BILL NUMBER: SB 696 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 17, 2009
AMENDED IN SENATE JUNE 9, 2009
AMENDED IN SENATE MAY 5, 2009
AMENDED IN SENATE APRIL 13, 2009
INTRODUCED BY Senator Wright
FEBRUARY 27, 2009
An act to add Sections 40440.12 and 40440.13 to the Health and
Safety Code, relating to air quality, and declaring the urgency
thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 696, as amended, Wright. Air quality: CEQA exemptions: emission
reduction credits.
(1) The California Environmental Quality Act (CEQA) requires a
lead agency, as defined, to prepare, or cause to be prepared, and
certify the completion of, an environmental impact report (EIR) on a
project that it proposes to carry out or approve that may have a
significant effect on the environment or to adopt a negative
declaration if it finds that the project will not have that effect.
CEQA also requires a lead agency to prepare a mitigated negative
declaration for a project that may have a significant effect on the
environment if revisions in the project would avoid or mitigate that
effect and there is no substantial evidence that the project, as
revised, would have a significant effect on the environment. CEQA
exempts certain specified projects from its requirements.
Under existing law, every air pollution control district or air
quality management district in a federal nonattainment area for any
national ambient air quality standard is required to establish ,
by regulation, a system by which all reductions in emissions
of air contaminants that are to be used to offset certain future
increases in the emission of air contaminants are banked prior to
use. Pursuant to this requirement the South Coast Air Quality
Management District (district) promulgated various rules establishing
offset exemptions, providing Priority Reserve offset credits, and
creating or tracking credits used for offset exemption or Priority
Reserve projects. In Natural Resources Defense Council v. South Coast
Air Quality Management District (Super. Ct. Los Angeles County,
2007, No. BS 110792), the superior court found the promulgation of
certain of these district rules to be in violation of CEQA.
This bill would exempt from the requirements of CEQA, except as
specified, the adoption and implementation of specified district
rules relating to emission credits. Because a lead agency would be
required to determine whether the use of the credits qualifies for an
exemption, this bill would impose a state-mandated local program.
(2) This bill would state the findings and declarations of the
Legislature concerning the need for special legislation.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(4) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares all of the
following:
(1) Because of the superior court decision in Natural Resources
Defense Council v. South Coast Air Quality Management District
(Super. Ct. Los Angeles County, 2007, No. BS 110792) holding the
South Coast Air Quality Management District (district) violated the
requirements of the California Environmental Quality Act (CEQA)
(Division 13 (commencing with Section 21000) of the Public Resources
Code) in the promulgation of certain district rules, the district is
unable to issue over a thousand pending permits that rely on the
district's internal offset bank to offset emissions.
(2) The superior court decision also required the district to set
aside several thousand permits that were previously issued in
reliance on the district's internal offset bank. These permits have
been subject to analysis performed pursuant to CEQA that the lead
agency has deemed appropriate.
(3) Between 2003 and 2005, the federal Environmental Protection
Agency conducted an extensive review of the criteria for, and the
types of documentation used to support, the deposit of credits in the
district's offset bank. As a result of that review, the district
made a significant adjustment. They The
district reduced the total credits by an average of 60 percent
over all pollutants and by over 90 percent for PM10 credits. As a
result of this review, the Environmental Protection Agency issued a
letter to the district on April 11, 2006, confirming that the
district tracking system addressed the underlying historical issues,
including the use of pre-1990 credits and further recommended a rule
codifying the revised tracking system. The district in 2006 adopted
Rule 1315 to meet this recommendation. Rule 1315 is now in part the
subject of the litigation described paragraph (1).
(4) If prompt legislative action is not taken to correct this
situation, projects will be stopped from going forward or frozen in
place, representing significant losses to the economy, as well as
numerous well-paying jobs. The impact of approved projects not going
forward will dramatically impede any economic recovery in southern
California and contribute to another state deficit as a result of
lower tax revenues.
(5) Affected projects include equipment replacement to reduce air
emissions, plus projects for essential public services such as
hospitals, schools, landfills, sewage treatment plants, renewable
energy projects, and small sources, including small businesses that
are unable to locate or afford credits on the open market. With time,
many other similar projects will have to be placed on hold, or have
their application withdrawn.
(6) The superior court decision also prohibits the district from
issuing air credits from its Priority Reserve to thermal powerplants
that are needed to meet the current and future projected
electricity needs of the region and to prevent blackouts during peak
demand periods. that the Public Utilities Commission
found were needed. The commission's finding was made after extensive
public hearings in the commission's long-term electric procurement
plan proceedings held pursuant to Section 454.5 of the Public
Utilities Code. The commission concluded that these thermal
powerplants were needed after concluding that efforts at all
cost-effective, reliable, and feasible demand response and demand
reduction resources were exhausted and that additional supplies of
electricity from eligible renewable energy resources were
insufficient to meet the current and future projected electricity
needs of the region to prevent blackouts during peak demand periods,
to maintain a stable supply of electricity if imported supplies of
electricity are interrupted, and to integrate and backstop new,
intermittent electricity generated by eligible renewable
energy resources that will be added to the grid.
(7) Without corrective legislation, the district cannot improve
air quality by allowing the existing older and higher emitting and
less efficient powerplants to be replaced with new cleaner and more
efficient powerplants. Fifty percent of available total power in the
region is generated from powerplants that are 40 years or older.
(8) Failure to correct this problem will mean the district cannot
help meet the mandates set forth in the California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section 38500)
of the Health and Safety Code) if it cannot issue permits to provide
necessary peaking and load-following power to support
increased reliance on renewable energy
intermittent electricity generated by eligible renewable energy
resources as will be required by state efforts to reduce
emissions of greenhouse gases.
(b) It is therefore necessary that legislation be enacted to allow
the district to resume issuing permits and to abrogate the superior
court decision in Natural Resources Defense Council v. South Coast
Air Quality Management District (Super. Ct. Los Angeles County, 2007,
No. BS 110792).
SEC. 2. Section 40440.12 is added to the Health and Safety Code,
to read:
40440.12. (a) South coast district Rule 1309.1, as amended on
September 8, 2006, and replaced August 3, 2007, and Rule 1315, as
adopted September 8, 2006, and readopted August 3, 2007, relating to,
among other things, the creation of internal accounts for essential
public services, small sources, exempt sources, and eligible
powerplants, are hereby continued in full force and effect without
interruption since September 8, 2006, and August 3, 2007.
(b) The adoption and implementation of Rules 1309.1, 1315, 1304,
and any amendments to these rules required by the United States
Environmental Protection Agency for approval, are exempt from the
California Environmental Quality Act (Division 13 (commencing with
Section 21000) of the Public Resources Code), except as provided in
subdivision (d).
(c) The exemption provided in subdivision (b) applies to all
actions taken pursuant to the rules listed in subdivision (b)
occurring on and after September 8, 2006, and to the use of credits
pursuant to the May 3, 2002, version of Rule 1309.1, except as
provided in subdivision (d).
(d) (1) There are hereby established two accounts of offset
credits in the south coast district's internal bank: the operating
account and the set-aside account.
(2) The starting balances of the operating account are hereby
established in the following amounts:
(A) Volatile organic compounds: 10.98 tons/day.
(B) Nitrogen oxides: 14.27 tons/day.
(C) Sulfur oxides: 2.32 tons/day.
(D) Carbon monoxide: 12.72 tons/day.
(E) PM10: 10.63 tons/day.
(3) The credits in the operating account may be used for
implementation of Rules 1304 and 1309.1. The use of credits in the
operating account are exempt from the California Environmental
Quality Act (Division 13 (commencing with Section 21000) of the
Public Resources Code) except that the issuance of any permit using
these credits is not exempt from the act
included within this exemption . Future rules authorizing the
creation of additional offset credits for deposit into the operating
account are not exempt from the California Environmental Quality Act
under this section. The south coast district shall account for
emission credits used pursuant to this section to ensure that the
credits issued do not exceed the allocations described in this
subdivision.
(4) The starting balances of the set-aside account are hereby
established in the following amounts:
(A) Volatile organic compounds: 55.56 tons/day.
(B) Nitrogen oxides: 11.24 tons/day.
(C) Sulfur oxides: 0 tons/day.
(D) Carbon monoxide: 0 tons/day.
(E) PM10: 0.55 tons/day.
(5) The use of the credits in the set-aside account is not exempt
from the California Environmental Quality Act pursuant to this
section.
(e) The exemptions from the California Environmental Quality Act
provided in this section shall not apply unless all of the following
are satisfied:
(1) A south coast district rule requires the use of the best
available control technology, as defined in Section 40405, and air
quality modeling to ensure the source will not cause a violation, or
make significantly worse an existing violation, of any ambient air
quality standards as defined in district Rule 1303, unless exempted
from modeling pursuant to district Rule 1304, as amended June 14,
1996, for each new, relocated, or modified source with an emissions
increase of one pound per day or greater of any air contaminant.
(2) A south coast district rule prohibits the construction of any
new, relocated, or modified permitted unit if the emissions of any
toxic air contaminant, as listed by the district board, exceed a
cumulative increase in maximum individual cancer risk at any receptor
location of greater than one in one million if the permitted unit is
constructed without best available control technology for toxic air
contaminants, or greater than 10 in one million if the permitted unit
is constructed with best available control technology for toxic air
contaminants or exceeds a chronic or acute noncancer health effect
hazard index of 1.0.
(3) The south coast district accounts for the use of offset
credits pursuant to this subdivision as part of the district's state
implementation plan submissions and demonstrates that the use of the
offset credits will not interfere with attainment or maintenance of
ambient air quality standards.
(4) South coast district Rules 1304, 1309.1, and 1315, as
specified in this subdivision, have been submitted to the United
States Environmental Protection Agency, and have not been disapproved
by that agency.
(f) No fee shall be charged for the use of credits by essential
public services, as defined in south coast district Rule 1302.
(f)
(g) A powerplant may be eligible to receive offset
credits under this section if it meets both of the following
conditions:
(1) The powerplant has filed its application for certification
before the State Energy Resources Conservation and Development
Commission and its certificate is approved pending release of
internal offset credits by the south coast district.
(2) The powerplant will provide electric power to customers in
California, and either the powerplant owner has entered into a
binding contract for purchase of the power by an electrical
corporation subject to regulation by the Public Utilities Commission,
and the contracts have been approved by the Public Utilities
Commission consistent with its authority, including, but not limited
to, Section 380 of the Public Utilities Code, or the plant is a
powerplant owned by a local publicly owned electrical utility, or
owned by a municipality, that is designed and constructed not to
exceed the municipality or utility's native demand load projections.
(g)
(h) (1) A powerplant accessing emission credits
pursuant to this section shall pay a mitigation fee for the Priority
Reserve offset credits obtained that shall be the amount set forth in
south coast district Rule 1309.1, as amended August 3, 2007.
(2) The south coast district shall, to the extent technically and
economically feasible, use the mitigation fees to mitigate emissions
of the relevant pollutants or its precursors in the area impacted by
emissions from the powerplant, with a minimum of one-third to be used
for installation of renewable or alternative sources of energy. Up
to 10 percent may be used by the district for administration of the
mitigation program.
(h)
(i) Any credits used pursuant to this section shall not
be transferable except to a new owner of the same source, and shall
revert back to the south coast district's internal accounts upon the
source, or portion of a source, ceasing operation.
(i)
(j) Except as expressly provided in subdivisions (b)
and (d), nothing in this section shall affect the applicability of
the California Environmental Quality Act to the licensing and
permitting of any powerplant project, or to the permitting of any
project by the south coast district.
(j)
(k) The decisions of the court in Natural Resources
Defense Council v. South Coast Air Quality Management District
(Super. Ct. Los Angeles County, 2007, No. BS 110792) are hereby
abrogated.
SEC. 3. Section 40440.13 is added to the Health and Safety Code,
to read:
40440.13. (a) (1) Any amendment of the operating account to
increase the amount of emission credits above the amounts established
in paragraph (2) of subdivision (d) of Section 40440.12 or a change
in the eligibility for those credits shall be made in accordance with
the requirements of this section and any applicable requirements of
the federal Clean Air Act (42 U.S.C. Sec. 7401 et seq.).
(2) The south coast district shall post its internal credit
accounts, including debits, credits, and balances on its Internet Web
site.
(b) A powerplant shall be eligible to receive offset credits from
amounts added to the operating account beyond the starting balances
established in paragraph (2) of subdivision (d) of Section 40440.12
only if the powerplant meets both of the following conditions:
(1) The powerplant will provide electric power to customers in
southern California, and the capacity addition is authorized by the
Public Utilities Commission in its long-term power procurement
decision in accordance with Section 454.5 of the Public Utilities
Code, after concluding that efforts at all cost-effective, reliable,
and feasible demand response and demand reduction resources were
exhausted and additional supplies of renewable power were
insufficient to meet the current and future projected electricity
needs of the region.
(2) The powerplant owner has entered into a binding contract for
purchase of the power by an electrical corporation subject to
regulation by the Public Utilities Commission, and the contracts have
been approved by the Public Utilities Commission consistent with its
authority, including, but not limited to, Section 380 of the Public
Utilities Code, or is a powerplant owned by a local publicly owned
electrical utility that is designed and constructed not to exceed
that utility's native demand load projections within the local
publicly owned electrical utility's service area. Powerplants that
meet this paragraph are deemed needed to meet electric power demand,
system reliability, and integration of renewable power into the grid.
(c) Any credits used pursuant to this section shall not be
transferable except to a new owner of the same source, and shall
revert back to the south coast district upon the source, or portion
of a source, ceasing operation.
(d) The south coast district shall establish a fee paid by the
powerplant for the use of offset credits from the Priority Reserve
issued pursuant to this section.
(e) Nothing in this section affects the responsibilities of the
State Energy Resources Conservation and Development Commission with
respect to environmental analysis of a proposed powerplant.
SEC. 4. The Legislature finds and declares that a special law is
necessary and that a general law cannot be made applicable within the
meaning of Section 16 of Article IV of the California Constitution
because of unique circumstances concerning the South Coast Air
Quality Management District.
SEC. 5. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because a
local agency or school district has the authority to levy service
charges, fees, or assessments sufficient to pay for the program or
level of service mandated by this act, within the meaning of Section
17556 of the Government Code.
SEC. 6. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
Due to the court decision in Natural Resources Defense Council v.
South Coast Air Quality Management District (Super. Ct. Los Angeles
County, 2007, No. BS 110792), the South Coast Air Quality Management
District is unable to issue over a thousand pending permits that are
either exempt from offset requirements or qualified to use offset
credits from the district's Priority Reserve and is required to set
aside thousands of permits already issued; therefore it is necessary
for this measure to take effect immediately to allow the district to
issue permits in an expeditious manner and to validate previously
issued permits called into question by the superior court's decision.