availability of outside contractors to install and verify in a timely manner that the equipment was working properly. Staff responded that contractors were available. Chair Carney added that there is also a Small Business Assistance Program that might be useful and, given the economic climate, could provide a more sensitive approach. Dr. Wallerstein replied that he did not want to leave an impression that staff was being insensitive regarding how the penalty structure is being proposed, but there is also a need to be mindful of those that proceeded in a timely fashion. Dr. Wallerstein additionally stated that finding a middle ground is still possible and that staff could give a presentation on this topic to the Stationary Source Committee meeting.

Mr. Bill LaMarr stated that it would cost several of the gas stations approximately $80,000 to be compliant. Mr. LaMarr hoped that by providing that number it would put the issue into perspective, especially noting the difficulty in financing such sums.

Mr. Gonzalez reported that on March 2^nd the Assembly Utilities and Commerce Committee and the Assembly Natural Resources Committee held a joint hearing on the challenges to the power supply in Southern California. The two primary issues discussed at the hearing were once-through cooling systems and the availability of emission reduction credits in the South Coast basin. Mr. Gonzalez reported that this was a very beneficial hearing as the legislature needed to hear how complex the problem is. He further commented that AQMD staff did an excellent job at making others understand the severity of the problem and the need to resolve the issues.

Mr. Gonzalez reported that over 60 renewable energy bills were introduced, though most are spot bills. He categorized the bills into four categories: Transmission and siting, energy efficiency, renewable portfolio standards (RPS), and various programs for the sale of excess power. The RPS bills in play are as follows:

• AB 64 (Krekorian) which requires the share of renewable portfolio to be 25% by 2015, 35% by 2020, and 50% by 2035. This bill also deals with transmission and permit streamlining and there is serious discussion in the capitol to break the bill up into several pieces.
• SB 14 (Simitian) requires the RPS to be 33% by 2020 and tackles several Public Utilities Commission governance issues. There is talk of stripping this bill down to only the RPS provisions.
• SB 805 (Wright) is mostly a spot bill and will likely increase the RPS to 33% by 2020 without tackling additional issues.

Mr. Gonzalez reported that the major issues under discussion regarding RPS legislation are: annual targets and how to ensure steady progress towards RPS goal while allowing for the uncertainty for getting renewables online; cost containment and should price benchmarks be set to limit costs to utilities; renewable energy credits (RECs) and can utilities purchase them to meet their RPS goals; hydro allowance and how much hydro power can be used by utilities to meet their RPS goal; whether utilities can be allowed to purchase their renewable power from out of state and import to their customers; and whether utilities should be forced to pay penalties to the PUC or CARB if they do not meet their RPS targets.

Mr. Gonzalez stated that five feed-in tariff bills and three net metering bills have been introduced. Mr. Gonzalez noted that last year’s feed-in tariff bill (SB 1714) made it through both houses before it died.  Mr. Gonzalez stated that it is likely that both a feed-in tariff and a net metering bill are likely to pass this year.

Senator Richard Polanco, AQMD state legislative consultant, stated that with the special elections in May he is concerned that all the work that has been put together regarding balancing the budget may go by the wayside.
 

Proposed Legislation to Resolve NSR Credits Banking and Availability Under State Law [Attachment 2]

Barbara Baird, District Counsel, outlined the proposed legislation to the Committee. Dr. Wallerstein emphasized that the requirement for a needs analysis was a significant addition. He further added that the California Energy Commission (CEC) conducted a needs assessment prior to deregulation. When deregulation occurred that requirement was removed from state law. Ms. Baird reported that a March 11, 2009 version of the proposed legislation was distributed at the NSR working meeting and the comments basically fell into two categories; 1.) Environmental activists were opposed to the use of credits; and 2.) Industry representative commented that the needs assessment by the energy commission and the requirement that the power plant have a contract with the utility should not be included in the bill. Dr. Wallerstein stated that he has indicated in correspondence to the Board and to a broad audience that there are over 1,000 permits that are basically sitting in the engineering section and cannot be processed at this time. Most of those permits are for small businesses, environmental improvement projects, local government and essential public services. He strongly recommended Committee approval.

Dr. Wallerstein further added that, the Committee may recall that the state court judge also set aside 2,000 already issued permits where equipment was installed. If the Board had not appealed that part of the decision, those permitees would all be in violation of law. Absent legislative action, this issue will involve a great deal more time before it is resolved and then there would remain the uncertainty posed by continued litigation. Dr. Wallerstein stated that the notice of preparation is being issued for the Board’s readoption of Rule 1315 and 1309.1 (power plants excluded). Ms. Baird added that this is an urgency statute and therefore if the bill is adopted as urgency, it could go into effect even before we are able to readopt Rule 1315. Councilmember Jan Perry asked whether the legislative proposal addressed the megawatt issue.

Dr. Wallerstein explained that the language addresses the megawatt issue. LADWP, Pasadena, Burbank, City of Riverside, City of Anaheim or City of Vernon could put in a power plant, but only to meet the needs within their jurisdiction, under the proposed language.

Ms. Perry also addressed the language on 21080(b)(17)(vi) and suggested deleting the word “reasonably”. Dr. Wallerstein agreed.

Ms. Perry asked for clarification regarding what a “yes” or “no” vote on this bill would mean. Dr. Wallerstein explained that a “yes” vote would mean that all of the “mom and pop” and essential public services would be able to again receive offsets if they qualified. Dr. Wallerstein explained that on the specific case of the Vernon power plant, they would not be in any better situation than when the rule was adopted since the major obstacle is that they have to get a contract from the state or one of the utilities to build the power plant they proposed. Ms. Perry asked what the likelihood is that the City of Vernon will be able to do that. Dr. Wallerstein replied that in the near term he did not think it likely, because there are three other projects that already have contracts from Southern California Edison and it will be difficult to be competitive. Dr. Wallerstein further added that he has informed the Board that staff is moving towards canceling the Vernon permit applications; pending review of information received from the city.

Ms. Perry asked what the time frame is for canceling the City of Vernon’s permit. Dr. Wallerstein stated that it does not require a vote of the Board, since that duty has been delegated to the executive officer and staff. Ms. Perry asked when Dr. Wallerstein will make a decision. Dr. Wallerstein affirmed that a decision will be made quickly.

Chair Carney stated that there are three people on the Committee who voted against Rule 1309.1. Dr. Wallerstein said that the needs analysis that has been added should hopefully address all of the concerns that existed previously. Additionally, Dr. Wallerstein said he hoped that the Committee members and the board would balance their prior concerns against the real pain that is occurring day–to-day with local businesses, public agencies and residents’ livelihood. Air quality improvement projects that would reduce pollution are not moving forward because of the current litigation. It is going to be difficult to implement some of our own SIP rules because of the current state of affairs and some of the goals of AB 32 will not be achievable.

Chair Carney commented that additional language about the CEC necessity findings would require the CEC to look at the ability to meet the renewable standards and other environmentally friendly goals that the legislature is trying address. She acknowledged that she voted no on Rule 1309.1, but she agreed with this legislation, given the additional safeguards. Supervisor Roy Wilson asked who is going to carry this legislation and is there a spot bill. Mr. Abarca replied that there is a spot bill and Senator Rod Wright has agreed to carry this legislation. Councilmember Tonia Reyes Uranga asked if the CEC had a problem with the needs assessment and asked how this is affecting employment. Dr. Wallerstein replied that he has not made a formal request for their opinion, but he has talked with CEC at a very high level and the indication he received is that they would welcome this. Dr. Wallerstein also stated that Councilmember Reyes Uranga is absolutely correct because permits for the construction and installation of equipment means jobs. Mr. Wilson asked whether staff wants Committee members to work with the local legislators to get co-authors on this bill once it is introduced. Dr. Wallerstein and Senator Polanco both affirmed this.

Ms. Perry asked what the urgency was to vote on this and how this will affect making decisions of whether or not to grant permits. Dr. Wallerstein replied that his review of any particular project’s permit is separate from what is before the Committee. Regarding the urgency issue, Dr. Walllerstein reminded the Committee that just over two weeks ago he was before a joint hearing of the Assembly of Natural Resources Committee and the Utilities Committee, where the legislators asked for specific guidance.

Dr. Joseph Lyou asked for some clarification on the needs assessment because it was previously defined in law, but no longer is. Specifically, Dr. Lyou asked what criteria would they use in the needs assessment and what would that process look like and how long would it take. Dr. Wallerstein replied that he is unable to answer for CEC, but the credits and permits will not be issued until the needs analysis was completed. Dr. Lyou stated that it would make a difference if we could go through the CEQA process independently and do it faster than CEC would do the needs assessment. Dr. Wallerstein said if the question was whether the CEC has the ability to perform an assessment very quickly, the answer is yes. The CEC has just issued an overall needs assessment for Southern California noting the concern about once-through cooling and system reliability given that nearly half of our power plants are 40 years old.

Dr. Lyou noted that this action presupposes approval by the USEPA. Dr. Wallerstein replied that Rule 1315 was carefully negotiated with them before we brought it to the Board. Dr. Lyou noted his disappointment that the NSR workgroup process did not result in a consensus approach that everyone could agree to. He predicted that there would be some difficult fights in the legislature on this bill particularly given the CEQA exemption. Dr. Wallerstein stated for the record that through our mediation process with the litigants we tried to arrive at something that would have lead to a settlement of the litigation as well as potential language for legislation. Unfortunately, no resolution was reached and the mediation is now on hold.

David Lloyd, an officer of El Segundo Power, informed the Committee that they have designed a plant utilizing new German and American technology which uses the same infrastructure, uses the same amount of gas but produces about 5% of the pollution of the old units and can support renewables by cutting on and off in 10 minutes and not running 12 hours like other units in El Segundo. On behalf of those similarly situated projects he expressed his enthusiasm over AQMD’s legislative proposal and offered to support the bill. He also expressed a desire to work with staff on the needs assessment language.

Lee Wallace speaking for CEEB stated that they hope the bill will go forward for power plants and for the other facilities that have been trapped in this situation. A similar view is held by the Gas Company.

Bill Lamarr asked what insulates the facilities that have old equipment operating without a permit. Dr. Wallerstein replied that he commented earlier that the judge’s decision has been stayed by an appeal, and thus allows for their continued operation; however, if the appeal is lost and the District has not yet readopted its rules, those permits would be void.

Greg Adams stated that it is silly when the older more polluting power plants and energy recovery facilities can not be replaced by newer, more efficient and less polluting equipment. Mr. Adams explained that AB 32 cannot be implemented, there cannot be reduction in greenhouse gases through the more efficient use of fuel, because a permit is required. Moreover, there can be no installation of standby generators which are mandated by administrative orders to be used at sewage treatment plants and pumping stations to prevent sewage from running in the streets.

Carmen Thompson, Environmental Health and Safety Manager of Tesoro, stated the Tesoro also supports this legislation that is being introduced by AQMD. Tesoro pollution prevention programs that would have replaced old eqipment with newer best available control technologies are on hold because permits cannot be obtained.
 

The Legislative Committee decided to recommend approving the proposed NSR legislation and to sponsor the bill with Dr. Lyou the only opposing vote.
 

Recommend Position on State Bills

The Legislative Committee did not take a position on bill AB 397 (Jeffries) and referred the bill to the Governing Board. [Please refer to the April 3, 2009 Board Agenda Item # 23B for additional information on this item.]

Report on Sacramento Legislation Being Tracked [Attachment 3]

Please refer to Attachment 3 for the bill report.
 

Legislative Report from AQMD Home Rule Advisory Group Committee [Attachment 4]

Please refer to Attachment 4 for a written report.
 

Public Comments

See public comments under Proposed Legislation to resolve NSR credits banking and availability under state law
 

_________________________

Special Meeting of March 25, 2009

Attendance

A special meeting of the Legislative Committee was held on March 25, 2009. Committee Member Jane Carney (Chair) was present. Committee Members Michael Antonovich, Tonia Reyes Uranga, and Dr. Joseph Lyou were also present via telephone conference.

Surface Transportation Language [Attachment 5]

Mr. Eric Haley, AQMD legislative consultant, presented a brief summary of themes included within the staff proposed legislative language relating to the upcoming federal surface transportation reauthorization legislation. Marc Carrel, Program Supervisor, outlined the ten proposals included within the proposed legislative language to the Committee. Committee Member Dr. Joseph Lyou proposed an amendment to the proposed language which would include replacing the phrase “toxic air contaminants” with the phrase “hazardous air pollutants”. Dr. Wallerstein stated that staff would recommend the suggested amendment.

Chair Carney asked about whether the proposed legislative language added a reference to clean diesel. Mr. Carrel clarified that the reference to clean diesel was already included within existing law.

Committee Member Lyou proposed adding language with respect to the clean construction equipment incentives proposal. However, Mr. Haley and Dr. Wallerstein commented that the currently proposed language addresses Dr. Lyou’s concerns as written.

Oscar Abarca, Deputy Executive Officer, and Dr. Lyou commented that specific legislative language which addresses air quality issues has already drawn interest from legislative offices because of its specificity.

The Legislative Committee unanimously decided to recommend approving the proposed surface transportation legislative language with proposed amendments.
 

Climate Change Legislation [Attachment 6]

Barbara Baird, District Counsel, outlined the staff proposed legislative language with respect to upcoming federal climate change legislation to the Committee. Ms. Baird stated that the legislative language is mostly consistent with the legislative principles for climate change legislation previously adopted by the AQMD Board, and also reflects some of the lessons learned from the RECLAIM program.

Ms. Baird responded to Committee Member Joe Lyou’s question with respect to the proposed language’s impact on preemptions existing within current law.

Dr. Lyou proposed amendments to the proposed language relating to: 1) the transparency of monitoring, recordkeeping and reporting with regard to a climate change control program; and 2) with respect to strengthening environmental justice protections within climate change legislation.

Dr. Wallerstein stated that staff would recommend the suggested amendments.

The Legislative Committee unanimously decided to recommend approving the proposed climate change legislative language with proposed amendments.
 

Attachments (EXE, 281k)

1. Attendance Roster [Attachment 1]
2. Proposed Legislation to resolve NSR credits banking and availability under state law [Attachment 2]
3. Proposed Legislation to add sections 21080(b)(16) and 21080(b)(17) of the Public Resources Code [Attachment 2a]
4. Report on Sacramento Legislation being tracked [Attachment 3]
5. Legislative Report from AQMD Home Rule Advisory Group Committee [Attachment 4]
6. Proposed legislative language regarding surface transportation reauthorization legislation. [Attachment 5]
7. Proposed legislative language regarding climate change legislation. [Attachment 6]