Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy
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Speaker 3
So to project the actual amount of SAF that would be induced by the proposed tax credit, my colleagues and I developed a model that incorporates the tangled web of state and federal policies that affect fuel use. Our model projects SAF production at least double that projected by the administration and up to seven and a half times the administration's projection, depending on how quickly SAF production from ethanol scales up. My second point is that SAF production will be costly for the state budget and for drivers. SAF credit would reduce diesel excise tax receipts by between 2075%. Those lost taxes represent money that would not be available for road construction, for maintenance, and for repairs.
In addition, drivers would likely pay more at the pump for gasoline and for diesel because of cost of complying with the state's low carbon fuel standard would increase. My third and last point, this net reduction in carbon emissions would be small and effective Small and expensive. I'm sorry. Most of the additional SAF that's induced by this tax credit would come from a reduction in renewable diesel. And this is perhaps the most important point here that I want to get across.
We would be taking the vegetable oil based fuel that we are currently putting into trucks and instead putting it into planes. To understand why, we need to know two facts. First, renewable diesel and SAF are between 2 and $5 per gallon more expensive than fossil jet fuel to produce. That means that they're only viable if they have significant subsidies and support. The second relevant fact is that the federal renewable fuel standard requires a certain quantity of these fuels to be used in the country each year.
So and the federal government program provides subsidies for these fuels. Because they're more expensive than the alternative, then industry is not going to provide more of them than is required under the federal standard. That means if we use more of one, we're going to use less of another. And if I could perhaps use an analogy, imagine somebody who has to drink a gallon of some kind of medicine, at least a gallon of some kind of medicine, and they do not like it. There's red and there's green.
They can use any combination of red or green they like, and they have to use at least a gallon. There's no way this person's going to drink more than a gallon because they do not like it. If you pay them a little extra to drink drink green, they'll drink some more green and correspondingly less red, but they're not going go over that total of a gallon. And that's the fundamental tension here with SAF and renewable diesel, that incentivizing SAF will tip the balance to mean more SAF, but correspondingly less renewable diesel. I also don't believe it's likely that the SAF tax credit would meaningfully save jobs in California because it is available for access to both in state companies operating in state and also out of state.
It's not meaningfully changing the competitive balance between firms that are operating in the state versus out of the state. So in summary, SAF is expensive to produce, and we generate few benefits for the climate if incentivized through this particular tax credit. I think promoting it only makes sense if it creates a clear path for future costs and emissions reductions, And I think, generally, when we're thinking about climate change, we have a finite number of resources to spend, and so we need to be thinking about how to spend those most effectively. Thank you.
Speaker 4
Good morning. Andrew March with the Department of Finance. So just to provide a brief overview of the proposal. So the governor's budget includes a $1 to $2 tax credit against the state diesel excise tax for sustainable aviation fuel sold for use in California from 2026 to 2036. The value of the tax credit will be $1 to $2 per gallon of SAF, depending on the carbon intensity of the SAF.
A few points I'd like to make in response to Doctor. Smith and also the LAO's analysis. One, this shifting that Doctor. Smith implied would happen between renewable diesel and sustainable aviation fuel, we believe, is highly unlikely to happen, given the production capacity of sustainable aviation fuel, the amount of additional feedstock that's available in the country based on publicly available data, and then additionally, recent changes that were announced by the U. S.
EPA for the Renewable Fuel Standard. Two, we don't believe that it's not likely that gas prices would increase because the gas prices increasing is based on this idea that there is limited feedstock in the country or world, which would lead to the shifting between the two fuels. We think that's highly unlikely. It's likely that there would be maybe no impact to gas prices, or they could decrease if there's additional renewable fuel provided. And lastly, the LEO has implied that certain companies could restructure to take advantage of this tax credit.
We haven't seen that happen in other states that have implemented tax credits. To our knowledge, there's no evidence to show this, so it should be speculation, which would mean that sort of this worst case scenario that they're being sort of enormous amounts of SAF produced and sold into California would be highly unlikely, given in 2024, the state consumed about 100,000,000 gallons of sustainable aviation fuel. We believe it would sort of be around that same area.
Speaker 5
Morning, Chair and Senators. Helen Kerstein with the Legislative Analyst's Office. So we're recommending rejecting the proposal and some of the comments I have will you I know have already been referenced or somewhat similar so I'll try to go through them relatively quickly there are five main reasons we're recommending rejection The first is that according to our analysis, this is a relatively expensive way to decarbonize. So the cost per GHD reduced is relatively high. And we think in general the state should focus on the more cost effective approaches to GHD reduction before proceeding to the less cost effective approaches.
The second reason I wanted to highlight is we think there's a lot of uncertainty about the environmental benefits of sustainable aviation fuel and they could be quite a bit less than are estimated. One of the main reasons is what Doctor. Smith referenced just a few minutes ago about this potential substitution of different renewable fuels. So, to the extent that this policy resulted in less renewable diesel and more sustainable aviation fuel, basically just switching which renewable fuel, the net environmental benefits would be significantly less. That's one reason it could be less than estimated.
Another reason is that in the literature, there's some disagreement about the level of environmental benefits from these fuels and renewable fuels just more broadly. And part of that is basically how much the environmental impacts of the feedstocks and sort of what their you know, if there are indirect land use changes that could occur because of the use of those feedstocks. The third reason I wanted to highlight is that we think that there's a lot of uncertainty about the size of this potential tax credit and the according loss in diesel excise tax revenues. So, the bigger this tax credit is, the less diesel excise tax revenues the state will have to spend on its programs. We think there is a lot of uncertainty, so we think that it is certainly possible that those losses could be less than are estimated by the administration, but we also think they could be quite a bit larger.
I know that was also referenced by Doctor. Smith as well, but potentially, we think it could be a billion dollars or more of lost revenue in a sort of worst case scenario situation. And then fourth, we highlight that we think those reductions in deselect size tax revenues will have some implications for transportation programs that rely on those funds. So currently, there's a formula that allocates those funds, and so to the extent you have this tax credit, it's going to be less money for those programs. So those there are three programs that are affected one is Caltrans highway maintenance program its SHOP program another is local streets and roads so it's the money that goes to cities and counties to do work on their streets and roads and then also funds go to the trade corridor enhancement program and that's a competitive program the state runs so again depending on the size of this tax credit which is unknown there would be losses accordingly and then fourth we wanted to highlight that in our view this proposal deviates from the spirit of the voter imposed restrictions on transportation fuel taxes so voters have said a few times at the ballot box we want to restrict the use of those funds we want them to go to streets highways and certain mass transit activities so this instead would deviate would sort of divert those funds to the aviation sector which we think is not consistent with the spirit not necessarily the letter but the spirit of those restrictions So, are my comments.
Happy to take questions as appropriate.
Speaker 7
Well, thank the presenters. I appreciate the work that went into this. And this is a controversial issue. We could see outside there was a lot of folks out there waving cards and showing their passion on this issue, which I sort of appreciate. But I want to understand a couple of things about the feedstock that goes into sustainable aviation fuels, the impact on diesel production, the impact on food costs.
We going to be using ethanol was mentioned that has an impact on food supply, fertilizers that are used. I mean, then lastly, our forest and ag waste, are those potential food, feed stocks for this? So, professor, would you care to take the first stab at this?
Speaker 3
Need to oh, there I am. Okay. Yeah, I'm happy to do that. So, I think there's some contention, first, on the feed stock question. So, I think one number I've seen is to say, well, there's 23 times as much feed stock available as the diesel use in California or something to this effect.
Well, that's true, but most of that is going into the food system, because 20% of our calories we eat as Americans come from vegetable oils, which is a surprising number to me. I wouldn't have known it was that high until I looked at the data. So most of that is going into the food system, and I think that sort of gets to the price question as if, like, if you were going to put more of it into biofuels, then the price is going to have to go up because you're to have to convince people to produce more of it, or you're have to convince consumers to use less of it. In terms of the effect on diesel it's I mean I think it's it's it's really important to remember that these fuels are significantly more expensive to produce than fossil fuels. And that's because the feedstocks cost more.
Soybean oil is you know, 60¢ a pound, and and and if we're collecting used cooking oil, it's that same sort of a thing, and you need a certain number amount of it in order to produce the fuel. So there's just no way to drive down those costs to get them even close to the fossil fuel. So what that means is the industry as a whole is only going to use as much of these feedstocks as they have support for under the federal program. And so, what California does might move things around more SAF, less renewable diesel, maybe more sort of used cooking oil, less soybean oil being used to make these kinds of fuels, but the cost problem is fundamental, and that's really what underlies the idea that increasing one will lead to a loss in the other. And it's true that there's been a bunch of buildout of refineries to be able to produce these fuels, and they're not producing at capacity.
And that's because they don't have enough subsidy support about to make money doing that. And this proposal sort of shuffles things around, but doesn't do anything to expand the demand.
Speaker 8
Yeah. Thanks for the question, Senator Matthew Botow with the California Air Resources Board. So a couple of points that I did want to make with respect to feedstock availability in the structure of both the tax credit proposal, but also of our policies here in California. And that is that the way this proposal is designed, it would encourage and support more waste based feedstocks being used for sustainable aviation fuel. And that is also in alignment with our other biofuels policy here in California that also provides a stronger incentive signal for waste based feedstocks to be used to produce, whether it be renewable diesel or sustainable aviation fuel.
So I think the question that we ask ourselves when we look at a policy like this is, you know, if the incentive is to support is to pull waste based feedstocks, what's the availability of waste based feedstocks like use cooking oil or tallow, for instance, to be used as a as a first order feedstock as opposed to a, you know, crop, for instance, like soy or canola. And so that kind of gets to your question about impacts on food systems. The policy is structured to incentivize waste feedstocks and not feedstocks that would go into the food system as a way to avoid or to help reduce the pressure on the commodities markets. And we did look at publicly available data on waste feedstock availability. And there's kind of a both a historical precedent and a future looking precedent.
And that is, historically, we've seen kind of waste based feedstocks grow to almost triple in availability over the past five years for these types of biofuels. And I think that was unexpected. But what has happened has been enhanced collection from restaurants of waste oils from commercial facilities, both domestically and internationally, to show that supply chain grow pretty significantly. And there's estimates, there's independent estimates showing that there's potential for that to continue to grow to the order of four to 10x over the next decade. So this question about like, is there enough waste feedstock?
It's a good question. We've seen the private industry kind of respond to these incentive signals to find new creative ways to access those waste feedstocks at cost effective prices that has driven a bigger supply to be able to meet the demand from the biofuel production. So, it's a good question. You know, and we continue to evaluate it, but we see availability of those waste feedstocks to meet the increased production demands.
Speaker 7
I mean, that sounds pretty optimistic. And it's not our job to be optimists as to lay policy that's going to not have unintended consequences. Professor Yu?
Speaker 3
Yeah, I mean, because I think one follow-up to that is and I hope it's true that we can cost effectively collect a whole bunch more waste feedstock. But if that is possible, what it means, number one, is without this California tax credit, we're going to see just more renewable diesel in The United States. Because you should think of renewable diesel and SAF as being pretty similar, but SAF's a little more expensive to produce. One's used in trucks, one's used in trains. So if we really do get access to this, you know, sort of extra waste feedstock, then that means more renewable diesel that can that can go into trucks, in California and and in other states, and I think that's that's a good thing.
It also means that this tax credit, which incentivizes, as Matt said, focuses on the waste feedstocks, would have an even more of a switching effect to expanding SAF at the expense of renewable diesel because there's more available sort of feedstock than maybe what some expect. It's part of this is about the balance between like, if we have this optimistic view, what does the tax credit do? Does it make things better or does it make things worse?
Speaker 7
I don't know there's consequences. The other question I have relates to highway maintenance and that kind of question. Air travel is going to probably need liquid fuels forever. I mean, maybe batteries will get light enough and enough energy density, but maybe not. We don't know.
And meanwhile, we're seeing with EVs and so on reduction of highway transportation funds. Is this gonna affect our ability to maintain our highways and keep people from hitting potholes and calling me and say, hey, let's fix those potholes, you know. Don't know who cares to answer that.
Speaker 5
I can take a stab. I mean, I think on the margin, yes. I mean, the scale, again, it depends on how big this tax credit ends up being. But some of this funding goes, for example, into the SHOP program. That's one of the state's, you know, key programs that's addressing those the highways and their condition and rehabilitation, as well as, you know, some of it goes to local streets and roads.
So, I think the answer is yes. Is, Again, the size, there's uncertainty. Is it going to mean that there's no funding? No. But it could be a significant you know, it could be a notable decrease.
And certainly, I think, as you point out rightly, Senator, there are other pressures on that funding source already. And I think, you know, there are already concerns about whether the fund existing funding is sufficient, particularly in light of some of those pressures, such as the switch to ZEVS, which, of course, is reducing helping to reduce our use of gasoline and diesel in the state. So, yeah, I think those are real questions, and I think that's one of the challenges with this potential proposal.
Speaker 7
Okay. Lastly, another question that comes to mind is the fairness issue here. You know, why give significant tax credit to this as opposed to other industries? I don't know. I've been warned.
I better stick my face in this microphone. So, I mean, is this fair to the average California consumer, average California resident, to put this kind of money into this kind of a program?
Speaker 3
I won't say whether it's fair or not, but I think it is it is worth thinking about who winners and losers might be. And so, you know, we so we project there would be some increase in gasoline prices that, you know, could be 5¢ a gallon, could be 10, which was our main projection, could be more. And so that's something that's felt by sort of everybody across the state. You know, there are others who are specifically in sustainable aviation fuel who would benefit from that. So I think that's the trade off to think about.
Speaker 7
Are there other states that are a are there other states that have comparable Yeah. Aviation fuel type?
Speaker 3
So there are, but they don't have a low carbon fuel standard. And so what California's got is we've already got a policy that's providing incentives, and now we're going to provide something on top of it, which is going to be enough to tilt the balance in favor of producing significant SAF. A lot of the other states that also have these tax credits on the books are not yet seeing much SAF, because they don't have an additional program, like a low carbon fuel standard, to sort of help top up the subsidy.
Speaker 4
Yeah, just one note, just again on the gas prices. So as Doctor. Smith previously noted, there could be, with additional waste feedstocks, additional SAF production, and additional renewable diesel, which I think would under would which would lead to not that increase in gas prices. So just want to, clarify that, again. And then, there are other programs that we have in California, as Doctor.
Smith noted, we have the Low Carbon Fuel Standard. Sustainable aviation fuel is an opt in program for the Low Carbon Fuel Standard. Other states there are a number of other states that have sustainable aviation fuel tax credits. They have varying degrees of either low carbon fuel standards or cap and trade programs that are sort of in various stages of maturity. But we haven't seen sort of this broad production or big shift for sustainable aviation fuel.
The big I would say the big thing that did happen is that under the Inflation Reduction Act, the federal government put forward a had a sustainable aviation fuel tax credit. Last year, the federal government pulled back quite a bit on that federal tax credit, which caused a shock to the market. And some of the changes that they did to that federal tax credit disincentivized California refineries specifically. So, we're still sort of waiting to see the impacts of how that change will sort of affect sustainable aviation fuel in the country. It still hasn't been seen.
We did see sort of a really big uptick when that tax credit was put into place and where we saw sustainable aviation fuel production and consumption jump significantly in 2024 from 2023 in prior years. So, there's still to be seen about whether there would be a contraction in that industry or whether we would sort of, with this tax credit, sort of see that just stabilize with what it's been.
Speaker 7
So, the challenge seems to me to calibrate what this might look like, you know, just to and then to have some ability to adjust it if it goes out of whack in one way or the other. So, with that, I will yield back to the chair.
Speaker 9
Thank you. I don't have any solutions, I have more questions. Maybe my questions can be answered, anyone who may have answer to that. Basically, this tax credit is trying to incentivize the self
Speaker 9
to produce more sustainable aviation fuel. And then obviously, that fuel is low carbon than comparison to petroleum based aviation fuels. To begin with, is the amount of what are the different amount of carbon between petroleum based aviation fuel versus SAF. And from the report that what I read is that California's carbon production by the aviation airlines is only 1% of that. That's already a very small amount to me in comparison to other carbon generations.
So basically, the current use of aviation fuel based upon petroleum based fuel or SAF? What are the ratios or differences right now? And currently, at the current status is only 1% of carbon contribution from the airlines. So and my worry is that if we continue to encourage, incentivize more production of SAF, then we need to encourage more refineries to work on that to reduce the cost of that. But our refineries are leaving and I hear some six of them left in our state right now and will they be enough to produce the needed aviation fuels?
That's the question. And from this report, it was amazing to read that renewable diesel production in the country, whole amount of RDs are not enough even California consumption alone. And how about other states, if the renewable diesel amount is just not enough even for California, how other states are surviving with that low amount of production of our RDs, renewable diesel, and continuously because of our carbon reduction policy, we are just choking the industry to fold up the business from California and the labor of the other states. So are we planning to continuously rely upon the good fuels such as, you know, from produced from other states or are we trying to encourage remaining whoever survived in our state to keep on producing more by this tax credit program that's being produced? Yep.
Okay, I will stop there.
Speaker 8
Thanks, Senator. If you don't mind, I'll maybe take the first question. Matthew Woteligan from the Air Resources Board. So, the question about comparing sustainable aviation fuel to fossil jet fuel, think it's a really good one. Depending on how you produce your sustainable aviation fuel, because as we've talked about, you can use waste based feedstocks, for instance, or maybe, you know, crops like soy, for instance.
But depending on how you produce that sustainable aviation fuel, it can be anywhere from half to, you know, to like more than 70% reduction in carbon intensity relative to fossil jet fuel. So, you know, what we would be talking about here with the tax credit incentive would be to also have a structure that really incentivizes the lowest carbon intensive staff to replace that fossil jet fuel. I think you made a couple of other important points too with respect to the refineries and to the energy transition and what's happening kind of in California relative to the other states. When we're talking about this potential substitution effect between renewable diesel and sustainable aviation fuel, you know, from my perspective, I'd to think about this as what is the long term strategy that California is embarking upon for its energy sector? And for us, when we look, you know, into the next ten, twenty years, we talk about how are we going to meet our climate objectives, legislatively mandated carbon neutrality goals by 2045.
We see a ongoing and significant energy transition that has to happen across many sectors, but particularly in the transportation space. And for the on road fleet, for the heavy duty fleet right now, they're using predominantly renewable diesel with some fossil diesel to meet that energy demand. That fuel is being produced both here in California and outside of California to meet our on road energy demand. Over time, we expect that the on road fleet will transition into zero emission alternatives, declining overall demand for liquid fuel. It's not going to happen overnight.
It's going to take decades, two decades to realize that vision. But there will be a, and what we expect, an ongoing transition to lower liquid fuel demand in the heavy duty and the trucking space. That is not true for the aviation space. We honestly expect that there will be an ongoing growth in liquid fuel demand as we fly more, as we demand more aviation. And that means we need to find options for decarbonizing the aviation sector that are going to largely rely on liquid fuels.
And so what we see here is an energy transition happening in California. We see refineries making decisions. They make long term decisions, ten plus year decisions to invest billions in producing the types of energy that we think we will need here in California. We've had refineries convert into renewable diesel production and SAF production. And we've had refineries do that both in California and outside of California.
And so, as they look at where the long term markets are, they're also looking at, okay, where are we going to be producing for the future? And maybe aviation is a good sector for us to produce in because they also see those signals about what's going on in the on road space. So, this transition for our energy system is important to make sure that we're also, you know, aligning kind of the incentives where we need to be long term and with the decisions that have been made to convert these refining assets to maintain that reliable supply of fuels that will be needed over the long haul.
Speaker 1
second part of the senator's question had to do with only 1% of the state's emissions come from jet fuel. If you'll respond to that part of his question as well.
Speaker 8
Happy to. And so California's jet fuel consumption, that 1% number and I'd have to, you know, kind of caveat this, double check the math, but my understanding is that that number reflects the consumption of jet fuel used for flights that are within California. Because we have data on how that emissions derived from those flights that are moving like from Southern California to Northern California, for instance. So it is a subset of the total jet fuel that is used and filled into airplanes here in California. We actually use a fair bit more jet fuel than is representative by those numbers, because there is, there are of course very busy airports in California, San Francisco, LAX that fuel and fly internationally that also contribute to global emissions.
So that number I believe reflects the intrastate flights. Our true jet fuel kind of consumption is much larger. And so the other piece of this is, you know, again going back to kind of California's long term vision, we have, you know, a two decade experience here of setting policy that helps provide a guidepost for other jurisdictions looking to decarbonize their sectors. And so this is an opportunity to California to once again establish its leadership role in establishing policies that help support long term deep decarbonization. And so we would hope, and to Senator McNerdy's point, yes, I'm an optimist, I'm a perpetual optimist, that we see growth in other jurisdictions in similar policies as we move to things like electrification.
They move on to liquid biofuels to help support ongoing decarbonization in the rest of the country and globally, that we can set that example and that others will follow.
Speaker 3
And maybe just a couple of follow ups to that. So, Matt laid out a sort of a multi decade process here by which we might transition. One question to ask is, you know, these costs, which I think are quite large, that would be borne by Californians now from this tax credit, is that going to meaningfully accelerate the transition as we go into the future? And one thing that is about this SAF technology for producing SAF from vegetable oils and animal fats is it's a relatively mature technology. The scope to maybe reduce the cost a little bit as you do it more, but you're fundamentally not going to get close to the cost of fossil jet fuel.
It's probably still going to be double the cost of fossil jet fuel. And so by using this technology now and paying extra as Californians to provide this leadership, it's I don't I don't think we're going to meaningfully sort of accelerate where we end up ten or twenty years from now, because the technology for producing SAF is very similar to the technology for producing renewable diesel that we're already doing. And so, think that's one thing that's relevant and important to keep in mind there.
Speaker 9
I'm curious, is supposed to be very raw material, is stock feed or vegetable oils or the food products. That sounds like it should be much cheaper. So, is that the process is costing a lot more?
Speaker 3
No, it's the feedstock. So, you say, to buy, say, soybean oil, 60¢ per pound. You need nine pounds to make a gallon of sass. So nine times six, that's $5.4 And fossil jet fuel, well, as of a month ago, was about $2 per gallon wholesale. So you're already just by buying the feedstock, you're already at a high cost, then you've got some additional cost So greenhouse emission
Speaker 3
Yeah. If you're using if you're using the waste feedstock. So, that would be used cooking oil or if you're using, say, beef tallow, which is considered a byproduct of beef production. If you're using those, then you're 70% reduction. If you are and this tax credit wouldn't would only give credit to that particular technology.
Speaker 9
So California has no other alternative because we are trying to phase out eventually petroleum based fuels, right? And we what I hear is that the only other alternative is SAF, and no matter how expensive it is, so we are trying to offset by the tax credit, right?
Speaker 3
Yeah. I mean, so I think the only alternative in the near term is liquid fuels, and SAF right now is the most cost effective way to do that. It's still expensive. Even more expensive would be to use chemistry through sort of extracting hydrogen out of water, and you extract carbon out of CO2, and you put those together in an expensive manufacturing process, and you can make jet fuel that way. That's even now right now, even more expensive.
And until we can get really, really cheap electricity, that will remain expensive. But there's other technologies that, in theory, could exist ten or twenty years from now that could potentially also compete with SAF from biofeasures.
Speaker 3
Maybe they figure out how to make batteries lighter. That's possible, too. Yeah. I do want to I'm sorry.
Speaker 8
Can I make one comment real quickly on Professor Smith's, and I reinforcing that? He mentioned the ability to produce fuels from hydrogen, electricity, and other sources of carbon. That's what we typically refer to as an e fuel for aviation. It is still the liquid fuel. So, it would still be a form of SAF that would be produced.
It's it is much more costly and does rely on very cheap and low carbon electricity, which is not available at this point. So, if you could think about, you know, again, coming back to the long term, that there still is the ultimate endpoint on the aviation sector is, by and large, the liquid fuel, and it's just a question of how can you get that liquid fuel produced with the lowest cost and the lowest carbon possible, and that will require more innovation.
Speaker 1
Yeah. I think Elio wanted to give a comment regarding that last question Okay. Before you move on to the next one.
Speaker 5
Thanks so much. You brought so many interesting and good points. I think one of the things, just on that last point, is that ultimately, yes. I mean, aviation is certainly hard to decarbonize. Right now, we don't have other good options, but I think one of our points is, okay, we don't necessarily have to do the hard, expensive things that we're ultimately going to have to do down the road right now.
We can start with the lower hanging fruit. And in general, we want to start with the lower hanging, more cost effective, cheaper things. There are some exceptions, like if you really need if you want to stimulate innovation, like real, true innovation that's going to take years and years, maybe you want to do something that's a little more costly, because you want to kind of get that process going. As Doctor. Smith said, in general, we understand this technology to be relatively mature.
Yes, on the margin, they can make some efficiency changes, but this is a relatively mature technology, and the way this is structured, it doesn't appear to be aimed at doing at really transforming this industry to do something that's totally different, and it's going to be a game changer. So, you could do a different policy, and I think, you know, the agenda even mentions staff mentioned some other alternatives there. So, there are other ways you could do it. So, I think that's one kind of key point. You mentioned so many others, but just in the interest of time, I'm happy to
Speaker 9
so I'm going simplify just the last comment I made about the renewable diesel and heavy trucks, they all operate on diesel. And so that means that that situation will be the same, either petroleum based diesel or renewable diesel. And entire nation's production of the renewable diesel is not enough for California alone. So that means how are we going to meet the demand of all these renewable diesel production demands in our state if we continue to try to choke the refinery industry not to operate and get out of our state. That's, to me, contradicting policy.
Speaker 3
Yeah, and I think, I mean, you have a good point there about sort of just the amount of renewable diesel, which has increased a lot, that's being produced in the country now, almost all of it being used in California. And if we think about what is the potential scope nationwide, if you were to replace all jet fuel with SAF produced from soybean oil, you'd have to plant soybeans to every single agricultural piece of land in the entire country. So if you can get it from importing canola or you can get it from waste feedstocks, could reduce that down. But the there's just there is a sort of a scale problem here that I think we can't think about these bio based fuels as being our long term solution, either for diesel, where renewable diesel is a lot of it in California, but nationwide, percentage of the total. It's probably on the order of 10% to 15% of the total.
So to get all of the aviation fuel and all of the renewable diesel is just not possible to make it all from vegetable oils and animal fats. So we do need to continue working on other solutions. And I think that if you know, if we're going to pay a lot of costs now for something like this, SAF tax credit, does it get into us into a better place ten or twenty years from now? And I'm not convinced that it does.
Speaker 6
Okay. Thank you. This is a really important and interesting conversation. So I appreciate all the comments and the panelists. I think I'll just start with the thing that's most important to me in this big in this conversation is what we're defunding.
So I guess that's the thing that I'm really concerned about as a member of a budget sub, is the idea that we would be pulling money away from Caltrans highway maintenance, local street and road funding, and competitive freight grants. So I'm already concerned about the fact that we don't have a reliable, sustainable funding stream for our roads, and that we are also defunding transit. And so LAO's suggestion that we could get more bang for our buck if we were able to move more people into transit and focus our GHG reductions in that area. I think that's a really important point that we don't talk about enough up here. And so that sort of overlays this whole conversation for me is, if the governor was proposing a way to backfill those from somewhere else, then I might feel better about this.
And I guess the other thing that I am thinking about as I'm reading through all this, and is the refinery conversation that we're having at the state level, around trying to keep refineries open, because we because it's important that we have a local supply, but mostly the the, fuel the refined fuel that we use is basically a global market. So we are what we're doing in in state is less is not really affecting the gas prices that we're seeing, but we are still committed to keeping our refineries open because we are reliant still on, gasoline, and they are also job centers, a job base, and, communities rely on them. And so figuring out this mid stage transition question of how are we transitioning our refineries, and what is their future? So to me, it seems like when we're talking about sustainable aviation fuel, the question of, is it important to us that we onshore them, that we have them in California, or could we be buying sustainable aviation fuel that's produced in Washington state or some other place or some other part of the world, In the same way that that, petroleum is a is a international market, sustainable aviation fuel could be that too when when we're really dealing with that at that level.
And so it seems like the framing of part of the main goal here is that we're trying to help one of our refineries to be successful, Phillips sixty six. So if that is a goal, I'd rather have that be an overt goal, that we're talking specifically about them and what they need, and that we're not trying to hide the ball or obscure that, if that is actually what's happening here, that we want to keep our refineries in business, that they're important to our economy and our state, and that this is something that they have asked for, because they see this as a path forward for them. Because And so, if that was the goal, the proposal might be structured slightly different differently. I don't know if that's the case or not. To me, it seems like those things are overlaying with each other here in a way that's really important to the conversation.
So I wanted to ask the question, though, of my understanding of sustainable aviation fuel was that it's more expensive by about a dollar. And so possible that we would do this, and then it wouldn't actually be purchased, so then it wouldn't actually be used?
Speaker 4
So the tax credit would only be for fuel that is sold into California for use in California. So, by nature, the sustainable aviation fuel would then have to be used. I mean, I assume it could just be stored, but the shelf life of sustainable aviation fuel is not particularly long, so there would be challenges there.
Speaker 6
But and so what you're saying is you think the price would float down to the level at which an airline would buy it? So Instead of buying something else, somewhere else.
Speaker 4
Yeah. So I mean airlines are buying sustainable aviation fuel now. It is being sold. But as I mentioned previously, the federal tax credit being decreased, and then there are other policies that disadvantage sustainable aviation fuel compared to other renewable fuels. So depending on the literature, that incentive gap could be around 1 point dollars 5 or higher, depending on what incentives you're looking at.
Speaker 4
So, when you're looking at that, that's sort of the other reason for the value of the tax credit of between $1 and $2 is to sort of make up that gap to bring parity between other renewable fuels and sustainable aviation fuel to help decarbonize the aviation sector, as we've heard, is the most difficult to decarbonize sector. And I'll turn it over to Doctor. Smith now.
Speaker 3
Sorry about that. So, yeah, so what I was just going to clarify, I mean, sustainable aviation fuel is $4 or $5 more expensive than fossil jet fuel, but there's other programs already that are providing subsidies through the federal renewable fuel standard, through federal tax credits, which were reduced somewhat, and then the state's low carbon fuel standard, but you're still kind of a dollar short. So that's where this tax credit would come in with that extra $1.0.2 would be enough to sort of tilt the balance to where a refinery such as Phillips sixty six could find it more profitable to sell SAF instead of renewable diesel into into the California market. The I think I really think your point that you made is about the target of the policy is a really important one, because right now, the way this is set up, it seems to create an incentive for anybody, including the refineries that are set up in The Gulf, for example, to produce sustainable aviation fuel and send it to California. And so if the goal is to create an advantage for those firms operating refineries in California, for Phillips sixty six in particular, you want to do something that's going to give them a competitive advantage, and this I don't see how this does that.
It creates an opportunity for any firm who wants to sell a sustainable aviation fuel link to California to do that. There's the you know, there's the machinations about how they would figure out how to offset, you know, the diesel excise tax, and there'd be some financial engineering to make that happen. But I think if I think your point is a really good one, that if you want to target something, then you should target that thing, rather than creating this thing that might have a lot of unintended consequences. Uh-huh.
Speaker 6
Do you and I I want to ask Elio for a bit, but do you have any response to that point?
Speaker 4
Yeah. So based on our legal analysis, in 1988, the sue US Supreme Court had a very similar sort of fact pattern case, where Ohio was incentivizing, ethanol production and providing a tax credit. The US Supreme Court overturned that and said that it was not allowed under the Commerce Clause. So, based on the similar fact pattern here, we don't think that that would sort of fall in line with federal law and federal case law. I understand maybe the LAO has done a different legal analysis.
They've previously in other hearings that they don't necessarily see the same sort of concern, so I'll turn it over to the LAO.
Speaker 5
Thank you. Thank you so much. LAO, your response to this, my friend. I really appreciate the question, very good I think this is a key point, what is the goal of this? And it seems like, while it's not the sort of main stated goal that the administration has, it seems like one of the goals that many folks appear to have for this proposal is keeping particularly at least one individual refinery, perhaps more in the state.
And so, really thinking about, like, how do we if that is the goal, how do we do that? And how do we not have unintended consequences that might not be as good? In terms of whether you could limit this just California, I'm not an attorney, but we do know that some other state policies that exist are able to be limited to California, right? So, it's perhaps I'm not sure whether this particular type of policy, as proposed to be structured could be limited that's something I think we have to consult with our attorneys on but I would point out that the state has other policies for example California competes is a policy that the state has currently that just applies to California it's tied to California jobs we can actually pull back that money if the company doesn't produce the jobs doesn't comply with what we want so that's one example of a program that's explicitly about California jobs and can be very targeted. So for example, if that was the if that were the state's goal is to kind of keep those jobs here, and really have it limited to California companies or a California company at least, then we could create a different kind of policy.
It might not look exactly like this tax credit. It might be different, but we think there's there are other tools that could be in the legislature's toolbox to do that, and so, you know, we'd certainly be happy to work with the legislature if that were something that you're interested in doing.
Speaker 6
Okay. Thank you. And can could Department of Finance just address this question? I know the governor cares about roads and potholes and paving, and so, you know, can you just address that directly? The loss of the money to those important values that we have?
Speaker 4
Yeah. So the reason maybe I'll back up. And the reason why the diesel excise tax is the tax chosen is because we don't believe that these corporations are very profitable, so they don't have income tax to offset. So this couldn't be sort of another sort of tax credit where you're providing tax credit credits against income tax, and it's not a refundable tax credit. So, if you think about like the film tax credit, that's a refundable tax credit that's sort of funded by the general fund.
So, one of the largest or the largest tax liability for many of these corporations is various motor fuels taxes, one being the diesel excise tax. So, obviously, roads are very important to the administration. This is, you know, sort of a difficult trade off. But as you mentioned, you know, you could backfill the lost revenue to make the transportation programs whole, but still be able to provide that incentive. Where that funding would come from would be difficult to do, obviously, given our general fund situation, sort of what where that would come from would be something that would be a difficult conversation to have.
Speaker 6
But if that was part of the governor's proposal, then we would see that already, right? If there was a backfill proposal.
Speaker 4
Yeah, it's not part of the proposal, Because just to be of the general fund situation, right, we have limited other funding sources. As I'm sure we'll talk about in a little while, GGRF is not necessarily a funding source. So there are limited funding sources that we have in order to be able to backfill.
Speaker 6
Okay. Yeah, I mean, that just remains a major problem. I guess, I mean, what I hear you saying is this, it's essentially a weighing of priorities. This one, the offsetting that would happen is something that we could absorb in the transportation sector, and that this is a higher value for that money. And I don't know if I read this the same way, especially around just the statistics about which, you know, 1% of GHG coming from aviation.
And the answer that you gave, which was that that's only for in state flights, I don't know if that's something that LAO agrees with that or
Speaker 5
Yeah, that's our understanding as well. But we would note, I think one of the numbers we cited we couldn't find, like, a perfect estimate for all of California origin trips, but our understanding is that nationwide aviation is about 3% of GHG emissions, so again, if you use that as sort of a proxy, yeah, it's probably a little bit more than the 1% it's probably more than the 1% that's interest state. But it's not. This isn't the bulk of GHGs, right? It's a it's still a relatively small contributor, it may grow over time as we hopefully decarbonize other sectors.
And at that point, again, we think we may really have to spend quite a bit of money to try to decarbonize this. But at this point, it's not the driver of GHGs in the state.
Speaker 6
Right. Yeah. And I guess I do think and this was referenced in the letter that was sent by 36 legislators. I mean, the idea that we're investing in the future, that we're and I appreciate the context that a lot of our vehicles will eventually probably be on batteries, but a lot of our airplanes probably won't. So we'll need to have a fuel source.
I appreciate that, and that the future is that we need to be dealing with this and decarbonizing this sector. So, you know, but the reality of the tradeoffs and the bang for your buck, how much are you getting for what you're giving up, And I'm I'm having a bit of a struggle around that because of the things that I've talked about. So the last thing that I just wanted to ask is, are we coordinating at all with Washington State around sustainable aviation fuel? Because I know that they have maybe they're a bit more advanced in this area, and can you just talk about that?
Speaker 4
So they're more advanced in the fact that they've they have a sustainable aviation fuel tax credit in place. However, there's a trigger for that sustainable aviation fuel tax credit of I believe it's 20,000,000 gallons being produced in the state of Washington, and so it has not been triggered on yet. So I think to this point is that they do have renewable diesel facilities in the state of Washington, and they have not invested to shift to sustainable aviation fuel production, even with that incentive, which is a similar incentive. It's structured the same as what this proposal is.
Speaker 6
And but our proposal wouldn't have a trigger? No. Okay. And do you what's the your understanding of why they have a trigger and why we don't?
Speaker 4
Think their trigger was because there is no sustainable aviation fuel currently produced in Washington State. So, the incentive was to have sustainable aviation fuel be produced at 20,000,000 gallons, which is, I think, a fairly large amount for the state of Washington, so.
Speaker 6
Okay. So if we did this, does it affect Washington at all if we move forward with
Speaker 4
this? I think it'd be difficult to sort of sort of piece that together. I mean, there there could be some other knock on effects to the state of Washington, but but since their their tax credit is not in effect yet, and I don't know if there's any plans for any of the renewable diesel facilities to be converted to sustainable aviation fuel in Washington State, or for the creation of another sustainable aviation fuel refinery. So I think it's still maybe too early to tell. Okay.
Speaker 8
Yeah. Just one quick point on coordination. We do have regular coordination calls and meetings with the State of Washington, both the regulators and kind of the folks that are working in the policy space in Washington. And certainly, if this were to move forward, we would have frequent communication because we don't want to see a situation where somehow we are setting up a situation of lots of fuel shuffling happening into California that is harming Washington's ability to meet its own climate objectives as well. And we work very closely with them as part of our broader Pacific Coast Collaborative, Oregon as well.
And this has been a conversation that we have with them.
Speaker 6
Okay, yeah. And, I mean, because of cap and invest connection, I didn't know if that was somehow implicated in this policy area. No. Okay. Okay.
Okay. Well, thank you very much. I yield back, Chair.
Speaker 1
Thank you so much. I really appreciate the comments and the questions from the senators. Did you have another question, Senator?
Speaker 1
I really appreciate them, and I appreciate the responses, and also the rebuttal from each other, because there's no perfect answer, and I think that something that the senator mentioned in her comments is, What are we really trying to do? And I think one of the a question then is, how many companies are currently eligible for this tax credit, to your knowledge?
Speaker 4
this proposal leverages existing low carbon fuel standard, we actually know how many companies have sort of certified pathways that would meet the eligibility. There are four companies that currently have that produce sustainable aviation fuel that would be eligible. However, the diesel excise tax liability is the other piece where
Speaker 4
We know that two of the firms do not have any diesel excise tax liability, and the other two do. One of them a small amount, the other one a much larger amount.
Speaker 1
I think and going back to the center's question, if we are talking about a particular refinery, then we need to be very specific. I mean, we are talking about protecting jobs. We are talking about protecting communities, and trying to find a way to do this, and being creative, and I understand this fuels no pun intended the idea that we need to find something that may help to keep that refinery here in California, and keep those jobs going, and keep the communities the economic base going. And again, we go to the same thing, that perhaps we need to say, This is what we're trying to do. Let's find a way to do that, as opposed to saying, We're opening this up, and I think the comment was that there are four to six others nationwide who may be poised to take advantage of these incentives, then our money that goes should go to our roads is now going out of state to produce something that we're hoping would be produced here in California.
So, a number of factors to consider in this, and that's why I asked how many companies are currently eligible would be currently eligible for this, as this is structured? And I understand there's only one here in California.
Speaker 4
That's correct. There could however, there are other facilities in the state that could transition to be to produce sustainable aviation fuel if this proposal were to pass, which would then there's for example, the Martinez refinery had a public they were they received a grant from the federal government to update their facility in Martinez to produce sustainable aviation fuel. They've since put that on hold as a potential that if this proposal were to go into place, maybe the Martinez refinery would continue with their sustainable aviation fuel process at the Martinez refinery.
Speaker 6
Yeah. I just I do want to emphasize that I think it's important that we are thinking really strategically about how our refineries could transition to participate in the green and clean energy future. So having sustainable aviation fuel be a future for a refinery that's currently petroleum based, you know, is a really good thing to be thinking about. It's exciting, and it does seem like one of the very few options I don't know how many options there are for refineries to participate in that. That seems it is exciting to think of that.
So, you know, I had a number of negative comments, but I also just wanted to add that in, because I think it's important to recognize it. Yes. Yeah. Thank you.
Speaker 3
Yeah. And I think I mean, you're right. When you see all of this sort of capital, billions of dollars were spent to build these things, and then we're just going to let it sit there and not use it for anything. Think to you know, it's important and potentially economically beneficial to look at ways both for companies and for people who work in those places to be able to renew those facilities. But I think this proposal wouldn't achieve that because it's open.
So if an out of state firm is lower cost producer now, then it's still going to be a lower cost producer under this tax credit. So you're not, I don't think you're doing enough or much to really help the California those operating in California versus outside, if that's your goal.
Speaker 1
And it seems there would be no assurance that this would keep a refinery in California either, or keep it from shutting down. Any final comments from Elio?
Speaker 5
Yeah, I think that's absolutely the case. Think that that's part of the challenge, right? And I think, thinking about these communities, there are real community impacts I mean, they're which are both the jobs, and then there are also the emissions impacts. So, are the tradeoffs, EJ impacts as well. And so, those are all the things I think we're going to have to think about as a state, and certainly the legislature will have to wrestle with when it's thinking about this.
But really, I think, you know, our advice would be to think about what are your goals? What is that plant? We're in the mid transition, I think, was referenced by Senator Blakespeare. This is a tough time. We're going to have refineries, you know, potentially closing.
It's not necessarily going to be at the same pace as our declines in fossil fuel. How does that affect gas prices? How does this fit in with the future of those refineries? And does this actually encourage the transition of some of those refineries even earlier and being less fossil and then have other impact I mean it's complicated I think if there's one thing that I have taken away from looking at this proposal is how complex it is and how many potential unintended consequences or other consequences that we may not fully appreciate are really a part of this. And so, I think that's one of the real challenges in trying to get your head around it, at least it has been for me.
So, encourage the legislature to think about what the priorities are, and then we can try to help work with you to craft the best way to get at those.
Speaker 4
I would just thank the committee for the questions today. As I previously mentioned, this is a priority for the governor to help decarbonize the aviation sector. We understand that there are criticisms, and we're happy to work with the legislature to help craft a more, you know, whether that be a narrow policy or something that still doesn't run afoul of the U. S. Supreme Court decisions, because the last thing we want is to have another sort of legal battle on our hands.
Speaker 1
We don't want that. Even as an attorney, don't want that. Final comments, Professor?
Speaker 3
I think it's so two things. We've all talked about the imperative for I think it's important to remember cost. And if we can we can do things that are less costly to do that, then we should focus on those areas. And and this seems like a really costly way to to to decarbonize. And then the other point, just to, again, reiterate, is that I think this policy potentially opens up a lot of unintended consequences that may happen, as we heard the things that we haven't really thought about, because these policies in this industry are so complex.
And so I think you need we need to be cautious on those grounds.
Speaker 8
Maybe just just one, and I just appreciate the comments about being in the the mid transition and recognizing that the the difficult place that that puts us all in. And I will say that it is complex, but there are some fundamental aspects of this transition to think about. And that is the trajectory of the gasoline pool, the diesel pool, and the jet fuel pool, and how we make sure we have reliable supply for all of those. And historically, they all came out of the refineries. They moved in lockstep.
The demand for those fuels all kind of went in the same trajectory and the supply did. They are now disaggregated. We have zero emission vehicles and vehicle efficiency in the gasoline pool. We have potential ZEVs and hydrogen trucks coming in the heavy duty fuel pool. And now we've got an aviation sector.
And so thinking about how we maintain reliable fuel supply for each of these, you know, sources of fuel and energy in California is really important. And thinking about what the alternatives are. If we, you know, don't have zero emission or low carbon fuels, we're going to have more fossil. And what's the time frame of that transition? How long do we want to rely on that fossil fuel?
And do we want to rely on more imports or out of state production for either the fossil or the biofuels or the other sources of energy? And these are all aspects of this mid transition that we're in. And very much of the view that the best way that we can kind of navigate our way through the transition is to give reliable and kind of affordable alternatives to those fuel sources to support meeting the energy demands of the state.
Speaker 1
Very good. Thank you so much. Thank you to the panelists. Thank you to my colleagues for the questions and comments. We'd now like to open it up for public comment.
We ask that you give your name, your organization, and we only have two people speaking? Okay, we're going to limit it to thirty seconds maximum per person.
Speaker 23
Wonderful, thank you. Christina Scringe with the Center for Biological Diversity. We oppose the SAF tax credit. The legislature has not yet fully funded and should first max out funding for cost effective GHG reduction programs and accelerating equitable clean transportation. As you've noted, the state's been struggling with how to deal with its mid transit transition including how to stabilize an increasingly volatile transportation fuels market and CEC has made clear that demand, reductions are a critical stabilization strategy.
Speaker 15
So I really appreciate the comments from the LAO and from, Doctor. Smith, as well as Blakespeare, thinking about what we're losing with this. Thank you.
Speaker 1
Thank you. You went a little over the thirty seconds, we ask. We we won't put that alarm on, but
Speaker 3
thank you. I'm Dan Lashoff, a senior fellow with World Resources Institute. We oppose the governor's proposal because it's the wrong way to accomplish two important goals that we discussed, decarbonizing aviation and providing a just transition for refinery workers and managing that transition. It won't reduce net emissions for the reasons doctor Smith explained. It will just shift use of a very limited waste resource from renewable diesel to aviation with no net benefits.
Speaker 16
Second, it is the wrong way and extremely expensive way to try to protect workers. We should do it directly. Thank you.
Speaker 1
Appreciate your comments. Thank you. But you don't have to take up the whole thirty seconds.
Speaker 44
Thank you, chair, senators, panelists. My name is Gary Hughes. I work as a co director with the International Organization Biofuel Watch. And, first off, definitely in solidarity with the workers. We are in a serious dilemma, but it's a result of the can being kicked down the road.
Speaker 17
There are a lot of environmental harms associated with liquid biofuels, and I think that whole thing's been kind of downplayed in the discussion. So we know that the benefits are not worth the harms, and something does have to be done about what's going on with the unmanaged transition that we're living in the state.
Speaker 73
Good afternoon, Chair and members. My name is Travis Bertu. I am a USW Local three twenty six member at the Rodeo Renewable Energy Complex, and I am in support of this incentive program. Thank you.
Speaker 81
Hello, chair and members. My name is Felix Luna, a proud member of United Steel Workers Local three twenty six, Joint Health and Safety Chair, Committee Chair, and resident of Vacaville and Celano County. Supporting the California's staff incentives keeps California economy strong and positions the state as a leader in green energy innovation by keeping well paying jobs in our state and keeping well trained and experienced operators, technicians, and tradespersons employed. I thank you all favorably for considering the staff incentives.
Speaker 31
Chair and distinguished members, my name is Nick Vigil from Vallejo in Salon County. I'm proud to stand before you today in strong support of the Governor's Sustainable Aviation Fuel Incentive. I respectfully urge you to support this effort and help build a healthier, more sustainable future for all Californians. Thank you.
Speaker 74
Madam Chair, members SRDS on behalf of p sixty six, here in support of the tax credit, sends a clear message that the state is serious about keeping fuel production and the jobs that come with it in state rather than losing their investment to competing markets. For companies like P66, these are long term capital intensive decisions and this type of incentive helps anchor those investments here. Lastly, we agreed that an amendment is needed to focus the tax credit to fuel produced and sold in California. This can significantly limit the impact on the road construction and maintenance funds. Thank you.
Speaker 24
Good afternoon, chair members. My name is Jared Witry. I am the director of operations for the Rodeo Renewable Energy Complex. One item I'd like to challenge on the LEO and the house report is the increase in gasoline prices. When with the methods of producing sap, you actually make more gasoline range materials so that would increase the supply of gasoline to the state.
Speaker 22
So, I respectfully ask that you support the governor's incentive for staff tax. Thank you.
Speaker 4
Good afternoon, chair and members. Thank you for having me today. My name is Tony Vanyenko. I'm a resident of Concord in the Contra Costa County. I would like to ask you all to support the staff incentive today.
Speaker 23
It helps support well paying jobs in the California economy and also provides a good market for green energy. I humbly ask you to support this incident. Thank you.
Speaker 33
Good afternoon. I am Renee Streiber. I'm a resident of Alameda in Alameda County. I'm also an employee at Phillips sixty six Refinery. I'm here to to request the support of the sustainable aviation fuels.
Speaker 8
Hello. My name is Evan Jones. I live in Berkeley, California. I work at the Rodeo Renewable Energy Complex. Really proud to have a good paying job in the energy sector here, green energy sector now.
So please consider passing the incentive. Thank you.
Speaker 35
Good morning, madam chair and members. My name is Derek Vines. I'm also a employee at Phillips sixty six Rodeo Renewable Energy Complex. I'm a long time member of the community there in Rodeo since 1974. I have family, two brothers that were operators there at the facility.
Speaker 25
I've seen what this facility has done for the community and for the families that have lived in the community and the opportunities, the economic opportunities that they provided for families in the community. This the members live in three different districts. In short, I support the tax incentive and hope that you do as well. Thank you.
Speaker 34
Hello, everyone. My name is Eddie Castaneda. I live in Pittsburgh, California. I'm a proud apprentice for Local three forty two. I started my career three years ago.
Speaker 26
Phillips sixty six has helped me support my family for those three years. Staff will keep my career and my family moving forward in a positive direction. Thank you.
Speaker 52
Good afternoon, Chair and Committee members. My name is Sanjay Prasad. I live in Hercules, California, which is in the Contra Costa County. I'm here to support our Governor's incentive on the staff. Please join me and my family.
Speaker 27
We care for the environment. We want our kids and our future kids to breathe clean air. So please, I appreciate if you can support that, pass the bill. Thank you.
Speaker 54
Hello. My name is Paul Hollidge. I work also work at the, Rodeo Energy Complex there. We are making sustainable fuels. I appreciate the professor's encouragement about carbon fuels, but we have we were a carbon fuel complex.
Speaker 28
We have switched over sustainable fuel because the governor and we believe in clean air and clean aviation fuel. Please go ahead and continue to support our community and support this because we have to have a way, a segue into going to clean fuels. And we've done this at our refinery to keep it going.
Speaker 96
morning. Tim Sobrante, Contra Costa Building Construction Trades Council here to speak in support of staff. I also want to say our members, we do local streets and roads, so we care about that too. We think that's a false choice. We think there's ways that we can do both.
Speaker 30
And also just want to say, you know, it's not let's lose sight lose sight of the bigger picture. This is something not in the abstract to increase, decrease greenhouse gas emissions, something we can do today, and we can protect good union jobs while we do it. Let's not overthink this. I thought the gentleman from CARB did a fantastic job outlining the benefits, and I hope the committee takes that into consideration, and we should keep it in state. Thank you.
Speaker 75
Good afternoon, madam chair, members of the subcommittee. My name is Graham Noyes. I'm a fuel and carbon attorney. I've been working for ten years for dedicated SAF producers, who have built this industry. I'd like to make clear this is not a SAF incentive.
Speaker 31
This is a P66 bailout bill. To make this a great SAF tax credit, the tax credit should be transferable and available or available to all producers, and the life cycle analysis should be tech neutral and follow the Inflation Reduction Act 45Z, and CORSEA approaches. Thank you.
Speaker 76
Good morning, panel. My name is Dorio Anderson. I'm a resident of Fairfield, California. I'm here to support this half tax incentive only because it not only supports jobs, open jobs, but I believe California always speaks about being a green state, and I believe this is the step in the right direction. So if we wanna make California green, let's go ahead and make the right choice.
Speaker 10
Good afternoon. My name is Tommy. I live in Solano County. The staff incentive isn't only about investing in credits. It's about reducing the carbon emissions and stand behind the bar that was set for the long long term goal.
Speaker 33
It's about securing California's leadership in clean energy and creating jobs with future technology. Please stand with us and support staff to keep active and potential renewable energy complexes in California. Thank you.
Speaker 29
Hello, board. My name is Scott Soberson. I'm a resident of Contra Costa County and Phillips sixty six employee. I asked you guys to consider, not only Phillips sixty six contribution what they've already contributed into what you guys have asked them to, or not you guys, but California as a whole on the carbon footprint. Right?
Speaker 34
So they've already invested billions of dollars on the conversion and then it just seems that we're not getting the support by following those rules. So please consider the efforts and also the job placement for, you know, that community as a whole. It's very, very stable, you know, income and as it is
Speaker 17
Morning, chair members. My name is Trevor Russell. I'm a third generation family member that works at p sixty six, and I'm asking you guys to support that bill, please.
Speaker 5
My name is Ralph Alter. I live in El Sobrany, California in Contra Costa County. I've been an employee of the Phillips sixty six Refinery. Please support this bill. It makes a big difference to the communities.
Speaker 38
These jobs are generational. The spread of wealth through the communities is going to be hard to measure. You may have a real measuring stick in Benicia here pretty soon. It's not pretty what's going to, you know, when a big industry leaves. I've grew up in the Bay Area.
There was industries like this everywhere. They're gone. These jobs are going away, and they make a big difference for people.
Speaker 13
Good afternoon, panel. My name is Johan Maddox. I live in Fairfield, California. Grew up in Contra Costa County. I've been in and out of refineries for the last thirty some plus years, and I was here to help support the South program.
I hope you're to do the same. It's opened up a lot of jobs. I see a lot new faces, new people on and out, and it's been taking care of my family for years. So I hope you guys please stand behind it.
Speaker 18
Good many good morning, board member. My name is Aaron Yarborough. I reside in Walnut Creek, California. I just wanted to say I was listening to the hearing earlier, and there were questions about the difference between the SAF and the fossil fuels. Well, it has the when burned, it releases a new c o two into the atmosphere, which that, carbon was previously locked away, but now it adds to the total atmosphere carbon.
Speaker 39
But the, South is made of carbon sources like plants waste waste oils, agricultural residue, and plants absorb c o two in the area while growing, and they send it back out.
Speaker 1
You want us to support it or not support it? Support it. Very good. Thank you.
Speaker 11
Good morning chair and members. My name is Derrick Henry. I'm a USW three twenty six member, retired Navy after twenty four years of serving and a resident of Fairfield. After serving my country for over two decades, I now take care of my family with a good USW playing job, local playing job. This is why we support the governor's staff incentive and we're asking you to support too.
Speaker 68
Good afternoon, chairman members. My name is Joe Jawad, president, United Steelworkers Local three twenty six, representing about 250, union workers at the Renault Renewable Energy Complex. Local three twenty six has been there ninety two years serving that facility. You know, it it's simple when when state of California called for cleaner fuels, our our facility answered. We transform a traditional refinery into renewables remote renewable fuel operation producing, renewable diesel and sustainable aviation fuel, and our members made that happen.
Speaker 2
Hi. Good afternoon, Sharon members. My name is Angelie Goraya. I'm a proud member of USAW, and I'm a resident of Solano County. And I'm here to support the SAF incentive program.
Speaker 95
My name is Arturo Torres. I'm a local one fifty two carpenter, and I'm here to report to staff, and I hope you do too.
Speaker 25
Good afternoon, madam chair, committee members. My name is Michael Miller, and I live in Benicia. I'm here in support of the sustainable aviation fuel package. I've seen in my city what happens when a petroleum refinery does not see economic value to continue operating. This incentive advances California's nation leading climate goals while supporting good paying jobs and furthering clean energy investment in our state, and I ask you to support the governor's budget proposal.
Speaker 44
Good afternoon, board. Name is J. C. Navarro. I live in Richmond, California.
I've been in this industry for like twenty one years already and looking for your support too for the SAF incentive.
Speaker 38
Afternoon. My name is Leah Abraham and I live in Berkeley in Alameda County. I'm here to support the Governor's Staff Initiative. It supports clean energy and jobs in California, so I respectively ask you to support this as well. Thank you.
Speaker 12
Good afternoon. My name is Cynthia Fife. And I would like to offer my support for the SAF initiative. And I am an employee at the RREC, and that's what I got. Thank you.
Speaker 37
Good afternoon. My name is Ted Wickers. I'm the USW three twenty six unit chairman. I've been at the facility since 1983, Union Oil of California, and I can tell you it is the best thing we've done. More importantly, I've heard enough to know we're a savvy enough group to pull this together to keep this facility open because we need fuels.
So thank you for supporting
Speaker 35
Good afternoon, church and members. My name is Jesus Buenos from Turlock, Stellis County. I was trying to support the governor's, staff. This proposes a direct investment in California's future, creating high quality local green jobs and blossoming our agricultural community by converting waste products into fuel, spreading in the state's production keeps our economy competitive while moving us towards a cleaner future. Urge you to Thank you.
Speaker 1
Thank you. Good afternoon chair chair members. My name is Elizabeth Terry. I live in Salonia County. I am here to support the governor's self program for good jobs and a clean fuel future.
Please support it with us. Thank you.
Speaker 97
Good afternoon, chair members. My name is James Couch. I live in Crockett, just four minutes away from the from the plant. I'm a member of Local seven forty one. I'm a painter.
Speaker 47
I support this bill because projects like this, they just show they show California they're really leading the way in innovation for cleaner energy. It's not just about protecting the environment. It's about creating jobs. It's about strengthening communities, and it's about building a more sustainable future right here at home. Please support this bill.
Speaker 53
Chair and members, my name is Joseph Graziano. I live in Manteca, a proud member of Painters Local seven forty one. I'm here today to support the incentive, supports the jobs here locally, and will help reach the ultimate goal of the SAF Grand Challenge for DOE. Thank you.
Speaker 47
Good afternoon, chair members. My name is Amy Henry. I live in Fairfield, California. We've already made real measurable progress on air quality right here in California. At our facility, we've reduced SOX emissions by over 80%, particulate matter by 20%, and NOx by 33%, delivering cleaner air for our communities.
Speaker 49
And we're doing it using waste based feedstocks, Waste oils that would be otherwise go into the landfill. Staff builds on that progress. It's one of the only solutions and I support the governor's incentive package. Thank you.
Speaker 58
Good afternoon, everyone. My name is Tita Escalada, and I'm a resident of Rodale. And I represent the Hercules Rodale Crockett Rotary Club, and I am here as a partner of Phillips sixty six because they are our sustaining partner for all the projects and programs that we do in the community. We are talking about all of this tax credit that they would be getting, but at the same time, we have to remember the millions of dollars that they're actually pouring out there in the community. A lot of the programs that we do out there is because of the support of Phillips sixty six.
Speaker 50
And we do we have just dealt with program on the homelessness, which they are spearheading right now, because I think every single one of us who lives in this community, we have that issues. We need to be able to take care of that. Thank you. I
Speaker 8
Good afternoon, everyone. My name is Franklin Gordine. I'm a proud local member of three twenty six. I support the governor's SAF initiative and hope you do too. Thank you.
Speaker 55
Good afternoon, chair and members. My name is Enoch Yacopo. I'm part of a proud member of USW Local three twenty six and one of the 600 families that will be affected with this staff incentive decision. I ask that you please vote in this favor. Thank you.
Speaker 59
Good morning, chair and members. My name is Perry Bjornstad. I live in Benicia and Solano County, and I also am a proud member of USW Local three twenty six. I'm here today to support the governor's staff initiative, and I work in a facility alongside over 600 people, many of which are union jobs. We produce renewable fuels from Rodeo, which are reducing emissions today.
Speaker 52
This transact this transition is exactly what the state asked our industry to do. SAF is a solution. It's here now. These are just some of the reasons I support it and kindly ask for your support as well.
Speaker 54
Maria LaRacho with Leadership Council and Justice and Accountability. We strongly agree with the LAO's recommendation to oppose staff tax credit. We agree with the biofuel agree that biofuels are expensive and often do not result in net GHG reductions and do can pose harm to local air quality, and this policy would result in a loss of revenue to critical local transportation funding. Thank you.
Speaker 5
Good morning. Ada Welder with Earth Justice, and also here to provide comments on behalf of the Union of Concerned Scientists. We're opposed to the tax credit. If this is an attempt to reduce our greenhouse gas emissions, we should be investing into transportation electrification. And if it's to help refineries, then we should more narrowly tailor to support the one refinery.
Thank you very much.
Speaker 79
Good afternoon. My name is Paul Webster, Bragg's safety regional director. I'm here in support of the bill. A couple words, one I'm going say for the next thirty seconds is generational. P sixty six is generational.
Speaker 55
I've started working there since my son has worked there. He's now an x-ray tech. One of my best friends, Mike Miller, since passed, a great guy, his son works there. So just imagine your whole life going through P66 and seeing generational things. One thing before I leave here, I want to say, just imagine, this is how we start our day at P66.
Our conversation is about environment, communication, community, and safety before we even touch a tool. P66 is generational saving lives. Thank you.
Speaker 46
Hi, everyone. My name is Sean Gibson. Pleasure to meet you guys. I'm a resident of Alamo in Contra Costa County. I came here today in support of the governor's SAF proposal.
Speaker 56
California has always prided itself on recognizing and investing in the innovation and technology of the future. This bill, I believe, supports that. It also will support and maintain current jobs as well as potentially future jobs. So thank you again and support.
Speaker 88
Good afternoon. My name is Aurelio Nochoa and I'm here representing the Heat and Frost Insulators Local sixteen and on behalf of my membership and myself, we in full support of this. Thank you.
Speaker 9
Good afternoon my name is Arro Garcia I'm a proud member of local sixteen. I'm here to show support.
Speaker 18
My name is Hansen Flores, and I live in Antioch. I'm currently working at p sixty six, and I'm here with full support on the bill and, hopefully, your support as well. Thank you.
Speaker 61
My name is Victor Hernandez. I'm with Heat and Frost Insulators, Local sixteen, and I am in support of this bill. Thank you.
Speaker 89
Good afternoon. Nick Chappie here on behalf of the California Trucking Association to comment on item one. The tax credit proposal would increase the trucking industry's reliance on fossil diesel as production of renewable diesel is substituted for SAF. Biofuels such as renewable diesel have been critical in reducing GHG emissions in the transportation sector. This proposal would reverse the historical progress the state has already made with decarbonizing the transportation sector.
Speaker 59
As noted by the analysis, the price of diesel could increase by 12¢ and net reduction in carbon emissions would be small and expensive. For these reasons, we urge the committee to reject the proposal. Thank you.
Speaker 12
Hello. Thank you. My name is Randy Thomas. I'm the business manager of Boilermakers Local five forty nine in Pittsburgh, California. Represent members that work inside of Phillips sixty six and help to build the facility.
We're in support of this here and please allow us to continue to keep making fuel here in California at the highest labor standards and environmental standards in the country.
Speaker 11
Good morning. Kathy Van Austin on behalf of United Airlines. I we strongly support this proposal. We do, support it for in state production. We think that would help Taylor and alleviate some of the concerns on, the the hit on the diesel tax.
Senator Blakespeare had, suggested that maybe we can buy SAF from other states. Other states do have incentives. Right now Chicago has the richest incentive in in this in The United States. That's where all the SAF is going. That's where the SAF is going to be used.
Speaker 32
If we wanna use it here in California, we need to have the incentive here to keep it here and use it here. So we strongly support the proposal. We don't have other alternatives.
Speaker 19
Good afternoon, chair and members. Evan Gayorkas on behalf of the Boeing Company. We echo the sentiments of our airline partners, and while we appreciate the administrate and we appreciate the administration's effort to provide an incentive to produce more staff in California. While Boeing is hard at work developing alternative technologies, and each generation of planes is more fuel efficient than prior generations, SAF is the only pathway to zero emission zero emissions within the aviation sector until at least the next three to four decades. Additionally, no replacement technologies currently exist to carry a 150 passengers a thousand miles or more.
Speaker 60
We look forward to contributing to the CARB and A for A working group to develop other efforts to expand the production and use of staff in California to help reach our industry's goal, of net zero by 2050. Thank you.
Speaker 20
with Samson Advisors here on behalf of the Alaska Air Group, in strong support of the SAF proposal and aligning our comments with Boeing and United.
Speaker 98
Good afternoon. Todd Welch, proud five forty nine union member in USW. I'm from Fairfield, California. I live in and that's Solano County, and I'm here to support staff.
Speaker 26
Hello. My name is David Bulkley. I work at, Phillips sixty six in Rodeo. I live in Concord, California. Just like to say that Phillips sixty six has done an excellent job with their renewable energy complex.
Speaker 63
They've gone above and beyond what California wanted with our solar field, brand new, top of the line, renewable energy complex. They're not set or they're not ready to go. They are going. They're making the best aviation fuel diesel that you can get. I don't know why California isn't bragging about their awesome renewable energy complex.
Thank you.
Speaker 64
Hi. Good afternoon. Christina Mojib here with California Environmental Voters. I wanna echo the comments made by Earth Justice and Leadership Council. We have to use our state transportation dollars sparingly and shouldn't be moving forward with a new tax credit for a fuel that already receives existing subsidies and yields dubious air quality benefits.
This proposal would also benefit out of state producers when we need to focus funds on in state transportation investments. Thank you.
Speaker 2
Good afternoon. Lauren Wieschie on behalf of the California Airports Council, representing the state's 31 commercial service airports. We are in strong support of the SAF tax incentives, specifically in state production. Thank you.
Speaker 54
Good afternoon, chair, and members. I'm here on behalf of the Riverside County Transportation Commission urging the rejection of this governor's, sustainable aviation fuel tax credit proposal, due to transportation program impacts. Thank you so much.
Speaker 7
Good afternoon, madam chair Jackie Anas. We have the California Fuels Convenience Alliance representing fuel retailers and marketers across the state. We respectfully oppose the proposed staff tax credit. These are create significant fiscal risk while delivering limited climate benefit. Independent analysis shows it could raise gasoline diesel prices by 10 to 15¢ per gallon, adding billions in annual cost for consumers while also reducing diesel excise tax revenues that fund road repairs.
Speaker 65
The benefits are narrowly concentrated, but the costs are widely shared. We respectfully urge you to reject this proposal.
Speaker 8
Good afternoon. I'm Ria Ripitiam on behalf of the California Asphalt Pavement Association. We are strongly opposed to the sustainable aviation fuel tax credit proposal, which according to the LAO would steal millions over the next ten years from funds that are dedicated to repairing and fixing the roads. Our Our organization and many others pushed hard to pass SB one to secure road funding, and we strongly encourage you to reject this proposal to protect road funding in all the job jobs it creates. Thank you.
Speaker 56
Good afternoon. Mark Neuberger of the California State Association of Counties registering our opposition to this sustainable aviation fuel tax credit because of the negative impact it would have to the local streets and roads programs and the millions of dollars that local streets and roads needs to make up to their maintenance needs. Thank you.
Speaker 83
Good afternoon, chair and members. Vincenzo Caparelli here on behalf of the California associates association of council of governments to register our opposition to the governor's proposal to establish the sustainable aviation fuel tax credit. Similar to other groups, our concerns are centered around what the impact will be to transportation funding programs that our members rely on. This is particularly problematic as we are facing major transportation funding shortfall over the next decade. We urge you to reject this proposal.
Speaker 69
Good afternoon, madam chair and members of Wes Frankel here on behalf of Southwest Airlines, who supports a sustainable aviation fuel tax credit proposal, which keeps the aviation industry on track to meet its greenhouse gas emissions goals.
Speaker 60
Damon Conklin with the League of California Cities respectfully oppose the SAF tax credit. Our members are responsible for maintaining the state's 147,000 center line miles. And with SB1 dollars declining, our cities are having to do more with less. And this proposal further set back our deferred maintenance. And so for those reasons, we're opposed.
Speaker 71
Sarah Brennan, NextGen California. We are in opposition to this, the sustainable aviation fuel tax.
Speaker 69
Hi. My name is Liat Carlisle here with the Cascadia Sustainable Aviation Accelerator, a nonprofit headquartered in Washington. We really can't understate the importance of SAF. A 150,000,000 gallons at SFO alone would reduce the airport's jet fuel emissions by 13%, equivalent to 3,200,000,000 vehicle miles traveled. In Washington, we wanted to prioritize in state production to ensure that we received all the benefits that come from staff production, which was the reason behind our 20,000,000 gallon trigger in our tax credit.
Speaker 72
In California, we're lucky to have a facility that can already produce that scale. I urge you to join Washington State in adopting this tax credit so that the two states can continue to lead the region in climate action as we link our carbon markets.
Speaker 60
Good afternoon, committee members and chair. My name is David Schoenfeld. I reside in Concord, California. I'm here to support the Rodeo Renewable Energy Complex and the governor's staff incentive tax credit. Thank you.
Speaker 3
Hello, chairing members. I'm Justin Nyehaus. I live in Benicia, California, and I'm here to support TEP. Thank you.
Speaker 43
Hello. My name is Joshua Ward. I'm a proud member of USW Local three twenty six. I'm here to support staff. Thank you.
Speaker 99
Hi. Juanita Martinez on behalf of World Energy and, GIVO. We are manufacturers of staff, and what we are asking for is opposed and less sorry, opposed and less amended position on this particular bill. We're asking for transferability language that would allow all producers to be able to participate. As long as we are opening the door and allowing all, producers to participate, we increase the consumption here in the state of California, and we begin to see the emissions that are, that can be generated here in the California.
Speaker 73
But once we limit it, as the current proposal is done, then we see those, consumption levels going over to other states. And we'd like to see the consumption levels here. So we ask for transferability. Thank you.
Speaker 53
Good morning, Madam Chair. Timothy Jeffries, international brother to bullet makers. I thank you for the opportunity to stand in support of the SAFSAF bill SAFSAF bill. And then for the jobs and the economies that it's going to build out. I mean, are a lot of jobs in the building trades in these sectors that have have built out local economies that change people's lives.
And the building trades are our job, the Bullet Makers and other jobs are one of those opportunities that we have a state accredited apprenticeship program, a six thousand hour four year apprenticeship program that keep those investments local in those local economies in those areas that they support those industries. So we're asking your support for this bill as well. Thank you.
Speaker 40
Chair and members, thank you for the opportunity to speak. I'm Bobby Thomas, the vice president of the Rodale Renewable Energy Complex. We stepped up when the California asked for us to convert our petrochemical our petroleum refinery into a renewables facility. We did just that and sustained the jobs there. I like to respectfully disagree with LAO and the HAAS report.
When it comes to switching, our facility is one of those that can do both, produce both diesel and sustainable aviation fuel at the same time. We're doing so now. Thank you. I'm obviously in support. Thanks.
Speaker 1
Yes, sir. Anyone else wishing to provide a public comment on issue number one? Seeing none, this concludes Issue one. Did I hear applause? A very important topic, and I appreciate everyone's participation in it.
Thank you. We'd like to now move to issue number two. Greenhouse Gas Reduction Fund expenditure plan and trailer bill language. First, we're going to hear from Brandon Merritt from the Department of Finance, who will present the Governor's proposal, and then from Helen Kerstein from the Legislative Analyst Office.
Speaker 8
Okay. Good afternoon, chair. My name is Brandon Merritt. I'm with the Department of Finance, and I will be presenting the overview of the Greenhouse Gas Reduction Fund budget as detailed in issue two. The 2026 governor's budget estimates auction revenues of approximately $3,800,000,000 in twenty twenty six-twenty seven.
The governor's budget proposal for the twenty six-twenty seven cap and invest expenditure plan reflects the updated structure pursuant to SB eight forty. The new structure includes three tiers of expenditures with tier one fully funded first, followed by tiers two and three. Tier one includes the manufacturing tax credit, state responsibility, area fee backfill, and the legislative council climate bureau. Tier two includes $1,000,000,000 for the high speed rail authority and $1,000,000,000 for other discretionary items. Of the $1,000,000,000 in discretionary funding, 250,000,000 is reserved for various investments identified in SBA 40.
Speaker 65
The remaining 750,000,000 from the $1,000,000,000 in discretionary funding supports the CAL FIRE general fund backfill. Tier three funds previously percentage based continuous appropriations that will now be capped dollar amounts beginning in 2026, 2027 with proportionally related allocations that adjust downwards as necessary to ensure tiers one and two are fully funded in addition to state operations appropriated in the budget act. At the governor's budget, there is $1,400,000,000 estimated for tier three. The governor's budget maintains the 2025 budget act agreement to support Cal Fire operation costs with $1,250,000,000 GGRF in 2026, '27, 500,000,000 in twenty twenty seven, twenty eight, and 500,000,000 in twenty twenty eight, twenty nine. Finally, as will be discussed in issue three, the budget includes $115,000,000 one time GGRF to support the $200,000,000 zero emission vehicle incentive proposal.
Speaker 8
The governor's budget also proposes trailer bill language to make technical and clarifying changes to SB eight forty to allow impacted departments and programs to more effectively implement the intent of the updated GGRF expenditure plan. That concludes my presentation. Thank you for your time. I'm happy to answer any questions.
Speaker 5
Good afternoon, Chair and Senators. So there's really kind of two pieces of this agenda item. There's the trailer bill and there's the expenditure plan. So, I'll provide comments on both, if you'll bear with me. First, on the trailer bill, we understand the administration intends this to be technical and clarifying, but there are some sort of, we think, significant questions before the legislature about, is the way that the governor's proposing to implement this consistent with what your intent was?
And is this really just clarifying, or is this making changes to what you intended? So, are a couple of places I want to just highlight in the trailer bill for you to consider. One of them is how interest income is treated and also the entering fund balance, whether that should be part of that SB eight forty framework or whether it should be considered outside of that and considered discretionary revenue so the governor the governor I think their understanding of the agreement was that those should be considered outside of SB eight forty and so they're clarifying that in the language so if you're comfortable with that then approve this. If you have a different understanding, then you may want to clarify that in a different way. Another piece is they are clarifying how state operations costs are treated under this framework.
So they're clarifying that those are part of tier one, basically getting top priority. And they're already sort of implicitly getting pretty high priority, but it sort of just provides a little bit of clarification on that. So again, I think that has some potentially important implications, because, if they're way up in the priority and then as you add more types of activities to that state ops category, it means there's less for the other categories. One of the things that we've seen and when we talk about the expenditure plan you'll see is Tier three, for example, in this upcoming year is not anticipated to be fully funded, and that may be the case in future years. Really thinking about how much do you add to Tier one or those top tiers because it has effects on those remaining tiers.
And then the third thing that we are suggesting legislature consider is really what kind of flowing from that, a key question is, what do you think should be included in that state operations category? So do you want to provide some more specificity or some more direction to that? Because again, the more you put in there, it kind of becomes a one line item, so it's not all broken out, but the more that's in that, the less money is available for other activities. So that's really a kind of a policy question for you. So those are our comments on the trailer bill.
Just on the expenditure plan, I have a few high level comments I'd also like to provide quickly, hopefully, because I know we are well into this hearing already on issue two. The first is that we think in general the administration's proposal appears consistent with some with past legislative agreements. You heard from the Department of Finance that they're proposing $1,250,000,000 for a Cal Fire backfill, that's consistent with what was in last year's budget bill and then also $250,000,000 for intent items that were in SB eight forty so that also appears consistent and the new thing really is that ZEV proposal so that's a new discretionary thing that they're adding Again, the amount that's available for those activities is partly because of that structure and how they're implementing the bill. And then we would also just flag for the committee that there were some agreements in twenty four-twenty five, there was an out year GGRF expenditure plan that, as part of recent agreements, that's no longer the administration is no longer putting that forward. So, for example, you know, I think as of 'twenty four-'twenty five at least, there was an expectation that this year there would be more transit funding, and there would be more funding, for example, for the Clean Energy Reliability Investment Program, as well as some other activities.
So, those are no longer included in the administration's plan. So, I wanted to flag that for you as well. And then in terms of our overall comments, this really fits with the theme, where it bears bad news, it seems, this year, but we think that the state is really facing some pretty significant budget challenges, even despite some robust revenues that we've seen recently. So we think that this GGRF can be a really important tool for you because it is pretty flexible, so we're recommending that you think about is this plan in general, we think it makes sense to stick with your existing commitments, but given the nature of the budget challenges, we think it could be appropriate to just revisit them, make sure they are still your highest priorities for those limited dollars, and also be really careful about and sort of have a really high bar for new funding proposals as well. So those are my high level questions.
Happy to or comments, happy to take questions.
Speaker 7
You're looking at me there, so I guess I'll start off. Last year, we were fighting over the whether we were going to move forward with the GGR program this year. Now, it looks like we have to decide how we're going to spend the money. My first question is to the LAO. How confident are we of that $3,800,000,000 income?
Or is that something I should be aiming at Andrew? You're the one that gave it, Andrew, so I guess I'll Yes.
Speaker 4
I'm happy to take that. So that $3,700,000,000 figure, that was sort of our projection based on the auctions that had happened to date at January. Since the auctions have come in a little bit lower, we saw the last auction in February sell at the floor price. So we would anticipate that at the May revision, we would have a downward revision to our greenhouse gas reduction fund revenues. So expect I would expect them to be lower than what we have at Governor's budget.
Speaker 7
Okay. Well, that's not the good news we were hoping for. Where's our optimistic guy from carb here? No. The a couple of programs I'm excited about.
The farmer program replaces dirty diesel agricultural equipment with low and zero emission equipment. This is extremely beneficial, and I think it really is in with the spirit of the GGR program. Second, healthy soils and the newer management program. I think healthy soils farming practices will help absorb carbon emissions, carbon from the atmosphere, and the manure management program I think will also be beneficial both in terms of greenhouse gas emissions and in terms of water quality. So it's a highly effective, good rate of return.
Speaker 45
Food production incentive programs, FPIP, FPIP, at the CEC helps food producers replace dirty production equipment with much better equipment, more efficient. And then, a couple other things. I'm in favor of the government's ZEV program, especially with the proposed light duty vehicle, SITV. And lastly, I have a little project I'm working on. It's SB8872 to help pick up the aqueducts that are subsiding in the valley, and then also at the same time, work on the levees that are facing imminent failure in the delta.
Speaker 7
Both of those will have enormous impact on Southern California water supply, incredibly important to the state. Supplying water is probably the most important function of the state of California, and we need to make sure that that happens. I'm not totally focused on GGRF money for that process, of that project, but it would be helpful if we could get some money from GGRF to secure California's water for the future. So, those are my comments, and I yield back.
Speaker 6
Yes, thank you. So as I previewed in my previous comments, I am really concerned about funding for transit. The administration is silent on more than $700,000,000 in prior year funding commitments for transit. And I know that we have a lot of priorities, but it is true that in my district, in the 38th District, which is Southern California, the operators MetroLink, North County Transit District, MTS, and OCTA are all struggling to fund current operations, in addition to the state required zero emissions equipment. So, you know, we're I guess I just want to turn it back to ask, like, what is the plan for transit?
And, you know, I see this new proposal for ZEV, and I wonder about that decision making.
Speaker 4
Yeah. So, as Elio mentioned, so as part of last year's sort of budget agreement, this discretionary funding plan that was agreed to in twenty four-twenty five had to be put aside to support general fund activities. So the funding that you're referring to, Senator Blakespeare, was previously agreed to in twenty four-twenty five, but since because of the dire situation of the general fund, we've we need to use that discretionary funding instead of for that plan, including transit funding to support general fund to avoid further health and human services cuts. So it's a difficult trade off. It doesn't mean that that funding wouldn't be put forward in the future.
Part of the agreement was $1,250,000,000 in 'twenty six, 'twenty seven, and then that the general fund shift for Cal Fire drops to $500,000,000 in 'twenty seven, 'twenty eight, and 'twenty eight, 'twenty nine. So theoretically, there would be an additional potentially at least $500,000,000 for discretionary funding in twenty seventwenty eight and twenty eighttwenty nine. However, if GGRF revenues exceed the total allowance under SB eight forty, then there would be other funding available. And, yeah, so I'll just leave it there.
Speaker 6
But, I mean, maybe more to the point about, you know, transit as a priority. Yeah,
Speaker 4
so I mean, the administration continues to support transit. Recently, there was the efforts to provide the short term loan for transit operators in the Bay Area. There's still additional funding that's been provided for transit, just not sort of the full amount. There are billions of dollars that have been provided over the last few years from GGRF and general fund. I'll turn it over to my colleague from the that covers the transportation and transit assignment to provide more detail.
Speaker 41
James Moore with finance. I echo everything that, my colleague said. We did provide several billion, I think it was $8,000,000,000 to transit on a one time basis, in the last several years over the multi year, transportation package. The key state programs, like the Transit Development Act, various other programmatic sorry, formula and competitive programs remain in place. In addition to the one time loan that was that is going to be issued from CALSTA to the Bay Area agencies, CALSTA stood up a transit transformation task force that brought different transit stakeholders from across the state to figure out how to move forward.
Speaker 74
So, it remains a priority of the administration. The vast majority of the one time additions to transit remain appropriated, and the ongoing programs are intact.
Speaker 6
Okay. Yeah, I mean, I'll just I do want to acknowledge that there was an enormous amount of money. I mean, I thought it was $5,000,000,000 not $8,000,000,000 but an enormous amount of money went to transit agencies. And part of that was the SP 125 funding that was paired with the Transit Transformation Task Force, which was led by CALSTA and produced an incredibly underwhelming report, which has not resulted in any legislation. So having the Transit Transformation Task Force led by the state, by essentially the executive branch, come up with things that we already know, identifying we don't have a stable revenue stream, we need better interoperability between transit agencies, we need to invest in clean energy, you know, the sorts of things that we already know.
To me, it doesn't mean that our the work is done. It means that we didn't quite get there. So so if a state if, as a state, we do value transit, we need to be thinking in an energetic way about how we're going to have reforms on the the which was the point of the Transit Transformation Task Force reforms on the operation of transit, but then also the balance of how much money are we providing for new equipment. If new equipment is driving around and it's clean but there's nobody in it, or it's so infrequent and it's so unreliable that no one takes it, You know, these are all the really important questions that we have to get to in order to make transit successful. But, you know, it is really important When you think about the ways to create GHG reductions and also to improve community well-being, having a better functioning transit system is a really key part of that.
So the administration and the legislature together are saying, This is something we prioritize, and we want to figure out how can we have the reforms we need and also fund it at an appropriate level, instead of just saying, well, we funded it, and now it's dropping off a cliff. And I recognize that the Bay Area got together and said, we're we would like to request a loan. And after a lot of back and forth and hand wringing, the state is giving them a loan. But that's still not handling the rest of the state, and it's only a loan. And so it is, you know, that's not exactly a bold investment, I guess I would say, a loan to the Bay Area transit agencies.
So I would just continue to advocate for us to be more muscular, more committed, more verbal, more invested in our transit system. And, you know, a series of decisions that go across this item and then the item before that are resulting in less money and less money for transit and no reforms on operations, you know, does just to me is not indicating where we want to be going. So I would just continue to say that I hope our North Star can shift a little bit. You know, I do note that there's $115,000,000 to create a new light duty ZEV incentive program. You know, that's a new program in the same area where we already have other programs in that area.
So, you know, that's a decision that's being proposed by the governor's office to do that instead of to invest more in transit and in any of the different ways that could be possible. So I am concerned about the new programs. The LAOs references that, that we should have a very high bar to say we want new programs. So this new light duty ZEV incentive program, to me, is something that I don't know if I would identify as the top priority, given very limited and reduced revenues in this area. But, you know, I mean, I welcome any responses to that, but it does seem to me like what we've done isn't quite enough, and it doesn't mean that our work's over.
Speaker 74
Sure. And I think your point is well taken. I think we're continuing to talk with transit agencies around the state, and are always open to what will serve them and the state, and remain committed to providing a functional transit system.
Speaker 82
Just one or a couple points, if I may. Just that the there is still the, you know, the TIRCP and Low Carbon Transit Operation Program funds in Tier three for the transit entities that continues. Part of the agreement with SBA forty and AB twelve oh seven was to continue that to 2045, where previously it would have ended in 2030 to provide additional funding. And then just to go back to this 2024 plan, the majority of the funding that's actually remaining was actually is actually was actually for zero emission vehicle programs. So in for example, in twenty six-twenty seven, what was scheduled was about $250,000,000 for transit programs, but nearly $600,000,000 for zero emission vehicle programs.
Speaker 4
So just sort of just to call back to that these sort of investments, although there are choices to be made and difficult choices to be made going forward, is that we're we did have a framework to work from broadly for these GGRF investments going forward.
Speaker 1
An overall question I want to ask: What was anticipated from the auction? When this was put together, what was the dollar amount that we were anticipating?
Speaker 4
So, think it's difficult to say. So, prior to the reauthorization, we saw depressed auction revenues, to where even in May, not all of the allowances sold. So we were coming into the reauthorization in a fairly precarious situation, I think, as far as difficulty to project auction proceeds. And since then, I would say and since the reauthorization, there's still been, I think, sort of a depressed market. It's been trading or it's been selling near the floor, slightly above the floor.
You know, we think part of that is due to that there's still additional outstanding questions, although we solved the reauthorization and sort of the to provide certainty there. There's that CARB is going through rulemaking, and so we think that there's probably various entities that are still waiting to see how this sort of plays out. But that's to underscore that it is a very difficult market to project. I would argue we have a methodology at finance that looks back historically on auction proceeds and then uses that to predict the future. But it's perfect science.
I don't think that anyone would have has a perfect science for how to project the
Speaker 1
I certainly would not anticipate you saying we expected this dollar amount, but with the reauthorization, with greater certainty, and as the three parties were trying to negotiate how that GGRF money would be spent, it appears that it was about $7,500,000,000 is what would have been anticipated.
Speaker 4
I think that's that would be very optimistic from our standpoint. You know, historically, we've seen GGRF around 4 to 5,000,000,000. So, I think 7,500,000,000.0 would be sort of an all time high for the program.
Speaker 1
Okay. So, there was a particular amount that was anticipated, and then we went through the numbers trying to figure out Tier one, Tier two, Tier three. But Tier one, I want to talk specifically on Tier one, and I'll come back to that anticipated amount from the auction at a later time. But on Tier one, on state operations, it includes a wide range of departments, far beyond the cost of CARB implementing GGRF. Would you please provide some examples of what is funded at like, CAL FIRE and Conservation Corps with this money?
A little more specificity, as was noted earlier.
Speaker 4
So, think so, a few things are in Tier one. So, I think there's the manufacturing tax credit backfill. Or state operations for
Speaker 1
Yeah, just state operations. Manufacturing tax exemption, the 159, I may have some questions, or maybe my colleagues will, but I'm talking specifically about state ops.
Speaker 4
Yeah, so that's previous budget change proposals that the legislature has approved for various departments. Don't believe that Cal Fire or the Conservation Corps, I think maybe referring to the state responsibility area fee backfill. I think there's some small amounts for Cal Fire and the Conservation Corps, but these are largely BCPs that have been approved over the years by the legislature Understood. That support various staff.
Speaker 42
Yeah, so, Julianne Rolfe, Department of Finance. The non SRA fee back fill GGRF funding for Cal Fire is related to various chaptered legislation. As an one example is
Speaker 75
Chaptered legislation. So one of one most recent one is SB, I think, eleven oh one, which provided two positions, and I think 700,000, roughly, dollars, and so most of it's chaptered legislation. If you'd like that list of the specific bills that are coming for CAL FIRE, we can provide that for you.
Speaker 75
Yes. Yeah. So, roughly, it's about it's hovered between 7 and 9, and it's I think it's going up to 10,000,000
Speaker 75
Yes. Yeah. So SB eleven oh one is just one of the bills, but we can provide you with a list and the number of positions, as well. I believe it's 27, starting in budget year, for that pot of funding.
Speaker 1
And is there ever any ongoing reviews of these costs, and whether GGRF is the appropriate fund source for these?
Speaker 4
So when we propose budget change proposals and the legislature approves them from that fund source, that's when that discussion happens, whether it's an appropriate fund source to be using for it. Generally, these are climate change related bills or efforts that support staff for the state. So that's part of the reasoning. So currently, SB eight forty sort of reduces tier three for the state operations that's appropriated in the budget. So, would like to clarify that it's coming out of Tier one.
One, because we hope that the legislature also shares a commitment to not lay off state staff. If there is ever a situation where GGRF funding didn't materialize, we wouldn't be able to fund state staff to implement core priorities of the state.
Speaker 1
Well, from the general budget. So, we're talking specifically about GGRF, and talking about whether it is appropriate to use GGRF money for those expenses.
Speaker 4
And these are decisions that we've made we've that We that we and the legislature have made. They've been appropriated through the budget it's through budget change proposals.
Speaker 1
And I understand. They're appropriated through the budget, but specifically for GGRF?
Speaker 4
Yes, specific when we come before the legislature, we propose a fund source, and the legislature can choose to deny that, or choose to have a different fund source for it. So, all of these expenditures that we're discussing have been approved by the legislature,
Speaker 1
specifically for GGRF. The pro rata also, as noted, is quite high. Is there is this proportional to the revenues generated by the fund?
Speaker 4
So, pro rata is it's fairly complex. It's individually based on a department's entire state operations budget, and then the portion of that state operations budget that's funded by a particular program, or a particular fund. So, it comes to it comes about for GGR from a variety of different ways, but it's based on the state operations budgets for each individual department, and then portioned out between the funds that they charge. So it goes to fund various central support costs, as noted in the agenda, for the controller, for the legislature is also in there as well, that supports that to reimburse the general fund for those costs.
Speaker 1
I think this causes more confusion, even as we're speaking. So, my question then would be, what avenues does the legislature have in auditing and reviewing what is included in this part of spending, specifically for as we're talking about state operations?
Speaker 4
State operations. So, certainly, each year, when the budget happens, the legislature can make various decisions about what should be coming out of there for state operations. So right now, as SB eight forty is worded, we think it's fairly broad, where it notes that state operations appropriated in the budget. That could be a very broad term. If you took that literally, as it is right now, that would also include the Cal Fire fund shift.
So, you would be sort of taking $1,250,000,000 and you would be taking it away from tier three. So that's why we've proposed sort of a more nuanced shift of that, because if we take the literal interpretation in SBA 40, think there would be significant unintended consequences. But to about the check-in, we're happy to have further discussions with the legislature about better ways to craft this. One thing is that we, you know, we propose in the governor's budget, in the budget summary, various charts and tables that call out sort of what the Department of Finance is characterizing as various things. That's one way for us to be transparent about what we're characterizing as state operations.
Speaker 1
I would ask the same question of Elio, about auditing and reviewing of what's included in this particular pot of money.
Speaker 5
Yeah, so, I think this is a challenge, right? It's something that kind of grows over time as more proposals are added, and especially if the general fund condition isn't very good, it's tempting to put stuff in general, you know, and it kind of gets in here and it's a little bit obscure, right? There's no right now we don't have an annual kind of report of what's in there and so it's a little hard to know and you know staff has requested this and this information I think that's in the agenda and the Department of Finance provided this level but but even then it's hard to know what's in the conservation corps for example so I think it's certainly appropriate if the legislature wants additional detail both about upcoming proposals and being really clear about what where which tier things are coming from this is a new structure to right so maybe it wasn't quite as relevant in the past, but now, especially under this structure, it seems like it's really worthwhile for the legislature to really understand where it's coming from, what the implications are on other programs, including in Tier three, and ask the administration to provide whatever information you feel like you need, both on past both on sort of what's in that base, as well as upcoming proposals.
I think that's absolutely, you know, an appropriate thing, if there's interest in doing that. I also think, certainly, clarifying state operations. I mean, there is as the Department of Finance mentioned, they're proposing some clarifications, but it leaves quite a bit of discretion up to DOF. And so, if the legislature has a clear idea of, like, what do you think state operations should be, right? Are there specific things you could provide a framework or some guidance in statute to kind of help direct the Department of Finance and the administration in future years about what the legislature thinks is appropriate.
Because, again, the more stuff we put in that state ops, the less money there is, especially for Tier three. And then, other kind of comment, if I might, because I know there was a previous question about projections of GGRF, which are really hard. I think many of us thought we'd see a big bump after the reauthorization. I think the number you're citing I mean, I don't think that seemed potentially unrealistic, because we've been at the floor. We've been around 20 something dollars an allowance, but the ceiling is, you know, 90.
So, you could have seen a significant bump, there's a lot of uncertainty. We haven't seen that yet. So, I think perhaps this framework was put into place when there was an expectation of a higher revenue number than has at least yet materialized. So, does that change how you view this framework? I think that's a question for the legislature.
And I'd also just I think your agenda mentions it. I know we're limited on time, but I just I think it's also a really important point that these CARB regulations are potentially quite impactful. They're talking about changing the share of allowances that would go to GGRF versus going to industry, versus going to utilities for the climate credit, that could have big impacts. And in CARB's rulemaking, they're projecting GGRF revenues could be under $1,000,000,000 for multiple years. Like, that would be not enough mean I there's a lot of uncertainty around that but that would be not enough to even fund all of Tier two so I think also thinking about not just this year and the expenditure plan for this year but thinking you know going forward how do you feel about, if revenues end up being really low, are you comfortable with the way this framework would play out?
It would be important.
Speaker 1
And I think that and I appreciate the offer to provide greater detail. We accept that offer. We, in fact, are requesting it in order to fully understand what it is we are including in Tier one, because, as is noted as is noted, whatever is in Tier one takes money away from whatever would be, we would assume, in Tier two and Tier three. In fact, it doesn't take Tier two remains the same. It's Tier three that suffers through this process, and I think that it's really important to know what we're including as Tier one, which means it takes top priority, and the legislature would like to know what the governor's proposal is on Tier one on all the tiers, of course, but the others are a little more explicit but in Tier one, what is being included?
Because we anticipate that what is included this year, it's going to be presumed next year that it was okay this year, when we're talking about Tier one, Tier two, Tier three. So that is something we do want more specificity in that regard.
Speaker 4
We're happy to provide additional detail, just noting that some of this funding was may go beyond our records. It goes back to the beginning of GGRF in the early 2000s, so it may be difficult to understand sort of exactly what some of the specific funding was provided for, but we'll do our best to provide a comprehensive sort of accounting of various funding that's been provided and to what. Just noting that sort of if it's not included in what the legislature's definition of state operations is, that would mean that departments would either have to find an alternative funding source to do this work that they're doing, or not do it.
Speaker 1
Or go to tier three. I would The issue is whether it warrants being tier one. That is really what the first issue is. Is the Governor's proposal. We want to look at it in its entirety, to see what it is GGRF funding was meant for, and whether we are using that money for the intention for which it was supposed to be.
And I think that is the entire purpose. My colleagues expect this committee to be able to give recommendations. RPT expects this committee to give recommendations, and without the specificity that we need, it is difficult to then make those recommendations.
Speaker 4
Certainly. Again, I would just note, SB eight forty notes that any state operations appropriately in the budget should reduce the amount for tier three. So, we've even taken we've taken a more narrow approach, Happy to provide this additional information to help the legislature make its decision, but just noting that the language in SB eight forty is very broad, and would require the Department of Finance to take a significant amount of funding away from tier three, based on the language that's in SBA 40.
Speaker 1
And we understand, but Department of Finance is making a judgment call on what should be included in tier one.
Speaker 1
brings us back to the very same basic question, and I think that is what we're trying to that's what we're trying to understand. Okay. AB 102 included intent language that if the general fund is not projected to be in a deficit in 'twenty six-'twenty seven, then only $500,000,000 would be used to cover General Fund costs, rather than $1,250,000,000 which is being proposed here. Given recent months' revenues, and this increase in revenue that we all welcome, does the Administration expect to update the GGRF expenditure plan accordingly?
Speaker 4
So, I can't speak to what we'll do. Again, at May revision, we'll have an updated GGRF expenditure plan that will hopefully answer your question, Senator.
Speaker 4
Yes, it will certainly be considered as it was with the you know, the agreement from last year, although I would note that there is maybe some ambiguity about what the what it means to have the general fund in a deficit, so happy to have further conversations about that.
Speaker 1
Well, I think well, let me ask Elio. Any additional funds on using GGRF to backfill general fund, given the updated revenue estimates?
Speaker 5
So, I mean, as I understand it, the language basically gives finance the ability to determine whether or not there's a deficit, and then there's intent language that would direct Department of Finance to make different allocations, both in this budget also, it would affect future budgets, depending on what their I think, at least implicitly, it's sort of their assumption of what it is, although I guess it could be there could be discussions about that. So, I think, as Department of Finance mentioned, we'll see what their projections are soon. Certainly, may be somewhat higher based on some of the things we don't know, but we've seen some relatively robust cash coming in, so it's possible there could be upward adjustments, but
Speaker 1
I think it's too early to tell. Okay. On issue number three, on the zero emission vehicle incentive proposal, I know there was a question earlier, but can you explain the need to create this new program to deploy ZEVS? There exists existing successful programs like Clean Cars for All, which have had positive impacts on low income consumers that would benefit for more funds. What do you know?
There were I thought my colleague had asked a question on it, but if you'd like to present on it, on issue number three, I think that would be appropriate.
Speaker 76
Very good. Well, thank you for the opportunity. Courtney Smith, California Air Resources Board. Earlier this year, the governor proposed a one time $200,000,000 appropriation to the California Air Resources Board in order to establish a new incentive program for zero emission vehicles to help keep California's zero emission vehicle transition moving forward, particularly in the wake of the federal administration's cancellation of the federal ZEV tax credit. This proposed program is focused on helping more residents become first time zero emission vehicle buyers by providing an incentive at the point of sale for those first time purchases or leases of new and used light duty passenger ZEVs.
And this is because we know that once you go ZEV, you tend to not go back. Research suggests that first time buyers, when they go to buy their second vehicle, are 82% likely to continue to purchase zero emission vehicles. Most importantly, this proposed program would require a one to one funding match from original manufacturers that participate, effectively doubling California's investment. With the federal with the expiration of the federal ZEV tax credit, consumer demand for light duty vehicles has slowed significantly, creating a very critical moment right now, and a need to take action in order to help maintain that momentum. Thank you, and I'd be happy to answer any questions you have.
Speaker 5
Thank you so much, Chair. So, we're recommending rejection of this proposal. I'm going highlight three reasons really quickly. The first is, as we talked to the committee about before, we think that a very high bar should be applied to new proposals this year, given the budget condition. Again, even with higher cash coming in, we see the out year, especially the out years looking like there's a significant structural issue.
So, we don't think that this proposal meets that sort of urgent health and safety kind of bar that we think we're recommending the legislature apply to new proposals. The second thing I wanted to highlight is that there's a lot of details that haven't yet been fleshed out about this proposal. CARB anticipates and they're currently going through a process of soliciting feedback. So, it's really hard to evaluate. But the amount of money, even though not insignificant, is actually relatively modest in the context of kind of this type of program.
And so, we think that probably the amount of incentives is going to be pretty modest, and or it's going to be very few vehicles that would be able to participate. And so, really, its ability to change to sort of move the needle, we're not sure that it's going to be super effective at that. We understand that there's this one for one funding match, but really assuming that I think it'll be hard to really validate that that's all really new money and how much gets passed on to customers. You know, I think we're all aware of sometimes how opaque vehicle pricing can be, if you think all of us who've gone to buy a car, and there are already existing incentives some manufacturers are providing, so I think it'll be really a challenge potentially to really make sure that that's all real new money and it's all really going to customers. We know that that's something CARB is very aware of and trying to address, but that's a challenge.
And then the third thing, and this gets, I think, at your point, Chair, is the potential for some duplication. We've already got some other existing programs, some of which are running out of money, including Clean Cars for All for a number of districts. And so, really thinking about, okay, if there you know, do we want to have another program, especially a one year program that kind of stacks on top of that, maybe? Or do we want to think about how do we kind of have fewer programs, so you don't have as many kind of layers and as much administrative complexity, or it also gets really hard to even suss out how much is one program affecting the market versus other programs when you've got all these sort of different layers. So those are some three points that we'd like to highlight.
Happy to take questions.
Speaker 76
Absolutely. I think, to start, it would be important just to lay out the problem that this proposal attempts to address. I obviously mentioned the expiration of the federal tax credit. When you actually look at the impact that that has had on ZEV sales in California, it's significant. So, the third quarter of last year, ZEV sales were at the highest we've seen, 29%.
So, that's almost one in three cars coming off the lot are zero emission. A lot of that driven by folks trying to run and take advantage of that tax credit. In the fourth quarter, that dropped to 19%. But when you drill down further, it paints a more dire picture. That first month in October was juiced a little bit from folks running to get the tax credit.
In November and December, you see 1315%, respectively, in terms of the ZEV sale percentages. We haven't seen levels this low in five years. And so, I think it just underscores that right now we are at a very critical moment where we have seen ZEV sales increase almost quarter over quarter for the last decade because of the investments that California has made, and this is a significant backslide. So, this proposal is intended to help maintain that momentum by expanding the ZEV market. And what I mean by that is it's highly focused on reaching first time ZEV buyers.
Because as I mentioned, once they have that experience, they tend to become lifelong ZEV buyers. In terms of, I appreciate the Elio's perspective on, you know, details that need to be worked out. As she mentioned, we are going through a public process to be able to determine those details. We just had a workshop last month where we got a lot of good input. We plan to do another work shop in early summer, so that way these details are available to the legislature before the budget is decided.
In terms of the incentive amount, we are looking at a range of between $1,500 and that would be with the state and the OEM contribution, up to, you know, a full replacement of what the Fed's provided at $7,500 We think that the reality is, is the sweet spot is probably somewhere in the middle. In terms of criticism that the incentive amount is modest, I don't think that's the right way to think about it. It's really about is the incentive amount effective. And research shows, there's a really important study out of MIT, it shows that for every thousand dollars that you put on incentives, you change sale price 6%. So we know incentives work.
Of course, there's a little bit of magic in figuring out what that right amount is. But at the end of the day, being able to focus on those first time buyers, even a modest amount we know will be effective, we are hoping that we'll be able to influence this market and not backslide, and be able to, you know, maintain that momentum that we need to see.
Speaker 1
But why not provide the funding to a program that already exists, rather than obviously are going to have new administrative costs to implement a new program. You to determine that somebody is a first time ZEV purchaser, do they sign under penalty of perjury? How are you going to determine that they are first time? Is it the husband that purchased it before? Now the wife is going to purchase it, so now the wife is the new first time purchaser?
These are things, whereas the program that you had, Clean Cars for All, it was for the disadvantaged community who, under most circumstances, would not be purchasing a new vehicle. They would be looking at a used vehicle. We don't have enough used ZEVs for them to purchase, and so we're finding ways for them to purchase a new vehicle. Here, we're talking there is no income limit here, so it could be somebody who can absolutely afford to purchase a ZEV is now going to get an incentive to purchase a ZEV. The prior program was an incentive to those who normally would not be looking to a ZEV probably wouldn't be looking to purchase a vehicle to begin with.
Why this change? Why take away the income qualification? And how are you going to determine their first time ZEV buyers?
Speaker 76
Great questions. So, in terms of program design, first, just to emphasize, it would be for first time purchaser purchases and leases of both new and used vehicles. The idea behind not having any sort of income requirement is because we want to be able to effectively focus on expanding the market. And the reality is affordability is an issue for middle income folks as well. So, we think that this particular program will be able to get more people in these vehicles, and it's ultimately solving a slightly different policy problem than the Clean Cars for All programs, which are also very important.
This joins an ecosystem of investments that we're making across light duty and heavy duty to be able to move towards more zero emission. In terms of program design, and, you know, I think the point you're making is how do you determine eligibility based on a household versus individuals? I think, again, ultimately, we're very focused on getting new consumers to become part of the ZEV market. Households are complicated. Even in the more traditional ones, I can just offer, like, my parents had their own vehicles, and they had their own values around why they'd wanted those vehicles.
And so, being able to focus on the individual purchaser who's coming in, and having them be able to attest that they're first time buyers is one way we are thinking about being able to design the program. But as mentioned, we are getting public feedback on how to do that, so that way we can, you know, put forward a program design that balances being able to absolutely ensure there are checks in place for accountability, while also having a program that's fast, that we're able to you know, we're designing this in a way that, should the legislature approve, we would be able to hopefully be getting money out there this year, so very quickly.
Speaker 1
Fast But the let me stop you Okay. For a To get the money out there this year, you just had your first workshop. You're just putting together the regs that you're going to be using to get the money out there without going through this process, with your first workshop only under your belt? We're looking at a may revise a budget by June. How do you do it?
How would you do it? We're in April.
Speaker 76
Well, as I mentioned, we're planning to have another workshop where we're able to provide more details, and that would be in the early summer time frame. And then, in addition to that, we're also having conversations with original engine manufacturers right now to help bring them along. I think part of the reason why this would be fast, should it be approved by the legislature, is because the program design is one in which we would enter into agreements with original engine manufacturers, and they would be responsible for carrying out that incentive program. And so, that's part of the design, is that it's intended to be able to move quickly, so we can actually make an impact sooner.
Speaker 1
Let me ask just two more questions, then, in this area. You can tell that I have lots of questions, and I read through the bill language, the proposed language, and I have even more questions, and I know that you had your first workshop, and I appreciate that. The there is the possibility, still, of price gouging. You give the incentive to the manufacturer, and you anticipate that it's going to be two for one, but it depends on what the manufacturer suggested retail price is. But how do you ensure that, and how do you hold the manufacturers accountable for applying that rebate and reducing the price of the vehicle in the first place?
Speaker 76
Yeah, no, I really want to acknowledge your point, and we absolutely are very mindful of the fact that any time you have an incentive program, there's risk. We have a long history in California and at the Air Board of administering vehicle incentive programs, and I can say that through that experience, we don't have any evidence to suggest that there has been any sort of historic issues with misrepresentation or taking advantage of programs. That being said, MSRP is one tool that you mentioned. It's something that we are tracking very closely. And I think most important, though, is ultimately what the price that people pay at the end, right?
So, we will be requiring that data be provided on how much people end up paying for their vehicles. And through that, we'll be able to, I think, be able to identify if there are any sort of structural reasons that lead us to believe there might be something exogenous happening between OEMs and dealers.
Speaker 76
Several. So, in terms of OEMs that would be eligible, it's OEMs who sell zero emission vehicles in the state of California that fall within the MSRP cap that we have proposed to use, which aligns with what the feds used, essentially. And so, there would be several of those. And I know that there have been questions around, well, how do you decide how much money does each OEM get? That's one of the program details we're working through.
One way that I know folks are thinking about it is those who are interested, we divide it up equally.
Speaker 1
Okay. Now, talking about leasing, car leases, providing incentives for those who are interested in leasing rather than purchasing, is this something that is being considered? Because I when you if you have new car leases, those then become those used cars that can be a path for somebody to be a new No, car
Speaker 76
Yeah. I think the true the same is also true for when you are purchasing and not leasing, that that can eventually become a used car. Although I appreciate the timetable might be slightly different based on, you know, how long a consumer hangs on to that vehicle. Ultimately, because we are really interested in getting folks who wouldn't otherwise purchase a ZEV into a ZEV, the best way to do that is to make sure that they have as many options as possible. And that includes the mechanism in which they would enter into in order to obtain that vehicle.
So, that's the rationale behind offering it for both the purchase, as well as a lease of a vehicle.
Speaker 1
Very good. In my last question, since I've been here in the legislature, I've tried to emphasize the use of and the incentives for medium and heavy duty vehicles, they are the ones that are providing it's trying to clean up our air. We're going to have a better luck if we're working with medium and heavy duty versus light duty vehicles. What about something to consider, because of the budget constraints that we have, is funding for medium and heavy duty vehicles through programs such as a clean truck through HVIP. Yes.
This has led to the deployment of more than 11,000 medium and heavy duty vehicles, thousands of fleets, and addressing air quality to a more to a greater degree than light duty vehicles. And, again, it's the disadvantaged communities who benefit more from this, because it's those trucks that are going through the our disadvantaged communities that are causing the greatest harm to our communities. So something that I think that the administration should consider with such a limited budget to try to figure out what provides the greatest benefit to our community.
Speaker 8
I will say, Brandon Merit, Department of Finance, just to your point, Senator, the state has appropriated a total of $6,200,000,000 since 2019 towards the medium and heavy duty sector. So it certainly has not been overlooked as to the importance in reducing greenhouse gas emissions and also in areas such as ports and that type of thing. So I just wanted
Speaker 1
And I to worked sure to highlight on the reauthorization last year, so I'm very well aware of that, but there's no money now. Just as a note, there's no money for the clean vehicles, Clean Cars for All, and these are programs that have been successful, and I think we've talked about this in prior hearings, that if something is successful, why are we trying to do something different? Just something to consider. Very good. Let's move on to issue number four.
I thank you all for your comments. Issue number four, bidirectional electric vehicle charging proposal and trailer bill language.
Speaker 8
Brandon Merit, Department of Finance. So the bidirectional EV charging proposal. HARB is requesting limited term funding for 'twenty six, 'twenty seven, and 'twenty seven, 'twenty eight in the amount of $1,100,000 air pollution control fund and four limited term positions. And accompanying trailer bill language to make statutory changes to implement SB 59. And happy to take any further questions.
Speaker 5
Aliyah? So, we don't have any specific concerns with the proposal, but we did want to highlight for the committee that this undoes a change that was made in the policy process You know, this bill, as it was going through the policy process, the administering agency was changed, and this would change it back. So, I know that's sometimes a concern for the legislature. I think that was done on the assembly side, but just wanted to make sure that was clear and highlighted, in case it is a concern.
Speaker 1
Okay. Issue number five, AB six seventeen, Community Air Monitoring Update.
Speaker 8
California Air Resources Board requests $1,600,000 greenhouse gas reduction fund in twenty six-twenty seven, and ongoing for 5.2 permanent positions, and equipment and contract costs to implement Chapter 118, statutes of 2025, SB three fifty two. Happy to take any further questions on that.
Speaker 5
Thank you. Hi, Leo. So no specific comments or concerns, except just to highlight that this and the other the next couple of items are all ones that are funded, at least in part, by that Tier one, so just wanted to kind of The three.
Speaker 1
Very good. I since passage of six seventeen, this has been something has been very important. I was probably one of the last of the joint authors of that particular bill. The having the personnel to make sure that it's not just preparing reports, because the reports have already been prepared by the communities. If we don't implement them, they are worthless.
The communities have suffered tremendously, and that is why six seventeen was passed to shed light on what they are suffering. It's been documented now. The plans have been put together, and the plans sit there, which brings us to tier three, which becomes a problem because, instead of two fifty, which was supposed to be what AB six seventeen implementation was supposed to be, it's down to one?
Speaker 1
177. Two fifty was a number that was selected specifically to help to not only implement those plans that had been put together by the community, the SERPs, but also to add additional communities that are suffering because of this pollution that they are suffering under. It's not every community. There are certain communities that are suffering more than others. The if approved, how many CARB staff in total would be working on AB six seventeen implementation?
And can you talk about why implementation is not absorbable in the existing staff level?
Speaker 76
Absolutely. Do want me to take this? Great. So, first, I just want to acknowledge your leadership on AB617. It is, know, ushered in, I would say, a different way of thinking about how we protect communities.
And while there is certainly more to be done to make it more effective, it's also resulted in communities being able to drive the emissions they want to see in their communities. We have around when AB six seventeen was passed, there was around $18,000,000 for 75 positions authorized for the Air Board to be able to help implement the six seventeen program. And that workload is far reaching. It's not only being able to support the air districts and the selected communities in carrying out their work, but in addition to that, we also administer the 177,000,000 that we were just referencing, the Air District implementation monies, or implementation grant monies, Air District support, and also the community air grants. The proposal before you today is for five additional positions.
And this is very specifically to be able to carry out the requirements the new requirements of SB three fifty two. So, when AB six seventeen was passed, we did do a monitoring plan back in 2018. Right. And this new legislation requires us to update that every five years. And as you point out, it is not just about putting together a plan that sits on a shelf.
First, the work that goes into developing that plan is significant. We have to, you know, the legislative mandate is for us to evaluate existing air monitoring systems to see if they're sufficient. There's over 150 air monitoring systems right now in California between community led air district state, and being able to evaluate the technologies that we need, and that as they are evolving, you know, there's more there's cheaper, low cost sensors. Some communities are very interested in VOCs and metals, so being able to look at technology that can look at that. And then in addition to that, being able to engage with community, engage with the six seventeen consultation groups, the air districts, academics, industry who is advancing this technology, to be able to put together a plan that actually aligns with what communities need, and also is doable.
That takes time, right? That engagement, that technology evaluation. You'll see in our proposal, there's a little bit of contract money, for instance, so we can buy some of this testing equipment and actually test it to make sure that it's reliable, it gets the results communities want to see. So, that is why we're requesting the five additional positions, to be able to carry out this work. And then, also, another important part of this is to be able to translate that work to and liaise with communities.
So that way, particularly, some community groups have received grants to be able to do their own technical monitoring. Being able to ensure they have the results from this monitoring plan and can benefit from it is really important, that, you know, this work doesn't sit on the shelf. So, there is part of our resource request is for that, as well.
Speaker 1
So, 75 people or staff members were included initially, 19 communities in total. It has not been increased. It's 19, right?
Speaker 1
Yes. 19 is what we have now. Yes. But those plans have they're have not been implemented until now they will be implemented. Is that correct?
With the exception of air monitoring?
Speaker 1
Correct. Yes. Is there a long term plan for the post implementation of these SERPs? Well What is the transition what is that transition from existing SERPs to having those completed, and then being able to bring in new communities? Because that's the plan, right?
Speaker 76
Absolutely, yeah. No, we very much are trying and very interested in how we can encourage additional communities to join this program, and that's certainly a focus of ours. We have an annual update that we provide every year to be able to report out on that progress, but that is certainly an area that's a priority for us. And in terms of, you know, very specifics on what that looks like, and how we can do that, happy to get back to you.
Speaker 1
Further comments? All right, let's move on to issue number six, cap and implementation of AB twelve oh seven and SB eight forty.
Speaker 8
Okay. California Air Resources Board requests a total of $3,640,000 and 10 permanent positions in 'twenty six, 'twenty seven and ongoing, which is composed of $2,700,000 cost of implementation account and $871,000 greenhouse gas reduction fund to implement the updated regulations and program requirements from the reauthorized cap and invest program consistent with AB twelve oh seven and SBA 40. Happy to answer any further questions.
Speaker 76
So, currently, we so, just for a little history, we have six current compliance offset protocols, and we have roughly eight staff that have been maintaining those for the last decade. Their focus is really on being able to ensure that those programs are followed, and that the regulatory requirements are complied with, both in terms of engaging with third party verifiers, as well as the offset registries. We get a ton more projects You're you know, the number of projects that apply continue to grow. They have to review those. So, to date, the resources have been very much focused on maintaining the existing offset protocols.
It's largely why we haven't had the capacity to update those in a meaningful way. So, we appreciate the legislative direction to do that, and approval for this request would give us the resources to be able to review existing offset protocols, then also be able to start to identify additional ones, as directed by the legislation.
Speaker 1
Then AB or SB eight forty requires Corp. To use best available science. How does the department define this?
Speaker 76
Great question. So, in terms of how we will ensure that we're using best available science, and then also, I believe it also says best practices, You know, the first and foundational way will be through the support of this proposal. With these staff, we plan to hire folks who are experts in the protocol areas that we believe we need to advance. Those experts will be able to draw on lots of different folks, as well as academic research. So, not only, you know, taking advantage of academic research, evolution in our understanding of best practices from other offset programs, but then also, too, there's the offset protocol task force that we are supporting and would be leveraging and getting input from them as well.
And then lastly to, you know, of course, academics as well. Ultimately, the development of any new offset protocol will go through the same process, you know, a rulemaking process, so subject to the Administrative Procedures Act. So, this will be developed through a public process, and that helps us ensure we are able to hear many different voices, and be able to evaluate, you know, what is the, you know, what are the best practices elsewhere, and how do we, you know, balance those different perspectives, so that way we can develop a protocol that really does reflect the significant evolution that we've seen in the last decade.
Speaker 1
Great, good. Thank you. And Issue No. Seven, California's sixth Climate Change Assessment. First, let's hear from Abby Edwards, the Office of Land Use and Climate Innovation, who will present the Governor's proposal.
Speaker 77
Afternoon, Madam Chair. You for having Finally. My name is Abby Edwards. I'm the senior deputy director at governor's office of land use and climate innovation. It's an honor to be here to represent LCI as well as the natural resources agency and the energy commission who have been key partners on the California climate change assessments.
As we know, California is on a trajectory toward hotter, drier, and more extreme conditions. And while climate projections do not point to a single predetermined outcome, they show a range of possible futures. And which path we follow is still shaped by the decisions and policies that we put in place today. That window to change course will not remain open indefinitely, which is why as climate accelerates, we must so must the tools, the information, and resources we use to protect people and strengthen California's resilience. So, that's really the exact role of the California Climate Change Assessments.
So, jointly with the Natural Resources Agency, the Energy Commission, and LCI, we're requesting $9,900,000 from the Greenhouse Gas Reduction Fund over five years to implement the California six climate change assessment and deliver statewide scientific resources critical to informing, climate risk reduction in the state. This $9,900,000 BCP represents the absolute minimum level of funding needed to maintain the core functions of the climate assessment and deliver the sixth assessment on time, as required by statute. This ask includes $6,100,000, for LCI to deliver the assessments, the regional reports, the data and tool management, tribal and community engagement, expert review, editing, and strategic communications, dollars 2,300,000.0 to the Energy Commission to advance a third round of the tribal research grant program, expanding tribally led climate research, and $1,500,000 to CNRA to fund original research addressing the state's most critical climate knowledge gaps. With consideration for the tight budget year ahead, we've developed a scaled back sixth assessment that still advances our climate science foundation and leverages the momentum and the partnerships built through the fifth assessment. So, I'm joined by CC and CNRA, and we're happy to answer any questions you may have.
Speaker 5
So, just a couple quick comments. We think this proposal highlights a couple of the issues that we've been talking to the committee about. One is on that state ops tier one. So, this is climate related, but it's not permanent state staff. It's sort of a short term proposal.
So, there's some staffing that would be limited term, and then there's also some sort of non staff related pieces of it. So, I think one of the questions is, you know, this isn't it doesn't have quite as clear of a nexus to like, has to be in that tier one state ops as some of the other proposals. So really thinking about does this fit with what you think that funding should be used for, or is there another funding source that you would like to use? And then the second is, we have pointed this out as one of the potential examples of a potential type of proposal that you could think about funding we think you could potentially fund a little bit less. For example, there is research funding in here.
You know, you could probably change the amount of research you fund, and you could still get a useful assessment. Would it be quite as good? Maybe not, but there's probably some flexibility there. So, depending on what your budget priorities are, we think there could be some give there. So, happy to take questions at the appropriate time.
Speaker 1
So the first question is, which tier does it come from? Comes from Tier one?
Speaker 43
I'm happy to take that question. Courtney Masking, Yale Department of Finance. So this will be coming from Tier one. It's a state operations cost required by legislation, and it fits and aligns with GGRF enabling statute and SB eight forty. Given the considerations of the general fund in the state it's in, we think GGRF is the most appropriate funding source, but we're, you know, open to other considerations, but, you know, through our analysis, we didn't identify any other funding sources that were more appropriate.
Speaker 1
I think we go back to our discussions earlier is one is that it comes out of GGRF. The other is Tier one. Yeah. Because everything from Tier one then takes away from we just heard AB six seventeen implementation of those programs, where we already have a plan, and they can't be implemented, and we can't take care of the pollution that communities are suffering under, because now we're going to spend $10,000,000 on this. Now, another question for the three of you is, How has the research produced out of the prior climate change assessments been used at the community and local government level?
And can you provide some examples?
Speaker 77
Yeah, of course. Happy to. And I can start, and then Jen Phillips from CNRA can add as well. You know, there's a lot we could spend a lot of time sort of on the use cases of the past assessments and how it's informing decision making. State agencies are pointing to Caledap, which is a website that houses all the data and the projections generated by the assessments.
It's a required resource for grant applications, for planning infrastructure, implementation. Lots of state agencies sort of point to this data as the best available science. The California Public Utilities Commission has used this for their adaptation rulemaking as the trusted source to implement their different planning and in their planning. The Department of Water Resources used the fourth assessment in their vulnerability assessments and state water delivery capacity report to inform CAL communities.
Speaker 1
Let me stop you for just a moment. I want to talk about community and local Female governments.
Speaker 1
I know that PUC, I appreciate Right. And, you know, they take, you know, years to do their decisions, and Yeah. You know, so, by the time the community receives the benefit of that
Speaker 77
Yeah, that's a great question. I think something that's unique about this the fifth assessment is this community participatory engagement model, where at the beginning of the fifth assessment, the team went out and spent a lot of time doing engagement across the state, working with community to identify research gaps that they could help kind of fill into the research process. And so, by doing a lot of that listening, they helped identify over 600 research priorities, and then it was scaled down, of course, to around 26 priorities that we were able to identify. But this model of the community engagement being able to fit into the research is a model that doesn't necessarily exist elsewhere. And it's a time where, you know, we're able to inform the researchers to do the science, and then make sure that the community sees themself in the process.
And this is sort of a new model that the Fifth Assessment done that we're really excited to continue into the Sixth Assessment. And we're seeing that identify be able to identify different topical reports as well. So, as a part of the portfolio for the sixth or for the fifth assessment, we have topical reports, one on environmental justice and equity, one on tribal that's tribally led, one that's on the economic impacts of climate change, and then another on human induced climate migration. And all these topical reports are really identified through the community engagement to help see what are the key questions that they want answered, and how can that inform sort of the decision making on the local level. And we're seeing sort of the regional reports that come out of the fifth assessment as well really help inform communities that need to do the planning for climate change ahead.
And being able to have that down scaled data to that level and the regional reports to help inform decision makings is really crucial. So, we're seeing a lot, especially coming out through the fifth assessment that will be coming out, as well, to
Speaker 1
help How do inform you use I'm sorry. How do you use a fifth assessment to make sure that the work that you're doing is not duplicative? What are lessons learned so that you can use that information without having to go through the same iterations, but to learn from those and to build from that, as opposed to saying, This is a six, and we're starting all over again?
Speaker 77
Yeah. So, as I mentioned, sort of this kind of engagement process through the first time around, the team identified 600 research priorities, and we're only able to focus on 25 or 26 of those. So, there's a huge kind of wealth of information on gaps that could be filled. And so, while we, you know, were able to focus on some for the fifth assessment, this proposal would really help build the momentum and continue that gap analysis. What's being done at the state?
What's being done at the community level? What are researchers focusing on? And how can we really identify where those gaps are and where the key questions are that we're missing? And so, this continuity, being able to continue that into the sixth assessment is really important. I don't know, John, if you had anything you want to add.
Speaker 61
my mind. I would just underscore what Abby is sharing, and I think the first year of the assessment, the sixth assessment, is all about doing that interagency gap analysis and needs assessment, but also doing that with the UCs, the CSUs, other academic partners, and researchers to make sure it is truly not duplicative. And we're just filling those very critical gaps that will really kind of drive forward on decision making and action. Thanks.
Speaker 1
So my final question is, how do you ensure geographic equity, so that you're not just studying the coastal communities, for instance, or places where you would want to visit, but places like the Inland Empire, to study those areas, and determine what the needs are of areas like the Inland Empire.
Speaker 77
Yeah. So, as I mentioned so during the fifth assessment, the team, in the very beginning, divided the state into nine different regions. And as a part of that process, there will be nine regional reports coming from that worked with the authors, community based organization, researchers in those regions to uplift the findings, the priorities all through these regional reports. So, we have the whole state covered through this assessment, and then all of those findings will be uplifted into a statewide report as well. And then, as I mentioned, we have those topical reports, too, that all will be reflective of the entirety of the state.
Speaker 1
so I'd like to when that is done, I'd like to see the Inland Empire section on.
Speaker 1
Female All right. Anything further from okay. All right. Thank you so much. All right.
Now we are going to take public comment on issues two through seven. Please give your name, your where you're coming from, the organization you represent, and we will again limit it to thirty seconds.
Speaker 49
Hi. Good afternoon. Mars Wu with the Green Lighting Institute also giving comment on behalf of the Center for Biological Diversity. First of all, thank you so much, Sherrias. Really appreciate your questions that you shared during the hearing on issue three, which we share.
Speaker 79
We wanna emphasize that we should be prioritizing California's limited dollars for supporting low income and disadvantaged communities who have the highest barriers towards accessing clean transportation. That means prioritizing funding for existing equity centered ZEV programs like Clean Cars For All, medium heavy duty programs a trip, and that also means putting equity parameters, including income caps, lower MSRP caps, and incentive stacking on the proposed new light duty incentive. If as Karb said, affordability oh, alright. Thank you very much.
Speaker 62
Chair, thank you. I'm Tom Knox, a Valley Clean Air. Now, speaking on his incentive, we believe that it is possible to fund not only the governor's proposed seven incentive, but also the successful existing medium and heavy duty incentive programs, as well as Clean Cars for All. As the staff report notes, most of the regional Clean Cars for All programs will run out of money and go dark in the near future. Thank you.
Speaker 54
You so much. I'm Maria LaRacha with Leadership Council for Justice and Accountability. We asked the legislature to fully fund AB six seventeen. California is the world's fourth largest economy, but millions of residents still lack access to clean air and adjacent to polluting facilities and hundreds of thousands lack access to safe and affordable drinking water, a human basic right. The list of communities that are severely affected by air pollution has expanded and funds for are still needed to implement community emission, reduction plans.
Along with funding, we urge the legislature to reform, the program. Thank you, member, for SB75, in terms of reforming, six seventeen program. In South Fresno Time's for example
Speaker 70
Good afternoon, Madam Chair. Paul Mason with Pacific Forest Trust here on item six. We're in support of funding the Butterchange proposal for implementing SB eight forty and AB twelve oh seven. In particular, SB eight forty called for report to the legislature by the end of this year on a variety of things around offsets, including alternative approaches, alternative methodologies that could achieve greater state benefits, in particular for achieving some of our nature based climate targets and 30 by 30 targets, and there are some very real and actionable ways to do that. And so I really hope that, RB, is that an alarm for me, or is that the building?
Speaker 1
It is. It is. And we appreciate so much that you all were here to listen to the testimony, and we appreciate that you're here also to give public comment. Thank you so much.
Speaker 84
Good afternoon, Madam Chair. Brooke Rose with the Wildfire Solution Coalition, and I am commenting on behalf of our coalition members, Sierra Business Council, Association of California Water Agencies, California Farm Bureau, Rural County Representatives of California, Save the Redwoods League, Climate and Wildfire Institute, Mountain County's Water Resources Association, Regenerative Forest Solutions, and Tahoe City Public Utility District. We are here in support of issue number two, and we want to urge the legislature to restore the 200,000,000 from GGRF set aside for wildfire that was established in SB nine zero one. GGRF should be prioritized for critical climate resilience investments, but the general fund is more appropriate for Cal Fire backfill. Thank you.
Speaker 1
Thank you. I was part of that initial conference committee for 09/2001, so I'm very familiar with it. Thank you.
Speaker 77
Good afternoon, Chair Reyes. Megan Cleveland with The Nature Conservancy. Just here to provide comments on issue two. First, TNC appreciates the legislature and the administration recognizing the importance of nature based solutions in reaching our climate goals in the cap and invest reauthorization language, particularly adding NBS as a priority for GGRF investments. We respectfully request that the legislature consider appropriating $250,000,000 for GGRF funding from Tier two discretionary funding to the California Natural Resources Agency to support the achievement of the Nature Based Climate Solutions targets, and then just echo my comment the comments from my colleague with the Wildfire Solutions Coalition.
Speaker 85
Good afternoon. Steve Wallach here on behalf of the Alameda Contra Costa Transit District, Napa Valley Transportation Authority, Foothill Transit, Golden Gate Bridge District, and the and CALAC to urge your support for continuing to live up the main or maintain the commitment made for the, zero emission transit capital program and to, you know, provide funding to backfill for the Tier three funds. There's money there in the interest income and rollover funds to do that. And then also, on behalf of the Centers for Transportation Environment, we urge you to at least examine the need for funding for demonstration programs for zero emission hydrogen buses, particularly bus purchases and for the hydrogen fuel production. Thank you.
Speaker 57
Good afternoon, Madam Chair. I'm Scott Cox on behalf of CalSTART and the Electric Vehicle Charging Association. Thank you for your time. My comment spans issues two and three. We support a revised budget that maintains the Legislature's discretion in the Greenhouse Gas Reduction Fund Tier two priorities, including entering fund balance and interest income more aligned with the intent of SB eight forty to support the governor's light duty incentive and an all of sector approach supporting medium and heavy duty vehicles, charging infrastructure, and community mobility options.
Speaker 84
California's portfolio of programs remains a critical part of a better managed and more affordable energy transition.
Speaker 72
Good afternoon, Chair Reyes. My name is Maggie Field with Ceres. We're a national nonprofit working with major investors and companies to advance policies to build a cleaner economy. Many of these companies who supported reauthorization of California's cap and invest program. On issue two and six, we strongly support CARB's implementation of a robust cap and invest program this year, along with funding for CARB and CPUC staffing to implement AB twelve oh seven and SB eight forty.
Speaker 85
Timely, well resourced implementation is essential to maintaining market certainty. We also urge protecting the integrity of SB eight forty's funding structure even amid budget pressures. And on ZEVS, we support the $200,000,000 in funding but recommend stronger equity targeting and prioritizing robust funding for medium heavy duties of programs like HFIP and Clean Cars For All. Thank you.
Speaker 57
Good afternoon, chair. Kirk Blackburn here on behalf of the San Diego Association of Governments or SANDAG, which offers the following comments on several GGRF, funding items. First, SANDAG supports efforts to modernize affordable housing and sustainable communities program, including dedicating flexible funds to support infrastructure investments aligned with regional priorities. Next, SANDAG supports SB eight forty's proposed $125,000,000 allocation for transit passes. Next, Sandag supports the restoration of $75,000,000 for the highways to boulevards, reconnecting community reconnecting communities pilot program.
And then finally, Sandag supports the GGRF priorities identified by the California Transit Association. Thank you.
Speaker 86
Good afternoon. My name is Lacey Rocke. I'm representing the California Green Business Network. We support thousands of small businesses throughout the state to reduce greenhouse gas emissions and achieve other environmental, recognitions and achievements. And we connect the largest sector of our economy, which is new job growth and economic vitality in the state with personal relationship based technical assistance.
The conversation made clear today that while a large chunk of GGRF funds are already pre allocated, to the extent feasible, please consider small businesses and their ability to reduce greenhouse gas emissions.
Speaker 50
Good afternoon, Chair. Chris Nielsen with the American EV Jobs Alliance. We strongly support the, $200,000,000 proposed for light duty EV vehicles. We thank you for all your incredible work on clean over the years, and appreciate your work on this, and of course, the committee staff as well. Thank you.
Speaker 2
Hi, Lauren Wesche, on behalf of the Bay Area Rapid Transit District, and we agree with the LAO that neglecting, to provide funding could prevent and disrupt, capital programs and jeopardize our ability to draw down federal funding, and as such, the legislature to appropriate the plan $230,000,000 for, NGGRF for zero emission transit capital programs, and establish funding certainty for the transit and interest in T rail capital program and low carbon transit operating program in the GGRF. Thank you.
Speaker 63
Good afternoon, Chair. Benjamin Liu from the American Lung Association. We appreciate the Governor's $200,000,000 proposal and believe that should be the starting point for ongoing investment into both medium heavy duty vehicle incentives, as well as light duty programs that improve access to clean vehicles for low and moderate income consumers, for example, through Clean Cars For All. We also echo Senator McNerney's call to fund incentives for converting off road diesel equipment through Farmer and Senator Blake Spears' support for funding alternatives to cars through transit and active transportation. EVs reduce the pollution that drive asthma attacks, emergency room visits, long term lung damage, especially for children, and heavily impacted communities.
Speaker 1
Thank you, and thank you for the work that you do to make sure that we have the statistics and we have the science behind especially here. Thank you.
Speaker 29
Alan Abs with the Bay Area Air Quality Management District, supportive of full funding for the AB six seventeen program, which would support the four Bay Area communities. The work that the communities have done with the air district staff is a great story, and we'd love to be able to talk more about it and use it as a way to support the funding for this program. Also supportive of full and continuous funding for the Clean Cars for All program. Right now, we find ourselves running out of money. We have to shut down the program.
We get money. We start to back up. It's not a very efficient way to run a program. And if we could fix that, that would be great. Thank you.
Speaker 90
Brendan Toug, on behalf of the California Air Pollution Control Officers Association, we understand money's tight. In that within that context, we urge you to consider prioritizing the farmer program. It's cost effective. It's also SIP creditable for meeting state and federal standards, which is really important with what the federal government is doing with rollbacks. And then the same goes for heavy duty.
Speaker 89
Urge you to think about we think that's a good idea, but make projects line up and and meet Karl Moyer guidelines. And what that gets you is it means then that those reductions are also SIP creditable, so it helps us not only meet our federal standards, but deal with this hole that the that the feds are are creating.
Speaker 64
Good afternoon. Eric Thromson on behalf of Sacramento Regional Transit District. Just echoing the concerns and asks of my other fellow transit representatives. And also really appreciate the chair and the rest of the committee that you all prioritize transit funding. I mean, in today's hearing, it was clear that this is important to you and we just like to thank you for that and continue to fight for us.
Speaker 90
As you know, transit is critical for all of our GHG emission reduction goals. Thank you.
Speaker 58
Bill McGovern with the Coalition for Clean Air. We agree with the governor that we need to continue incentives for zero emission transportation. We agree with you, madam chair, that we need to continue incentives for trucks and buses as well as cars. When it comes to light duty, we want those funds steered toward low and moderate income Californians through Clean Cars for All and other equity programs because these are the folks who need the assistance making the transition to zero emission transportation. Thank you.
Speaker 64
Hi. Good afternoon. Grishina Mohabir, California Environmental Voters. We also appreciate the proposal for the new $200,000,000 tax credit. Dollars to help move the EV transition in the face of federal rollbacks are crucial.
Speaker 48
And for this program to yield the greatest benefits, we urge consideration of equity factors in program design like income caps, which we know has been brought up today. I would also like to voice support for funding our existing incentive programs, both on the light duty and the medium to heavy duty side, all of which are critical to moving us forward holistically in the clean the clean transportation transition. Thank you.
Speaker 91
Madam chair and members, Andrew Antwee here today on behalf of a number of clients, On behalf of the office of Cat Taylor and Tom Cat Ranch, we support $90,000,000 annually from GGRF for the Sustainable Agricultural Lands Conservation Program. For LA Metro and Metrolink, I want to thank Senator Blakespeare for her remarks about operational funding needs for commuter rail. And also for LA Metro, we support the ZETCP and LC Top and TI RCP, funding priorities and maintaining those commitments. And for the Port Of LA, we support ZEV funding, and thank you for your time.
Speaker 42
Good afternoon. Ethan Honohano here today commenting on item two on behalf of Powering America's Commercial Transportation or PACT, a coalition dedicated to accelerating the deployment of accessible and reliable charging infrastructure to support medium and heavy duty vehicle markets. PACT supports the broader industry request for $365,000,000 for medium and heavy duty vehicle incentive programs in addition to the 135,000,000 for clean fueling infrastructure programs. Thank you.
Speaker 87
Good afternoon, chair Chris Lee here on behalf of Tri Delta Transit in Contra Costa County as well as the Sacramento Area Council of Governments, both echoing the concerns of our transit colleagues related to the zero emission transit capital program as well as providing certainty for TURCEP and LC TOP in those tier three GGRF expenditure programs. The Zero Mission Transit Capital Program, that's a $23,000,000 hit in the Sacramento area region alone, and so urge you to restore that funding. Thank you.
Speaker 21
Good afternoon, chair and staff. Rebecca Marcus on behalf of the Union of Concerned Scientists speaking in support of issue number three, continued investment in clean cars is critical in protecting our clean air and infrastructure and public health. We do ask that you also include funds to support zero emission heavy duty vehicles. On behalf of American Farmland Trust and the California Climate and Ag Network, I urge you to maintain the Sustainable Ag Lands Program or SALCs continuous appropriation within GGRF and invest $90,000,000 to meet current increasing funds and also ask on behalf of the California Certified Organic Farmers for $15,000,000 for the CUS program. Thank you so much.
Speaker 9
Good afternoon. Taylor Trifo on behalf of Variety of Agricultural Associations. Ag has not received funding from GGRF for the last two years. So, we are requesting funding for farmer, F PIP, alternatives to agricultural burning, and livestock method emission reduction. Thank you.
Speaker 5
Good afternoon. Ada Welder with Earth Justice. We'd like to thank the chair for your comments in support of the HVIP program. This medium and heavy duty truck program is obviously extremely important in reducing community pollution and some of the most harmful NOx and particulate matter that that harm communities. So appreciate your support there.
We're asking for at least 350,000,000 GGRF. Thank you.
Speaker 93
Good afternoon, chair and staff. Thank, thank you. My name is Rocky Fernandez. I'm with the Center for Sustainable Energy. We're here in support of item number three, the $200,000,000, z zero emission vehicle incentive.
Speaker 95
He's a long time administrator for CARB's clean vehicle rebate project, as well as some of their low carbon fuel standard used electric vehicle programs, as well as some, some of the regional clean cars for all programs. We know how important these these are to keeping mark market certainty and moving everything forward. So we look forward to working with the legislature to make sure this program is successful. Thank you.
Speaker 66
Hi. Andrew Dawson with the California Housing Partnership. Us along with 49 organizations are wanting to elevate the equity building decarbonization program and ensure there's no cuts to that program. Additionally, Tech Clean California program and the Low Income Weatherization program are running out of funding this year, so we want to maintain funding to those critical programs to help low income Californians decarbonize their homes. Thank you.
Speaker 92
Good afternoon. Madison Vander Clay with the Building Decarb Coalition Action Fund, respectfully looking for an appropriation to support Tech Clean California, which as mentioned, helps households decarbonize with heat pumps, also lower their energy bills, and gain to air conditioning. Really critical program for our climate goals, but unfortunately ran out of funding in January. So we're looking for funding to support that. Thank you.
Speaker 69
Good afternoon, Madam Chair. I'm here on a for a couple of clients on a few issues. I'll try and wrap this up super quick. On behalf of the California Electric Transportation Coalition on issue three, they support the $200,000,000 light duty ZEV incentive proposal for first time buyers. On issue six, CalETC has submitted a letter to this committee from a from a board coalition a broad coalition of established stakeholders supporting the infusion of GGRF dollars into complete suite of California's existing low carbon transportation programs.
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And then on behalf of Utility Global, strongly support Senator Archuleta's request to appropriate $20,000,000 for hydrogen production investment in California. Without this investment, California risks losing federal dollars and potentially stalling smaller projects. Thank you.
Speaker 71
Hi. Melanie Mathewson from Deveau Burr Group on behalf of Rivian speaking in support of the one time $200,000,000 incentive for light duty zero emission vehicles. Rivian is an all electric all American vehicle manufacturer employing 4,000 Californians with dozens of service locations across the state. Timing of this program is critical for Rivian, which will release the new midsize SUV this spring and is looking to their home state to support them in this endeavor. We respectfully urge your support for this $200,000,000 appropriation.
Thank you.
Speaker 13
Good afternoon. Caitlin Rudner Sutter on behalf of Environmental Defense Fund, also in support of the $200,000,000 one time light duty incentive program. In addition to all of the air quality and climate benefits of that, we see this as a really important partnership between the state and the automakers, so we can work together eventually to develop the next generation of durable vehicle standards. Also very supportive of investments in heavy duty for all the reasons you outlined, Chair, with all of the air quality and climate benefits that come with cleaning up heavy duty transportation. So thank you.
Speaker 94
Hello, Ryan McCarthy on behalf of Lucid Motors, a California based EV automaker with about 3,000 employees in the state, making some of the longest range and most efficient electric vehicles on the market. Through a leasing model, they have been able to turn over vehicles very quickly and now you can find about 400 or pardon me, 400 mile range EVs for $40,000 This is how you increase access is making the most compelling products available to everybody. We strongly support the governor's EV incentive program, hope it will support leases, hope it will support California companies and the jobs there, and the most innovative products that they and other leaders are developing. Thank you.
Speaker 66
Good afternoon. I'm Ria Repetian on behalf of Hyundai. We strongly support the governor's 200 millions of tax credit proposal. We believe this proposal will help stabilize the market, support CARB development and drive forward regulations, and encourage continued EV investments. So we strongly encourage you to support this proposal.
Thank you.
Speaker 36
Herman Baragona, executive director of the Sacramento Environmental Justice Coalition. I'm here on behalf of our affiliate, the Common Ground Industrial Areas Foundation. We cover Yolo, Solano, Placer County, Sacramento, El Dorado Counties. We represent people who earn less than $2,000 a month and they cannot buy EVs. And the dealerships are trying to mess with them all the time.
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So we are strongly supportive of any enhancements of these programs, but they're going to help people navigate through the dealerships all the way what's going on on the ground. This is why we also support SB ten seventy five, because we need more controls on the ground. Thank you.
Speaker 14
afternoon to everyone. My name is Jesus Figueroa Acasio. I'm here with Sacramento Environmental Justice from Sacramento. So I also strongly agree to AB ten seventy five. Thank you.
Speaker 5
Good afternoon. Melissa Werner here on behalf of Honda, also in support of the $200,000,000, proposal by the governor towards light duty, ZEV incentive program. Thank you so much.
Speaker 14
Hi there. I'm Alexandra Lavey on behalf of the Agricultural Energy Consumers Association. We are urging funding for all ag programs in GGRF, but want to express strong support for dairy methane reduction programs that are extremely oversubscribed and needed to achieve the state's ambitious methane reduction goals. Thank you.
Speaker 51
Good afternoon. Katrina Fritz, California Hydrogen Business Council. We're the largest hydrogen trade association in The US. We represent automakers, OEMs, and community groups as well. So I'm here today on item nine.
Speaker 101
We support additional funding from for HFIP from the Hino settlement, and we would support more going back to the vouchers themselves for faster deployment of trucks and buses. Transit agencies are choosing hydrogen buses. We have over 400 in fleets in California now. The Federal Transit Administration is not funding new zero emission bus projects, and tariffs have increased vehicle costs. So we strongly urge you to fund the HENO settlement back into the HFIP program.
Speaker 1
Thank you.
Hi, Chair Rays. Good morning or good afternoon. I'm Ryan Kenny with Clean Energy asking for your support of the assembly request for $100,000,000 in incentive funds for low NOx truck, incentives that would go to into the HFIT program. The state right now has a clean air problem and is, threatening to not meet federal attainment, which would jeopardize up to $75,000,000,000 in federal transportation funding. So the displacement of dirty diesel to the cleanest available technology, cleanest trucks, for low NOx trucks, that meet a 20 milligram or cleaner standard would be needed.
Speaker 27
Hello, chair. Brian Schoeb on behalf of the California Climate and Agriculture Network. I wanna echo senator McNerney's comments about alternative manure management and healthy soils. Fertilizer prices have doubled in the past month, and and food prices will soon follow. The AMP program offers a three in one solution by giving dairies the financial assistance they need to convert manure into compost, improve water quality, produce methane, and reduce imported fossil fertilizers.
Speaker 71
Good morning. Sarah Brennan with Weiderman Group on behalf of NextGen California in support of one
Speaker 40
fully restored Greenhouse Gas Reduction Fund allocations to not backfill general fund obligations with prioritization for community air protection programs and a strong regulation of a B twelve oh seven and SB eight forty to generate critical funds for the greenhouse gas reduction fund while reducing pollution and lastly a passage of the 200 millions of incentive program and expansion of funds to also support medium and heavy duty zero emission vehicles. Thank you.
Speaker 15
Good afternoon, Madam Chair. Chris McKeeley, on behalf of the California Renewable Transportation Alliance, similar to clean energy, we support a $100,000,000 allocation from GGRF targeting heavy duty low NOx trucks. We think that that $100,000,000 incentive could get 2,000 trucks off the road, and that is targeting the highest polluting, hardest to electrify heavy duty vehicles. Thank you, madam chair.
Speaker 36
Hi, chair. Anna Vasquez here on behalf of the Riverside County Transportation Commission and the San Diego Metropolitan Transit System, urging the GGRF discretionary backfill to fully fund tier three TRICP and LCTOP, as well as appropriate the plan 230,000,000 in the GGRF funding for the zero emission transit capital program and the allocation of 20,000,000 for fiscal year twenty six twenty seven for SB one twenty five. And on behalf of the San Diego MTS to reinstitute the partial sales tax and use tax exemption for zero emission buses purchased by transit systems. Thank you.
Speaker 10
Madam Chair, Michael Pimentelier with the California Transit Association, voicing for, one additional time, support for the monies for SB one hundred twenty five zero emission transit capital program dollars. These money is critical for getting agencies to remain operational, get them to a point of self sufficiency through, self help measures. Would also note that we wanna see establish some funding certainty on the TI or CP and LC top, recognizing that they're now in tier three. Then finally, I do want to see some investment move forward in medium and heavy duty so we can continue to move forward on zero emission transition in the transit sector. Thank you.
Speaker 28
Madam Chair, Brendan Erpikey, on behalf of Via Transportation, which partners with more than 80 communities across the state to expand equitable, clean transit options. As you consider the GGRF, we request you restore at least $40,000,000 to CARB's Sustainable Community Strategies Programs, which saw its funding cut last year. These programs directly support underserved and disadvantaged communities. Also request the legislature restore the $230,000,000 to the Zero Emission Transit Capital Program. Thank you.
Speaker 30
Good afternoon, Chair Nate Solov on behalf of ZIM Solutions. Appreciate your support of the HVIP program and the 2024 budget. Finance took over $300,000,000 from the Cummins settlement and used that for other parts of the budget. We're asking that a minimum of 170,000,000 of that amount go to the HVIP program in this year's budget, which was stipulated as part of that settlement agreement. Also, on behalf of the Port of LA, supporting that GGRF funding go to the Zero Mission Ports Program, which was zeroed out several years ago.
Speaker 106
It's critically important to reduce emissions in port communities. Thank you so much.
Speaker 94
Good afternoon, Chair. Tricia Geringer with Agricultural Council of California, representing over 15,000 farmers throughout the state. Here on Issue two, GGRF, we're very supportive of the farmer program and ag equipment and also food production investment program as supported by Senator McNerney at the beginning of the hearing and also ag waste sustainability and livestock methane reduction programs. Thank you so much.
Speaker 68
Good afternoon, Chair. Vincenzo Caparelli here on behalf of California Association of Council of Governments regarding the GGRF proposals. First, we wanna call on the governor and legislature to appropriate the $230,000,000 in funding for the zero emission transit capital program. And in light of the changes to s b eight forty, With s b eight forty, we call on the governor to in legislature to establish funding certainty for TERSIP and LC TOP. Finally, turning to AISC, we appreciate the governor's proposal including requirements to incorporate regional priorities in the SCS allocation.
Thank you.
Speaker 22
Good afternoon, Madam Chair. John Moffitt, on behalf of the Alliance for Automotive Innovation here in support of two items today, issue number four, moving the bidirectional charging regulations from Energy Commission over to ARB. They are our traditional regulator. We have a good working relationship with them. Look forward to working with them on that.
Speaker 107
And also in support of issue number five, the $200,000,000 for the light duty zero emission vehicle rebate. I want to align ourselves with the comments Department of Finance made earlier. We know incentives work. Thank you.
Speaker 1
And they work. Thank you. All right. Thank you all who provided information on the panel. Thank you for those of you who are still here, Aleo.
Thank you to the staff that is here also, and thank you to all those who provided comments. Comments and suggestions are important to us. We want to include your testimony in the official hearing records, so if you would did not provide your comment today, you can certainly provide it online. Thank you to everyone, and thank you for your patience. This Budget Subcommittee two is adjourned.
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