CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 753

Author:(Eduardo Garcia)

As Amended Ver:August 28, 2019

2/3 vote. Urgency

SUMMARY:

This bill would ratify the tribal-state gaming compact (Compact) entered into between the State of California and the Cabazon Band of Mission Indians, California (Tribe), executed on August 21, 2019.

The Senate Amendments:

COMMENTS:

Note: On September 5, 2019, the Assembly Governmental Organization Committee held an informational hearing on the tribal-state gaming compact between the State of California and the Cabazon Band of Mission Indians.

SUMMARY:

The tribal-state gaming compact between the State of California and the federally recognized Cabazon Band of Mission Indians, was executed on August 21, 2019. The Compact authorizes the Tribe to operate a maximum of 1,800 slot machines until December 31, 2023, and a maximum of 2,250 slot machines, thereafter, at no more than two gaming facilities.

The Tribe has agreed to pay the State its pro rata share of costs the State incurs for the performance of its duties under the Compact. The Tribe has agreed to pay $1.8 million until December 31, 2023 and 4.25% of its gross gaming revenue thereafter, from the operation of slot machines in excess of 350 slot machines to be shared with tribes that are not gaming or that otherwise are not substantially benefitting from gaming.

Specifically, from its payments to the Revenue Sharing Trust Fund (RSTF) or the Tribal Nation Grant Fund (TNGF), the Tribe may take annual credits of up to $180,000 per year until December 31, 2023 and up to 55% thereafter for in-kind contributions made to the County, local jurisdictions, and non-profit and civic organizations operating facilities or providing services within the County for improved fire, emergency medical services, law enforcement, public safety, public transit, education, environmental, water, recreation, tourism, and other services and infrastructure improvements that in part serve off-reservation needs of County resident.

Furthermore, the Compact: 1) provides a regulatory framework that respects the role of the tribal gaming agency as the primary regulator while also ensuring that state gaming regulators fulfill their responsibilities; 2) requires the Tribe to conduct its gaming activities pursuant to an internal control system that implements minimum internal controls that are no less stringent than those in federal regulations; 3) requires the Tribe to adopt a Tribal Labor Relations Ordinance, as specified; and, 4) contains provisions to protect the health and safety of patrons, guests, and employees.

According to the Governor's Office, certain terms of the Compact related to licensing, compliance enforcement, mitigation of off-reservation gaming impacts and protections for patrons and employees are consistent with recent compacts. The Compact's preamble states that the Tribe is committed to improving the environment, education status, and the health, safety and general welfare of its members and the surrounding community.

The Tribe currently operates the Fantasy Springs Resort Casino that includes approximately 1,800 slots machines, approximately 250 rooms, conference center, various restaurants, a family bowling center, and a golf course. The resort employs approximately 1,100 members of the community. In addition to the Resort, the tribal government employs approximately another 50 employees on a full-time basis. With the economic development of the gaming operation and federal grant funds, the Tribe has established operational tribal government.

Once effective (legislative ratification and federal approval required), this Compact will be in full force and effect for 25 years following the effective date.

Brief History and Background – Cabazon Band of Mission Indians:

The Cabazon Band of Mission Indians is a federally recognized tribe, located in Riverside County, California. The Tribe consists of 23 members, with several children awaiting enrollment. The Tribe has called the Coachella Valley home for thousands of years. The Tribe's reservation was established by executive order in 1876. The Tribe was granted a checkerboard style reservation consisting of approximately 2,000 acres, spread over 16 miles. The largest section contains the tribal offices, police and fire departments, gaming operation and bowling alley.

Tribal members of the Tribe are descendants of Chief Cabazon, a leader of the Desert Cahuilla Indians from the 1830s until 1870s. Over the generations the Tribe has often faced adversity, but they remain undaunted as they shape their destiny and sustain their most honored cultural values: bound by the land as its custodians, a rich tradition of unity, leadership and generosity.

According to the Tribe, they led the charge in the fight for gaming rights and were the named party in the Supreme Court's decision in California v. Cabazon Band of Mission Indians in 1987 that gave tribes the right to establish and operate gaming facilities on reservation land. Congress responded by passing the Indian Gaming Regulatory Act (IGRA) in 1988, which expanded the kinds of games (high-stakes bingo, Las Vegas-style games (slot machines), and other commercial gaming) that tribal casinos could offer, and provided a framework for regulating the industry. Indian gaming, as a direct result of the Cabazon Band, now has a market greater than $31 billion nationally.

In 1999, the Tribe and the State of California entered into a gaming compact which the Tribe has operated under since that date. The compact expires in 2020. The Tribe currently operates the Fantasy Springs Resort Casino that includes approximately 1,800 slots machines, approximately 250 rooms, conference center, various restaurants, a bowling center, and a golf course. The resort employs approximately 1,100 members of the community. In addition to the Resort, the tribal government employs approximately another 50 employees on a full-time basis. With the economic development of the gaming operation and federal grant funds, the Tribe has established a fully operational tribal government.

Across the street from the casino is the Cabazon Cultural Museum where admission is free and visitors can enjoy interactive hands-on exhibits of past, present and future Cahuilla culture. Since 1981, the Tribe has hosted the annual Indio Powwow, with dancing, Cahuilla bird singing, drum competitions, and peon games. There are also opportunities for visitors to join the dancers in the arena during non-competitive, intertribal dancing.

KEY PROVISIONS OF THE COMPACT:

Scope of Class III Gaming Authorized. The Tribe is authorized to operate up to 1,800 slot machines until December 31, 2023 and up to 2,250 slots machines thereafter. The Tribe is also authorized to conduct banking or percentage card games, and any devices or games that are authorized under state law to the California State Lottery, provided that the Tribe will not offer such games through use of the Internet unless others in the state not affiliated with or licensed by the California State Lottery are permitted to do so under state and federal law. The Tribe shall not engage in Class III Gaming that is not expressly authorized in the Compact.

Authorized Gaming Facility - the Tribe may establish and operate no more than two gaming facilities and engage in Class III gaming only on eligible Indian lands held in trust for the Tribe, located within the boundaries of the Tribe's reservation.

Payments to the Special Distribution Fund (SDF). The Tribe shall pay to the State, on a pro rata basis, the costs the State incurs for the performance of all its duties under this Compact, as established by the monies appropriated in the annual Budget Act for the performance of their duties under the Class III Gaming Compacts.

Exclusivity. Provides that in the event the exclusive right of Indian tribes to operate Class III gaming in California pursuant to the California Constitution is abrogated by the enactment, amendment, or repeal of a state statute or constitutional provision or the conclusive and dispositive judicial construction of a statute or the State Constitution by a California appellate court after the effective date of this Compact, that gaming devices may lawfully be operated by non-Indian entities, the Tribe shall have the right to terminate this Compact, as specified.

Payments to the RSTF or the TNGF - the compact requires, until December 31, 2023, the Tribe to pay $1.8 million into the RSTF or the TNGF. Effective January 1, 2024 the Tribe is required to pay 4.25% of its "gross gaming revenue" from the operation of gaming devices in excess of 350 slot machines to be shared with tribes that are not gaming or that otherwise are not substantially benefitting from gaming.

"Gross gaming revenue" is defined as the win from gaming activities, which is the difference between gaming device gaming wins and losses before deducting costs and expenses or deducting incentives or adjusting for changes in progressive jackpot liability accruals.

Credits Applied to the RSTF or the TNGF. Specifically, from its payments to the RSTF or the TNGF, the Tribe may take annual credits of up to $180,000 until December 31, 2023 and up to 55% thereafter for in-kind contributions made to the County, local jurisdictions, and non-profit and civic organizations operating facilities or providing services within the County for improved fire, emergency medical services, law enforcement, public safety, public transit, education, environmental, water, recreation, tourism, and other services and infrastructure improvements that in part serve off-reservation needs of County resident.

ADDITIONAL COMPACT COMPONENTS:

Gaming Ordinance and Regulations. Gaming activities conducted under this Compact shall, at a minimum, comply with a gaming ordinance duly adopted by the Tribe and approved in accordance with IGRA and all applicable rules, regulations, procedures, specifications, and standards duly adopted by the National Indian Gaming Commission (NIGC), the Tribal Gaming Agency, and the State Gaming Agency, and with the provisions of this Compact, as specified.

Licensing Requirements and Procedures. Requires all persons in any way connected with the gaming operation or gaming facility who are required to be licensed or to submit to a background investigation under IGRA, and any others required to be licensed under this Compact, including, without limitation, all gaming employees, gaming resource suppliers, financial sources, and any other person having a significant influence over the gaming operation, must be licensed by the Tribal Gaming Agency. Also, every gaming employee must obtain, and thereafter maintain current, a valid tribal gaming license, as specified.

Inspection and Testing of Gaming Devices. Gaming devices will have to be tested, approved and certified by an independent gaming test laboratory or state governmental gaming test laboratory to ensure they are being operated according to specified technical standards. Also, requires the Tribal Gaming Agency to maintain adequate records that demonstrate compliance with software and hardware specifications. The State Gaming Agency would be authorized to annually conduct up to four random inspections of gaming devices in operation to confirm that the devices are operating in conformance with these standards.

Minimum Internal Control Standards (MICS). The Tribe must conduct its gaming activities pursuant to an internal control system that implements MICS that are no less stringent than those contained in the MICS of the federal NIGC standards, as specified. It requires gaming to operate pursuant to a written internal control system that reasonably assures that assets are safeguarded and accountability over assets is maintained; liabilities are properly recorded and contingent liabilities are properly disclosed; financial records are accurate and reliable; transactions are performed in accordance with the Tribal Gaming Agency's authorization; access to assets is permitted only in accordance with the Tribal Gaming Agency's approved procedures; recorded accountability for assets is compared with actual assets; and, functions, duties and responsibilities are appropriately segregated and performed by qualified personnel. The Tribe is required to provide the California Gambling Control Commission (CGCC), upon written request, a copy of the independent certified public accountant agreed-upon procedures report conducted annually for submission to the NIGC pursuant to federal law. This report verifies that the gaming operation is in compliance with the NIGC's MICS.

Environmental Protections. Provides that if the Tribe operates 349 slot machines or less, the Tribe is required to adopt a Tribal Environmental Protection Ordinance (TEPO) and prepare a Tribal Environmental Impact Document (TEID). The Compact requires that each TEID be specific to the project at issue, the TEPO requires that the TEID address, at a minimum, the impacts of the project on the following: air quality, water resources, traffic, public services, hazardous materials, and noise. The Compact provides procedures for notice to the appropriate state agencies and the public, as well as procedures by which these state agencies and members of the public can respond to the initial TEID. The Compact specifies that upon the Tribe's issuance of the report and before the Tribe commences construction; the State and the Tribe are required to enter into a binding and enforceable Mitigation Agreement. The Compact also provides for a dispute resolution process if the State believes the Tribe has failed to comply with any requirements in the Mitigation Agreement.

If the Tribe operates more than 349 slot machines, the Tribe is required to prepare a comprehensive and adequate tribal environmental impact report (TEIR), analyzing the potentially significant off-reservation environmental impacts of the project. The TEIR is required to provide detailed information about the significant effects on the environment that the project is likely to have and shall include a detailed statement of specified information. The Compact provides procedures regarding the 1) Notice of Preparation of Draft TEIR, 2) Notice of Completion of Draft TEIR, and 3) Issuance of Final TEIR. Before the commencement of the project, and no later than the issuance of the final TEIR to the County and the city, the Tribe shall offer to commence government-to-government negotiations with the County, and upon the County's acceptance of the Tribe's offer, shall negotiate with the County on a government-to-government basis and shall enter into enforceable written agreements on specified matters. The Compact provides arbitration procedures to assure that the Tribe is not unreasonably prevented from commencing a project.

Public and Workplace Liability. The Tribe is required to obtain and maintain a commercial general liability insurance policy which provides coverage of no less than $10 million and adopt a Tort Liability Ordinance stipulating that California tort law governs claims.

Compliance Enforcement. Provides it shall be the responsibility of the Tribal Gaming Agency to conduct on-site gaming regulation and control in order to enforce the terms of this Compact, IGRA, NIGC gaming regulations, state gaming agency regulations, and the gaming ordinance, to protect the integrity of gaming activities and the gaming operation for honesty and fairness, and to maintain the confidence of patrons that tribal governmental gaming in California meets the highest standards of fairness and internal controls. To meet those responsibilities, the tribal gaming agency shall promulgate rules and regulations for these purposes.

Labor Provisions. Provides that the gaming activities authorized by this Compact may only commence after the Tribe has adopted an ordinance identical to the Tribal Labor Relations Ordinance (TRLO), referenced as Appendix D of the Compact, and the gaming activities may only continue as long as the Tribe maintains the ordinance. If the Tribe employs 250 or more persons in a tribal casino facility, then the provisions of the TLRO become effective. The TLRO provides for a secret ballot election and union neutrality. After the certification that 30% of the eligible employees in a bargaining unit have expressed an interest in the union, a notice of election shall be issued and the election shall be concluded within 30 calendar days thereafter. Employees may mail in ballots provided they are received by Election Day. Union representation requires an affirmative vote of 50% plus one of all votes cast.

Workers' Compensation. The Tribe agrees to participate in the State's workers' compensation program with respect to employees at the casino. All disputes arising from the workers' compensation laws shall be heard by the State Workers' Compensation Appeals Board pursuant to the California Labor Code. The Tribe acknowledges the jurisdiction of the Board in such manners. In lieu of participation in the State's system, the Tribe may create and maintain a system through self-insurance, which includes specified provisions, including hearings before an independent tribunal. Furthermore, the Tribe agrees that it will participate in the State's unemployment compensation program for providing benefits and unemployment compensation disability benefits to employees at the casino. The Tribe shall withhold all taxes due to the State, except for Tribal members living on the Tribe's reservation, and forward such amounts to the State.

Health, Safety, and Minimum Wage Standards. The Tribe has agreed to adopt and comply with tribal health standards for food and beverage handling that is consistent with the State's public health standards. Also, the Tribe has agreed to comply with federal water quality and safe drinking water standards applicable in California. The Tribe must also adopt and comply with federal and state laws forbidding harassment, including sexual harassment, discrimination and retaliation. Furthermore, the Tribe must maintain a $3 million insurance policy for these purposes and adopt an ordinance that includes a dispute resolution process. The Tribe must also comply with the State's minimum wage laws.

Building Codes and Fire Safety. In order to assure the protection of the health and safety of all gaming facility patrons, guests, and employees, the Tribe shall adopt and shall maintain throughout the term of this Compact, an ordinance that requires any covered gaming facility construction to meet or exceed the applicable codes. Gaming facility construction, expansion, improvement, modification or renovation must also comply with the federal Americans with Disabilities Act.

Prohibitions Regarding Minors. Prohibits persons under the age of 21 from participating in gaming activities, or to loiter in the vicinity of the gaming facility. The compact does allow persons under the age of 21 to be employed in a non-gaming capacity. If the Tribe permits the consumption of alcoholic beverages in the Gaming Facility, the Tribe shall prohibit persons under the age of 21 from purchasing, consuming, or possessing alcoholic beverages. The Tribe shall also prohibit persons under the age of 21 from being present in any room or area, in which alcoholic beverages may be consumed.

Problem Gambling. The gaming operation must establish a program, approved by the Tribal Gaming Agency, to mitigate pathological and problem gaming by implementing specified measures.

Patron Disputes. The Tribal Gaming Agency must promulgate regulations governing patron disputes over the play or operation of any game, including any refusal to pay to a patron any alleged winnings from any gaming activities that includes specified minimum standards.

Tobacco Provisions. The Tribe agrees to provide a non-smoking area in the gaming facility and to utilize a ventilation system throughout the gaming facility that exhausts tobacco smoke to the extent reasonably feasible under state-of-the-art technology existing as of the date of the construction or significant renovation of the gaming facility. The Tribe shall not permit the sale of tobacco products to anyone under the age of 21.

Alcohol Provisions. Makes it explicit that the purchase, sale, and service of alcoholic beverages shall be subject to state law – the Alcoholic Beverage Control Act.

Emergency Services Accessibility and Possession of Firearms. The Tribe must make reasonable provisions for adequate emergency fire, medical, and related relief and disaster services for patrons and employees. Also, the Compact prohibits the possession of firearms by any person in the gaming facility at all times except for federal, state, or local law enforcement personnel, or tribal law enforcement or security personnel, as authorized.

Effective Date. This Compact shall not be effective unless and until all of the following have occurred: the Compact is ratified by statute in accordance with state law and notice of approval or constructive approval is published in the Federal Register. Once effective, this Compact shall be in full force and effect for 25 years following the effective date.

Amendment by Agreement. The terms and conditions of this Compact may be amended at any time by the mutual and written agreement of both parties, provided that each party voluntarily consents to such negotiations in writing. Any amendments to this Compact shall be deemed to supersede, supplant and extinguish all previous understandings and agreements on the subject.

According to the Author:

None on file

Arguments in Support:

None on file

Arguments in Opposition:

None on file

FISCAL COMMENTS:

Unknown.

VOTES:

ASM TRANSPORTATION: 11-1-3

YES: Frazier, Aguiar-Curry, Berman, Chu, Daly, Diep, Gipson, Grayson, Medina, Nazarian, O'Donnell

NO: Cunningham

ABS, ABST OR NV: Fong, Bigelow, Friedman

ASM APPROPRIATIONS: 14-1-3

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Obernolte

ABS, ABST OR NV: Bigelow, Brough, Fong

ASSEMBLY FLOOR: 56-4-20

YES: Aguiar-Curry, Arambula, Berman, Bloom, Bonta, Calderon, Carrillo, Cervantes, Chau, Chu, Cooper, Cunningham, Daly, Diep, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gipson, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wood, Rendon

NO: Gallagher, Melendez, Obernolte, Patterson

ABS, ABST OR NV: Bauer-Kahan, Bigelow, Boerner Horvath, Brough, Burke, Chen, Chiu, Choi, Cooley, Dahle, Flora, Fong, Friedman, Gabriel, Gloria, Kalra, Mayes, Muratsuchi, Ting, Wicks

SENATE FLOOR: 40-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

UPDATED:

VERSION: August 28, 2019

CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0001912

 THIRD READING  

Bill No: AB 753

Author: Eduardo Garcia (D)

Amended: 8/28/19 in Senate

Vote: 27 - Urgency

PRIOR VOTES NOT RELEVANT

Note: On August 27, 2019, the Senate Governmental Organization Committee held an informational hearing on the tribal-state gaming compact between the State of California and the Cabazon Band of Mission Indians.

SUBJECT: Tribal gaming: compact ratification

SOURCE: Author

DIGEST:

This bill ratifies the tribal-state gaming compact (Compact) between the State of California and the Cabazon Band of Mission Indians, California (hereafter “Tribe”), executed on August 21, 2019.

Senate Floor Amendments of 8/28/19 add an urgency clause.

ANALYSIS:

Existing law:

1. Provides, under the Indian Gaming Regulatory Act (IGRA), for the negotiation and conclusion of compacts between federally recognized Indian tribes and the State for the purpose of conducting Class III gaming activities on Indian lands within a State as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.
2. Authorizes expressly a number of tribal-state gaming compacts between the State of California and specified Indian tribes.
3. Authorizes the conduct of Class III gaming activities to the extent such activities are permitted by state law, a gaming compact has been concluded by a federally recognized tribe and the State, and the compact has been approved by the Secretary of the Interior.
4. Limits the operation of Class III gaming activities to Indian lands acquired on or before October 17, 1988. Provides, for certain exceptions to conduct gaming activities on Indian lands acquired after October 17, 1988.
5. Requires the State to negotiate to conclude a compact in good faith with an Indian tribe having jurisdiction over the Indian lands upon which the Class III gaming activity is to be conducted. Provides the U.S. district courts with jurisdiction over any cause of action initiated by a tribal government alleging that the State failed to negotiate in good faith to conclude a compact. Prescribes the remedy, mediation supervised by the courts, if it is found that the State failed to negotiate in good faith to conclude a compact.
6. Authorizes the Governor, under the California Constitution, to negotiate and conclude compacts, subject to ratification by the Legislature.

This bill:

1. Ratifies the Compact between the State of California and the Tribe, executed on August 21, 2019.
2. Provides that in deference to tribal sovereignty, certain actions are not deemed projects for purposes of the California Environmental Quality Act (CEQA).
3. Stipulates, except as expressly provided, that none of the provisions shall be construed to exempt a city, county, or city, and county, or the Department of Transportation, or any state agency or local jurisdictions, from CEQA requirements.
4. Contains an urgency clause.

Background

The Compact between the State of California and the Tribe was executed on August 21, 2019. The Compact authorizes the Tribe to operate a maximum of 1,800 slot machines until December 31, 2023, and a maximum of 2,250 slot machines, thereafter, at no more than two gaming facilities.

The Tribe has agreed to pay the State its pro rata share of costs the State incurs for the performance of its duties under the Compact. The Tribe has agreed to pay $1.8 million until December 31, 2023, and 4.25% of its gross gaming revenue thereafter, from the operation of slot machines in excess of 350 slot machines to be shared with tribes that are not gaming or that otherwise are not substantially benefitting from gaming.

Specifically, from its payments to the Revenue Sharing Trust Fund (RSTF) or the Tribal Nation Grant Fund (TNGF), the Tribe may take annual credits of up to $180,000 per year until December 31, 2023, and up to 55% thereafter for in-kind contributions made to the County, local jurisdictions, and non-profit and civic organizations operating facilities or providing services within the County for improved fire, emergency medical services, law enforcement, public safety, public transit, education, environmental, water, recreation, tourism, and other services and infrastructure improvements that in part serve off-reservation needs of County resident.

Furthermore, the Compact: (1) provides a regulatory framework that respects the role of the tribal gaming agency as the primary regulator while also ensuring that state gaming regulators fulfill their responsibilities; (2) requires the Tribe to conduct its gaming activities pursuant to an internal control system that implements minimum internal controls that are no less stringent than those in federal regulations; (3) requires the Tribe to adopt a Tribal Labor Relations Ordinance, as specified; and, (4) contains provisions to protect the health and safety of patrons, guests, and employees.

According to the Governor’s Office, certain terms of the Compact related to licensing, compliance enforcement, mitigation of off-reservation gaming impacts and protections for patrons and employees are consistent with recent compacts.

The Compact’s preamble states that the Tribe is committed to improving the environment, education status, and the health, safety and general welfare of its members and the surrounding community.

The Tribe currently operates the Fantasy Springs Resort Casino that includes approximately 1800 slots machines, approximately 250 rooms, conference center, various restaurants, a family bowling center, and a golf course. The resort employs approximately 1,100 members of the community. In addition to the Resort, the tribal government employs approximately another 50 employees on a full-time basis. With the economic development of the gaming operation and federal grant funds, the Tribe has established operational tribal government.

Once effective (legislative ratification and federal approval required), this Compact will be in full force and effect for 25 years following the effective date.

Brief History of the Tribe. The Cabazon Band of Mission Indians is a federally recognized tribe, located in Riverside County, California. The Tribe consists of 23 members, with several children awaiting enrollment. The Tribe has called the Coachella Valley home for thousands of years. The Tribe’s reservation was established by executive order in 1876. The Tribe was granted a checkerboard style reservation consisting of approximately 2,000 acres.

According to the Tribe, they led the charge in the fight for gaming rights and were the named party in the Cabazon Decision in 1989 that gave tribes the right to establish and operate gaming facilities on reservation land. In 1999, the Tribe and the State of California entered into a gaming compact which the Tribe has operated under since that date.

The Tribe currently operates the Fantasy Springs Resort Casino that includes approximately 1800 slots machines, approximately 250 rooms, conference center, various restaurants, a family bowling center, and a golf course. The resort employs approximately 1,100 members of the community. In addition to the Resort, the tribal government employs approximately another 50 employees on a full-time basis. With the economic development of the gaming operation and federal grant funds, the Tribe has established a fully operational tribal government.

KEY PROVISIONS OF THE COMPACT

Scope of Class III Gaming Authorized. The Tribe is authorized to operate up to 1,800 slot machines until December 31, 2023, and up to 2,250 slots machines thereafter. The Tribe is also authorized to conduct banking or percentage card games, and any devices or games that are authorized under state law to the California State Lottery, provided that the Tribe will not offer such games through use of the Internet unless others in the state not affiliated with or licensed by the California State Lottery are permitted to do so under state and federal law.

Authorized Gaming Facility. The Tribe may establish and operate no more than two gaming facilities and engage in Class III gaming only on eligible Indian lands held in trust for the Tribe, located within the boundaries of the Tribe’s reservation.

Payments to the Special Distribution Fund. The Tribe shall pay to the State, on a pro rata basis, the costs the State incurs for the performance of all its duties under this Compact, as established by the monies appropriated in the annual Budget Act for the performance of their duties under the Class III Gaming Compacts.

Payments to the RSTF or the TNGF. The compact requires, until December 31, 2023, the Tribe to pay $1.8 million into the RSTF or the TNGF. Effective January 1, 2024, the Tribe is required to pay 4.25% of its “gross gaming revenue” from the operation of gaming devices in excess of 350 slot machines to be shared with tribes that are not gaming or that otherwise are not substantially benefitting from gaming.

“Gross gaming revenue” is defined as the win from gaming activities, which is the difference between gaming device gaming wins and losses before deducting costs and expenses or deducting incentives or adjusting for changes in progressive jackpot liability accruals.

Credits Applied to the RSTF or the TNGF. Specifically, from its payments to the RSTF or the TNGF, the Tribe may take annual credits of up to $180,000 until December 31, 2023, and up to 55% thereafter for in-kind contributions made to the County, local jurisdictions, and non-profit and civic organizations operating facilities or providing services within the County for improved fire, emergency medical services, law enforcement, public safety, public transit, education, environmental, water, recreation, tourism, and other services and infrastructure improvements that in part serve off-reservation needs of County resident.

ADDITIONAL COMPACT COMPONENTS

Prohibitions Regarding Minors. The Tribe shall prohibit persons under the age 21 years from being present in any room or area in which gaming activities are being conducted unless the person is en route to a non-gaming area of the gaming facility, or is employed at the gaming facility in a capacity other than as a gaming employee. If the Tribe permits the consumption of alcoholic beverages in the Gaming Facility, the Tribe shall prohibit persons under the age of 21 from purchasing, consuming, or possessing alcoholic beverages. The Tribe shall also prohibit persons under the age of 21 from being present in any room or area, in which alcoholic beverages may be consumed.

Environmental Protections. The Tribe is required to prepare a comprehensive and adequate tribal environmental impact report (TEIR), analyzing the potentially significant off-reservation environmental impacts of the project. The TEIR is required to provide detailed information about the significant effects on the environment that the project is likely to have and shall include a detailed statement of specified information. The Compact provides procedures regarding the (1) Notice of Preparation of Draft TEIR, (2) Notice of Completion of Draft TEIR, and (3) Issuance of Final TEIR. Before the commencement of the project, and no later than the issuance of the final TEIR to the County and the city, the Tribe shall offer to commence government-to-government negotiations with the County and the City, and upon the County’s and the City’s acceptance of the Tribe’s offer, shall negotiate with the County and the City on a government-to-government basis and shall enter into enforceable written agreements on specified matters.

Tobacco Provisions. The Tribe agrees to provide a non-smoking area in the gaming facility and to utilize a ventilation system throughout the gaming facility that exhausts tobacco smoke to the extent reasonably feasible under state-of-the-art technology existing as of the date of the construction or significant renovation of the gaming facility. The Tribe also agrees not to offer or sell tobacco products to anyone younger than the minimum age specified in state law to legally purchase tobacco products.

Labor Provisions. Provides that the gaming activities authorized by this Compact may only commence after the Tribe has adopted an ordinance identical to the Tribal Labor Relations Ordinance (TLRO), referenced as Appendix B of the Compact, and the gaming activities may only continue as long as the Tribe maintains the ordinance. If the Tribe employs 250 or more persons in a tribal casino facility, then the provisions of the TLRO become effective. The TLRO provides for a secret ballot election and union neutrality. After the certification that 30% of the eligible employees in a bargaining unit have expressed an interest in the union, a notice of election shall be issued and the election shall be concluded within 30 calendar days thereafter. Employees may mail in ballots provided they are received by Election Day. Union representation requires an affirmative vote of 50% plus one of all votes cast.

ADDITIONAL BACKGROUND INFORMATION

Indian Gaming Regulatory Act. In 1988, Congress enacted IGRA to provide a statutory basis for the operation and regulation of gaming on Indian lands. IGRA provides that an Indian tribe may conduct gaming activity on Indian lands if the activity “is not specifically prohibited by federal law and is conducted within a State which does not prohibit such gaming activity.”

IGRA distinguishes between three classes of gaming (Class I, Class II, and Class III) and provides for different forms of regulation for each class. Class I gaming includes “social games” for minor prizes or “traditional forms of Indian gaming.” Class II gaming is defined to include bingo and card games that are explicitly authorized by the laws of the state, or that are not explicitly prohibited by the laws of the state and are played at any location in the State, so long as the card games are played in conformity with those laws and regulations. Class III gaming includes such things as slot machines, casino games, and banked card games such as black jack and baccarat. Class III gaming may only be conducted under terms of a compact negotiated between an Indian tribe and a State.

IGRA was enacted against a legal background in which Indian tribes and individuals generally are exempt from state taxation within their own territory. IGRA provides that with the exception of assessments permitted under the statute, to defray the State’s costs of regulating gaming activity, IGRA shall not be interpreted as conferring upon a State authority to impose any tax, fee, charge, or other assessment upon an Indian tribe to engage in Class III activity. Nor may a State refuse to enter into negotiations based on the lack of authority to impose such a tax, fee, charge, or other assessment.

When a tribe requests negotiations for a Class III compact, IGRA requires the State to negotiate with the Indian tribe in good faith. IGRA provides a comprehensive process to prevent an impasse in compact negotiations, which is triggered when a tribe files suit alleging that the State has refused to negotiate or has failed to negotiate in good faith.

Before 2000, the California Constitution prohibited Class III gaming. In 2000, California voters approved Proposition 1A, which had been proposed by the Governor and passed by the Legislature. Proposition 1A amended the California Constitution to permit the State to negotiate compacts with federally recognized Indian tribes for certain Class III gaming activities. Because non-Indian parties were still forbidden from operating gaming facilities, Proposition 1A granted Indian tribes a “constitutionally protected monopoly on most types of Class III games in California.”

Revenue Sharing Trust Fund. Existing law creates in the State Treasury the RSTF for the receipt and deposit of moneys derived from gaming device license fees that are paid into the RSTF pursuant to the terms of specified tribal-state gaming compacts for the purpose of making distributions to non-compacted California tribes (e.g., federally-recognized non-gaming tribes and tribes that operate casinos with fewer than 350 slot machines).

Revenue in the RSTF is available to the California Gambling Control Commission, upon appropriation by the Legislature, for making distributions of $1.1 million annually to non-compact tribes. The RSTF was created as part of the 1999 compacts, which, in conjunction with the passage of Proposition 1A, created gaming compacts with approximately 60 California tribes. Non-compact tribes are considered third-party beneficiaries of the 1999 compacts.

Tribal Nation Grant Fund. This particular fund (referenced in recent compacts) was created to complement the RSTF and provides for the distribution of funds to non-gaming tribes, upon application of such tribes for purposes related to effective self-governance, self-determined community, and economic development. Payments from this fund are intended to be made to non-gaming tribes on a “need” basis, upon application.

Related/Prior Legislation

AB 1333 (Dahle, 2019) ratifies the tribal-state gaming compact between the State of California and the Susanville Indian Rancheria, California, executed on October 19, 2018. (To enrollment)

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/26/19)

None received

OPPOSITION: (Verified 8/26/19)

None received

Prepared by: Felipe Lopez / G.O. / (916) 651-1530

8/29/19 11:26:56

**** END ****

SENATE COMMITTEE ON TRANSPORTATION

Senator Jim Beall, Chair

2019 - 2020 Regular

Bill No: AB 753 Hearing Date: 6/25/19

SUBJECT: Alternative and Renewable Fuel and Vehicle Technology Program: fuels: fueling infrastructure

DIGEST: This bill requires the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) program under the California Energy Commission (CEC) to continuously budget at least 20% of its funds for projects that produce alternative and renewable low carbon fuels and at least 10% of its funds to research, develop, produce, and deploy innovative and emerging fuels.

ANALYSIS:

Existing law:

1. Establishes the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) program under the California Energy Commission (CEC) with the purpose of developing and deploying innovative technologies that transform California’s fuel and vehicle types to help attain the state’s climate change polices.
2. Provides about $100 million annually from smog abatements, portions of the annual vehicle registration fee, a fee for special identification plates, and a fee for vessel registration, to fund the ARFVTP until January 1, 2024.
3. Establishes 12 criteria for the CEC to consider in allocating the ARFVTP funding.
4. Establishes 13 categories of projects which are the only categories eligible for funding.
5. Notwithstanding the above criteria and categories, the CEC is required to allocate $20 million annually to fund hydrogen fueling stations.

This bill:

Requires the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) program under the California Energy Commission (CEC) to continuously budget at least 20% of its funds for projects that produce alternative and renewable low carbon fuels and at least 10% of its funds to research, develop, produce, and deploy innovative and emerging fuels.

Priority shall be given to projects that demonstrates a minimum of three of the following:

• Maximizes local workforce and economic benefits
• Produces multiple environmental and public health cobenefits
• Leverages additional public or private funding
• Utilizes feedstocks derived from in-state-sourced waste streams
• Distributes innovative and emerging fuel capable of achieving cost-effective reductions in emissions of greenhouse gases and criteria air pollutants on a dollar-per-metric-ton basis

Defines “innovative and emerging fuel” to mean a transportation fuel that meets all of the following:

• The quantity of consumption in the state of the renewable fuel is not expected to exceed the energy equivalent of 30,000,000 gallons of petroleum-based fuel
• The carbon intensity of the renewable fuel is capable of meeting a carbon intensity value of at least 60 percent lower than the petroleum-based fuel baseline carbon intensity value pursuant to the Low-Carbon Fuel Standard regulations
• The renewable fuel production technology is at technology readiness level 6 or greater, as defined in the federal Department of Energy’s Technology Readiness Assessment Guide.
• The renewable fuel produces lower levels of emissions of criteria air pollutants than petroleum-based fuels.

COMMENTS:

1. Author’s Statement. There is inconsistent or inadequate funding available for fuel infrastructure and production, which has a particularly harmful impact on innovative and emerging fuels attempting to break into the market. This bill will address those funding challenges in a manner that encourages the creative, entrepreneurial spirit of businesses who are inventing new ways to help transition our state away from petroleum-based fuels and toward our ambitious climate targets.
2. Background on ARFVTP. AB 118 (Núñez) Chapter 750, Statutes of 2007, established the ARFVTP, which is administered by CEC, and provides funding for development and deployment of alternative and renewable fuels and advanced transportation technologies to reduce GHG emissions and help attain the state’s climate change goals. This program is funded at $100 million annually through surcharges on vehicle registration fees, a portion of the vessel registration fee, a portion of the Smog Abatement Fee (paid to register vehicles less than six model years old and therefore exempt from smog check), and an increase in the fee for identification plates for various types of vehicles, such as logging vehicles operated on public roads. As part of the ARFVTP, CEC prepares and adopts an annual investment plan that identifies the funding priorities for the coming fiscal year. That process includes input from an advisory panel comprised of a broad cross section of stakeholders, including industry and trade groups. It is a very competitive program with only 20% of proposals awarded funding.
3. Where the Money Goes. In general, CEC makes awards based on four program categories. As of December 1, 2018, CEC has awarded 21% for Alternative Fuel Production, 35% for Alternative Fuel Infrastructure, 31% for Alternative Fuel and Advanced Technology Vehicles and 13% for Related Needs and Opportunities (e.g. manufacturing, workforce training, and regional planning).
4. Too Specific? The selection criteria established in this bill are very specific, relating to the capacity, readiness, and physical characteristics of the fuel. The intent seems to be to focus on newer, cleaner technologies. Rather than invoke such specific criteria and suffer whatever unintended consequences may result, it may be preferable to articulate policies and then let the CEC develop the specific regulations based on public and expert input.
5. It’s Working. One of the main supporters of this bill, Oberon Fuels, has been seeking funding from the ARFVTP for several years. In June the company was awarded $3 million, which seems to indicate that the CEC program works.
6. Already a Winner. The hydrogen fuel industry, one of the main supporters of this bill, is already one of the largest awardees of the program benefitting from an ongoing statutory set-aside of 20% of the program funds for deployment of hydrogen fueling stations. The perils of a statutory set-aside are illustrated by a fire earlier this month at the hydrogen production facility in Santa Clara, which has created severe shortages in northern California. Whether that facility returns to production or not, 20% of the ARFVTP will be spent on additional hydrogen fueling stations. Better uses of those funds cannot be considered.
7. A Fairer Contest. The reason the ARFVTP is administered by the CEC, rather than the Legislature appropriating specific project funding each year, is that the CEC can establish a process for hearing from all relevant industries, discuss technology and market evolution with industry experts, and weigh the different proposals against each other. And each year as technology and markets evolve, the CEC can have a fresh competition as new proposals emerge from the dynamic renewable fuel industry. Establishing a statutory set-aside for any one industry predetermines the outcome of the awards process without evaluating whether that set aside is better for California’s environmental or policy goals. It is similar to creating a budget: An individual budget item may look meritorious in a vacumn, but it would make no sense to fund that item without considering all the other budget proposals and prioritizing based on resources and consistency with state goals. Creating a continuous appropriation, as this bill does, should require an even higher level of scrutiny.

The Legislature has no ability to evaluate the set aside for the types of projects proposed by this bill against proposals for any other worthy industries or projects because there has been no solicitation of those industries for competing projects. The Legislature also lacks the technical capacity to perform such an evaluation. Moreover, the set aside locks in funding for years irrespective of changes to markets and technologies over time, causing limited funding to be spent in inefficient or wasteful ways.

Were this bill and AB 1406, a related bill creating a set aside for 10% of the ARFVTP funds, enacted, 60% of the ARFVTP funds would be statutorily directed for specific purposes, leaving only 40% for a truly competitive program.

1. Not Zero Emissions. California is not on track to meet its greenhouse gas emission reduction goals in the transportation sector. Potential solutions, which include reducing vehicle miles travelled, have been controversial. Less controversial is supporting zero emission vehicles. Opponents are concerned that the vehicles supported by this bill are not zero emission.
2. A New Day with Clearer Direction. The ARFVTP program allocates $100 million annually to help California meet its GHG reduction goals. As the effects of climate change become more pronounced and severe, the need to effectively focus California’s efforts is greater than ever. The 12 statutory criteria for the program are all individually laudable but collectively so diverse as to provide the CEC with very broad latitude and therefore no effective policy direction. A better way to improve the ARFVTP program may be to hold this bill, as well as AB 1406 which deals with this same subject. The committee could then engage with relevant stakeholders and the CEC to refocus this program with clearer legislative direction and performance metrics.
3. Double Referral. This bill was also referred to the Senate Committee on Environmental Quality.

Related Legislation:

AB 1406 (O’Donnell) — would require CEC to allocate at least 10% of the ARFVTP funding for alternative fuel and advanced technology vehicles. AB 1406 is pending in the Senate Transportation Committee.

AB 1697 (Bonilla), Chapter 446, Statutes of 2016 — expanded the criteria for funding programs through the state’s ARFVTP to include workforce training.

SB 32 (Pavley), Chapter 249, Statutes of 2016) — required ARB to ensure that statewide GHG emissions are reduced at least 40% below 1990 levels by 2030.

AB 8 (Perea), Chapter 401, Statutes of 2013) — extended until January 1, 2024, the fees that support the ARFVTP.

AB 118 (Núñez), Chapter 750, Statutes of 2007) — created the ARFVTP to provide funding measures to specified entities to develop and deploy technologies and alternative and renewable fuels in the marketplace to help attain the state’s climate change policies.

AB 32 (Núñez, Chapter 488, Statutes of 2006) — required ARB to develop a plan of how to reduce emissions to 1990 levels by the year 2020.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

1. From the Assembly Appropriations Committee: Ongoing annual ARB costs of approximately $725,000 (GGRF) to develop guidelines and for tracking, reporting and developing quantification methods over the course of the Program.
2. CEC costs are absorbable.

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 19, 2019.)

SUPPORT:

California Advanced Biofuels Alliance

Clean Energy

CR&R Environmental Services

Global Automakers

Golden Gate Zero Emission Marine

H2B2 USA LLC

H2Safe, LLC

Hitachi Zosen INOVA

ITM Power

Johnson Matthey

Loop Energy Inc.

Millennium Reign Energy

Nel Hydrogen

Oberon Fuels

Pacific Ethanol, Inc.

PDC Machines

Plug Power

Propel Fuels

Red and White Fleet

Solar Wind Storage

SunLine Transit Agency

US Hybrid

Vinjamuri Innovations LLC

Winkelmann Flowform Technology

OPPOSITION:

California Electric Transportation Coalition

Sierra Club California

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 753

Author:(Eduardo Garcia)

As Amended Ver:May 20, 2019

Majority vote

SUMMARY:

Establishes funding carve-outs within the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) at the California Energy Commission (CEC) for the production of alternative and renewable low-carbon fuels, and to research, develop, produce and deploy innovative and emerging fuels.

Major Provisions

1. Requires CEC to allocate ARFVTP monies for the following projects based on the following percentages: at least 20% for projects to produce alternative and renewable low-carbon fuels in the state, as specified; and at least 10% for projects to research, develop, produce, and deploy innovative and emerging fuels, as defined.
2. Requires priority to be given to projects that demonstrate a minimum of three of the following:
   1. Maximize local workforce and economic benefits.
   2. Provide multiple environmental and public health benefits cobenefits, including reducing emissions of methane, criteria pollutants or toxic air contaminants.
   3. Leverage additional public or private funding.
   4. Utilize feedstocks derived from in-state sourced waste streams.
   5. Distribute innovative and emerging fuels capable of achieving cost-effective reductions in GHG emissions and criteria air pollutants on a dollar-per-metric-ton basis when considering fuel production, vehicle acquisition, and fueling infrastructure costs.
3. Defines "deploy", "innovative and emerging fuel" and makes various findings and declarations.

COMMENTS:

AB 118 (Núñez) Chapter 750, Statutes of 2007, established the ARFVTP, which is administered by CEC, and provides funding for development and deployment of alternative and renewable fuels and advanced transportation technologies to reduce GHG emissions and help attain the state's climate change goals. Eligible projects include, for example, development, improvement, and production of alternative and renewable low-carbon fuels; improvement of light-, medium-, and heavy-duty vehicle technologies; and expansion of infrastructure connected with existing fleets, public transit, and transportation corridors. Alternative and renewable low-carbon fuels include electricity, ethanol, dimethyl ether (DME), renewable diesel, natural gas, hydrogen, and biomethane, among others, and certain feedstocks. CEC, through the ARFVTP, helps transform California's fuel and vehicle types by developing and deploying technology and alternative and renewable fuels in the marketplace, without adopting any one preferred fuel or technology type.

The ARFVTP is funded at about $100 million annually. Although CEC has flexibility to fund eligible projects, existing law requires CEC to allocate $20 million annually, not to exceed 20% of the moneys appropriated, to hydrogen fueling stations until there are at least 100 publicly available stations. As part of the ARFVTP, CEC prepares and adopts an annual investment plan that identifies the funding priorities for the coming fiscal year. CEC develops this investment plan by incorporating input from stakeholders and the ARFVTP Advisory Committee, and by analyzing the best project opportunities for funding. Now in its eleventh year, the ARFVTP has provided more than $791 million to more than 600 agreements. In general, CEC awards these agreements based on four program categories. As of December 1, 2018, CEC has awarded 21% for Alternative Fuel Production, 35% for Alternative Fuel Infrastructure, 31% for Alternative Fuel and Advanced Technology Vehicles and 13% for Related Needs and Opportunities (such as, manufacturing, workforce training, and regional planning).

Further, this bill targets specific fuels--emerging and innovative fuels--that have not achieved commercial viability. A few currently meet the definition in the bill. For example, DME, renewable hydrogen and propane. DME is a synthetically produced alternative to diesel for use in specifically designed compressed ignition diesel engines. DME can be produced from biomass, methanol, and fossil fuels. Renewable hydrogen can be produced from diverse domestic resources with the potential for near-zero greenhouse gas emissions. Propane is a cleaner-burning alternative fuel. There is interest in using biomass or waste feedstocks to produce renewable propane.

According to the Author:

"Nowhere is ingenuity needed more than in the transportation sector, which – despite ambitious climate targets and innovative programs – continues to persist as California's greatest source of emissions. There is inconsistent or inadequate funding available for fuel infrastructure and production, which has a particularly harmful impact on innovative and emerging fuels attempting to break into the market. This bill will address those funding challenges in a manner that encourages the creative, entrepreneurial spirit of businesses who are inventing new ways to help transition our state away from petroleum-based fuels and toward our ambitious climate targets."

Arguments in Support:

Writing in support, Oberon Fuels states, "By dedicating a percentage of funding...for low carbon transportation be set aside for innovative and emerging fuel development… this bill will help pave the way for ongoing technology development, which is necessary to achieve our ambitious emissions reductions targets and maintain California's recognized role as a leader."

Arguments in Opposition:

In opposition, Sierra Club writes, "In order for California to meet its energy and climate targets, we need to transition to zero-carbon resources. However, this bill will encourage investment in those low-carbon energy resources that are still causing damage to our environment. For example, hydrogen production can result in GHG emissions as well as other environmental impacts, especially when it is created from fracked gas, or methane gas, or made using electrolytic processes powered by fossil fuels."

FISCAL COMMENTS:

CEC costs are absorbable.

VOTES:

ASM TRANSPORTATION: 11-1-3

YES: Frazier, Aguiar-Curry, Berman, Chu, Daly, Diep, Gipson, Grayson, Medina, Nazarian, O'Donnell

NO: Cunningham

ABS, ABST OR NV: Fong, Bigelow, Friedman

ASM APPROPRIATIONS: 14-1-3

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Obernolte

ABS, ABST OR NV: Bigelow, Brough, Fong

UPDATED:

VERSION: May 20, 2019

CONSULTANT: Cynthia Alvarez / TRANS. / (916) 319-2093 FN: 0000987

Date of Hearing: May 15, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 753

Author:(Eduardo Garcia) – As Amended Ver:May 6, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes funding carve-outs within the Low Carbon Transportation Investment Program at the California Air Resources Board (ARB) and the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) at the California Energy Commission (CEC) for the production of low-carbon fuels and to research, develop, produce and deploy innovative and emerging fuels.

Specifically, this bill:

1. Requires ARB, beginning in the 2019–20 fiscal year and each fiscal year thereafter, to allocate funding appropriated in the annual Budget Act for Low Carbon Transportation investments to the following projects based on the following percentages:
   1. At least 10% for the production of low-carbon fuels.
   2. At least 20% for the research, development, production and deployment of innovative and emerging fuels, as defined.
2. Requires CEC to allocate ARFVTP monies for the following projects based on the following percentages:
   1. At least 20% for the production of alternative and renewable low-carbon fuels in the state, as specified.
   2. At least 10% for for the research, development, production and deployment of innovative and emerging fuels, as defined.
3. Requires priority to be given to projects that demonstrate a minimum of three of the following:
   1. Maximize local workforce and economic benefits.
   2. Provide multiple environmental and public health benefits cobenefits, including reducing emissions of methane, criteria pollutants or toxic air contaminants.
   3. Leverage additional public or private funding.
   4. Utilize feedstocks derived from in-state sourced waste streams.
   5. Distribute innovative and emerging fuels capable of achieving cost-effective reductions in GHG emissions and criteria air pollutants on a dollar-per-metric-ton basis when considering fuel production, vehicle acquisition, and fueling infrastructure costs.

FISCAL EFFECT:

1. Ongoing annual ARB costs of approximately $725,000 (GGRF) to develop guidelines and for tracking, reporting and developing quantification methods over the course of the Program.
2. CEC costs are absorbable.

COMMENTS:

1. Background. AB 118 (Núñez) Chapter 750, Statutes of 2007, established the ARFVTP, which is administered by CEC, and provides funding for development and deployment of alternative and renewable fuels and advanced vehicle technologies to reduce GHG emissions and help attain the state’s climate change goals.

As of December 1, 2018, CEC has awarded 21% of program funds for alternative fuel production, 35% for alternative fuel infrastructure, 31% for alternative fuel and advanced technology vehicles and 13% for related needs and opportunities (such as, manufacturing, workforce training and regional planning).

The Low Carbon Transportation Investment Program at ARB is designed to accelerate the transition to advanced technology for both light-duty and heavy-duty transportation sectors. Programs funded through the Low Carbon Transportation Program include, but are not limited to, the Clean Vehicle Rebate Program (provides rebates of up $7,000 for the purchase of light-duty clean vehicles) and the deployment of heavy-duty technologies. Most of this funding has been allocated to vehicle acquisition programs. To date, the program has expended $1.72 billion from the Greenhouse Gas Reduction Fund (GGRF).

1. Purpose. According to the author:

California leads the world by using our resources and policies to demonstrate to the world that ambitious climate action is technologically feasible and economically prosperous. Nowhere is that ingenuity needed more than in the transportation sector, which – despite ambitious climate targets and innovative programs – continues to persist as California’s greatest source of emissions. There is inconsistent or inadequate funding available for fuel infrastructure and production, which has a particularly harmful impact on innovative and emerging fuels attempting to break into the market. This bill will address those funding challenges in a manner that encourages the creative, entrepreneurial spirit of businesses who are inventing new ways to help transition our state away from petroleum-based fuels and toward our ambitious climate targets.

1. Related Legislation. AB 1406 (O’Donnell) requires CEC to allocate at least 10% of the ARFVTP funding for alternative fuel and advanced technology vehicles. AB 1406 is pending in this committee.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: April 22, 2019

ASSEMBLY COMMITTEE ON TRANSPORTATION

Jim Frazier, Chair

ABPCA Bill Id:AB 753 (

Author:Eduardo Garcia) – As Amended Ver:April 11, 2019

SUBJECT: Alternative and Renewable Fuel and Vehicle Technology Program: fuels: fueling infrastructure

SUMMARY: Requires the Air Resources Board (ARB) and the California Energy Commission (CEC) to allocate specified percentages of moneys from the Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) and Low Carbon Transportation investments (which come from cap and trade funds) to provide incentives for the production, fueling infrastructure, research and development of specified fuels. Specifically, this bill:

1. Requires ARB, beginning in the 2019–20 fiscal year and each fiscal year thereafter, to allocate funding appropriated in the annual Budget Act for Low Carbon Transportation investments to the following projects based on the following percentages:
   1. Seven and one-half percent for the production of low-carbon fuels;
   2. Seven and one-half percent for the installation of stand-alone alternative and renewable fueling infrastructure; and
   3. Seven and one-half percent for the research, development, and production of innovative and emerging fuels.
2. Requires CEC to allocate ARFVTP monies for the following projects based on the following percentages:
   1. Seven and one-half percent for the production of alternative and renewable low-carbon fuels in the state;
   2. Seven and one-half percent for the development of stand-alone alternative and renewable fuel infrastructure, fueling stations, and equipment that are not tied to vehicle acquisition; and
   3. Seven and one-half percent for the research, development, and production of innovative and emerging fuels.
3. Requires that priority be given to projects that demonstrate a minimum of three of the following:
   1. Maximize local workforce and economic benefits;
   2. Provide multiple environmental and public health benefits cobenefits, including reducing emissions of methane, criteria pollutants, or toxic air contaminants;
   3. Leverage additional public or private funding;
   4. Utilize feedstocks derived from in-state sourced waste streams; and
   5. Distribute innovative and emerging fuel capable of achieving cost-effective reductions in GHG emissions and criteria air pollutants on a dollar-per-metric-ton basis when considering fuel production, vehicle acquisition, and fueling infrastructure costs.
4. Defines "innovative and emerging fuel" as a transportation fuel that meets all of the following:
   1. The quantity of consumption in the state per calendar year of the renewable fuel is not expected to exceed the energy equivalent of 30 million gallons of petroleum-based fuel;
   2. The carbon intensity of the renewable fuel complies with the Low Carbon Fuel Standard (LCFS) and is capable of meeting a carbon intensity value at least 60% lower than the petroleum-based fuel baseline carbon intensity value;
   3. The renewable fuel production technology is at technology-readiness level (TRL) 6, or greater, as defined in the federal Department of Energy's Technology Readiness Assessment Guide; and
   4. The renewable fuel produces lower levels of emissions of criteria air pollutants than petroleum-based fuels when being used.
5. States legislative findings and declarations relating to low-carbon fuels.

EXISTING LAW:

1. Requires ARB, pursuant to California Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter 488, Statutes of 2006], to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. AB 32 authorizes ARB to permit the use of market-based compliance mechanisms to comply with GHG reduction regulations (cap and trade).
2. Requires ARB to ensure that statewide GHG emissions are reduced to at least 40% below 1990 levels by 2030.
3. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to cap and trade be deposited in the fund and requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop, as specified, an investment plan for the moneys deposited in the GGRF, and makes the GGRF funds available for appropriation by the Legislature.
4. Establishes the ARFVTP, administered by CEC, to provide grants and other financial incentives to accelerate the development and deployment of clean, efficient, low carbon alternative fuels and technologies without adopting any one preferred fuel or technology type.
5. Requires CEC to allocate $20 million annually to fund hydrogen fueling stations, not to exceed 20 percent of the moneys appropriated to the ARFVTP until there are at least 100 publicly available hydrogen-fueling stations in operation in California.
6. Defines “full fuel-cycle assessment” or “life-cycle assessment” to mean evaluating and comparing the full environmental and health impacts of each step in the life cycle of a fuel, including, but not limited to, all of the following: feedstock production, cultivation, extraction, transport, and storage; fuel production, distribution, transport, and storage and vehicle operation, including refueling, combustion or conversion, and evaporation.

FISCAL EFFECT: Unknown

COMMENTS: AB 118 (Núñez) Chapter 750, Statutes of 2007, established the ARFVTP, which is administered by CEC, and provides funding for development and deployment of alternative and renewable fuels and advanced transportation technologies to reduce GHG emissions and help attain the state’s climate change goals. Eligible projects include, for example, development, improvement, and production of alternative and renewable low-carbon fuels; improvement of light-, medium-, and heavy-duty vehicle technologies; and expansion of infrastructure connected with existing fleets, public transit, and transportation corridors. Alternative and renewable low-carbon fuels include electricity, ethanol, dimethyl ether (DME), renewable diesel, natural gas, hydrogen, and biomethane, among others, and certain feedstocks. CEC, through the ARFVTP, helps transform California’s fuel and vehicle types by developing and deploying technology and alternative and renewable fuels in the marketplace, without adopting any one preferred fuel or technology type.

The ARFVTP is funded at about $100 million annually. Although CEC has flexibility to fund eligible projects, existing law requires CEC to allocate $20 million annually, not to exceed 20% of the moneys appropriated, to hydrogen fueling stations until there are at least 100 publicly available stations in operation in California. As part of the ARFVTP, CEC prepares and adopts an annual investment plan that identifies the funding priorities for the coming fiscal year. CEC develops this investment plan by incorporating input from stakeholders and the ARFVTP Advisory Committee, and by analyzing the best project opportunities for funding.

Now in its eleventh year, the ARFVTP has provided more than $791 million to more than 600 agreements. ARFVTP funds various alternative fuels –ARFVTP funding (in millions) by fuel type as of December 1, 2018 has been:

• $275.6 for electric,
• $162.2 for hydrogen,
• $119 for natural gas,
• $72.3 for biodiesel,
• $61.3 for biomethane,
• $46.2 for ethanol,
• $46.5 for multiple fuel/other
• $6 for propane

In general, CEC awards these agreements based on four program categories. As of December 1, 2018, CEC has awarded 21% for Alternative Fuel Production, 35% for Alternative Fuel Infrastructure, 31% for Alternative Fuel and Advanced Technology Vehicles and 13% for Related Needs and Opportunities (such as, manufacturing, workforce training, and regional planning).

This bill requires the CEC to allocate a total of 22.5% of ARFVTP funding to specified purposes, specifically: 7.5% for the production of alternative and renewable low-carbon fuels in the state; 7.5% for the development of stand-alone alternative and renewable fuel infrastructure, fueling stations, and equipment; and 7.5% for the research, development, and production of innovative and emerging fuels, as defined.

Additionally, this bill requires ARB to set aside 22.5%, for specified fuels and technologies, from Low Carbon Transportation investments (which come from cap and trade funds). Funding from cap and trade supports programs and projects that facilitate in-state GHG emissions reductions and delivers major economic, environmental, and public health benefits for Californians, including meaningful benefits to the most disadvantaged communities, low-income communities, and low-income households. As of November 30, 2018, cumulative appropriations for GGRF investments have been approximately $9.3 billion of which $1.72 billion have gone to the Low Carbon Transportation Program. ARB’s Low Carbon Transportation Program is designed to accelerate the transition to advanced technology for both the light-duty and heavy-duty transportation sector. Programs funded through the Low Carbon Transportation Program include, but are not limited to, the Clean Vehicle Rebate Program (provides rebates of up $7,000 for the purchase of light duty clean vehicles) and the deployment of heavy-duty technologies. Most of this funding has been allocated to vehicle acquisition programs.

The LCFS is another tool designed to encourage the use of cleaner low-carbon fuels in California, encourage the production of those fuels, and therefore, reduce GHG emissions. The LCFS standards are expressed in terms of the "carbon intensity" (CI) of gasoline and diesel fuel and their respective substitutes. The LCFS is performance-based and fuel-neutral, allowing the market to determine how the carbon intensity of California's transportation fuels will be reduced. This program is based on the principle that each fuel has "lifecycle" GHG emissions that include CO2, N2O, and other GHG contributors. This lifecycle assessment examines the GHG emissions associated with the production, transportation, and use of a given fuel. The lifecycle assessment includes direct emissions associated with producing, transporting, and using the fuels, as well as significant indirect effects on GHG emissions, such as changes in land use for some biofuels. Subjecting this lifecycle GHG rating to a declining standard for the transportation fuel pool in California would result in a decrease in the total lifecycle GHG emissions from fuels used in the state.

In 2007, Governor Schwarzenegger issued Executive Order S-1-07, calling for a reduction of at least 10% in the CI of California's transportation fuels by 2020. The Order further directed ARB to consider initiating regulatory proceedings to establish and implement the LCFS. In response, ARB adopted the LCFS regulation in 2009, to be implemented beginning in 2010. To date, fuel suppliers have over-complied, predominantly by blending ethanol with gasoline, which is preferred in the near term because ethanol blending is required by the federal Renewable Fuel Standard and does not require significant changes in fueling and vehicle infrastructure. However, natural gas, biodiesel and electricity have also been used in significant amounts to comply with the LCFS.

This bill requires 7.5% of ARFVTP funds and 7.5% from Low Carbon Transportation investments to be allocated to “emerging and innovative fuels”. This bill is targeting emerging and innovative fuels that have not achieved commercial viability. A few currently meet the definition in the bill. For example, DME is a synthetically produced alternative to diesel for use in specifically designed compressed ignition diesel engines. DME can be produced from biomass, methanol, and fossil fuels. According to the U.S. Department of Energy, DME has several properties that make it attractive for use in diesel engines. The energy efficiency and power ratings of DME and diesel engines are virtually the same. Because of its lack of carbon-to-carbon bonds, using DME as an alternative to diesel can nearly eliminate particulate emissions; however, DME has half the energy density of diesel.

Renewable hydrogen can be produced from diverse domestic resources with the potential for near-zero GHG emissions. Once produced, hydrogen generates electrical power in a fuel cell, emitting only water vapor and warm air. It can be used in both the stationary and transportation energy sectors. Hydrogen's energy content by volume is low. This makes storing hydrogen a challenge, because it requires high pressures, low temperatures, or chemical processes to be stored compactly.

Propane is a cleaner-burning alternative fuel that's been used for decades to power light-, medium- and heavy-duty propane vehicles and in homes for heating, water heating, and cooking. Propane is generally sourced from petrochemicals that come from conventional oil reserves, so in its traditional form it isn’t renewable. There is interest in using biomass or waste feedstocks to produce renewable propane.

Under this bill, only those renewable fuel production technologies that are at a TRL 6 or greater are eligible for funding under the exclusive "innovative and emerging fuel" 7.5% set aside. That scale ranges from 1 (lowest - Basic Research) to 9 (highest - system operational). A TRL of 6 equates to an engineering/pilot scale project to validate the system in a relevant environment, such as testing a prototype with real waste. TRL 7 and 8 includes full-scale system demonstrations and actual system completion. TRL 9 is full-scale system operation of the technology in its final form.

According to the author, “California leads the world by using our resources and policies to demonstrate to the world that ambitious climate action is technologically feasible and economically prosperous. Nowhere is that ingenuity needed more than in the transportation sector, which – despite ambitious climate targets and innovative programs – continues to persist as California’s greatest source of emissions. There is inconsistent or inadequate funding available for fuel infrastructure and production, which has a particularly harmful impact on innovative and emerging fuels attempting to break into the market. This bill will address those funding challenges in a manner that encourages the creative, entrepreneurial spirit of businesses who are inventing new ways to help transition our state away from petroleum-based fuels and toward our ambitious climate targets.”

Writing in support, Oberon Fuels states, “By dedicating a percentage of funding received by the appropriate state agencies for low carbon transportation be set aside for innovative and emerging fuel development, as well as the necessary infrastructure to help facilitate the widespread utilization of these alternative fuels, this bill will help pave the way for ongoing technology development, which is necessary to achieve our ambitious emissions reductions targets and maintain California’s recognized role as a leader in the development and deployment of innovative technology solutions to address our global challenges.”

In opposition, Sierra Club writes, “In order for California to meet its energy and climate targets, we need to transition to zero-carbon resources. However, this bill will encourage investment in those low-carbon energy resources that are still causing damage to our environment. For example, hydrogen production can result in GHG emissions as well as other environmental impacts, especially when it is created from fracked gas, or methane gas, or made using electrolytic processes powered by fossil fuels.”

Committee Comments: The current investments strategies for both the CEC’s ARFVTP and ARB’s Low Carbon Transportation Program are informed by stakeholder input and are developed based on the state’s overall climate priorities. By setting aside funding for specified purposes, this bill may be limiting the ability for these state agencies to respond to market changes, advance the most cost-effective projects, and/or constraints them in the future to limited pots of monies. However, the author contends that the investment needed for alternative and innovative fuels are great and will continue to be needed to meet our ambitious climate goals.

It is also important to note that this bill is one of several bills this year that “carves out funds” for specified fuels, projects and technologies. For example, AB 1406 (O’Donnell) sets aside 10% of ARFVTP monies for alternative fuel and advanced technology vehicles and AB 1262 (O’Donnell) sets aside 15% of cap and trade funds to heavy-duty technology incentives. The legislature may need to consider how best to consolidate these efforts and still provide the state with “enough” flexibility.

Related Legislation: AB 1406 (O’Donnell) would require CEC to allocate at least 10% of the ARFVTP funding for alternative fuel and advanced technology vehicles. AB 1406 will be heard in this committee on April 22, 2019.

AB 1262 (O’Donnell) would continuously appropriate, beginning in the 2019-20 fiscal year, 15% of GGRF funds to ARB for the Clean Truck, Bus, and Off-Road Vehicle Equipment Technology program. AB 1262 will be heard by the Natural Resources Committee on April 22, 2019.

Previous legislation: AB 1697 (Bonilla), Chapter 446, Statutes of 2016, expanded the criteria for funding programs through the state’s ARFVTP to include workforce training.

SB 32 (Pavley), Chapter 249, Statutes of 2016, required ARB to ensure that statewide GHG emissions are reduced at least 40% below 1990 levels by 2030.

SB 350 (de León), Chapter 547, Statutes of 2015, set GHG reduction targets to be achieved by 2030 through a variety of measures, including supporting electrification of the transportation system and established requirements of California Public Utilities Commission in adopting electric vehicle charging proposals from the investor owned utilities.

AB 8 (Perea), Chapter 401, Statutes of 2013, extended until January 1, 2024, the fees that support the ARFVTP.

AB 118 (Núñez), Chapter 750, Statutes of 2007, created the ARFVTP to provide funding measures to specified entities to develop and deploy technologies and alternative and renewable fuels in the marketplace to help attain the state’s climate change policies.

AB 32 (Núñez), Chapter 488, Statutes of 2006, required ARB to develop a plan of how to reduce emissions to 1990 levels by the year 2020.

REGISTERED SUPPORT / OPPOSITION:

Support

Association of Global Automakers

CR&R Environmental Services

Golden Gate Zero Emission Marine

H2safe

Hitachi Zosen Inova

Itm Power

Johnson Matthey Fuel Cells

Loop Energy

Millennium Reign Energy

Nel Hydrogen

Oberon Fuels

Pdc Machines

Plug Power

Propel Fuels, Inc.

Red & White Fleet

Solar Wind Storage

Sunline Transit Agency

U.S. Hybrid

Vinjamuri Innovations

Winkelmann Flowform Technology

Opposition

California Advanced Biofuels Association (unless amended)

California Electric Transportation Coalition

Clean Energy (unless amended)
Pacific Ethanol (unless amended)

Sierra Club

Analysis Prepared by: Cynthia Alvarez / TRANS. / (916) 319-2093