Existing law creates the Clean Transportation Program, administered by the State Energy Resources Conservation and Development Commission, to provide, among other things, competitive grants and revolving loans to specified entities for those entities to develop and deploy innovative technologies that transform Californias fuel and vehicle types to help attain the states climate change policies. Under existing law, a project, as defined, that develops in-state production of raw materials and the manufacturing supply chain for zero-emission vehicle components is eligible to receive funding under that program. As part of that program, the commission has awarded grant moneys through a zero-emission vehicle battery manufacturing block grant to promote in-state battery manufacturing for zero-emission vehicles and related infrastructure.

This bill would require the commission, or an entity it contracts with, to administer its Zero-Emission Vehicle Battery Manufacturing Block Grant Program, and would impose eligibility, application scoring, workforce, and reporting requirements on the program. The bill would authorize the commission, or an entity it contracts with, to adopt procedures and criteria to supplement these requirements.

Existing law creates the Clean Transportation Program, administered by the State Energy Resources Conservation and Development Commission, to provide, among other things, competitive grants and revolving loans to specified entities for those entities to develop and deploy innovative technologies that transform Californias fuel and vehicle types to help attain the states climate change policies. Under existing law, a project, as defined, that develops in-state production of raw materials and the manufacturing supply chain for zero-emission vehicle components is eligible to receive funding under that program. As part of that program, the commission has awarded grant moneys through a zero-emission vehicle battery manufacturing block grant to promote in-state battery manufacturing for zero-emission vehicles and related infrastructure.

This bill would require the commission, or an entity it contracts with, to administer its Zero-Emission Vehicle Battery Manufacturing Block Grant Program, and would impose eligibility, application scoring, workforce, and reporting requirements on the program. The bill would authorize the commission, or an entity it contracts with, to adopt procedures and criteria to supplement these requirements.

Existing law, the Buy Clean California Act, requires the Department of General Services to establish and publish a maximum acceptable global warming potential for each category of eligible materials, as defined, in accordance with specified requirements. Existing law requires awarding authorities to require the successful bidder for certain types of contracts to submit information relating to each eligible material proposed to be used, as specified. Existing law requires an awarding authority, in carrying out its duties pursuant to the act, to strive to achieve a continuous reduction of emissions over time. Existing law defines various terms for purposes of the act.

This bill would make nonsubstantive changes to the provision that defines terms.

Date of Hearing: August 23, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

SBPCA Bill Id:SB 322

Author:(Becker) – As Amended Ver:June 13, 2023

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

SUMMARY:

This bill prescribes administration of the existing Zero-emission Vehicle (ZEV) Battery Manufacturing Block Grant Program (ZEV battery grant program) and obligations of grant recipients with the goal of ensuring state funds allocated to the program support “high-road employers” that pay employees higher wages; invest in workforce training and development; hire workers displaced from the fossil-fuel industry; maintain safe and healthy workplaces; and accommodate and promote worker advocacy and representation.

Specifically, this bill, among other things, limits grant eligibility to only those applicants that receive at least 80 points on a 100-point scale, with the program administrator to award points, as follows:

• 20 points if the applicant will pay its employees at or above a living wage and at or above local or regional prevailing wage standards, if applicable.
• 20 points if the application includes a plan for investments in employee training, growth and development, including the hiring of employees displaced or dislocated from jobs in the fossil fuel economy.
• 20 points if the applicant’s workplace provides safe and healthy working conditions and the applicant has adopted an injury and illness prevention program.
• 20 points if the applicant has demonstrated consistent compliance with workplace laws and regulations.
• 20 points if the applicant has adopted mechanisms to include worker voice and agency in the workplace.

The bill also prescribes threshold requirements an applicant with five or more employees must meet to be eligible to receive a grant. Those requirements include, among other things, (a) having an environmental safety plan, (b) having entered into certain labor agreements with employees and (c) committing to hiring employees with specified employment barriers and paying them a living wage.

The bill makes reporting requirements of grant recipients and directs the “relevant public agency”—the California Energy Commission (CEC) and its program contractors—to recover the full grant amount from an awardee that fails to meet the reporting requirements and to withhold the funds until the awardee comes in to compliance. The bill empowers an individual who paid personal income taxes to the state in the calendar year before the year in dispute, or any organization representing such a taxpayer, to bring a civil action in state court to compel recovery if the relevant public agency fails to do so.

The bill requires the relevant public agency, for each noncompliant report, to deduct $10,000 from an award to a grant recipient that fails to comply with the reporting requirements within deadlines established by the relevant public agency.

Finally, the bill provides the relevant public agency may adopt procedures and criteria to supplement the requirements of this bill.

FISCAL EFFECT:

It is likely the bill will increase CALSTART’s administrative costs and CALSTART, as a result, will likely seek to renegotiate its existing contract with the California Energy Commission (CEC) for administration of the battery block grant program. (For a description of the existing battery block grant program administered by CALSTRT, see below). CEC staff time to renegotiate the agreement will likely be minor and absorbable within existing resources. The more significant fiscal effect will be to reduce the amount of funds available for block grants as CALSTART diverts money from the block grant program to program administration. It is not known how much money will be diverted, but the amount is potentially significant and likely more than $150,000.

COMMENTS:

1. Purpose. The author intends this bill to support development of the ZEV battery industry in California while ensuring that industry provides good jobs, in safe working environments, to members of communities who most need them. According to the author, as expressed in the bill’s findings and declarations:

California has budgeted substantial funding, including $25,000,000 in grants related to zero-emission vehicle battery manufacturing. The state has the responsibility to ensure such financial support offered to businesses to produce batteries domestically provides for the creation of durable, quality jobs that do not require workers to surrender their statutory rights to fair pay and fair treatment at work.

1. Background.

California Provides Funds to Foster In-state ZEV Battery Manufacturing. As California, and other jurisdictions, transition to a vehicle fleet that is predominantly powered by electricity, there is potential for development of a robust domestic battery manufacturing industry. The budget acts of 2021 and 2022 provided CEC with $100 million to administer a block grant program to incentivize in-state manufacturing of batteries for zero-emission vehicles. In December 2022, CEC awarded the administration of the $25 million block grant to CALSTART, which will award grants under its PowerForward – Battery Manufacturing Grant Program. CALSTART is developing program details through, among other activities, public workshops to identify grant funding opportunities that will facilitate ZEV battery manufacturing provide feedback on the design of the solicitation and subsequent sub-grants, solicitation process, application process and sub-grant implementation process.

This Bill Places PowerForward on the High Road. This bill prescribes numerous requirements applicable to the ZEV battery grant program, its administrator and eligible recipients and their subcontractors. Very generally, and as described in the summary of the bill, above, these requirements address wages, employment opportunities for those facing employment barriers, public health and worker safety, and employee relations. These requirements seem generally consistent what are oftentimes called “high road jobs.” For example, recently enacted legislation (SB 674 (Durazo), Chapter 875, Statutes of 2022) characterized the high roads job standard as one that, at a minimum:

• Supports the creation and retention of quality, nontemporary and full-time jobs that provide high wages, including benefits and access to training.
• Supports the hiring of displaced workers and individuals facing barriers to employment.
• Encourages the development of the state’s long-term, climate-sustainable transportation and related infrastructure and manufacturing sectors.
• Protects public health by supporting the adoption of specific protections for worker health and safety.

Writing in support of the bill, the California Labor Federation contends:

All public subsidies should be conditioned on labor standards as the state too often must pick up the tab for employer wage theft, misclassification, and contracting out. By attaching high road standards to public subsidies and creating a competitive process that prioritizes job quality, California can reduce income and racial inequality while also reducing emissions.

CEC concerns. Incorporating these requirements into the state’s ZEV battery grant program may place any resulting jobs on the high road. But CEC has practical concerns, nonetheless. Consistent with fiscal effect described above, CEC predicts the bill will cause CEC to revise its agreement with ZEV battery grant program administrator, CALSTART, to accommodate what likely will be additional administrative duties, as well as a correspondingly higher administrative fee, which will reduce monies available for grants.

CEC is generally critical of the bill’s scoring criteria, describing it as the “strictest scoring criteria used within the Clean Transportation Program’s grants and subgrants.” CEC asserts the scoring criteria “omits the scoring and selection of applications based on other equally or more critical scoring criteria” such as market competitiveness, technological innovation and local environmental impacts, for example. CEC warns, “Weighting the scoring criteria in a sub-optimal manner can cause good projects to fail and bad projects to proceed.”

In addition, CEC expresses strong concerns with the bill’s empowerment of individuals and organizations to bring civil action to compel recovery of grant awards, fearing CEC entanglement in costly, time-consuming litigation.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: June 26, 2023

ASSEMBLY COMMITTEE ON TRANSPORTATION

Laura Friedman, Chair

SBPCA Bill Id:SB 322

Author:(Becker) – As Amended Ver:June 13, 2023

SENATE VOTE: 32-7

SUBJECT: Zero-Emission Vehicle Battery Manufacturing Block Grants Program

SUMMARY: Requires the Energy Resources Conservation and Development Commission (CEC) to administer the Zero-Emission Vehicle (ZEV) Battery Manufacturing Block Grant Program and imposes eligibility, scoring, labor, and reporting requirements on the program. Specifically, this bill:

1. Requires minimum labor and safety requirements for grant applicant eligibility.
2. Requires CEC, and the grant administrator, to score applications out of 100 points, and sets minimum application eligibility at 80 points, with 20 points awarded for each of the following criteria:
3. Payment of a living wage;
4. Investments in employee training;
5. Safe and healthy working conditions;
6. Demonstrated workplace law compliance; and,
7. Labor peace agreements.
8. Authorizes CEC, and the grant administrator, to use metrics other than score to determine which eligible applications are awarded funding.
9. Requires awardees to meet high road job standards, as specified.
10. Prohibits applicants who have violated any applicable federal, state, or local laws pertaining to leave, public health and safety, or employee protections from being eligible for grant funding.
11. Requires awardees to demonstrate compliance within 12 months of receiving a grant and annually after.
12. Contains a severability clause, so that if any provisions are held invalid, other provisions are not affected.
13. Makes Legislative findings and declarations and states Legislative intent to support the creation of equitable high-quality battery manufacturing jobs in California through the enactment and implementation of this bill.

EXISTING LAW:

1. Requires the California Air Resources Board (CARB), pursuant to the 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 to develop a scoping plan for achieving the maximum technologically feasible and cost effective reductions in GHGs. (Health and Safety Code (HSC) 38500)
2. Requires, pursuant to SB 32 (Pavley), Chapter 249, Statutes of 2016 that CARB ensure that statewide GHG emissions are reduced to at least 40% below 1990 levels by 2030. (HSC 38566)
3. Provides, pursuant to the California Climate Crisis Act (AB 1279 (Muratsuchi), Chapter 337, Statutes of 2022) that it is the policy of the state to do both of the following:
4. Achieve net zero GHG emissions as soon as possible but no later than 2045; and,
5. Ensure that by 2045, GHG emissions are reduced to at least 85% below 1990 levels.
6. Defines “high road” as a set of economic and workforce development strategies to achieve economic growth, economic equity, shared prosperity and a clean environment. The strategies include, but are not limited to, interventions that improve job quality and job access, including for women and people from underserved and underrepresented populations; meet the skill and profitability needs of employers, and; meet the economic, social, and environmental needs of the community. (Unemployment Insurance Code 14005(r))

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. To the extent that this bill would require the CEC to amend or revise its existing contract with its third-party administrator CALSTART to set and enforce the bill’s labor requirements, it could result in unknown but potentially significant costs (Alternative and Renewable Fuel and Vehicle Technology [ARFVT] fund).
2. Unknown but likely minor and absorbable costs (ARFVT fund) for the CEC to perform new actions required by this bill with regard to implementing the block grant agreement.

COMMENTS:

California’s climate goals require incremental GHG emissions reductions, and carbon neutrality by no later than 2045. Transportation is the single largest source of GHG emissions, and strategies for reducing emissions from the transportation sector include transitioning internal combustion engine vehicles to ZEVs, reducing the carbon intensity of fuels, and reducing vehicle miles traveled.

ZEV adoption is increasing in California. Financial incentives and manufacturer regulations have contributed to consumers purchasing a greater number of ZEVs. The state has awarded over $1 billion in consumer rebates through the Clean Vehicle Rebate Project (CVRP), resulting in the purchase of more than 500,000 ZEVs. The Advanced Clean Cars 2 regulation requires 100% of passenger vehicle sales to be zero-emission by 2035. California reached 1.5 million cumulative ZEV sales in April 2023. In the first quarter of 2023, over 21% of new car sales were ZEVs.

EV battery manufacturing in the United States and California is increasing. Consistent with the growth in EV sales, the U.S. Department of Energy projects that the EV battery manufacturing capacity in North America in 2030 will be nearly 20 times greater than in 2021. The Bipartisan Infrastructure Law, also known as the Infrastructure Investment and Jobs Act, passed in 2021, included $2.8 billion to build and expand commercial-scale facilities in 12 states to extract and process battery materials, manufacture components, and demonstrate new approaches, including manufacturing components from recycled materials. None of the funded projects are located in California.

SB 129 (Budget Act), Chapter 69, Statutes of 2021 appropriated $125 million to CEC to support manufacturing grants to increase California manufacturing of ZEVs, ZEV components, and ZEV charging or refueling equipment. At the end of 2022, CEC designated CALSTART, a nonprofit technology industry member organization, as the administrator of an initial $25 million block grant for ZEV battery manufacturing.

High road jobs. AB 398 (E. Garcia), Chapter 135, Statutes of 2017 requires that the California Workforce Development Board (CWDB) present a report to the Legislature on strategies “to help industry, workers, and communities transition to economic and labor-market changes related to statewide GHG emissions reduction goals.” The report, delivered to the Legislature in the fall of 2020, addresses workforce interventions to ensure that the transition to a carbon-neutral economy creates high-quality jobs; prepares workers with the skills needed to adapt to and master new, zero- and low-emission technologies; broadens career opportunities for workers from disadvantaged communities; and supports workers whose jobs may be at risk. Ultimately, a “high road” approach to economic development means optimizing climate policy outcomes while supporting the creation of, and access to, family-supporting jobs. This bill applies a “high road” framework to the ZEV manufacturing block grant program.

Under existing law, the CTP includes prioritization criteria for scoring applications and workforce consideration. CEC has indicated that it would not need to revise its contract with CALSTART as a result of this bill. CALSTART is currently in the program design process, and could relatively easily incorporate the requirements of this bill, albeit with a potential delay. However, a delay during the design phase would be less disruptive than if CALSTART were in the process of soliciting proposals for funding.

As a result of this bill, each project the block grant program funds could have additional costs associated with meeting new labor requirements which would result in less funding being available for ZEV battery manufacturing. For example, the cost of establishing workforce plans or creating an employee growth plan could reduce the amount of funding available to manufacture batteries.

Staff comments: This bill could potentially delay program implementation and reduce the amount of funding available for battery manufacturing as a result of ensuring that money awarded through the ZEV Battery Manufacturing Block Grant Program goes to high road jobs. The Legislature has signaled support of applying high road job standards to the green transportation sector by passing similar legislation related to vehicle incentive programs and state acquisition of zero-emission transit vehicles or EV supply equipment.

In addition, this bill has not been double referred to the labor committee and this analysis does not assess the merits of the labor standards added by this bill. This bill also prohibits applicants from being eligible for funding if the CEC has determined them to be in violation of specified labor laws. It is unclear if this is an activity that is suitable or feasible for the CEC to determine, or if a labor agency should be more directly involved.

According to the author, “On both the federal and state level, there have been significant investments in providing quality jobs while establishing the battery manufacturing industry and transitioning to a clean energy future. To meet the state’s clean energy goals, California will need to manufacture large amounts of lithium batteries.”

In support the California Labor Federation writes, “The transition to ZEVs will displace some existing auto manufacturing jobs, so it is even more important that we ensure job quality standards in sectors receiving significant subsidies. [This bill] will link climate goals with high road job creation by conditioning eligibility for grant funding on complying with labor, workplace safety, and anti-discrimination and leave laws, and proper classification of workers. [This bill] also requires applicants to commit to hiring workers with employment barriers and evaluate applicants based on their payment of living wages, investments in training programs, compliance with health and safety and labor laws, and adoption of labor peace agreements. As California increases its use and manufacturing of ZEVs, it is imperative that state incentives supporting this industry also support high quality, equitable jobs; especially for historically marginalized communities and workers in the manufacturing industry who have been heavily impacted by the transition.”

Related and previous legislation: AB 241 (Reyes) and SB 84 (Gonzalez) of this Session extend and revise the CTP to prioritize projects that meet certain air quality improvement goals and provide equity-based investments in disadvantaged communities. The bills specify that at least 50% of CTP monies must be allocated for certain types of projects, including programs that promote ZEV car-sharing in low-income and disadvantaged communities. AB 241 is on the Assembly floor and SB 84 is on the Senate inactive file.

SB 674 (Durazo), Chapter 875, Statutes of 2022 requires the Department of General Services and the Department of Transportation and their contractors to enter into a Labor Peace Agreement and adhere to High Road Jobs Standards, as defined, for contracts for the acquisition of zero-emission transit vehicles or EV supply equipment valued at $10,000,000 or more.

AB 794 (W.Carillo), Chapter 748, Statutes of 2021 attaches labor standards to eligibility for various clean vehicle incentive programs administered by CARB for fleet purchasers of new drayage or short-haul trucks.

AB 398 (E. Garcia), Chapter 135, Statutes of 2017 directs CWDB to assess the need for increased education, job training, and workforce development resources to help workers and communities transition to a low carbon economy.

REGISTERED SUPPORT / OPPOSITION:

Support

California Environmental Voters
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Jobs to Move America
Natural Resources Defense Council
Sierra Club
Sparkz
UAW Region 6

Opposition

None on file

Analysis Prepared by: Christine Casey / TRANS. / (916) 319-2093

 THIRD READING  

Bill No: SB 322

Author: Becker (D)

Amended: 4/18/23

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 11-3, 4/10/23

AYES: Bradford, Ashby, Becker, Dodd, Durazo, Gonzalez, McGuire, Min, Newman, Rubio, Skinner

NOES: Dahle, Seyarto, Wilk

NO VOTE RECORDED: Caballero, Eggman, Grove, Stern

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 4-1, 4/26/23

AYES: Cortese, Durazo, Laird, Smallwood-Cuevas

NOES: Wilk

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/18/23

AYES: Portantino, Ashby, Bradford, Wahab, Wiener

NOES: Jones, Seyarto

SUBJECT: Zero-Emission Vehicle Battery Manufacturing Block Grants Program

SOURCE: United Auto Workers

DIGEST:

This bill establishes labor preferences that the California Energy Commission (CEC) and any third-party administrator must use when awarding funds for the Zero-Emission Vehicle (ZEV) Battery Manufacturing Block Grants Program.

ANALYSIS:

Existing law:

1. Establishes the Clean Transportation Program (CTP) at the CEC to provide grants, loans, and other funding opportunities to develop and deploy innovative fuel and vehicle technologies to support California’s climate change policies. (Health and Safety Code §44272(a))
2. Establishes CTP grant prioritization criteria. These criteria include, but are not limited to, a project’s ability to reduce certain air pollutants, provide in-state economic benefits, attract non-state matching funds, and deploy projects in non-attainment areas pursuant to the federal Clean Air Act. The CEC must rank projects based on each project’s ability to meet the prioritization criteria. (Health and Safety Code §44272(c-d))
3. Specifies the types of projects eligible for funding from the CTP, including, but not limited to projects that develop and deploy alternative and renewable fuels, ZEV infrastructure and technologies, programs that help commercialize ZEV and alternative fuel vehicles, and workforce development projects that transition workers from fossil fuel industries to clean transportation jobs. (Health and Safety Code §44272 (e))
4. Allocates a portion of smog abatement fees to fund the CTP and sunsets the fee on January 1, 2024. (Health and Safety Code §44060.5)

This bill:

1. Establishes various definitions for the purposes of administering the ZEV Battery Manufacturing Block Grants Program, including but not limited to, the following definitions:
   1. “Labor peace agreement” means an agreement between an applicant and any union that includes at least the following:
      1. A prohibition on the union and its members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the applicant’s business.
      2. A prohibition on the applicant from engaging in a lockout of its employees.
      3. An agreement by the applicant not to disrupt efforts by the union to communicate with, and attempt to organize and represent, the applicant’s employees.
      4. Union access at reasonable times to areas in which the applicant’s employees work for the purpose of meeting with employees to discuss their rights to representation, employment rights under state law, and terms and conditions of employment.
      5. A methodology for determining whether the union has been chosen as the representative of particular job classifications of the applicant.
   2. “Living wage” means at least 167 percent of the minimum wage set by state statute or local ordinance, if higher.
   3. “Relevant public agency” means the commission and any entities with which it may contract to award or administer covered financial subsidies, evaluate applicants, or monitor compliance with conditions of covered financial subsidies pursuant to the program.
   4. “Subcontractor” means a private entity performing a portion of the work of the awardee through a subcontract or subgrant.
2. Defines an “Individual with employment barriers” a person with any characteristic that substantially limits that individual’s ability to obtain employment. These characteristics may include, but are not limited to, indicators of poor work history, lack of work experience, employment in nontraditional occupations, long-term unemployment, lack of educational or occupational skills attainment, dislocation from high-wage and high-benefit employment, including those displaced or dislocated from jobs in the fossil fuel economy, low levels of literacy or English proficiency, disability status, or welfare dependency.
3. Requires block grant applicants to do all of the following in order to obtain a subsidy from the ZEV Battery Manufacturing Block Grants Program:
   1. Include a specified environmental safety plan in the block grant application that identifies procedures for safe handling of materials, employee testing for chemical exposure, and environmental testing.
   2. Include a workforce plan that requires specified commitments from the employer, including commitments to pay a living wage, hire individuals with employment barriers for at least 30 percent of its workforce, and offer employment to individuals in approved apprenticeships or offer specified training or compensated education. Applicants may satisfy the commitment to hire individuals with employment barriers by showing that the employer has made a good faith effort to hire those individuals.

• 1. Attest that the applicant has entered into a labor peace agreement covering its employees. Applicants that have not entered into a labor peace agreement must indicate whether they will enter into and abide by a labor peace agreement with any union that communicates its interest in representing any classification of the applicants’ employees.
  2. Include in the application any current collective bargaining agreement between the applicant and a labor organization representing the project’s employees.

1. Requires the CEC and any third-party administrator to adopt a specified scoring process for evaluating applicants. This bill requires this scoring process to include five specified labor components, each worth 20 points. Applicants may receive a maximum score of 20 points, and no applicant that receives less than 80 points may receive an award from the block grant program.
2. Establishes certain workforce goals for recipients of block grant awards and prohibits any awardee that violates specified existing labor, employment, and antidiscrimination laws from obtaining a subsidy through the program.
3. Requires the CEC and any third-party administrator to adopt an annual reporting schedule for block grant awardees to submit documentation demonstrating their compliance with this bill. This bill specifies penalties for non-compliant awardees, including awardees who fail to report compliance documentation.
4. Authorizes the CEC and any third-party administrator to adopt procedures and criteria to supplement the bill’s requirements.

Background

CEC’s ZEV Battery Manufacturing Block Grant. The Budget Acts of 2021 and 2022 provided the CEC with funding to administer a block grant program to fund in-state manufacturing of ZEV battery electric vehicle (EV) components. While the CEC received funding to administer up to $100 million for the block grant, the CEC issued a funding opportunity for a third-party administrator to oversee an initial $25 million block grant program. In December 2022, the CEC awarded the administration of the $25 million block grant to CALSTART for the PowerForward program.

Bill would establish labor requirements for the ZEV Battery Manufacturing Block Grant Program. This bill establishes a number of workforce and labor requirements for applicants seeking subsidies from the ZEV Battery Manufacturing Block Grant Program. These requirements, include establishing workforce plans to create high-road employment opportunities and provide employment options for workers who have been economically displaced or face certain employment barriers. This bill also includes requirements for awardees to have plans to ensure that battery manufacturing projects funded by the block grant do not create hazardous working environments for employees.

The establishment of labor and occupational health and safety requirements are consistent with efforts to ensure that in-state battery manufacturing does not create exploitative conditions occurring in other parts of the world where battery components are mined and processed. Cobalt is a major component of many rechargeable batteries, and more than half of the world’s known supply of cobalt is located in mines in the Democratic Republic of Congo. These mines have been the site of substantial human rights abuses, including slavery. As California seeks to maximize its domestic battery manufacturing and lithium extraction in the Salton Sea, stakeholders are seeking mechanisms to ensure that domestic mineral extraction and battery supply chains do not replicate exploitative labor and environmental conditions. The federal government is also seeking to align tax incentives for EV batteries to domestic mineral extraction and processing. The Inflation Reduction Act of 2022 (IRA) aims to provide tax credits for EV manufacturing using minerals sourced within the United States. Under the IRA, an EV would need to have a battery in which at least 80 percent of the market value of its minerals are sourced domestically to qualify for the tax credit.

How will the CEC incorporate these labor requirements into the existing ZEV Battery Manufacturing Block Grant? The CEC established a third-party administrator for the ZEV Battery Manufacturing Block Grant program by issuing a funding opportunity under the CEC’s existing CTP authority. Under existing law, the CTP already includes a list of prioritization criteria for scoring applications and workforce considerations. While this block grant was issued under the CEC’s CTP authority, it is not clear whether the existing CTP program guidelines would apply to the block grant program. In the absence of program rules that could be amended to incorporate this bill’s labor requirements, this bill may require the CEC to amend or revise its existing contract with CALSTART to set and enforce the bill’s labor requirements.

Related/Prior Legislation

SCR 24 (Bradford, 2023) recognizes the human rights abuses, including child slave labor, occurring in cobalt mines in Africa and resolves that California should take steps to bring a greater proportion of mineral extraction for batteries in-state to reduce the state’s reliance on foreign sources of these minerals. This resolution is currently pending in the Assembly

SB 84 (Gonzalez, 2023) and AB 241 (Reyes, 2023) each extends and revises the CTP to prioritize projects that meet certain air quality improvement goals and provide equity-based investments in disadvantaged communities. The bills have specified that at least 50 percent of CTP monies must be allocated for certain types of projects, including programs that promote ZEV car-sharing in low-income and disadvantaged communities. SB 84 is pending in the Senate Transportation Committee, and AB 241 is pending in the Assembly Transportation Committee.

SB 589 (Hueso, Chapter 732, Statutes of 2021) expanded the types of projects eligible for funding from the CTP to include projects that develop in-state supply chains and the workforce for raw materials and components needed for ZEV manufacturing. The bill also expanded the groups the CEC must consult as part of CTP workforce development efforts.

AB 1657 (E. Garcia, Chapter 271, Statutes of 2020) authorized the CEC to convene a blue ribbon commission on lithium extraction in California and submit a report to the Legislature by October 1, 2022, which must include findings and recommendations from the blue ribbon commission regarding actions to develop lithium extraction from geothermal brines.

AB 2127 (Ting, Chapter 365, Statutes of 2017) required the CEC to conduct a statewide assessment of the EV charging infrastructure needed to support the levels of EV adoption required for the state to meet its goals of putting at least five million ZEV on California roads by 2030 and of reducing emissions of GHG to 40 percent below 1990 levels by 2030.

AB 1697 (Bonilla, Chapter 446, Statutes of 2016) added prioritization criteria for the CTP to prioritize projects that transition workers to the alternative and renewable fuel and vehicle technology sector. The bill also added criteria for workforce development programs eligible for CTP funding.

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

According to the Senate Appropriations Committee:

• To the extent that this bill would require the CEC to amend or revise its existing contract with its third-party administrator CALSTART to set and enforce the bill’s labor requirements, it could result in unknown but potentially significant costs (Alternative and Renewable Fuel and Vehicle Technology [ARFVT] fund).
• Unknown but likely minor and absorbable costs (ARFVT fund) for the CEC to perform new actions required by this bill with regard to implementing the block grant agreement.

SUPPORT: (Verified 5/18/23)

United Auto Workers (source)

California Environmental Voters

California Labor Federation

California Teamsters Public Affairs Council

Jobs to Move America

Natural Resources Defense Council

Sierra Club California

Sparkz, Inc.

United Auto Workers-Region 6

OPPOSITION: (Verified 5/18/23)

None received

ARGUMENTS IN SUPPORT: According to the author:

On both the federal and state level, there have been significant investments in providing quality, good paying jobs while establishing the battery manufacturing industry and transitioning to a clean energy future. To meet the clean energy goals outlined in SB 100 (de Leon, 2018), SB 1020 (Laird, 2022), and the EV adoption targets in the California Air Resources Board’s Scoping Plan, California will need to manufacture and purchase large amounts of lithium batteries. As California increases its use and manufacturing of zero-emission vehicles, it is imperative that state incentives supporting this industry also support high quality, equitable jobs.

Historically marginalized communities and workers in the manufacturing industry are most impacted by the transition toward a non-fossil fuel future and would most benefit from additional high road job transition support.

SB 322 will establish a ranking system to prioritize businesses who establish a workforce plan to employ individuals with employment barriers when applying for the Zero-Emission Vehicle Battery Manufacturing Grant. By doing so, this bill will simultaneously support business development and workers in underserved communities with high paying, stable jobs as California leads the transition to a green economy.

Prepared by: Sarah Smith / E., U. & C. / (916) 651-4107

5/20/23 12:44:28

**** END ****

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 322 (Becker) - Zero-Emission Vehicle Battery Manufacturing Block Grants Program

Bill Summary:

This bill would establish labor preferences that the California Energy Commission (CEC) and any third-party administrator must use when awarding funds for the Zero-Emission Vehicle (ZEV) Battery Manufacturing Block Grants Program.

Fiscal Impact:

• To the extent that this bill would require the CEC to amend or revise its existing contract with its third-party administrator CALSTART to set and enforce the bill’s labor requirements, it could result in unknown but potentially significant costs (Alternative and Renewable Fuel and Vehicle Technology [ARFVT] fund).
• Unknown but likely minor and absorbable costs (ARFVT fund) for the CEC to perform new actions required by this bill with regard to implementing the block grant agreement.

Background:

CEC’s ZEV Battery Manufacturing Block Grant. The Budget Acts of 2021 and 2022 provided the CEC with funding to administer a block grant program to fund in-state manufacturing of ZEV battery electric vehicle (EV) components. While the CEC received funding to administer up to $100 million for the block grant, the CEC issued a funding opportunity for a third-party administrator to oversee an initial $25 million block grant program. In December 2022, the CEC awarded the administration of the $25 million block grant to CALSTART for the PowerForward program.

Proposed Law:

This bill would establish labor preferences that the CEC and any third-party administrator must use when awarding funds for the ZEV Battery Manufacturing Block Grants Program. Specifically, this bill would:

1. Establish a workforce plan that the CEC and any third-party administrator must use when awarding funds for the ZEV Battery Manufacturing Block Grants Program.
   
2. Require block grant applicants to do all of the following in order to obtain a subsidy from the ZEV Battery Manufacturing Block Grants Program:
   
   1. Include a specified environmental safety plan in the block grant application that identifies procedures for safe handling of materials, employee testing for chemical exposure, and environmental testing.
      
   2. Include a workforce plan that requires specified commitments from the employer, including commitments to pay a living wage, hire individuals with employment barriers for at least 30 percent of its workforce, and offer employment to individuals in approved apprenticeships or offer specified training or compensated education. Applicants may satisfy the commitment to hire individuals with employment barriers by showing that the employer has made a good faith effort to hire those individuals.
      
   3. For applicants with more than five employees, attest that the applicant has entered into a labor peace agreement covering its employees. Applicants that have not entered into a labor peace agreement must indicate whether they will enter into and abide by a labor peace agreement with any union that communicates its interest in representing any classification of the applicants’ employees.
      
   4. Include in the application any current collective bargaining agreement between the applicant and a labor organization representing the project’s employees.
      
3. Require that each grant application be scored out of 100 points for grantees who pledge to do the following. An applicant that scores 80 point would be eligible for a grant.
   1. Pay a living wage (20 points)
   2. Create an employee growth plan (20 points).
   3. Create and report on safe and healthy working conditions (20 points).
   4. Consistently comply with workplace laws and regulations (20 points).
   5. Agree to labor peace agreements or collective bargaining opportunities for workers (20 points).
      
4. Establish high road standards for block grant recipients and prohibits any awardee that violates specified existing labor, employment, and antidiscrimination laws from obtaining a subsidy through the program.
   
5. Require the CEC and any third-party administrator to adopt an annual reporting schedule for block grant awardees to submit documentation demonstrating their compliance with this bill. and specifies penalties for non-compliant awardees, including awardees who fail to report compliance documentation.
   
6. Authorize the CEC and any third-party administrator to adopt procedures and criteria to supplement the bill’s requirements.
   
7. Define certain terms for the purposes of the bill.
8. Make Legislative findings and declarations and state Legislative intent to support the creation of equitable high-quality battery manufacturing jobs in California through the enactment and implementation of this bill.

This bill would establish labor requirements for the ZEV Battery Manufacturing Block Grant Program. This bill would establish a number of workforce and labor requirements for applicants seeking subsidies from the ZEV Battery Manufacturing Block Grant Program. The establishment of labor and occupational health and safety requirements are consistent with efforts to ensure that in-state battery manufacturing does not create exploitative conditions occurring in other parts of the world where battery components are mined and processed. Cobalt is a major component of many rechargeable batteries, and more than half of the world’s known supply of cobalt is located in mines in the Democratic Republic of Congo. These mines have been the site of substantial human rights abuses, including slavery. As California seeks to maximize its domestic battery manufacturing and lithium extraction in the Salton Sea, stakeholders are seeking mechanisms to ensure that domestic mineral extraction and battery supply chains do not replicate exploitative labor and environmental conditions. The federal government is also seeking to align tax incentives for EV batteries to domestic mineral extraction and processing. The Inflation Reduction Act of 2022 (IRA) aims to provide tax credits for EV manufacturing using minerals sourced within the United States. Under the IRA, an EV would need to have a battery in which at least 80 percent of the market value of its minerals are sourced domestically to qualify for the tax credit.

How will the CEC incorporate these labor requirements into the existing ZEV Battery Manufacturing Block Grant? The CEC established a third-party administrator for the ZEV Battery Manufacturing Block Grant program by issuing a funding opportunity under the CEC’s existing CTP authority. Under existing law, the CTP already includes a list of prioritization criteria for scoring applications and workforce considerations. While this block grant was issued under the CEC’s CTP authority, it is not clear whether the existing CTP program guidelines would apply to the block grant program. In the absence of program rules that could be amended to incorporate this bill’s labor requirements, this bill may require the CEC to amend or revise its existing contract with CALSTART to set and enforce the bill’s labor requirements.

Related Legislation:

SCR 24 (Bradford, 2023) recognizes the human rights abuses, including child slave labor, occurring in cobalt mines in Africa and resolves that California should take steps to bring a greater proportion of mineral extraction for batteries in-state to reduce the state’s reliance on foreign sources of these minerals.

SB 84 (Gonzalez, 2023) and AB 241 (Reyes, 2023) would each extend and revise the CTP to prioritize projects that meet certain air quality improvement goals and provide equity-based investments in disadvantaged communities. The bill would have specified that at least 50 percent of CTP monies must be allocated for certain types of projects, including programs that promote ZEV car-sharing in low-income and disadvantaged communities.

SB 589 (Hueso, Chapter 732, Statutes of 2021) expanded the types of projects eligible for funding from the CTP to include projects that develop in-state supply chains and the workforce for raw materials and components needed for ZEV manufacturing. The bill also expanded the groups the CEC must consult as part of CTP workforce development efforts.

AB 1657 (E. Garcia, Chapter 271, Statutes of 2020) authorized the CEC to convene a blue ribbon commission on lithium extraction in California and submit a report to the Legislature by October 1, 2022, which must include findings and recommendations from the blue ribbon commission regarding actions to develop lithium extraction from geothermal brines.

AB 2127 (Ting, Chapter 365, Statutes of 2017) required the CEC to conduct a statewide assessment of the EV charging infrastructure needed to support the levels of EV adoption required for the state to meet its goals of putting at least five million ZEV on California roads by 2030 and of reducing emissions of GHG to 40 percent below 1990 levels by 2030.

AB 1697 (Bonilla, Chapter 446, Statutes of 2016) added prioritization criteria for the CTP to prioritize projects that transition workers to the alternative and renewable fuel and vehicle technology sector. The bill also added criteria for workforce development programs eligible for CTP funding.

Staff Comments:

Since a portion of each project that is funded through the ZEV Battery Manufacturing Grant Program could have some additional costs associated with meeting new labor requirements as a result of this bill, the practical impact of this change may be that there is an incremental decrease in ZEV battery manufacturing. For example, if a portion of a project award for ZEV battery manufacturing is dedicated to establishing workforce plans or creating an employee growth plan, fewer batteries may be manufactured.

-- END --

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Dave Cortese, Chair

2023 - 2024 Regular

Bill No: SB 322 Hearing Date: April 26, 2023

SUBJECT: Zero-Emission Vehicle Battery Manufacturing Block Grants Program

KEY ISSUE

Should the Legislature establish labor preferences that the California Energy Commission (CEC) and a third-party administrator must use when awarding funds for the Zero-Emission Vehicle (ZEV) Battery Manufacturing Block Grants Program?

ANALYSIS

Existing law:

1. Establishes the Clean Transportation Program (CTP) at the CEC to provide grants, loans, and other funding opportunities to develop and deploy innovative fuel and vehicle technologies to support California’s climate change policies.
   
   1. Establishes CTP grant prioritization criteria to include, but not be limited to, a project’s ability to reduce certain air pollutants, provide in-state economic benefits, attract non-state matching funds, and deploy projects in nonattainment areas pursuant to the federal Clean Air Act.
      
   2. Specifies the types of projects eligible for funding from the CTP, including, but not limited to projects that develop and deploy alternative and renewable fuels, ZEV infrastructure and technologies, programs that help commercialize ZEV and alternative fuel vehicles, and workforce development projects that transition workers from fossil fuel industries to clean transportation jobs. (Health and Safety Code §44272)
2. Allocates a portion of smog abatement fees to fund the CTP and sunsets the fee on January 1, 2024. (Health and Safety Code §44060.5)
   
3. Defines “high road” as a set of economic and workforce development strategies to achieve economic growth, economic equity, shared prosperity and a clean environment. The strategies include, but are not limited to, interventions that improve job quality and job access, including for women and people from underserved and underrepresented populations; meet the skill and profitability needs of employers, and; meet the economic, social, and environmental needs of the community. (Unemployment Insurance Code §14005(r))
   
4. Allows a Public Entity to enter into or require contractors to enter into a project labor agreement if it includes the following provisions:
   
   1. The agreement prohibits discrimination based on race, national origin, religion, sex, sexual orientation, political affiliation, or membership in a labor organization in hiring and dispatching workers for the project.
      
   2. The agreement permits all qualified contractors and subcontractors to bid for and be awarded work on the project without regard to whether they are otherwise parties to collective bargaining agreements.
      
   3. The agreement contains an agreed-upon protocol concerning drug testing for workers who will be employed on the project.
      
   4. The agreement contains guarantees against work stoppages, strikes, lockouts, and similar disruptions of the project.
      
   5. The agreement provides that disputes arising from the agreement shall be resolved by a neutral arbitrator. (PCC §2500)
      
5. Defines “Labor peace agreement” to mean an agreement between an employer and any bona fide labor organization that, at a minimum, protects the state’s proprietary interests by prohibiting labor organizations and members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the applicant’s business. In exchange, the employer has agreed not to disrupt efforts by the bona fide labor organization to communicate with, and attempt to organize and represent, the employer’s employees. (BPC §26001)
   
6. Defines “skilled and trained workforce” to include, among other criteria, skilled journeypersons who are paid at least a rate equivalent to the applicable prevailing hourly wage rate. (HSC § 25536.7)

This bill:

1. Establishes a workforce plan that the CEC and any third-party administrator must use when awarding funds for the ZEV Battery Manufacturing Block Grants Program.
   
2. Requires block grant applicants to do all of the following in order to obtain a subsidy from the ZEV Battery Manufacturing Block Grants Program:
   
   1. Include a specified environmental safety plan in the block grant application that identifies procedures for safe handling of materials, employee testing for chemical exposure, and environmental testing.
      
   2. Include a workforce plan that requires specified commitments from the employer, including commitments to pay a living wage, hire individuals with employment barriers for at least 30 percent of its workforce, and offer employment to individuals in approved apprenticeships or offer specified training or compensated education. Applicants may satisfy the commitment to hire individuals with employment barriers by showing that the employer has made a good faith effort to hire those individuals.
      
   3. For applicants with more than five employees, attest that the applicant has entered into a labor peace agreement covering its employees. Applicants that have not entered into a labor peace agreement must indicate whether they will enter into and abide by a labor peace agreement with any union that communicates its interest in representing any classification of the applicants’ employees.
      
   4. Include in the application any current collective bargaining agreement between the applicant and a labor organization representing the project’s employees.
      
3. Requires that each grant application be scored out of 100 points for grantees who pledge to do the following. An applicant that scores 80 point would be eligible for a grant.
   
   1. Pay a living wage (20 points).
      
   2. Create an employee growth plan (20 points).
      
   3. Create and report on safe and healthy working conditions (20 points).
      
   4. Consistently comply with workplace laws and regulations (20 points).
      
   5. Agree to labor peace agreements or collective bargaining opportunities for workers (20 points).
      
4. Establishes high road standards for block grant recipients and prohibits any awardee that violates specified existing labor, employment, and antidiscrimination laws from obtaining a subsidy through the program.
   
5. Requires the CEC and any third-party administrator to adopt an annual reporting schedule for block grant awardees to submit documentation demonstrating their compliance with this bill. and specifies penalties for non-compliant awardees, including awardees who fail to report compliance documentation.
   
6. Authorizes the CEC and any third-party administrator to adopt procedures and criteria to supplement the bill’s requirements.
   
7. Defines, for the purpose of this bill:
   
   1. “Applicant” as a private entity or entities that apply, bid, or seek qualification for a covered financial subsidy pursuant to the program.
      
   2. “Awardee” as a private entity that has been awarded a covered financial subsidy pursuant to the program.
      
   3. “Covered financial subsidy” as a grant awarded by the relevant public agency for the development of battery production capacity, improvement of battery production methods, or remediation of environmental effects of battery production.
      
   4. “Individual with employment barriers” as an individual with any characteristic that substantially limits the individual’s ability to obtain employment, including, but not limited to, indicators of poor work history, lack of work experience, employment in nontraditional occupations, long-term unemployment, lack of educational or occupational skills attainment, dislocation from high-wage and high-benefit employment, including those displaced or dislocated from jobs in the fossil fuel economy, low levels of literacy or English proficiency, disability status, or welfare dependency.
      
   5. “Labor peace agreement” as an agreement between an applicant and any union that, at minimum, includes all of the following:
      1. A prohibition on the union and its members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the applicant’s business.
      2. A prohibition on the applicant from engaging in a lockout of its employees.
      3. An agreement by the applicant not to disrupt efforts by the union to communicate with, and attempt to organize and represent, the applicant’s employees.
      4. Union access at reasonable times to areas in which the applicant’s employees work for the purpose of meeting with employees to discuss their rights to representation, employment rights under state law, and terms and conditions of employment.
      5. A methodology for determining whether the union has been chosen as the representative of particular job classifications of the applicant.
         
   6. “Living wage” as at least 167 percent of the state minimum wage set by state statute or local ordinance, if higher. For the state minimum wage, it would currently be $25 per hour.
      
   7. “Program” as the ZEV Battery Manufacturing Block Grants Program administered by the relevant public agency.
      
   8. “Relevant public agency” as the CEC and any entities with which it may contract to award or administer covered financial subsidies, evaluate applicants, or monitor compliance with conditions of covered financial subsidies pursuant to the program.
      
   9. “Subcontractor” as a private entity performing a portion of the work of the awardee through a subcontract or subgrant.
      
   10. “Union” as a bona fide labor organization that is the recognized or certified exclusive bargaining representative of the employees of an employer. A labor organization is bona fide if:
       1. The labor organization represents employees in California as to wages, hours, and working conditions;
       2. The labor organization’s officers have been elected by secret ballot or otherwise in a manner consistent with federal law, and;
       3. The labor organization is free of domination or interference by any employer or association of employers and has not received improper assistance or support from an employer or association of employers.
          
8. Makes Legislative findings and declarations and states Legislative intent to support the creation of equitable high-quality battery manufacturing jobs in California through the enactment and implementation of this bill.
   

COMMENTS

1. Background

Federal Inflation Reduction Act

The Inflation Reduction Act of 2022 (IRA) provides tax credits for electric vehicle (EV) manufacturing using minerals sourced within North America. Under the IRA, an EV will need to have a battery in which at least 80 percent of the market value of its minerals are sourced in North America to qualify for the tax credit. Beginning in 2025, EVs cannot have any battery components or critical minerals sourced from a foreign entity of concern in order to qualify for the maximum available tax credit for the purchase of an EV.

High Road Standards
Last year, the Legislature passed and the Governor signed SB 674 (Durazo, Chapter 875, Statutes of 2022), which established the High Road Jobs in Transportation-Related Public Contracts and Grants Pilot Program to support the creation of equitable high quality transportation and related manufacturing and infrastructure jobs. The bill required the Department of General Services and the Department of Transportation, and their contractors, to adhere to High Road Jobs Standards on covered contracts worth $10 million or more.

CEC ZEV Battery Manufacturing Block Grant Program

The Budget provided the CEC with funding to administer a block grant program to fund in-state manufacturing of EV components. While the CEC received funding to administer up to $100 million for the block grant, the CEC issued a funding opportunity for a third-party nonprofit administrator to oversee an initial $25 million block grant program (GFO-21-606). In December 2022, the CEC awarded the administration of the $25 million block grant to CALSTART for the PowerForward project, which will design and implement the block grant to promote in-state battery manufacturing for ZEVs and related infrastructure. CALSTART is a national nonprofit that was founded in 1992.

Defining Labor Peace Agreement

The definition of “Labor Peace Agreement” in this bill was modelled after the definition in SB 674 (Durazo - Chapter 875, Statutes of 2022) with a few of distinctions. The rationale is to protect the state’s proprietary and economic interests in performing the work without interruption due to the economic effects of a labor dispute. First, the author and sponsor chose to clarify the union shall have reasonable access to employees at reasonable times in order to communicate with and organize employees. Second, the prohibition on the applicant from engaging in a lockout of its employees was specified. Finally, the bill specifies that a labor peace agreement shall include a methodology for determining whether the union has been chosen as the representative of particular job classifications of the applicant. According to the sponsor, the latter provision is in response to recent lack of clarity in another sector of industry in California.

Status of the Industry in California

Since the passage of AB 794 (Carillo - Chapter 748, Statutes of 2021), which attached labor standards to eligibility for various clean vehicle incentive programs administered by the California Air Resources Board for fleet purchasers of new drayage or short-haul trucks, dozens of battery manufacturers have opened with more coming on line every day. The CEC estimates California is currently home to 55 ZEV and ZEV related manufacturers.

According to recommendations from the July 2021 Bluegreen Alliance report Advancing High Road Standards in Zero-Emission Transportation “to achieve the state’s economic, climate, and equity goals at the least social and economic cost, high road standards elevating job quality are necessary. With regard to hiring and wages, the report recommends offering industry-specific or economy-wide wage and benefit standards that significantly exceed the California minimum wage to meet industry prevailing wages.

2. Need for this bill?

According to the author, “To meet the clean energy goals outlined in SB 100 (De Leon, 2018) and SB 1020 (Laird, 2022) and the Electric Vehicle adoption targets in the California Air Resources Board’s Scoping Plan, California will need to manufacture and purchase large amounts of lithium batteries.

Historically marginalized communities and workers in the manufacturing industry are most impacted by the transition toward non-fossil fuel industries and would most benefit from additional high road job transition support. This is exemplified in the Imperial Valley, near the Salton Sea, where there is a surplus of lithium and communities in need of economic opportunities. As California increases its use and manufacturing of zero-emission vehicles, it is imperative that the incentives we create to support this industry also support high quality, equitable jobs.

The current Zero Emission Vehicle Battery Manufacturing Block Grants Program, for example, lacks guidance on how the program will support goals to provide underrepresented communities with high quality jobs.

SB 322 will establish a ranking system to prioritize businesses who establish a workforce plan to employ individuals with employment barriers when applying for the Zero-Emission Vehicle Battery Manufacturing Grant.”

3. Proponent Arguments:

The sponsor, United Auto Workers Region 6 states “The auto industry is a cornerstone of manufacturing jobs in the United States, employing nearly 20,000 people in California and hundreds of thousands of people nationally. But job quality in the auto industry has been compromised by offshoring, reliance on temporary workers, attacks on workers’ freedom of association and weakened health and safety enforcement.

UAW members are fighting for a just transition to ensure that changes in the U.S. automotive industry result in quality jobs that benefit workers and their communities. California’s investments in EV and battery manufacturing offer a critical opportunity to revitalize U.S. industry and transition workers who build ICE vehicles or whose jobs are in the ICE supply chain to quality jobs in the EV supply chain that promote economic and racial justice.

California has budgeted substantial funding, including $25,000,000 in grants related to zero-emission vehicle battery manufacturing. The state has the responsibility to ensure such financial support offered to businesses to produce batteries domestically provides for the creation of durable, high quality jobs, labor standards, workers’ rights, career pathways, and community benefits.

UAW members know that the transition to zero emission vehicles presents an opportunity to preserve and grow high quality jobs in the EV supply chain, including in battery manufacturing. SB 322 (Becker) capitalizes on this opportunity by ensuring that battery manufacturers receiving public funds follow our laws, protect the safety of workers, and provide family-sustaining jobs for workers that serve as engines of economic development for their communities. These policies will encourage high road employment practices in highly strategic sectors of California’s economy.

SB 322 will link climate goals with high road job creation by conditioning eligibility for grant funding on complying with labor, workplace safety, and anti-discrimination and leave laws, and proper classification of workers. To ensure that the development of the battery industry also protects the air, soil, and water that our communities rely on, the bill also requires applicants to submit an environmental safety plan.

SB 322 amplifies the impact of public funds used to meet its climate goals by conditioning that support on also meeting employment objectives like providing quality jobs and promoting racial justice by ensuring opportunities in communities of working people of color. It does this by requiring applicants to commit to hiring workers with employment barriers and to complete a workforce application. This competitive scoring system evaluates applicants based on their payment of living wages, investments in training programs, compliance with health and safety and labor laws, and adoption of labor peace agreements. By attaching high road standards to public subsidies and creating a competitive process that prioritizes job quality, California can reduce income and racial inequality while also reducing emissions.”

4. Opponent Arguments:

None Received

5. Double Referral

This bill was first referred to the Senate Committee on Environmental Quality, where it passed 11-3.

6. Prior Legislation

SB 84 (Gonzalez, 2023) and AB 241 (Reyes, 2023) would each extend and revise the CTP to prioritize projects that meet certain air quality improvement goals and provide equity-based investments in disadvantaged communities. The bill would have specified that at least 50 percent of CTP monies must be allocated for certain types of projects, including programs that promote ZEV car-sharing in low-income and disadvantaged communities. As of April 21, 2023, SB 84 is pending in the Senate Committee on Environmental Quality and AB 241 is pending in the Assembly Committee on Natural Resources.

SB 740 (Cortese, 2023) would extend labor requirements to contracts awarded, extended, or renewed on or after January 1, 2024, by an owner or operator of a stationary source that is engaged in manufacturing hydrogen, biofuels, lithium batteries, or certain specified chemicals, in mining or beneficiating lithium, or in capturing, sequestering, or using carbon dioxide in specified conditions.

SB 822 (Durazo, 2023) would establish an Interagency High Road Team (Team) and charge the Team with creating high road evaluation metrics, including but not limited to, a set of principles, procedures, scoring rubrics, and contract application metrics pertaining to contractor applicant employment practices, including but not limited to, practices related to a contractor’s employee wages, benefits, and working conditions, and the contractor’s record of compliance with labor laws.

SCR 24 (Bradford, 2023) recognizes the human rights abuses, including child slave labor, occurring in cobalt mines in Africa and resolves that California should take steps to bring a greater proportion of mineral extraction for batteries in-state to reduce the state’s reliance on foreign sources of these minerals. This resolution is currently pending in the Assembly.

SB 674 (Durazo - Chapter 875, Statutes of 2022) established the High Road Jobs in Transportation-Related Public Contracts and Grants Pilot Program to support the creation of equitable high-quality transportation and related manufacturing and infrastructure jobs. SB 674 required a covered public contract for the acquisition of zero-emission transit vehicles or electric vehicle supply equipment valued at $10 million or more, to incorporate high road job standards.

AB 680 (Burke - Chapter 746, Statutes of 2021) required increased workforce standards on projects which utilize Greenhouse Gas Reduction Fund grants, including the payment of prevailing wage for construction projects.

SB 589 (Hueso - Chapter 732, Statutes of 2021) expanded the types of projects eligible for funding from the CTP to include projects that develop in-state supply chains and the workforce for raw materials and components needed for ZEV manufacturing. The bill also expanded the groups the CEC must consult as part of CTP workforce development efforts.

AB 794 (Carillo - Chapter 748, Statutes of 2021) attached labor standards to eligibility for various clean vehicle incentive programs administered by the California Air Resources Board for fleet purchasers of new drayage or short-haul trucks.

AB 1657 (E. Garcia - Chapter 271, Statutes of 2020) authorized the CEC to convene a blue ribbon commission on lithium extraction in California and submit a report to the Legislature by October 1, 2022, which must include findings and recommendations from the blue ribbon commission regarding actions to develop lithium extraction from geothermal brines.

AB 2127 (Ting - Chapter 365, Statutes of 2017) required the CEC to conduct a statewide assessment of the EV charging infrastructure needed to support the levels of EV adoption required for the state to meet its goals of putting at least five million ZEV on California roads by 2030 and of reducing emissions of GHG to 40 percent below 1990 levels by 2030.

AB 1697 (Bonilla - Chapter 446, Statutes of 2016) added prioritization criteria for the CTP to prioritize projects that transition workers to the alternative and renewable fuel and vehicle technology sector. The bill also added criteria for workforce development programs eligible for CTP funding.

SUPPORT

United Auto Workers Region 6 (Sponsor)

California Environmental Voters
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Jobs to Move America
Natural Resources Defense Council
Sierra Club
Sparkz, INC.

OPPOSITION

None received

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Steven Bradford, Chair

2023 - 2024 Regular

Bill No: Hearing Date: 4/10/2023

SUBJECT:

DIGEST: This bill establishes labor preferences that the California Energy Commission (CEC) and any third-party administrator must use when awarding funds for the Zero-Emission Vehicle (ZEV) Battery Manufacturing Block Grants Program.

ANALYSIS:

Existing law:

1. Establishes the Clean Transportation Program (CTP) at the CEC to provide grants, loans, and other funding opportunities to develop and deploy innovative fuel and vehicle technologies to support California’s climate change policies. (Health and Safety Code §44272(a))
2. Establishes CTP grant prioritization criteria. These criteria include, but are not limited to, a project’s ability to reduce certain air pollutants, provide in-state economic benefits, attract non-state matching funds, and deploy projects in non-attainment areas pursuant to the federal Clean Air Act. The CEC must rank projects based on each project’s ability to meet the prioritization criteria. (Health and Safety Code §44272(c-d))
3. Specifies the types of projects eligible for funding from the CTP, including, but not limited to projects that develop and deploy alternative and renewable fuels, ZEV infrastructure and technologies, programs that help commercialize ZEV and alternative fuel vehicles, and workforce development projects that transition workers from fossil fuel industries to clean transportation jobs. (Health and Safety Code §44272 (e))
4. Allocates a portion of smog abatement fees to fund the CTP and sunsets the fee on January 1, 2024. (Health and Safety Code §44060.5)

This bill:

1. Establishes various definitions for the purposes of administering the ZEV Battery Manufacturing Block Grants Program, including but not limited to, the following definitions:
   1. “Labor peace agreement” means an agreement between an applicant and any union that includes at least the following:
      1. A prohibition on the union and its members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the applicant’s business.
      2. A prohibition on the applicant from engaging in a lockout of its employees.
      3. An agreement by the applicant not to disrupt efforts by the union to communicate with, and attempt to organize and represent, the applicant’s employees.
      4. Union access at reasonable times to areas in which the applicant’s employees work for the purpose of meeting with employees to discuss their rights to representation, employment rights under state law, and terms and conditions of employment.
      5. A methodology for determining whether the union has been chosen as the representative of particular job classifications of the applicant.
   2. “Living wage” means at least 167 percent of the minimum wage set by state statute or local ordinance, if higher.
   3. “Relevant public agency” means the commission and any entities with which it may contract to award or administer covered financial subsidies, evaluate applicants, or monitor compliance with conditions of covered financial subsidies pursuant to the program.
   4. “Subcontractor” means a private entity performing a portion of the work of the awardee through a subcontract or subgrant.
2. Defines “Individual with employment barriers” as an individual with any characteristic that limits the individual’s ability to obtain employment, including indicators of poor work history, lack of work experience, employment in nontraditional occupations, long-term unemployment, lack of educational or occupational skills attainment, dislocation from high-wage and high-benefit employment, including those displaced or dislocated from jobs in the fossil fuel economy, low levels of literacy or English proficiency, disability status, or welfare dependency. This bill specifies a number of individuals and groups included in the definition of “Individual with employment barriers.”
3. Requires block grant applicants to do all of the following in order to obtain a subsidy from the ZEV Battery Manufacturing Block Grants Program:
   1. Include a specified environmental safety plan in the block grant application that identifies procedures for safe handling of materials, employee testing for chemical exposure, and environmental testing.
   2. Include a workforce plan that requires specified commitments from the employer, including commitments to pay a living wage, hire individuals with employment barriers for at least 30 percent of its workforce, and offer employment to individuals in approved apprenticeships or offer specified training or compensated education. Applicants may satisfy the commitment to hire individuals with employment barriers by showing that the employer has made a good faith effort to hire those individuals.

• 1. Attest that the applicant has entered into a labor peace agreement covering its employees. Applicants that have not entered into a labor peace agreement must indicate whether they will enter into and abide by a labor peace agreement with any union that communicates its interest in representing any classification of the applicants’ employees.
  2. Include in the application any current collective bargaining agreement between the applicant and a labor organization representing the project’s employees.

1. Requires the CEC and any third-party administrator to adopt a specified scoring process for evaluating applicants. This bill requires this scoring process to include five specified labor components, each worth 20 points. Applicants may receive a maximum score of 20 points, and no applicant that receives less than 80 points may receive an award from the block grant program.
2. Establishes certain workforce goals for recipients of block grant awards and prohibits any awardee that violates specified existing labor, employment, and antidiscrimination laws from obtaining a subsidy through the program.
3. Requires the CEC and any third-party administrator to adopt an annual reporting schedule for block grant awardees to submit documentation demonstrating their compliance with this bill. This bill specifies penalties for non-compliant awardees, including awardees who fail to report compliance documentation.
4. Authorizes the CEC and any third-party administrator to adopt procedures and criteria to supplement the bill’s requirements.

Background

CEC’s ZEV Battery Manufacturing Block Grant. The Budget Acts of 2021 and 2022 provided the CEC with funding to administer a block grant program to fund in-state manufacturing of ZEV battery electric vehicle (EV) components. While the CEC received funding to administer up to $100 million for the block grant, the CEC issued a funding opportunity for a third-party administrator to oversee an initial $25 million block grant program. In December 2022, the CEC awarded the administration of the $25 million block grant to CALSTART for the PowerForward program.

Bill would establish labor requirements for the ZEV Battery Manufacturing Block Grant Program. This bill establishes a number of workforce and labor requirements for applicants seeking subsidies from the ZEV Battery Manufacturing Block Grant Program. These requirements, include establishing workforce plans to create high-road employment opportunities and provide employment options for workers who have been economically displaced or face certain employment barriers. This bill also includes requirements for awardees to have plans to ensure that battery manufacturing projects funded by the block grant do not create hazardous working environments for employees.

The establishment of labor and occupational health and safety requirements are consistent with efforts to ensure that in-state battery manufacturing does not create exploitative conditions occurring in other parts of the world where battery components are mined and processed. Cobalt is a major component of many rechargeable batteries, and more than half of the world’s known supply of cobalt is located in mines in the Democratic Republic of Congo. These mines have been the site of substantial human rights abuses, including slavery. As California seeks to maximize its domestic battery manufacturing and lithium extraction in the Salton Sea, stakeholders are seeking mechanisms to ensure that domestic mineral extraction and battery supply chains do not replicate exploitative labor and environmental conditions. The federal government is also seeking to align tax incentives for EV batteries to domestic mineral extraction and processing. The Inflation Reduction Act of 2022 (IRA) aims to provide tax credits for EV manufacturing using minerals sourced within the United States. Under the IRA, an EV would need to have a battery in which at least 80 percent of the market value of its minerals are sourced domestically to qualify for the tax credit.

How will the CEC incorporate these labor requirements into the existing ZEV Battery Manufacturing Block Grant? The CEC established a third-party administrator for the ZEV Battery Manufacturing Block Grant program by issuing a funding opportunity under the CEC’s existing CTP authority. Under existing law, the CTP already includes a list of prioritization criteria for scoring applications and workforce considerations. While this block grant was issued under the CEC’s CTP authority, it is not clear whether the existing CTP program guidelines would apply to the block grant program. In the absence of program rules that could be amended to incorporate this bill’s labor requirements, this bill may require the CEC to amend or revise its existing contract with CALSTART to set and enforce the bill’s labor requirements.

Need for amendments. As currently drafted, this bill defines an “individual with employment barriers,” and provides non-exclusive list of groups and individuals who meet this definition. Since the bill’s definition of “individual with employment barriers” is not exclusive and broadly encompasses individuals with workforce challenges, it is not clear that the subsequent enumeration of certain groups and individuals is necessary. As a result, the author and committee may wish to strike the enumerated list and retain the broad definition of “individual with employment barriers.”

Double Referral. This bill is also referred to the Senate Committee on Labor, Public Employment and Retirement.

Prior/Related Legislation

SCR 24 (Bradford, 2023) recognizes the human rights abuses, including child slave labor, occurring in cobalt mines in Africa and resolves that California should take steps to bring a greater proportion of mineral extraction for batteries in-state to reduce the state’s reliance on foreign sources of these minerals. This resolution is currently pending in the Assembly

SB 84 (Gonzalez, 2023) and AB 241 (Reyes, 2023) would each extend and revise the CTP to prioritize projects that meet certain air quality improvement goals and provide equity-based investments in disadvantaged communities. The bill would have specified that at least 50 percent of CTP monies must be allocated for certain types of projects, including programs that promote ZEV car-sharing in low-income and disadvantaged communities. SB 84 is pending in the Senate Transportation Committee, and AB 241 is pending in the Assembly Transportation Committee.

SB 589 (Hueso, Chapter 732, Statutes of 2021) expanded the types of projects eligible for funding from the CTP to include projects that develop in-state supply chains and the workforce for raw materials and components needed for ZEV manufacturing. The bill also expanded the groups the CEC must consult as part of CTP workforce development efforts.

AB 1657 (E. Garcia, Chapter 271, Statutes of 2020) authorized the CEC to convene a blue ribbon commission on lithium extraction in California and submit a report to the Legislature by October 1, 2022, which must include findings and recommendations from the blue ribbon commission regarding actions to develop lithium extraction from geothermal brines.

AB 2127 (Ting, Chapter 365, Statutes of 2017) required the CEC to conduct a statewide assessment of the EV charging infrastructure needed to support the levels of EV adoption required for the state to meet its goals of putting at least five million ZEV on California roads by 2030 and of reducing emissions of GHG to 40 percent below 1990 levels by 2030.

AB 1697 (Bonilla, Chapter 446, Statutes of 2016) added prioritization criteria for the CTP to prioritize projects that transition workers to the alternative and renewable fuel and vehicle technology sector. The bill also added criteria for workforce development programs eligible for CTP funding.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

United Auto Workers-Region 6, Sponsor

California Labor Federation
California Teamsters Public Affairs Council
Jobs to Move America
Natural Resources Defense Council
Sierra Club

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

On both the federal and state level, there have been significant investments in providing quality, good paying jobs while establishing the battery manufacturing industry and transitioning to a clean energy future. To meet the clean energy goals outlined in SB 100 (de Leon, 2018), SB 1020 (Laird, 2022), and the EV adoption targets in the California Air Resources Board’s Scoping Plan, California will need to manufacture and purchase large amounts of lithium batteries. As California increases its use and manufacturing of zero-emission vehicles, it is imperative that state incentives supporting this industry also support high quality, equitable jobs.

Historically marginalized communities and workers in the manufacturing industry are most impacted by the transition toward a non-fossil fuel future and would most benefit from additional high road job transition support.

SB 322 will establish a ranking system to prioritize businesses who establish a workforce plan to employ individuals with employment barriers when applying for the Zero-Emission Vehicle Battery Manufacturing Grant. By doing so, this bill will simultaneously support business development and workers in underserved communities with high paying, stable jobs as California leads the transition to a green economy.

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