Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy

Energy will begin in 60 seconds. Senate Budget Subcommittee Number 2 on Resources, Environmental Protection, and Energy will come to order. Good morning. The Senate continues to welcome the public both in person and on the teleconference line. For individuals wishing to provide public content, today's participant number is 877-226-8163, access Code 694-8930. We're holding our Committee hearings in the O Street Building. Ask all Members of Subcommitee to be present at 2200 so we can establish quorum and begin our hearing.

We have 22 issues on today's agenda. We'll be discussing all the issues listed in discussion section of the agenda. After that, we will have public comment on all the items and then we'll have a vote only calendar on 1-16. Before we begin, let's establish a quorum. Consultant, please call the roll.

[Roll Call]

A quorum has been established. We're going to first start with discussion item 17 on the cap and trade spending plan. So I invite everybody up who's going to participate in this important discussion. Excellent. I think we will have the Air Resources Board start off. Or Department of Finance. Department of Finance. Okay, go ahead. Please, Mr. Merritt.

Good morning, Chair Becker and Members. Brandon Merritt with the Department of Finance. The Administration proposes a $2.8 billion cap and trade spending plan in 2023-24, which you can find on page 11 of your agenda. The spending plan is based on the estimated Greenhouse Gas Reduction Fund, or GGRF, revenues that are a result of auction proceeds from four quarterly auctions per fiscal year and assumes all current and advanced allowance to sell at the floor price.

Similar to historical practices, this methodology is used by the Administration to prevent speculation on upcoming changes related to the floor price. This also prevents sending any form of market signal and helps maintain the integrity of the election process of the auction process. It's important to note that we do update our estimates to reflect actual revenues after auctions occur. The Administration will be evaluating cap and trade revenues for the May Revision and reflect updated revenues at that point.

It's important to note that there are statutory obligations calculated as immediate off the top deductions, in particular the state responsibility area fee backfill, the Manufacturing Tax Credit, and the Healthy and Resilient Forests. Next is the mandatory 65% deduction for continuous appropriations to the following programs, high speed rail, affordable housing and sustainable communities, Transit and Inner City Rail Capital Program, Low Carbon Transit Operations Program, and Safe and Affordable Drinking Water Program.

What remains is 35% of revenues, which are considered discretionary. For the 23-24 Governor's Budget, the Administration exclusively proposes this discretionary pot to backfill General Fund solutions, specifically 250 million towards AB 617 programs and 611 million towards ZEV General Fund solutions split between CARB and CEC. Lastly, as mentioned, during the control, excuse me. Control section 15.114 contains language specifying that any additional discretionary GGRF revenues in the 23-24 fiscal year shall be used as additional backfill for ZEV programs impacted by General Fund reductions. That concludes my presentation, and I, along with my CARB colleagues as needed, am happy to address any questions you may have.

Great. So we'll have the LAO next, I believe.

Great, thank you. So we prepared a handout for today, so you should have this in front of you. I'll walk through it. It's also available on the LAO website for any members of the public who may want to follow along, and there should be copies outside the hearing room. So staff has asked me to give an overview of cap and trade spending. So turning to page one of the handout, the Cap-and-Trade Program is a market based mechanism to reduce emissions by establishing an annual cap on emissions.

It declines over time. CARB issues allowances equal to the cap and entities covered under the program, which include large emitters such as industrial facilities and refineries, purchase allowances to comply. Allowances can also be traded on the open market, and CARB gives some away for free. Entities can also purchase offsets to attain compliance. CARB hosts four of these auctions per year, and revenues are deposited into the Greenhouse Gas Reduction Fund.

And these revenues were authorized with a two thirds vote of the Legislature. So though they're intended for climate activities, they can, in theory be used for other purposes. And in recent years, cap and trade revenues have totaled between three and 4.3 billion per year. So turning to page two, auction revenues are, as I mentioned, intended to support climate activities. There are a number of continuous appropriations, so about 65% of revenue goes to these statutorily authorized appropriations.

Some of the larger buckets you can see here include high speed rail and affordable housing. Additional revenue, so about 30%, is remaining for discretionary expenditures. Some of the larger categories that the Legislature and the Governor have elected to fund in past years include low carbon transportation and forest health programs. And then turning to page three, so you can see here a summary of cap and trade spending by area since the program began generating revenue. So about 19.4 billion has been spent.

And you can also see here that most GGRF funds have focused on activities intended to reduce emissions, mitigating climate change rather than adapting to it. But you can see that some programs, such as forest health, are focused more on adaptation. And you can also see that the majority of revenues have been directed to these continuous expenditures, such as high speed rail. And there's a large focus on transportation and air quality.

So, moving to page four, the Administration develops estimates for emission reductions associated with GGRF expenditures and also prepares cost per ton of carbon reduced. So with these estimates prepared by the Administration, you can see that many programs are less cost effective compared to other programs. So there's quite a wide range of cost effectiveness in terms of emissions reductions, with some programs estimated at $9 per ton and others closer to 160,000 per ton, with most between about $150 and $2,000 per ton.

These are slightly more costly than other major programs, such as cap and trade, the Low Carbon Fuel Standard, and the Renewable Portfolio Standard. Those range from about $30 to $70 per ton. Our office and the State Auditor have also found that emissions reductions are likely overstated. This is because the Administration, in crafting at the estimates, often does not account for the interaction of different incentive programs.

So, keeping this in mind that these estimates are potentially overstated, there are certain programs that are estimated to be more cost effective. You can see these here. They include the Dairy Digester and Agriculture Programs. And turning to page five, it's also worth keeping in mind that there are additional goals that many of these programs serves beyond reducing emissions. So cost effectiveness of reducing greenhouse gas emissions may not necessarily be the sole metric by which to evaluate these programs.

For example, the AB 617 program focuses on reducing air pollution in disadvantaged communities. And then turning to page six. So we heard from the Administration their spending proposal. So I won't go into much detail here, but I'll just emphasize that the Administration is proposing to use all of the discretionary GGRF revenues to backfill reductions in the ZEV package and in the AB 617 Community Air Protection Program.

And then moving to page seven, the Administration is also proposing budget control section language to automatically allocate additional GGRF revenues beyond expectations to ZEV programs and commits out your GGRF revenues. So both in 24-25 and 25-26. So moving to page eight, we have a few issues for your consideration. First, the state will likely have additional GGRF revenues available. So the Administration uses the floor price of allowances to calculate its estimates. But in recent auctions, allowances have sold above the floor price.

So we estimate that both in the current and the budget year total about 800 million more could be available. You may want to consider whether the continuous appropriations continue to reflect legislative priorities, as most of these were established as part of the 2015 budget. And while the Governor is prioritizing ZEV investments, the Legislature may prefer a different mix of funding for this revenue.

The Administration's approach around the GGRF trigger, the budget control section language, would also limit legislative flexibility and oversight of these funds, and we recommend that you reject the trigger approach. We also recommend that you consider the trade offs that the trade offs associated with committing out your GGRF funds now. There could be emergent priorities that the Legislature may have in future years, and this would be an unusual approach to commit out your GGRF revenues now. And finally, last page.

We also recommend that you seek clarity on the fund balance for GGRF, so the Administration has not provided an accurate fund balance. This information could be helpful to get a better sense of the GGRF picture and how much revenue is available. And happy to answer any questions.

Thank you very much. I will have a number of questions here, and then I'll turn over to my colleagues. I want to start with a few comments because this is such an important topic. I'd say that, because these revenues are and are critical for us in reducing greenhouse gases, and in tough budget years, it may be some of the only revenues that we have going forward.

So one of my biggest parties for this Committee is really just trying to make sure that, going forward, that we're spending the money on effective, equitable greenhouse gas reductions. As I mentioned in previous committees, we're reducing emissions right now about 1% a year. We need to be reducing them at 4 to 5% a year. Climate change will be devastating to all Californians, particularly historically marginalized and low income neighborhoods.

And the less successful we are approving aggressive reductions with durable carbon sinks, we are creating even worse heat waves, flooding, intense storms, and agricultural losses for our children than is expected. And we need to demonstrate, as per the bill we passed last year, we get to net zero by 2045 with 85% reductions, while bringing along residents that won't have capital or time to transition. So it's imperative that we're tactical about how we're using these funds to include all Californians in the climate transition.

And currently, as LAO highlighted, these emissions. Sorry. Our funding really are going to a variety of projects that have a variety of great benefits. But I think, as we look going forward in the upcoming years, to think about how we can go back to some of the fundamentals targeting the transition from gas powered vehicles, industrial emissions, accelerating the clean energy transition, decarbonizing buildings, and reducing methane emissions from agriculture, and supporting disadvantaged communities in this transition, as we discussed last week, particularly, say, in the ZEV transition.

So with LAO, you kind of gave an overview of some of the bang for the buck analyses. And I just wanted to just kind of clarify for myself, too. One of the things mentioned in previous LAO reports, as well as mentioned today, is that the California climate investment reduction per dollar measurements that are posted don't necessarily take into account spending from non cap and trade or other regulations that might increase reductions. Can you just elaborate on that for a moment?

Mr. Chair, Ross Brown with the Legislative Analyst Office. Yes, that's an issue that we have highlighted in previous reports, and I think has also been highlighted by the reports from the State Auditor, for example. And the main issue, essentially, is that a lot of the funding through the GGRF goes to fund activities such as zero emission vehicle purchase, for example, where there are other funding sources that might also go to kind of support that, for example, zero emission vehicle purchase, for example, federal funding.

There might be other state regulatory programs that are also kind of encouraging the sale of that vehicle. And so when you sort of consider those other programs that are also kind of supporting that emission reduction activity, you might come up with a GGRF cost per ton estimate that is not entirely accurate once you sort of take some of those other factors into consideration and the interactions between the different programs.

And for CARB, is there a way that you think about that and think about those disparities?

Sure. Happy to take that. My name is Sydney Burgess. I'm a Division Chief with California Air Resources Board. So I represent both kind of the regulatory side and the incentive side. So one thing I like to underscore in these conversations is that when it comes to the emission reductions that are attributed to our regs, that is very precise. We have a state of the art inventory that we refine over time, and we use quite methodically in our regulatory estimates.

On the incentive side, one of the things I think we've all recognized over time is that there are a lot of different efforts going into trying to reduce emissions in this space, a lot of different incentive programs, as Mr. Brown pointed out. And we work over time with stakeholders to try to refine our quantification methodologies. In fact, in the past, we've taken recommendations from LAO on how to do that.

And moving forward, as a result from the Auditor's report, we also have in place a contract with UC Berkeley to help know, parse this out even further. So we're always looking for ways to refine. We have a pretty intensive public process to help inform our quantification methodologies. So this is an area of continuous improvement for us.

In terms of AB 617, I understand some of the revenues are supposed to be going to disadvantaged communities apportioned. How is that implementation of AB 617 going?

Thank you so much for the interest and the question. This is certainly one of our flagship programs when it comes to helping get much needed emission reductions in this space, and particularly from communities that have been most heavily burdened by both toxic air pollutants, criteria pollutants, and, of course, greenhouse gas emissions.

So the way the program works is that AB 617 charged CARB and local air districts with working with communities and stakeholders to help really take communities lead in terms of identifying much needed projects in their space. So what you see coming out of the AB 617 program is really a litany of kind of first of its kind programs. We see multiple air districts partnering to turn over old diesel locomotives and replacing them with tier four locomotives. We see urban greening projects, traffic rerouting studies. Really, this is a program that puts communities in the lead when it comes to identifying what they need most in their community.

Okay, thanks. Just come back to the previous question we mentioned, the Berkeley estimates. When do you expect those?

I'll need to follow up.

Okay.

Yeah. Apologies.

Yeah, that would be good to know. I'm not going to go through each area of current allocation. We just had an oversight hearing on high speed rail the other day. Obviously, that's been a big source of these funds. And our team's discussing with them how they're estimating the vehicle miles traveled or vehicle emissions that will be saved over time. On the Affordable Housing Sustainable Communities Program, which of these programs get the most of the cap and trade funding? Do you have any insights you can share with us on that?

That in particular, we don't have a representative from the HCD with us today, so I think we're going to get back to you with a written response.

Okay, good. Yeah, I'll have some follow up on that. We can discuss going forward. And on the healthy and resilient forests, how are we coordinating with the Natural and Working Lands Plan?

We do have a representative from CAL FIRE who I think is available to answer that question.

Yes, sir. Where would you like me? Behind the screen here?

What would make the most sense? Yeah, that's fine. There's a mic there. Yeah.

Chair Becker, Senator McGuire, and Dahle, it's a pleasure to be here in front of you. Again, Matthew Reischman. I'm the Deputy Director for Natural Resource Management with CAL FIRE. And the short answer is we absolutely support the Natural Working Land strategy within our forest health program and our fire prevention programs, which are the grant programs that we are using to administer those funds. The longer answer is, how do we do that?

And we have built that narrative into our grant guidelines, and they are part of the selection criteria that we are using in order to select grant projects. But it's not just the Natural Working Land strategies. We're also supporting the carbon plan, forest carbon plan, and several of the strategies that are being developed under the Wildfire and Forest Resilience Task Force. So as we select projects, we're looking at projects that are promoting those goals and objectives so that we're all working in a common direction underneath the task force.

Great. Thank you for that. Maybe one other question, I'll turn over to my colleagues on the funding question. I'll have some little more questions about the operations of cap and trade later. Thank you. Just for LAO. So in terms of the Administration's view, is basically kind of locking up some of those revenues in the future, GGRF. And your comment on that again was...

So we recommend that you reject that approach, the budget control section language, or also known as the GGRF trigger. We just find that that would limit legislative flexibility and oversight over the funds in the future. This is not an approach that has been taken before. And should the Legislature want to focus on directing additional dollars that could come in. And as I mentioned, we do estimate that there will be additional GGRF revenues beyond what the Administration is predicting.

The Legislature could always pass a mid-year spending bill and could focus on a variety of issues, including the ZEV package. But we find that this budget control section language would be binding and would ultimately give too much authority to the Administration.

Okay, we will take that into consideration. Again, do my colleagues any questions specifically on funding?

Have a whole bunch. Good morning or good afternoon, I should say. First of all, I want to just make some comments. For the cap and trade expenditure plan this year, I'd like to see the Legislature, that's us, reclaim some of our authority to make the difference in how we address the current conditions created by our policies.

While well intended at the time, we must admit that some of these priorities we've committed to 5 or 10 years ago, which the LAO mentioned, no longer are in the best interest of our states. The PPIC did a report, the price increases have caused financial hardship for 6 out of 10 Californian households. So I think it's time for the Legislature to pivot. I want to talk about those funds that are allocated in perpetuity.

At this point, it doesn't make sense anymore to spend 25% of our auction revenues on programs like the high speed rail every year, which won't impact emissions for 30 to 40 years. To date, we have spent $5.6 billion in cap and trade revenues to high speed rail. That's on top of $9 billion in Prop 1 a bonds and 3.5 billion in the federal government.

Sadly, that is $18 billion, less than 15% of the $128 billion now estimated needed to complete phase one of this project that will get us a rail line from San Francisco to Los Angeles. So we need, as legislators, I missed the meeting in Transportation, I sit on that Committee, when the high speed rail folks were there.

But this Committee has the ability to point out in discrepancies here. Those billions of dollars being wasted on a high speed rail would way better be spent for things like forest or reducing the regulatory burden on burden this state places on small business owners struggling to comply with the ever changing regulatory environment.

I hope that this year we will do whatever it needs to figure out how to do the hundreds of millions of dollars works pouring into programs that don't make sense anymore to provide some relief for taxpayers and address the affordability crisis that we have. Which leads to one of the questions you brought up. AB 617 actually directs money to those communities that are impacted the most.

And so can you imagine if we were spending 25% of our cap and trade dollars diverting it from high speed rail to those communities? So I have a question. I don't know who will take it. Maybe CARB or the LAO. How much closer would we be to reaching our 2030 goals and GHG reductions if the state began counting wildfire emissions as a CARB pollutant?

Well, I think we hear you and take your point. Overall, I'll just say that most recently we have been. I know this is a particular area of interest for you, especially given the area that you represent. We have started counting wildfire emissions in our overall scoping plan. So that's now a part of that much bigger and broader strategy. In terms of the calculation we're talking about. I think we'll need to put our heads together and circle back.

Sure. And I can add a little bit. Hi, everybody. Matt Patel. I'm a Division Chief at the California Resource Board. I oversee our climate change programs, including our scoping plan effort. And to your question. So for the first time ever, CARB included greenhouse gas emissions from wildfire in our climate change scoping plan that was approved by our board in December of last year.

What that looks like, it includes emissions that happen through the natural cycle from wildfire, as well as projections of how wildfire emissions can change going forward under climate change as drought gets worse, as extreme heat events get worse, as water conditions change. And it also includes estimates of how we can reduce those emissions through things like expanding fuel reduction activities in California.

So we put in estimates of what those emissions would be and what the emission reductions could be from taking management actions towards carbon neutrality in 2045. You know and many others know that forest ecosystem is a multidecadal system that management actions like fuels reduction actions and forest regrowth take decades to tackle. So we did include those emission estimates in the scoping plan and in our projections on how we can achieve carbon neutrality by 2045.

So is all carbon classified as carbon same? Carbon? I mean, is there a difference between carbons? Is there a difference between emissions from diesel particulate versus forest fire?

So diesel particulate matter is toxic criteria or toxic pollutant. Co2 emitted from diesel combustion and Co2 emitted from wildfire emissions are now treated the same in our scoping plan effort. And so they're different pollutants. One is a health impacting pollutant. One is a climate pollutant in terms of diesel PM, but Co2 is Co2.

Thank you. I'm glad that we both agree on that, that co2 is co2. So I want to make the statement here, and I want to go to page five of the LAO's. This is, I think, the point that needs to be driven home. And I am frustrated because I have actually ran legislation that didn't get out of the First Committee to actually count forest fire emissions.

But this is the part I think that is really fascinating to me is that we have emission reductions ranging from $10 a ton in reduction to $164,000 per ton per reduction. Now, our job is to reduce carbon for everybody in the state. So why wouldn't we focus more on the $10 or even the ones that are $150 to $2,000 per ton versus $164,000 per ton? That's the question that I think as legislators and as the agencies that are spending these dollars need to answer. Why would we spend $164,000 per ton when we can reduce carbon by $9 a ton? Can somebody ask, why are we doing that?

Sydney Burgess from Air Resources Board. So thank you for the question. I think a lot of this hinges on the priorities given a limited budget year. Certainly hear you in terms of cost effectiveness. That's one overlay, as the chair mentioned in your opening remarks, you also mentioned the overlay of equity and mobility. And so cost effectiveness is certainly one metric you can use as you make these hard decisions.

When we look at our equity programs on its merits, they may not be particularly cost effective, but they're helping us accelerate getting electric transportation to the people who need it the most. They also require a lot of outreach, which isn't necessarily a cost effective activity, but it's helping us deliver products to people who need it. So cost effectiveness is certainly one lens you can use. But there are all these other lenses as well that I think the Governor's Budget tries to balance.

So what I hear you saying is that $164,000 per ton is justified by maybe where we're spending at. In what area of the state?

Yeah, one thing I like to look at when I'm thinking about this is in the early days of school bus electrification. Those are pilot and demo projects that, as CARB, we were funding. And so they weren't necessarily cost effective, but they helped us get this new market off the ground and going, and then could be built into more cost effective programs like the rural school bus pilot project, which then became a more cost effective program over time as that technology improved.

So sometimes at the start of things, particularly, say in our pilot and demo projects, on the face, not necessarily cost effective, but helps serve, getting us there faster in the long run.

Well, I would suggest that we've been doing this for some time now, quite some time. Our goals from AB 32 originally, we actually met some of those goals, and we have a lot of history to see where we've been and we're still spending. In the case of the high speed rail, we're dumping tons of resources in that at a cost per ton, and we don't even know if it's even actually going to reduce carbon at this point.

I mean, if you calculate in all the concrete and the transportation, I don't even know if it'll ever get there. So I just want to go on record as saying that I think not only the governor's office, but the legislature. I know that you only implement the laws that we pass and you have the authority to change some of those in your agency, and I suggest you take a close look at this one as well. And it's been talked about for years.

I want to change gears to something that was mentioned also about so the low carbon fuel standard. This question is either CARB or LAO. How does the program interact with other GHG programs, and how much closer does it get to meeting the statewide goals? One criticism of the cap and trade program in general over the past few years is that there are 310,000,000 unused credits currently in the system as of November last year. This is a CalMatters pointed this out.

That's obviously a problem because the companies hoard credits and allows them to pollute past the state's limits in year after year. What's the status of the number of unused credits? This is the question in the system and how many of those credits are issued under the Low Carbon Fuel Standard program?

Thank you, Senator. So Matt Patel again from the California Resources Board, I want to make one clarifying point here in that the low carbon fuel standard is a program that impacts transportation fuels. The Cap-And-Trade Program is a separate program. Allowances that are established under the Cap-And-Trade Program are different from credits that are generated in low carbon fuel standards. So I'm going to respond to your question about the Cap-And-Trade Program and the allowances that exist in the cap-and-trade program.

As you mentioned, a number of entities that participate by regulation in the Cap-And-Trade Program have been banking allowances on the expectation that the program, because in regulation gets more stringent over time, they may need to use those allowances for compliance in the program in the future. Thus far, those allowances represent about 5% of the total emissions allowances issued under the program.

So there are a small portion of the emissions allowances issued under the program, and the ability to bank those allowances is in regulation for compliance flexibility and to support cost effective implementation of the Cap-And-Trade Program pursuant to AB 32. We have heard a number of criticisms on the allowance banking provisions and the allowance bank that exists. And so we have committed to coming back to the legislature later this year with an analysis on this question. And we have also issued a market notice.

We did that last month, informing the cap and trade market, the regulated entities, the public more broadly, that we are looking into this issue and that we're also looking into a number of issues on the regulation side as well. So that is work that is going to be happening this year.

If I could, I'm going to go a couple high level on that question, come back to you, because I did want to tackle parts of that as well. So just, I think you were getting to this, which is the LAO report this January, found that the Cap-And-Trade Program is not currently positioned to close the 2030 emissions gap. So just starting at a high level, could you expand on this finding and explain why that was.

Ross Brown with the LAO again. Yeah, I think, in short, I think you summarized our finding well. We essentially found that the program just isn't stringent enough to kind of close that emissions gap, which is basically where you might sort of expect emissions to be out in 2030 based on economic conditions or a range of other kind of policies that we might have to reduce emissions, such as lcfs or other programs. And if there's a gap, if those emissions are above where our target is.

In past scoping plans, the Cap-And-Trade Program has been identified as a program that would basically close that gap and reduce any remaining emissions that are needed to hit our targets. And we found, based on looking at a variety of different emission scenarios going forward, which are, of course, subject to uncertainty.

But we looked at a range of future emission scenarios, and under pretty much all of them, we found that the state could get to a point where in 2030, emissions are above where our targets are, and there are still a substantial number of allowances that do not need to be used. So essentially covered entities can still comply with the program, and we're exceeding our 2030 targets. And so that was our main finding.

And that situation and kind of where we find ourselves is it's driven by a lot of different factors, including where the caps have been set so far and where they're set into the future, where emissions have been so far. And that has contributed to kind of the bank of allowances that you mentioned earlier and Senator Dahle mentioned earlier. But all those different factors sort of contribute to the existence of this existing bank.

And then looking forward under different emission scenarios, the program kind of essentially not being stringent enough to kind of close that gap out to 2030. I do want to highlight just one thing. That analysis did essentially assume that the program ends in 2030. And the kind of conversations around the stringency of the program and to the extent to which this large bank of allowances is a problem, does hinge at least partly on kind of that longer term conversation around kind of the program past 2030 as well. So I will stop there, and happy to answer any other questions you have about it.

Yeah, well, thanks. Obviously, that's a big concern considering our 2030 goal. So turn it back to CARB, then. How are you thinking about this, and how does the treatment differ in recent versions of the scoping plan? And how does CARB think about getting cabinetry to where it's supposed to be in terms of reducing emissions?

Yeah, thanks. And thanks for the question. So when we approved the 2022 scoping plan just in this last December, we identified a pathway to achieve carbon neutrality by 2045, which is called for by AB 1279, as well as the 85% emission reduction target identified in AB 1279.

And as part of looking at that 2045 pathway, we also assessed how steep would our emission reduction trajectory need to be between now and 2045 going through the interim year of 2030 to achieve that carbon neutrality target and the 85% reduction target in 2045. What we found through that analysis is that if we're successful in implementing the actions called for in the scoping plan to get to carbon neutrality, we should get to about a 48% reduction in greenhouse gas emissions by 2030.

That's well below the current statutory target of 40% by 2030. And so what we have done, and we mentioned this in our market notice, is noticed the market that we are now going to evaluate the Cap-And-Trade Program this year and the cap set in the Cap-And-Trade Program to see how we can increase ambition towards those targets identified in the scoping plan so that we can make more progress on our greenhouse gas emission reduction goals and put us on the path to carbon neutrality by 2045.

And will that be in the form of a report back to the legislature? What is the mechanism there?

Right. So we have committed to a report back to the legislature on the emissions allowance banking question, and then we are also going to initiate a public process on the Cap-And-Trade Program this year, because, as you know, anytime we need to evaluate things like caps on the program, we need to do that through a public process at the airport. So we're going to be doing that this year.

Okay, great. Because also the Independent Emissions Market Advisory Committee, or IEAC, raised some concerns about impact of policies. Some of the recent policies we did with extending Diablo Canyon or the 1020 interim goals of Ira investments are anticipated to reduce the demand for allowances. So this again, gets to the question, is CARB going to make count for this reduced demand and the supply of allowances?

Yeah, that's part of the work that we do when we evaluate the cap set under a program, we look at what has evolved since the last time we set these caps. Last time it was in 2017 as part of implementation of the previous scoping plan. Obviously, things have changed. We have made some progress on the fuels market, on the electricity market, IRA, IIJA have passed. And so all of these things are going to be questions that we're going to look at as we assess what do the caps of the program need to be.

And you're also evaluating the offset program as well, is that correct? The forestry offsets.

In December of this year, of last year, sorry, of December of last year, we held a workshop on us forest offset protocol, soliciting feedback on how that protocol could be updated. And so we are now collecting information on how we could potentially revise that protocol to support our Cap-And-Trade Program. Yes.

And what time will we hear about, what's the timeline for hearing about the results of that?

The materials are posted online. The comment docket is online, and we're now going through and evaluating those comments and thinking through next steps. So I don't have anything definitive for you at this point.

Just a couple more things on this, and I'll turn it back to Senator Dahle. The consigned allowances, which are allowances that are consigned to auction from utilities, natural gas suppliers tend to be sold first. And the IMA also found that that was responsible for when we had the big drop in 2016, and that one step to protecting revenues is to remove the priority sales of consigned allowances. Has CARB taken any actions to implement this recommendation?

Not at this time, no.

Is it under consideration?

I'll point you back to the market notice that we issued in February. We are going to be conducting a number of studies to look at leakage risks for various different industries as part of this work that we have going forward, and that will also kind of inform our thinking on potential regulatory amendments in the future.

Is CARB seriously, I know that Washington state, which instituted very hard cap, and Quebec, are looking for seriously at joining together. And are we seriously looking at joining together with Washington state and Quebec.

So we are currently linked with the province of Quebec, and we have been for some time on our Cap-And-Trade Programs, and then we are providing technical support and expertise to the State of Washington as they look to stand up their program. They recently conducted their first auction, and so obviously, we look forward to the continued success of their program, and we'll continue to have conversations on how to run a Cap-And-Trade Program.

But tackling the allowance question that we discussed and the integrity of the cap are also important to that linkage, is that correct?

So there are a series of requirements established by the legislature in SB 1018 that require an evaluation on an established Cap-And-Trade Program prior to any linkage that needs to happen. And so that evaluation obviously would need to take place before any formal linkage with a jurisdiction like Washington. I should say that that includes an evaluation of stringency of the respective.

No. Any updates? So those conversations, would you say are ongoing, then, with Washington state?

Yeah. As I mentioned, the conversations that we're currently engaged with Washington are in technical support. How do you stand up a cafentrade program? How do you implement one? There is a lot to do when it comes to even just getting a program off the ground.

Is there any timeline for potential linkage?

No, not at this time.

Okay. We'll look forward to revisiting that. And it'd be a great sign if we can join together with, I think, a strengthened program, turn it back to Senator Dahle.

Well, I'm trying to get educated on the allowances, part of it. Some of those are given for free. Can you just give me an example of who would get those allowances?

Sure. So the state's Cap-And-Trade Program covers roughly 80% to 85% of the total emissions in, in California. These are the, the 600 or so major emitters in California that include fuel producers and, and transportation fuel providers, as well as electricity distribution, utilities and industrial facilities in the state. So these are the major sources of greenhouse gas emissions in the state.

We have allowances that are provided as part of our industrial assistance and transition assistance, our allowance allocation to those industries for both leakage protection and cost minimization. And so, for instance, the state's electrical utilities get allowances for free, and they are consigned at auctions. We also provide allowances to industry here in California to support decarbonization and to help reduce potential costs of the program.

Besides the electrical generation companies. Can you give me another example? Is it people who are developing batteries or those types of programs?

So the program covers emitters, the greenhouse gas emitters. And so industrial facilities like a food processor, for instance, or a cement plant, for instance, are also receiving allowance allocation under the program.

One last question, if I may, Mr. Chair. So on the report that you're developing, that's going to come back for the 20, I think it's 2030 that you mentioned that you're doing the base. In all those calculations, do you take into account for the amount of what you think the cost of energy and fuel will go up? So what's the cost of the consumer? Is that determined in the meeting by 2040 goals or 2030 goals that your analysis is going to look at right now?

Sure. So I'll try and separate these things a little bit as part of the scoping plan process, which is the five year plan, the plan that the state develops every five years to achieve its greenhouse gas targets. As part of the 2022 scoping plan process, we did an economic analysis on the cost to achieve carbon neutrality by 2045. What we found through that economic analysis is a macroeconomic analysis.

So if we transition our industries to less greenhouse gas intensive energy uses and reduce our emissions and complement our remaining emissions with things like carbon dioxide removal, that it would cost roughly 20 to 22 billion in direct costs in 2045, but that those costs would be offset by the over $200 billion in health savings that would come from reduced combustion emissions, primarily from transportation and buildings, because we would see significant reductions in things like asthma and premature mortality because we're cutting combustion of fossil fuels drastically in the state. So we provide that economic analysis. That information is included in the technical support documentation for the scoping plan.

Did that include projected wildfire? If we had wildfires, we would still have that pollution if we took every car off the road.

Yes. So we did also look at a health analysis of the health benefits from reducing wildfire emissions through accelerating things like fuels reduction and forest health projects in the state. So we do have those numbers. The cost and benefits from reduction in the particular matter that results from wildfires are in the scoping plan analysis. And I will say similar to the health benefits on the fossil fuel combustion reduction side, there are also health benefits from the wildfire emission reductions that we monetized.

That's an area where I think we could really improve the science and the health quantification. And so CARB is actually working as part of its research efforts to have better health outcome analyses for wildfire emission reductions going forward. And so we look forward to kind of improving the science and the quantification and monetization of those benefits in the future. What we found through the scoping plan is that if we do take relatively aggressive action to reduce fuel loads in the state, that the health benefits pay for the cost of that action.

Thank you.

Thanks. Well, lastly, just for CARB, if you had a magic wand to wave, which programs in the scoping plan and which recommendations would you think need the most urgent additional funding?

Brandon Merritt, Department of Finance. The Administration supports all of the various programs and actions identified in the latest scoping plan, many of which are continuing to receive funding through GGRF and other Fund sources. The administration will continue to explore options to support these programs moving forward contingent on the availability of funding.

What are some of the most interesting funding opportunities, would you say, when viewed from the standpoint of reducing climate mitigation costs and reducing emissions?

Christian Beltran with the Department of Finance. Mr. Chair think it's important to understand that the scoping plan is very broad and that there is going to be a significant amount of dialogue that occurs with the administration and the legislature to identify those moving forward. So it's very hard to pinpoint exactly what programs we would look to fund in the future, especially given the assessment that we would have to take about what particular programs are the most.

Efficient way of spending GHG dollars moving forward.

Okay, thanks. Well, we look forward to that discussion. I think it was mentioned LAO report earlier this year that the Legislature really needs direction on cost effectiveness and distributional impacts of the scoping plan recommendations. So look forward to continuing that discussion.

Well, with that, we do have a hold open recommendation on this item, and we will take that and move on to next item. Thank you all very much. And now we'll move on to issue 18, low carbon fuel standard administration, and we will, I believe, hear from CARB first, play a little musical chairs here.

You get me again. I guess I get to be in the middle of this. Yeah, give me a second while I get my remarks.

Sure.

Good.

When you're ready, go ahead.

Brandon Ma, Department of Finance I'm actually going to kick it off and then turn over to CARB for further discussion. California Air Resources Board requests a total of three permanent positions and 451,2324 and ongoing from the cost of implementation account to address the growing workload of the low carbon fuel standard program.

Increasing staffing resources for the LCFs will reduce processing times for fuel pathways submitted under the LCFS, which will encourage additional investments in low carbon fuels, increase confidence in the program, and increase support for the LCFs as an exportable model policy for addressing climate change. The three positions, one staff, air pollution specialist and two air resource technicians requested by this BCP, will be deployed to provide additional support to administration of the program and fuel pathway application processing.

The staff air pollution specialists will provide in depth fuel pathway expertise, which will help to accelerate processing times on more complex and unique tier two fuel pathway applications. The two air resource technicians will provide initial fuel pathway processing and review for tier one and tier two applications, allowing the more experienced scientific and engineering staff members to allocate their time to the more complex tier two fuel pathway reviews. And with that, I will kick it over to CARB.

Thanks and good morning. So once again, Matthew Botill, Chief of the Industrial Strategies Division, I was asked to give just a quick overview of the LCFS program, so I'm going to do that and then open up for questions. As I mentioned, we recently adopted or approved the 2022 scoping plan.

And as with past scoping plans, once those scoping plans are approved, CARB and other state agencies begin the process of reviewing and updating current regulations and programs to align with the actions called for in the scoping plan. And so we're in that process now with the low carbon fuel standard.

The low carbon fuel standard is part of the state's set of policies to meet California's ambitious climate targets, and the 2022 scoping plan demonstrates that significant increases in low carbon fuels and technology are needed on a faster time frame than we have historically seen. The LCFS has been and continues to be a key program in California's climate change portfolio that incentivizes the investment in Low carbon fuels and technologies in the transportation sector.

CARB has been implementing the program since 2011, and it's been a successful tool for diversifying our fuel pool and reducing greenhouse gas emissions. As part of the LCFS regulation, CARB has established annual carbon intensity, or CI, benchmarks for transportation fuels in California. Any transportation fuel that is above the CI benchmark in a given year, such as gasoline or diesel, generates deficits, and any fuel that is below the CI benchmark, such as low carbon hydrogen, electricity, renewable diesel, biodiesel, ethanol, or other low CI fuels, generates credits.

Each year the CI benchmark declines, which creates an increasing incentive to either reduce the carbon intensity of the existing transportation fuel pool or to invest in bringing additional volumes of low CI fuels into California. To generate credits under the program, fuel suppliers must match their deficits with credits each year. And so, in this way, suppliers of carbon intensive fuels that are above the annual benchmark are purchasing credits from low carbon fuel producers.

This, in turn, creates an ongoing revenue stream for those large carbon fuel producers to continue operation. This revenue stream can counteract the higher cost of producing low carbon fuels and can also be used to secure financing or investment in new low carbon fuel production facilities, particularly when it's coupled with upfront grants, tax credits, or other incentives.

In response to the current CI benchmark set in the LCFS regulation, which include a requirement that California reduce the carbon intensity of our transportation fuels by 20% by 2030, we've seen increasing volumes of renewable diesel, renewable natural gas, low CI electricity, and other low CI fuels here in California. Overall, in just the last 10 years, we've doubled the volume of low carbon fuel consumption in California. This is good news, and it means the program is working as intended by reducing the carbon intensity of our fuels.

And in fact, in our recent GHG inventory, we showed that just from liquid biofuels alone, like renewable diesel biodiesel ethanol, we're able to reduce our greenhouse gas emissions in the transportation sector by 15 million metric tons in one year since 2020. So, given the success of the program, we see an opportunity to leverage this program to accelerate California's greenhouse gas emission reduction efforts.

And so, for the past two years, CARB staff have been engaging with stakeholders on potential updates to the lcfs to align with the broader state goals and the recently approved scoping plan. The Governor also recognized this opportunity. And so in July last year, in a letter to CARB Chair Liane Randolph, the Governor asked that CARB consider increasing the stringency of the lCFs. We're currently evaluating options to accelerate the CI reductions called for by the program and plan to release a regulatory amendment package later this year.

We have received significant input on how we can align the program to broader goals and continue investment in the sector, and that input has come through workshops, written feedback, direct stakeholder engagement, and we're considering those suggestions as well. This is a particularly important time to amend the regulation, given the adoption of this coving plan, the climate legislation package that was passed just last year, and the opportunity to leverage federal dollars made available through recent bipartisan infrastructure law and the Inflation Reduction Act.

I'm going to close by saying that the success of the LCFS is tied to successful implementation of the LCFS provisions, particularly fuel pathway certification and annual verification. As I mentioned earlier, the program is attracting more investment and more market participation, which in turn requires more resources to implement.

So, as a quick snapshot, the current CARB fuel pathway staff have certified over 1300 fuel pathways since 2019, and this growing interest in the LCFS and the workload to process fuel applications in the program has meant longer time to be able to approve these. As Brandon mentioned, as the Department of Finance mentioned, we're requesting modestly to increase the staffing of the LCFs by adding a staff air pollution specialist and two air resource technicians.

And so I'd be happy to answer any questions on either the PCP or the lCFs. And thanks for the time.

Great. Thank you. And I know that this obviously is about staff to do more. Could you first discover, when you say fuel pathway, what does that mean?

Yeah. So if a producer of, let's say, renewable natural gas wants to be able to sell credits in the low carbon fuel standard, they have to apply for approval with a fuel pathway application to CARB staff. Our engineering and scientific staff then work to understand every aspect of the energy inputs and the fuel outputs from that fuel pathway for that individual facility. Not all fuel pathways are created equal.

If you're creating dairy biomethane and you're injecting it into a common carrier pipeline, you're going to have energy associated with processing that dairy or biomethane, with compressing it, with injecting it into a pipeline. We need to understand all of those energy inputs and to be able to assign a carbon intensity value to that specific fuel production pathway.

And so our staff with the fuel producers go in excruciatingly detail what the energy inputs are for each of these fuel pathways so we can assign it an appropriate carbon intensity score. And then we also rely on third party verifiers to audit those values and ensure that they are accurate.

So when I say fuel pathways and the 1300 fuel pathways that I mentioned in my earlier remarks, those are all unique fuel production pathways that have come into the low carbon fuel standard for credit generation that the staff have had to review.

Let's hear from the LAO.

Thank you. Sarah Cornett with the LAO, again. We didn't have any particular concerns about this specific proposal, but we agree with the staff comments that, as we heard, carve is updating the regulation, and this program has played an important role in the state's climate policy. So we recommend that the Legislature continue to monitor and pay close attention to what CARB unveils in terms of changes to the regulation this year.

Okay, great. Well, I know many hail this as a successful market based solution and a model. I think, as you referenced, I think you alluded to scoping plan NK. CARB is considering some changes to the program to achieve larger reductions and continued reductions towards 2045 net zero. Can you elaborate on what is in consideration? And do you intend to make the program more stringent by requiring a reduction in carbon intensity of more than 20%, for example, by 2030?

Yeah. So as part of the public process that we've embarked upon for looking at updates to the low carbon fuel standard, we have workshopped a number of options for increasing the stringency of the program. And what that looks like would be potentially adjusting the 2030 CI reduction targets in the program. It's currently set at a 20% CI reduction for fuels in California, and we've had discussions and released ideas about adjusting that to 25%, 30%, and 35% carbon intensity reductions by 2030.

And then we've also indicated that we would be looking at setting CI targets past 2030 to support our 2045 carbon neutrality targets in statute that we have here. So both of those things have now been part of our public workshop for a few months now, and we're soliciting feedback on what is the right stringency level for the program for 2030 and.

Post 2030, and what is the process to extend it beyond 2030.

So we would initiate a rulemaking proposal and it would follow the standard APA process for rulemaking.

Great. Have you considered ways to include other transportation fuels, aviation trains, marine fuels?

Yeah, so currently in the low carbon fuel standards, intrastate locomotive fuels and commercial harbor craft fuels that are sold below the rack are currently included in the program. And we've also now, I should say we currently allow for aviation, that is intrastate aviation, to be an opt in credit generator. So that means that they don't pay for any deficits generated on the fuel that they combust.

On the aviation side, as part of the workshops, we have put out the idea that we would consider including intra state aviation. So those are flights here in California only. And the fuel that is combusted in those flights as part of deficit generating for the program. So this is not currently part of the regulation. We've introduced the idea of potentially including them in workshops and we're soliciting feedback on that.

Okay. Some people say that LCF credits that dairies are getting don't account for the full emissions. Any comments on that?

Yeah. So as far as the dairy side, and I'll go back to my remarks earlier about how we calculate the carbon intensity of a particular fuel. What we're looking at is what does it take to bring low carbon fuel into the fuel market here in California? Dairies in California exist for the purposes of producing milk and milk products. They produce manure as a byproduct of their milk production. And so that manure, when it's put in a lagoon, for instance, generates methane.

And so what we've been looking at as part of our program is how do you make sure that we can meet our statutory targets to reduce methane emissions? Methane is a really potent greenhouse gas. We want to make sure that we're reducing it wherever we can. How do we utilize that methane for potentially displacing fossil fuels that are used in our current fossil fuel infrastructure? So under the LCFS, when that methane is released into the atmosphere, it's considered an emissions.

If it's captured at the dairy, it's purified to pipeline standards and injected into a pipeline and used in a transportation fuel. It can be used to displace fossil CNG. And so our analysis, our carbon intensity analysis assumes that but for the LC Fest, that methane would exist because of the milk demand and milk production that is happening at the dairy. So we look at the difference between that methane going to the atmosphere from a lagoon, from capturing that methane and then using it in a fuel.

Turn for a moment to carbon removal. As you know, carbon capture and sequestration. That's considered part of the 85% direct emissions reduction carbon removal CARB has set for in the scoping plan for 15% of emissions by 2045. So I just had a few questions on that. So, again, large amounts of carbon removal are called for both in the short term, 2030 and by 2045. Carbon said that LCFs already provides incentives for people to purchase carbon removal. Is this currently limited to direct air capture types of carbon removal?

So not quite. When we last updated the LCFS regulation in 2017 and 2018, we also adopted a carbon capture and storage protocol as part of our broader regulatory Amendment package back in 2018. And that protocol allows, and the LCS regulatory amendments allow for direct air capture projects that capture CO2 from the ambient atmosphere, as well as CO2 capture projects from fuel production. So, for instance, at a biofuel production facility and CO2 capture from energy used in crude production to all be credited under the ICFs.

And so, in order to be credited under the ICFs, they have to go through that rigorous protocol approval process. And as of today, we have not had a project come through that protocol process to get credited under the ICFs. So there are more than just DAC projects that can be credited under the ICFs.

But as I just mentioned, CO2 capture separate. Right. That's carbon capture. That's considered a direct emissions reduction.

That's right.

So really for carbon removal, it's really only direct air capture currently.

Right.

Okay. And how much direct air capture has been purchased so far?

You said is that we have not had a direct air capture project credit under the lcfs to date. I will note that we've had a lot of interest from direct air capture technology providers and product developers to be credited under the ICFs. And this has particularly happened in the last couple of years with the renewed federal tax credits to support carbon storage projects, as well as the DOE money that they've made available for direct air capture hubs.

That has meant that there's been a lot of product development space in this area where lcfs comes in. I'm going to kind of say this like on the back end, so to speak, where once you're injecting or storing that CO2 and you've passed your permanence thresholds required by the protocol, then you can start generating credits. So just because we don't have anything in the lCFs doesn't mean those products aren't happening.

What it means is we just haven't got to the point where a project is injecting and is able to pass the permanence and crediting requirements, which is very far down the product development and implementation timeline.

Right. But the CARB does plan, and the scoping plan calls for 7 million tons of carbon removal in 2030 and 75 million metric tons of carbon removal in 2045, correct?

Yes.

Considering lcfs is not driving any of that, I guess, at least today does carbon. Any other plans right now besides lcfs for driving carbon removal? Again, not carbon capture, carbon removal.

Yeah. So I do want to kind of amend that statement a little bit. As I mentioned earlier, we have seen significant interest in direct air capture and carbon dioxide removal technology providers for this deploying of this technology. And they have signaled that it's the combination of LCFS credits, the combination of 45 Q money on the federal level, as well as other investments like the DOE money that is getting them to enter into this space. And so it's not that the lcfs isn't driving investment.

What we've also heard, somewhat anec.ally, is that there is a lot of interest in identifying appropriate project locations to deploy direct air capture technologies and that many of those sites that folks are looking at right now are outside of the State of California, because, quite frankly, they've told us it's easier to build those projects outside of the state, that we have the geology here, we have the renewable electricity, but there are challenges in getting permit approval for those projects in terms of being able to either inject underground or land use approval.

And we also need to make sure that they can tie into the electricity grid for renewable electricity because some of these require a fair bit of electricity. So we've heard a lot of interest. We've also heard that because of some of the challenging environment of being able to build these products in California, that they're also looking at other states.

Yeah. Okay. Well, it sounds like we have a lot of work to do then. It sounds like there's interest in director capture, but obviously, nothing, I think, doesn't sound close to the permitting yet. And then you mentioned the permitting obstacles and others as well. Two follow ups. One, so director capture with carbon storage is eligible, as you mentioned, to generate LCF credits, but that's for projects anywhere currently in the world. And last year, 905 banned the use of co2 for enhanced oil recovery.

Other states can still do direct air capture with enhanced oil recovery and get full LCF credits. So has CARB considered disallowing these direct air capture with carbon and storage hands oil recovery from lcffs? So they create a level playing field for California projects. We don't want California projects to be disadvantaged.

As you mentioned, with the passage of SB 905 just last year, there's now a prohibition on CCS with EOR here in California. And so we're not going to see any LCFS projects with EOR in California. And we've heard similar concerns about potential out of state California projects continuing to pursue EOR and get credit under the lcfs during our public engagement process. And so we're continuing to take public comments in this aspect.

And if we were to do anything here, it would require a regulatory amendment to our low carbon fuel standard. And so that regulatory amendment package has not been released yet that, like I said earlier, it would come out later this summer.

Okay, look forward to seeing that last question. As you know, we produce millions tons of organic waste from farms and forests each year. And this waste is often burned and fields are left to decompose, releasing greenhouse gases and other harmful criteria, pollutant emissions. The scoping plan identifies the need to collect this waste and convert it into carbon-negative fuels like hydrogen.

However, we've heard that developers are hesitant to pursue these projects because of uncertainty regarding how CARB will credit these projects under LFCs. So has CARB considered options to address these concerns?

Yeah, no. Happy to see this question. So I want to be clear about one thing in particular, and that projects that generate fuel from woody biomass, like forest or agricultural waste, are absolutely eligible for the LCFs, and that we've been encouraging fuel producers to bring these products for crediting to us under the LFCs.

And as you mentioned, the scoping plan that we just approved by the board identifies a clear role and an opportunity for non combustion conversion of woody biomass to support increasing renewable natural gas or hydrogen production. We need those renewable fuels to displace fossil gas. We need that hydrogen to help on transportation, industrial decarbonization. And when you pair it with CCS, you can get carbon negative hydrogen or renewable natural gas as well. That would really help. And I'll go back to what I said earlier.

The LCFs, it provides credits for the production of low carbon fuels, and that's baked into the reg. That's the key to the program. And thus far, we haven't seen a forest biofuels program succeed in producing and delivering low carbon fuels to California. We've heard, and we've talked to a number of project developers that they've faced similar permitting hurdles and also struggled with things like feedstock availability, technology scaling. Building this technology at scale is an engineering challenge, as well as cost issues with these facilities.

And so these aren't specific LCFs issues. These are broader issues associated with bringing these facilities online. I know that there's a number of state programs trying to tackle some of these hurdles, but I don't want this to be viewed as an LCFS problem alone. And I want to make sure it's clear that this is something that we've been encouraging folks to bring to us.

Mr. McGuire, thank you so much, Mr. Chair.

And you just hit some of the hurdles. I think the biggest challenge is the startup costs, right. And the permitting can be a real pain in the backside just being honest about it. And you have eloquently stated that as I have not. But I think the other piece is transportation costs, right. Being able to get it out of the forest into where the nearest project is, which nonexistent at this point.

And then if we're serious about doing this, it's going to have to be located where the source material is. Right. And that means working with rural communities to be able to get that done. Know that it's a whole nother issue of biomass, and that's just been a challenge already with ensuring feedstock plus a guaranteed price for what that energy cost may be on the megawatt side. And then on this, it's just such a new technology.

I think it's long term, it's going to be a challenge, but unless the state incentivizes it, I just don't know if we're going to see it move. Your thoughts on that?

Yeah. So I know that last year there was also a push to appropriate funding, and I think this actually happened about $50 million to the Department of Conservation to support forest biomass to fuels projects, similar programs like this that are actually helping to kind of address those upfront costs. I know CDC has also looked at this as well. How can they get that capital funding?

But it's capital funding plus, I mean, if we're looking at the biomass side, if you're not getting a guaranteed cost on what that megawatt is going to be, then there is no reason to be able to get into the business, right. Because it's incredibly expensive, both with transportation plus on labor, to be able to get it in there. I think that's one of the bigger challenges that we're seeing in the operating costs of these facilities. So it needs to be able to assist on that side.

Yeah. And I'll leave the electricity comments to my colleagues at the PUC and the CEC, but at least on the fuel side, this is one area where we've said the LCFs can help. If you're able to produce those biofuels or that hydrogen from woody biomass, you can generate LCFS credits to help continuing operational costs of that facility.

But what needs to happen is that those facilities need to be able to start producing fuel so that we can do that detailed carbon intensity evaluation, provide the credits for those facilities. And so we've been working really closely with some of the developers to try and make sure that we can get their fuel pathways into the program. We can start the engineering evaluation so that when they get to that fuel production stage, they're ready to go on credit generation.

Senator Dahle.

Well, thank you. Thank you for this part of your presentation and a lot of the things that you're talking about as far as woody biomass. And I'm glad you touched on the methane part of it, because we see these horrific forest fires, all that decomposing wood out there is creating methane, which is a toxin as well. And the things that you're challenged with are out of your jurisdiction, quite frankly, when it comes to supply.

I've been working on biomass for my whole career, and it's hard, it's not easy to do. And to convert it to fuels is even the catalysts. There's Fisher tropes and there's all these other things, but we really haven't got there yet. But one of the biggest challenge is the supply. And our biggest supply that's out there is the Federal Forest Service lands that are desperately needing treated so where you can help.

And this is why, and I want to just thank you for putting up with my consistent bantering about counting carbon from forest fires as a carbon that we should actually put into this program and count it. Because when we divert that to some other source of set of open burn, which is what a wildfire does, we're reducing carbon, and it's helping save lives at the same time saving the environment, water quality, all those other things.

But at CARB, we have the ability to tell the Federal Government, you're polluting our air by not doing something on your land. I think that's where CARB and Administration could do some help, give us some help, and then we would be able to get long term contracts to do that treating and actually have that supply stock that would be able to put those plants in, because nobody's going to invest in California if you don't have a continued supply stock.

And that's one of the problems with the Forest Service is that they do a project over here and they do a project over there, and there's not. And my approach would be, take a watershed on. Let's take the Yuba watershed, and then the Yuba County Water Agency is already doing it. They're putting in a three-megawatt biomass plant that takes five loads a day, which is a joke compared to what it's growing every day.

Then we could put in a full size scale plant, and then we could work on, with the Legislature, the other parts of it that need to happen. But in your jurisdiction and the governor's jurisdiction, if we pushed on the forester to say, you can't continue to let your forest just burn and not manage it and reduce the carbon, I think that's where we could get some investment. The investors would come investment. So I just want to put that.

I know that all those things you talked about are not in your jurisdiction, but you are the jurisdiction that is going to give that Low carbon fuel credit out. And we desperately need that. One last question, and on the percentages of areas where the Low carbon fuel standards are at, I'm assuming hydrogen is in the electricity portion. Is that because it's not stated in here? But is that hydrogen? Go ahead.

No, I was going to say hydrogen is treated as its own fuel under the Low carbon fuel standard, just like any other fuel. We have to do a carbon intensity evaluation. So you can generate hydrogen in a number of different ways. Some which are more carbon intensive, for instance, using fossil gas with steam methane reformation to generate hydrogen, others that are less carbon intensive, like using renewable electricity to electrolyte water to generate hydrogen.

And so every hydrogen production pathway through the Low carbon fuel standard goes through a detailed carbon intensity pathway evaluation to assign an appropriate CI score in the program.

So, in the information I have, though, the credits fell. The majority of the credits were 30% renewable diesel, 22% electricity, 19% biomethane, 14% biodiesel, 11%. There's been a big push in the Legislature to focus a little bit more on hydrogen because its adaptability is a little bit better than batteries and weight wise and all those things. So we've been talking about it on our side, trying to push, maybe to get there. So I didn't see it, and I just wanted to see if that's part of the LCF.

It is part of the LCFs. I don't have the specific numbers on there, and I think you sound just about right, but I would say that one of the numbers was a little Low. Renewable diesel has really increased significantly in the state. I think we're up to like 40% to 45% now of the Low carbon fuel program is renewable diesel. So that has really taken off recently. Hydrogen, from a total volume perspective, I think, remains relatively small.

But as you mentioned, there's been a number of initiatives. We certainly recognize its importance in the scoping plan. There was a Bill last year, SB 1075, that also has CARB doing work on hydrogen fuel supply and demand analysis that we're embarking upon. So it's going to receive a lot of attention in the future.

These are 21- 2021 information we have. So it's probably changed.

Yeah. Taken off in last year.

Thank you.

Well, thank you. Appreciate all on this very important program. And with that, we'll move on to the next item. Thank you. It, this is issue 190 mission portfolio for implementation of the proposed Advanced Clean Fleets regulation.

Great. So, Sydney, you have a presentation.

We sure do.

Ok. Go ahead, whenever you're ready.

Well, thank you. Much for your time. So I'm joined by Branch Chief Tony Brasil, who's going to run you through the PowerPoint presentation just for a little bit of perspective and context. We've been working on zero-emission trucks for quite some time, and, in fact, one. One of the regulations that branch Chief Brasil helped lead was the advanced Clean Trucks regulation, which required manufacturers to bring zero-emission trucks to our state.

When we were talking to fleets, we were really finding that fleets wanted to buy zero emission trucks, but the supply simply wasn't available. So in 2020, the board passed the advanced Clean Trucks regulation, but then also directed us to come back with an advanced clean fleets regulation, which is the topic at hand. So, with that, I'll turn it over to you.

Good morning, Chair and Members. So I'm just going to give you an overview. I think you have slides in your package and so on. Starting on slide two, the advanced clean fleets regulation has four main elements to it. One is 100% zero emission vehicle sales requirement. We're talking about trucks that are generally bigger than a pickup truck. There's a drag truck element, state and local government fleet requirements, and then a high priority fleet one. And I'll cover each of these in a little more detail.

So the first item on slide three is the 100% zero emission vehicle sales requirement. We initially proposed that that would be a 2040 requirement. The board has actually asked for us to move that up to a 2036 model year implementation. So this would add specify to the manufacturers that all sales would be zero emission except for emergency vehicles, because we do not cover those.

So this is a key element of meeting the governor's Executive orders, and it sends a very clear market signal to the manufacturer's fleets and infrastructure providers to make those investments that are necessary to make this success. On the next slide, slide four is DRE's truck requirement. These are tractor trailer combinations that are operating at our ports and intermodal rail yards. The requirement for this one would begin with a registration here at the end of the year to identify all of the legacy trucks or existing trucks.

Anything that would be newly added starting in 2024 would have to be zero emission. Existing trucks would be able to continue to operate till the end of their useful life, which would be anywhere between typically about 15 to 18 years or 800,000 miles. And then there would be annual reporting requirements and a requirement that only the trucks stay in the registry are the ones that visit the ports each year. There are some very limited extensions associated with this provision.

And then by 2035, all of the trucks serving the ports and rail yards would have to be zero emission. On the next slide on number five, I'll talk about the high priority and federal fleets. So Federal Government vehicles are covered in this category, but the high priority fleets are otherwise fleets that have 50 or more vehicles operating in California, including those under common ownership and control, or fleets that have more than 50 million in revenue, regardless of the number of trucks in this particular category.

We also include light duty package delivery vehicles to get all of the trucks delivering packages in our neighborhoods to zero emission. And that also includes some of the yard trucks, whether they're on road or offroad, because they typically just operate on a property and those are primed for electrification. So the requirement for these high priority fleets is very similar to the dreus part. There is the registration required. It'll be at the beginning of next year to identify again all of the legacy trucks.

They also get to operate their full useful life. Anything new added to the fleets or brought into the California fleet would then have to be a zero emission vehicle or a near zero emission vehicle. And when I say that that is effectively a plug in hybrid vehicle, and those would count the same as zero emission up until 2035. And then there's an annual reporting requirement because that's how we distinguish between the regulated and the fleets that aren't affected by the rule.

And then once a vehicle gets to the end of its useful life, would have to be removed from the California fleet. And there are a number of provisions, and I will just highlight those here in a moment. The provisions are there to address circumstances where fleets might not be able to comply for an individual fleet, given their specific situation.

And then on slide seven are the state and local government requirements that in essence would be that 50% of purchases would need to be zero emission between 24 and 26 starting in 2027. All purchases would have to be zero emission or to the near zero emission vehicles. We do have a number of provisions for the more rural areas of the state that they would be exempt until 2027.

Fleets that have 10 or fewer vehicles at any division would actually be exempt until 27, and then there are a number of provisions and extensions that would also apply for them, and I'll cover those in just a moment. On slide eight, we have what we're calling the optional ZEV milestone phase, and this is a schedule that phases in the requirements based on the truck type and defers the requirements to later timeline for those that do long haul operation and for more specialized trucks.

So whether you're a high priority fleet or a public fleet, you can select this option if you find that it's to your advantage. I'm sorry, and I forgot to mention the public fleet requirements or the state local government fleet requirements are only when they make purchases. There is no requirement to retire any vehicles, so they can keep them as long as they want. Okay. And then under this milestone approach that is structured, the table kind of outlines the schedule.

The group one category represents the delivery vehicles like your box trucks and vans, some of your yard trucks and buses. They would start earliest with the 2025 milestone, where 10% would need to be zero emission. Other trucks that are like service trucks and day cab tractors and larger buses would start at 10% in 2027. And then the group three category are the sleeper cab and specialized vehicles, including those with heavy front axles.

Their requirements would start at 10% in 2030, and so those are phased in three year increments such that the group one vehicles would be all zero by 2035, the group two by 2039, and then the group three vehicles by 2042. And now I'll kind of highlight just a couple of the provisions that we have. So I'm not going to go over each of these, but there's a list of roughly 1011 provisions.

These, again, are designed to address things like, you've ordered the vehicle, but it just doesn't come timely. You're not going to be out of compliance if there's an infrastructure you need to put in and you do that timely, but it takes two to three years or even up to five years because of whether it's a utility delay or construction reason. Again, we would be able to cover that if the vehicle is not available to purchase.

We're making a streamlined list with the idea of the fleet owner then being able to just simply continue to buy combustion until we remove it from the list. And that'll be based on its availability and its emission configuration. And then there are other provisions to address mileage or daily usage if they don't fit the application.

Additional time for some of the waste and wastewater fleets, and then even some provisions to address vehicles that weren't part of the California fleet but might need to come in for a temporary period up to five days to do a repair, maintenance, or pick up a load that wasn't anticipated to be needed for that type of truck.

Snow removal equipment or dedication removal committee is flat out exempt, but we also have extra time for those that sometimes uses dump trucks and sometimes uses snow plows to provide additional time for combustion vehicles to be used in that area. Because one of the concerns we tend to hear is like, hey, there's a lot of uncertainty with the rule. How do you handle these situations?

These provisions are set up to address specific individual fleet situations, including if the truck is available, but it doesn't fit the actual application. We have a mechanism to be able to address that in those circumstances. So I think that's ultimately where our resources are going to be spent, is trying to assist these fleets in understanding, one, what their options are.

Two, identifying what's available for them to help them move forward, but also to then also evaluate what isn't available and the why not, to see if we can take on some of that burden rather than having every fleet going through the same process to identify the same thing. And then on the last slide, on 10, we actually started this rulemaking back in early 2020. The staff report was released last year on August.

We had the first hearing in October, and the board directed us to make some changes that we'll be taking back to them here in April. The proposed changes are out for comment currently, and then the implementation date would effectively be January of 2024, assuming the board approves the modified regulation.

Great. Thanks so much, Tony. And I'll just add, sorry, some overarching comments here. One of the things that we're finding in our analysis is that there is really significant health savings from these types of regulations. So we're projecting $26 billion in health savings from the advanced Clean fleets regulation alone, but also $48 billion in total savings for fleets. We know that the total cost of ownership for combustion trucks is already paying off against their zero emission, or, excuse me, it's the other way around.

Zero emission trucks are already penciling out against their diesel counterparts. And so one of the things is this will really accelerate getting zero emission trucks into the hands of fleet so they can start reaping those savings. Thank you.

Thank you. Now we'll hear from the LAO.

Thank you. We didn't have specific concerns about the request, but wanted to share that we agree with staff comments that the Legislature may want to monitor the final regulation when it comes up to a vote next month and determine whether the final regulation could affect this budget request.

Okay.

And attorney of finance, anything to add? No, not this time. Okay. Well, I appreciate CARB's thoughtful planning on all of this. How do the changes proposed fit into the scoping plan?

Sure. And I'd be remiss if I didn't say thank you for your personal interest in this we did receive your sign on letter, along with many others, asking CARB to look at moving the 100% zero emission purchase requirement to 2036, which we have accommodated. So we are listening and appreciate the input in terms of the scoping plan. We really look at the scoping plan as our California's roadmap to achieving necessary greenhouse gas emission reductions to get to our goals.

And then the details are really hammered out through this stakeholder process as we develop the specifics of these regulations. So ACF is certainly part of the scoping plan, but the details are really left to the stakeholder process that we're now engaging in. In terms of the second board hearing that we'll be going to in April. I just wanted to be clear, in April, for these second Board Meetings, we're really going for an up down vote to the board.

So if you're bracing for impact in terms of any additional changes, what staff is putting forward, the board will either vote for or against, but no additional tweaks.

Okay. Thank you, Mr. McGuire.

Thank you so much. Just specifically, on the issue of big rig trucks. Right. Not associated with ports, but just traditional big rig trucks that we see that are throughout the state. I think one of the challenges is in support of this is the issue of technology and range. Right. Especially on those larger rigs. Can you talk about that? Because I think, like we saw, for example, with, I know this is apples and oranges, but it's like sport charter boats that were going out.

You didn't have the motor technology available to be able to meet the timeline and car the board. Push that back. Can you talk about that a bit? Because I think that's the concern on that issue in regards to the technology.

Sure. And I'm happy to start. And, Tony, if you want to jump in, please feel free. So one of the reasons why, and I've switched back to slide 81 of the reasons why we've phased in these requirements this way is because we are trying to really make sure that we're targeting those groups and those applications for trucks that can be electrified as soon as possible, but then recognize that a little bit more time might be needed for, say, the port rate, for example, yours.

So, like the sleeper cab tractors, I think, fall nicely into the kind of group that you're describing. So you'll see that our percentage requirements are phased in on a little bit more of a staggered schedule to allow for the kinds of considerations that you're talking about in terms of the drainage trucks. What we're finding is that a significant population of those trucks travel under 100 miles in a given day, which is wonderful because that's certainly within the range of the technology that does exist today.

But we are looking to try to accelerate the transformation where it makes the most sense, but give a little time where that makes sense, too. And so that's what you see reflected in this group 123.

Can you just update us on so if we're looking at the longer term. Right. Or those trucks that are working. And again, I'll show my bicycle in Northern California and are working on dirt roads, hauling large and heavy product. Technology is still evolving on that.

Correct. So let me add a little to that. One of the things we did do back in 2020 was collect data directly from the fleets as to how they operate the vehicles, how they use them, and how many miles they do. So it might be surprising to most people that as far as the daycab tractors, about 68% of them do not actually travel more than 200 miles.

And one of the ways that we're structured the rule to phase it in is that a company who has a range of trucks would do the first 10% and potentially keep those closer. And the longer haul ones would continue to be diesel.

But I think the other element to it is, even if they don't fit the application in time, we do actually have a provision that's based on mileage, that if you're doing 500 miles a day and the zero emission truck can only do 300 miles per charge, then we would actually give you an exemption to allow you to continue to purchase combustion vehicles until the technology was ready to do the mileage that you need. And we'll address that company by company if necessary.

And would that purchase need to be out of state or retailer continue to sell in state, for example, you just use, for that example, the 500 miles range.

So in terms of the regulation, the ZEV milestone option does allow you to actually continue to purchase combustion vehicles if you choose to, as long as you're meeting the percentage requirements on the zero emission. So the requirement would be that you would purchase a California-certified engine, because that's a cleaner engine than what's federally available starting next year. And the presumption would be that sale would be here, but I guess, I suppose it could occur elsewhere.

No, I appreciate that and really appreciate the clarification. As I know, I think a lot of us are meeting with firms within the areas that we represent and going through that, and I know that there's some real indigestion on it and trying to be able to hit the goals while still being able to operate again, I'm focused more on those longer range and what that would look like. So I really appreciate the clarification. Thank you.

Senator Dahle.

This is based off of an Executive Order by the Governor. And then that's the first question, I guess, what I heard from.

Right. So we do have an Executive order guiding percent of fleet requirements for zero emissions. But I would say the other kind of principle that we look at when we develop our regulations is the real need to achieve the federally health protective air quality standards, particularly in Southern California and throughout the state. So a lot of our work is also aimed at how do we accelerate the drive to electrification so that communities that have been affected from these near source pollution hubs are less.

So how can we take advantage of the transformation that's taking effect and make sure that those benefits are realized in California? So yes, there's an Executive order that we look to for guidance. There's the scoping plan, but then there's also these criteria, health pollutant mandates that we look at as well. And then it all congeals in these regulations.

So the Legislature doesn't have to do anything. And you can implement this without legislative approval.

Our board can move forward on adopting the advanced Clean Fleets regulation in April. I think discussion point before you right now, at least in this context, is that one of the things that we're trying to do as CARB is take on a lot of the implementation ourselves versus put that implementation on fleets. So what you have before you in the context of today is BCP request, which know certainly your decision. And then of course their policy bills could take place that affect how we implement ACF. So the partnership continues.

Scary that we are giving away all of our authority to the board to actually make these decisions. I know there's a scoping plan and that's basically what this is is telling us how we're going to get there in the future. But I'm in the trucking business and I know that it's just right around the corner when you talk about 2035, 2045, 2036. And the technology is really at best not really there definitely for long haul.

And I know there's some talk about extending those abilities, but I think the cost of the public in goods movements is going to be very expensive and I don't know if we can get the charging stations in place as well. What about interstate commerce from people coming in and out of California that will have the ability with interstate commerce laws bringing, we're faced with that now we have trucks coming in that don't meet California air quality standards. And because of interstate commerce, they're not regulated.

So I'm in California, I'm regulated, but they're not. What does this look like for? Because a lot of commodities leave our ports and go across the nation.

And to be clear, so with the existing truck invest regulation, it applies to all trucks that do operate here. And we're approached the same way here with advanced clean fleets. You identify your California fleet, you phase in your zero emission trucks as part of that fleet, whether it doesn't matter where you're based. But if you're operating here, then you're going to have to meet the same requirements.

And again, and in this particular regulation, when we're talking the high priority fleets, it's the ones with over 50 million in revenue and or 50 or more trucks. So right now, it's not affecting in that high priority category the smaller companies at this time. And the board has already directed us to come back with another measure by 2028 to address all other trucks and how to get those to zero emission.

And we're looking at seeing if there are market mechanisms, but we would need legislative approval for those kinds of things to see if that's a better way to do it. But again, we do look at the competitive considerations of trying to have, like, for like companies meet the same requirements.

So large companies are the only ones that are going to get regulated first. And the D-G million or more.

Yeah. The drag category could be one owner operator, but that's a more localized and placing infrastructure can be strategized more quickly.

Right.

But at the end of the day, we're also looking at in the future rulemaking is how do you get other trucks to zero emission? And are there different ways to do it than just a pure regulation?

And on electrification, what's the weight of a three axle?

Yeah. So the answer is, in part, and I think people do not fully understand, is if you have a vehicle that's with 100 miles, battery weight is about the same or less. Once you need 300 miles range, 400 miles range, then you start getting into higher weights. And as you know, that battery technology continues to improve, and then those weights and energy intensity are going to improve. And so that is still an issue.

And we do know that here in California, there is a 2000 pound exemption for alternative fuel vehicles, including battery electric. By 2030, we think everything will be within that category. As of today, that's not the case, but also the reason why we kind of staggered those requirements to later dates for some of these trucks. Thank you.

Thank you. With that, we'll move on to the next item. Thank you all for your time here today. Moving on to issue 20, electric vehicle supply equipment payment standards in the trailer Bill Language. And we will hear from CARB, who will be hearing from this.

Good morning, Chair and Members Brandon Merritt with the Department of Finance. The Administration proposes trailer Bill Language to align CARB's EVSC standards regulation with recently published eligibility requirements for federally funded EVSC installations. This will help ensure California can continue receiving federal funds, in particular the National Electric Vehicle Infrastructure, or NEVI funds for this infrastructure.

This trail Bill Language also aligns with regulations adopted by the Air Resources Board in 2019, which implemented Senate Bill 454 to establish open access principles for EV charging stations. And I will now hand it over to my colleagues from the Air Resources Board for anything further on this item.

Nothing to add, LAO?

We don't have concerns or comments on this proposal.

So I guess for carbon, how will aligning the state standards with the federal standards support the state's efforts in getting federal funds for EV charging infrastructure?

Yeah. Thank you, Jennifer Gress. I'm Chief of the Sustainable Transportation and Communities Division at CARB, and my division is home to the electric vehicle supply equipment standards regulation. The main element of the regulation that the trailer Bill aligns with the federal NEBU funds is the requirement around the payment method. So our regulation requires EVSC to have both a chip reader and a tap reader. Nevi requires tap, and you can have other payment methods if you want, but they're optional and it also requires plug in charge.

So this Bill says plug in charge and tap as the minimum requirements. And then in 2028, CARB could revisit that once we have experience implementing the NEVI formula funds.

Okay. So that'll help us maximize the federal funds by doing this. Okay. I don't have anything further. Well, thank you. I guess we'll move that quickly. And I appreciate you being here to share that with us. So we'll now move on to issue 21, implementation and reduction in the sustainable agriculture package. And we will hear from CDFA when ready.

Okay, great.

Mr. Chair, Members of the Committee, JT Creedon with the Department of Finance, together, as you know, the administration and the legislature came together to make historic investments in sustainable agriculture of $1.1 billion in the 21-22 budgets affecting sustainable agricultural, food resilience and drought programs across our agricultural Committee communities. The government's budget continues to maintain over $1 billion of that investment, 89% of these historic investments in sustainable agriculture.

Just so you know, as a part of the administration's approach to how we address the fiscal situation with the General Fund, we looked at a number of different considerations when evaluating what we needed to do with some of the solutions. This included protecting the majority of funding for most of the programs, prioritizing investments in priority populations which face disproportionate harm from pollution in the climate crisis protecting funding for the most immediate climate risks such as water and wildfire, minimizing disruptions for programs already underway, including considerations for status of previously appropriated funds potential availability to shift to other funds, including federal funds if it was possible, providing equitable reductions across categories.

So we preserved about 89% as mentioned, for the sustainable ag investments, which is consistent with about the General range with what we took with other climate packages and of course the availability of program funding by fiscal year. All of these under the sustainable AG were under the control section refer triggers demonstrating the administration's commitment to the original intent and hopefully in a better fiscal climate that we can continue to support the full amount of these programs, but it does continue to preserve over $1 billion of the original investment.

Good afternoon, chair and Members of the Committee. Rachel O'Brien, I'm the deputy secretary for legislative affairs for the California Department of Food and agriculture. Happy to be here with you today in place of Secretary Karen Ross. Thank you for having me to speak about the department's proposed budget and the implementation of the 21--22 climate and agricultural packages that CDFA had a role and responsibility in implementing. And of course, thank you for the partnership on these many important funded programs over the last several years. CDFA has received $742,000,000 between the fiscal years 21-22 and 22-23 to help fulfill the state's vision of having a healthy, equitable and climate smart agricultural food system. Of this total, 288,000,000 has been committed to projects and 143,000,000 has been identified for General Fund solutions, this leaves a total of 311,000,000 uncommitted.

And as the secretary spoke to this Committee earlier this month when she came before you, these programs are essential to implementing key administrative and legislative goals, and CDFA has funding plans in place to commit 112.5 million in the first half of 2023 and all the remaining funding by the end of 2023. With that, I kind of wanted to pivot to some questions that had been sent to us through the chair's consultant on how the Department is focusing these programs on target populations.

CDFA views equity in our grant programs and throughout the department as one of our top priorities. Reaching socially disadvantaged farmers and ranchers has historically been a challenge, but CDFA seeks to navigate specifically language barriers to small and medium sized farmers who have limited time to look into and apply for government programs. We know that this has been a challenge in this space.

So with that said, CDFA does maintain a goal of 25% of all sustainable agricultural packaged funding going to those socially disadvantaged farmers and ranchers, as well as a goal of 35% for priority populations for GGRF funded programs. Building upon the recommendations that were within the 2020 Farmer Equity report that CDFA sent to the legislature, the department has increasingly implemented new policies and created new programs that embed equity.

Technical assistance is made available in the languages of the agricultural community to help socially disadvantaged producers apply for grant programs and also to implement those programs. CDFA's programs fund and support technical assistance providers who specifically prioritize support for socially disadvantaged and small scale producers in multiple languages. CDFA has also hired a grants coordinator to ensure outreach and communication is disseminated in a timely manner, and CDFA staff can best promote grant opportunities statewide.

The CDFA Small Farm liaison position was created in 2021 to further increase outreach to small scale and historically underserved producers in English and Spanish, along with support staff from public affairs in Spanish. New grant programs have been created within the department to address equity, such as the California Underserved Small Producer program and the beginning Farmer Farm Worker Training program, as well as our new organic transition pilot program.

These programs explicitly serve and benefit socially disadvantaged and small scale producers statewide, and all include elements of technical assistance to address equity. Existing grant programs, such as the ones that fall under our climate Smart Ag programs, continue to expand program support. This includes technical assistance, of course, and flexibility within those programs within the structure of those programs to specifically embed equity, such as language barriers, such as addressing language barriers.

These programs also prioritize 25% of funds for socially disadvantaged farmers and ranchers within the direct producer grants. Last year, for example, if you take like our Healthy Soils program, which had $65 million that were appropriated, we received $90 million worth of applications, which is an oversubscription rate of 144%. As you can imagine, some projects were not funded.

However, of the total funding that was requested, applications for socially disadvantaged farmers, ranchers constituted 22.5% of the funding requested and CDFA awarded 30% of the available dollars to those constituents. In all rounds of the program, CDFA awarded 26% of the funding to socially disadvantaged farmers and ranchers, even though they constituted only 24% of the total applications. So we are making an effort, significant effort, to prioritize these applications. To address the difficulty in reaching these applicants, CDFA invests 5% of all of its climate smart agricultural program funding in technical assistance to help with these applications, implementation, project closeout, all while navigating language barriers, and 25% of that funding is specifically focused on socially disadvantaged farmers and ranchers. Additionally, CDFA has programs that focus specifically on socially disadvantaged farmers and ranchers. These include, like I said, our California underserved small producer program, which made 80% of direct producer grants to socially disadvantaged farmers and ranchers or socially disadvantaged producers, and 100% to small scale producers.

In addition to funding, prioritize the funding prioritization I mentioned before, we see this technical assistance as really critical and core to helping these applicants in these categories. You also asked about federal funding. How is the Department and the program areas, what are we doing to maximize those federal fundings and leverage the federal funding and draw it down? The United States Department of Agriculture USDA's Natural Resource Conservation Service, they have a program called the Environmental Quality Incentive Program.

It's often called EQUIP, that funds programs like healthy soils and the State Water Efficiency Enhancements program. There are a few fundamental differences between our programs and theirs, though, but CDFA has recently partnered with the California Dairy Research foundation to apply for and secure $85 million from USCA's Climate Smart Commodities grant. And then the NRCS provides technical assistance to farmers and ranchers and helps them apply for federal grant funding.

They do have a strict process and their own infrastructure that limits what state funded technical assistance providers can offer in terms of supporting their processes. However, CDFA does encourage state funded technical assistance providers to facilitate finding federal cost sharing opportunities for state funded projects, and there is inherently some overlap in support for farmers and ranchers applying for both state and federal programs.

CDFA also recently finalized a memorandum of agreement between the largest technical assistance organizations in California to ensure that producers have comprehensive and full service access to all conservation programs and services that are available. And those organizations include the USDANRCs, the California Association of Resource Conservation Districts, and the University of California Ag and Natural Resources. And finally, the California underserved and small producer grant programs include technical assistance specifically to assist producers to apply for federal and state relief grant programs. And with that, I'll return the mic back to the chair.

Okay, thank you, hear from the LAO.

Good afternoon, Mr. Chair. And Committee Members Frank Jimenez with the Legislative Analyst Office. Overall, we find that the governor's proposals within the sustainable agriculture package are reasonable. In many cases, the governor's proposed reductions target new or recently established programs. We find this to be a reasonable approach given that these programs have a moderate amount of uncommitted funds and are relatively new with uncertain benefits.

In most cases, the Governor sustains some level of funding for these programs, so that ensures that activities that the legislature intended to support continue, but at a smaller scale. Also, sustaining funding for these new programs allow them to be implemented and for the state to gather information on their effectiveness, which could be helpful for the legislature and future budget decisions.

We note that given our office's recent estimates of a worsening budget condition, potentially in our report we identify additional solutions the legislature could look for within the Sustainable Agriculture package, one of those programs being the farm to school incubator grant program. The program is relatively new and has a moderate amount of uncommitted funds.

The program is supposed to be releasing an outcome report within the next year, so the legislature could scale back that funding to find additional solutions and allow the program to continue at a scale down level and wait for additional reporting outcomes before providing additional augmentations with that, happy to answer any questions.

Okay, thank you. It was quite comprehensive. I certainly was concerned about cuts to urban agriculture program or the farm to community food hubs program. But I do appreciate your comments about the work that the department is doing to try to target small farmers and socially disadvantaged communities. Let me see what questions my colleagues have, and then I'll see if I have anything else at the end. Okay. Well, again, it was a pretty comprehensive overview.

There's several of those programs I look forward to kind of diving more into personally, just making sure that offsets some of the cuts that are made here. So I think we'll have a hold open for now and return to this at another time. But thank you very much.

Thank you so much. Chair.

Thank you. So we're moving on to issue 22, which will be our last item of the day. And this is oversight cost for AB 1499. And, Rachel, will you be taking this one as well? Ms. O'Brien?

Chair I'm going to turn it over to my colleague, Deputy Kozina.

Great.

Thank you. Good afternoon. Chair and Members of the Committee, my name is Arima Kozina. I'm deputy secretary for finance and administration at the California Department of Food and Agriculture. Thank you so much for having me here today to speak to you about the proposed Trailer Bill Language to ensure funding for the important work that we do to oversee California's network of fairs.

So the fairs and expositions or f and e branch is required under business and professions Code, as well as food and ag code to oversee the 76 active fairs, including 52 district agricultural associations, or DAAs, as well as fairs under other governance structures.

So these activities include policy oversight and fiscal oversight, including fiscal and compliance audits, as well as legal services for the DAAs, provision of resources and training for the boards, and maintenance of activities to make the fairgrounds more accessible and responsive to community needs, all of which reduce liability and exposure to the state. The F&E branch also serves as a nexus between the Department OES and the fairgrounds in emergency situations. For example, under the current emergency, 11 fairgrounds are active with three fairgrounds housing evacuees.

So the F&E branch currently supports approximately 14.25, so we'll say approximately 14 total positions, with 10 of them specifically administering, coordinating, and otherwise providing oversight to the network affaires. To do this work, CDFA has been using funds from existing reserves and the horse racing handle. So for reference on the handle, based on pre pandemic revenue figures, F&E estimates that for fiscal year 2022-2023 revenue from the handle will range from about $110,000 to $161,000.

The F&E Fund balance as of December 31, 2022 was $13 million. Of this amount, $12 million is revenue collected pursuant to Assembly Bill 1499, which does not currently cover administrative expenses. So this leaves a net balance of only $1 million of Non-Ab 1499 funds, which will be depleted in approximately eight months.

At that time, the Department will be unable to fulfill our statutory obligation to oversee the network affairs or even distribute AB 1499 funds in the full fiscal year of 23-24 unless an additional funding source is identified. So, to remedy this situation, the budget includes trailer bill language to allow CDFA to use revenue collected pursuant to Assembly Bill 1499 to Fund existing fares and expositions, branch positions, and operating expenses.

These funds are distributed through the f and e account, and the use of a portion of these funds for Administration would be consistent with all other funds deposited in that account. The Administration asserts that these funds are an appropriate funding source to ensure that the F&E branch continues to be able to provide fiscal and policy oversight to the network affairs and ensure that funds collected via AB 1499 are being used appropriately, responsibly, and as intended. So with that, thank you again to the chair and members of the Committee for your Consideration of our proposal, and we welcome your questions.

Thank you. With that LAO.

The proposal raised no concerns for us. As CDFA mentioned, these are existing programs that already are existing positions that already exist within the Department. They've traditionally been funded with the Fairnix Position Fund, and currently the Fund cannot fund these positions. So it's reasonable to look for other Fund sources. The legislature could Fund these positions from the General Fund, but then that raises the question of who should be paying for these positions. Taxpayers broadly or fair growers specifically. Happy to answer any questions.

Okay, thank you. I know that Senator McGuire has some questions, concerns on this. I'll turn over to him.

Thank you so much, Mr. Chair. I'm grateful for today's hearing, sir, and thank you for all the work to you and to the staff team as well. So I know that we're going to be leaving this open today, but I got to say that this is using these funds that the Department of Finance originally opposed 1499 because it was going to impact the General Fund is offensive. If I could just be blunt, and I know this is not CDFA.

So, look, we have 79 fairs across the state representing a rural part of the state. It's the heart of our communities. And madam deputy secretary, as you mentioned, have been the gathering grounds for emergency staging in these devastating wildfires. And for almost a century, about 80 years, fairs have been able to rely on horse racing. But as we've seen, the popularity of horse racing deplete over the years, so has the revenue pot. So the recession then hit and funding was cut for fares.

And regardless of the governance structure, county fares or state fairs, fairs were then left to fend for themselves. And then that division that CDFA once had went dwindled down to from about a dozen to maybe one or two staff. So then we're going to fast forward. When 1499 came forward in 2017, Department of Finance opposed that. Opposed it. And now Department of Finance is saying they want $2 million from it. It's quarter percent of sales tax generated on fairgrounds.

And again, I have great respect for Department of Finance. I think Mr. Seppenshaw is one of the smartest individuals on this earth. And it is very frustrating that we're here today. And I know that there are a lot of other larger issues in this budget, but this is big for rural California. So the reason why I say all that is. Thank goodness then Governor Jerry Brown signed that bill, which was great, and then developed this alternative funding source for both county and state fairs.

And it was ongoing. And we are off to a pretty damn good start until Covid hit. Covid hit. And then we all cratered. And now it was about $3.1 million last year from 1499 revenue. And out of that, 3.1 million, want to take 2 million of it. Which leaves fairs with pennies with massive challenges across this state. So I do believe that there is going to be a long term solution, advanced yet again, a piece of legislation that western fairs will be supporting that would increase that quarter cent to potentially a higher amount.

But being really candid would fight this tooth and nail in its current form because it goes against what this pot was supposed to be, and that was supposed to assist fares with ongoing challenges with ADA, ongoing challenges with deferred maintenance, as well as issues in regards to operations.

So I think that there needs to be a long term conversation between the department, Department of Finance as well as Western affairs, and do believe that this piece of legislation will be starting in the Senate and with the author to be able to develop that long term solution. And I have amazing respect for Secretary Ross, and I think she has been one of the best things that happened to that Department and feel grateful. And so, Brian, you have always been wonderful and grateful.

And again, congrats on the baby, by the way. So happy and love seeing the pictures. And I look forward, Mr. Chair, to be able to hear about this again and again. It's nothing personal at all with DOF, but we're going to need to be able to figure out another rodeo and solution for this one.

Senator Mcguire, I'm sorry, Senator Dahle.

Well, I just would like to say that first. Welcome. Good to see you all. And I'm in lockstep with Senator Mcguire for 11 years, and I have now, with the addition of Senator Nielsen's, I have 15 counties. That means I have 15 county fairs and several district fairs. And we talked about this before we came to. This is one thing that we are both, and we worked with Assembly Member Gray, and it was challenging. Right. And at the end of the day, this isn't acceptable.

We have to come up with something different. I think you're going to see bipartisan support in both houses to try to retain the money to go to the fairs. At the end of the day, that's what we did it for, and that's where it should stay. So I won't belabor it anymore. I look forward to working with you on.

And I would just like to say that over the years, and many of you probably weren't, I mean, we had the fire marshal, the state fire marshal had to drive all the way to Siskiyou County to look at the fairgrounds. It's the same, never changed year after year, when we have a local fire marshal and the fairs got charged for that. That's the kind of stuff that we were like. That's what we're getting out of the process. And it's just not common sense.

Doesn't make sense to do that. And they are a home. This is the one I think I want to stress on, is we have flooding going on. We're using our fairgrounds right now. Fires come, we use our fairgrounds. Covid, we used our fairgrounds. Those are all things. And the maintenance has been deferred for years. It's been underfunded. And so whatever it was, 1499, it was an attempt to try to give some money back to locals and generate it at those facilities as well. So I'll leave it at that. Look forward to working together on a bipartisan nature to get this done.

Thank you for that bipartisan show on this important issue. And we look forward to revisiting, as we discussed here today. But Mr. Brown and your team, we thank you for being here. And with that, we'll accept the hold open recommendation and move on to the next item. Thank you. Which really would be public comment. So for public comment again, it's 877-226-8163 access code 694890. But we'll start with people in the room here today in the O Street building in 2200.

And with that, we'll ask you to go ahead.

Good afternoon. My name is Teresa Bui with the environmental nonprofit Pacific Environment. We are here in support of CARB's budget request for the LCFS as well as the Advanced Clean Truck Rule. In addition, we're asking for 5 to 10 additional staffing for CARB to implement their freight and mobile source pollution. CARB has adopted many life saving regulations over the years, including trucks, cars, and harbor craft.

But mobile source continues to be a huge pollution source in California, especially in the Southern California region, where in 2021, the port congestion crisis, shipping emissions is equivalent to 100,000 big rig trucks per day and 500 million passenger cars. And so with that, unfortunately, due to staffing shortages, CARB has been able to take on the shipping sector.

And so we are urging you all to provide additional staffing for CARB, 5 to 10 staff, as well as the authority to assess regulatory fees to recoup that cost in order for us to have more life saving regulations and effectively transition the shipping sector over to zero emission. Thank you for your consideration.

Thank you.

Good afternoon, Chair and Members. Cameron Demetre on behalf of Blink Charging. We're in support of the CARB EV contactless payment trailer ill Language. Thank you so much.

Thank you.

Good afternoon. Mark Neuburger, California State Association of Counties. We're here to note concerns with issue 19, CARB's advanced clean fleet regulations BCP. Primarily because of the workload associated with that staff and the exemptions that many counties would have to apply for as the regulations roll out and kind of the issues all along there. We'll be providing written comments to also to articulate our concerns in greater detail. Thank you.

Thank you. We'll look forward to seeing those. Thank you.

Good afternoon, Chair and Members. Derek Dolfie on behalf of ChargePoint, here in support of issue number 20, which is the electric vehicle supply equipment trailer bill. This will help align California with the NEVI Final Rule and expedite chargers being deployed across the state. Thank you very much.

Thank you.

Good afternoon, Chair and Members. Rebecca Marcus, on behalf of Union of Concerned Scientists. We're in support of fully funding CARB for administering a strong Advanced Clean Fleets Rule. This rule is foundational to an accelerated transition to a sustainable and equitable freight paradigm. Fully funding its Administration and digital reporting infrastructure is paramount to its success, feasibility, and ease of compliance. The most recent proposed ACF Rule language shifts the 100% ZEV manufacturer requirement to 2036 from 2040, resulting in an estimated 130,000 additional clean trucks on the road in 2050.

Our research shows that these added clean trucks will save hundreds of additional lives from decreased pollution and increased cost savings to fleets by over $300 million. Also, on behalf of the California Certified Organic Farmers, Carbon Cycle Institute, and the American Farmland Trust, we ask that you invest 5 million in the Organic Transition Program at CDFA, restore $15 million to the Farm to Community Hubs Program, support the Governor's proposal to fund 10 million in the Healthy Soils Program, and restore the proposed cuts to sweep. Thank you.

Thank you.

Brendan Twohig, on behalf of the California Air Pollution Control Officers Association, representing the Executive Officers from all 35 local air districts. As you contend with reduced revenues, we encourage you to prioritize programs that cost effectively reduce both air pollutants, so they do well on air quality, emissions reductions, and also greenhouse gas reductions. And the LAO did a report as part of their review of the 2022-23 Governor's proposed ZEV package.

And what they reported was that three air district programs perform near the top at both greenhouse gas reductions and also criteria pollutant reductions. So when you look at that combined, those programs are the Carl Moyer Program, which I'm not really talking about today, but also the Farmer Program and the AB 617 Community Protection Program. We do appreciate the comments. When you're talking about cost effectiveness, when you look at the AB 617 program in particular, that program started with 10 communities.

It now has 19, yet there's a $50 million cut in the budget on the incentive side, and the implementation money has gone from 60 million to 50 million. So these are actually rates that are the same as they've been historically. Also, the Farmer Program was reduced from 150 million last year to actually zero this year. It's been zeroed out. That's another very cost effective program ranking at the top. And so we ask that you restore funding for the Farmer Program to 150 million. We ask that you restore funding for the AB 617 program back to 300 million. And then you actually consider...

I do have to ask you to wrap up.

Yes, sir, I will. And just actually even consider an increase if GGRF revenues go up. And then just wanted to put a plug in for the Woodsmoke Reduction Program and hope that you could provide some funding for that this year. Thank you for your indulgence.

Thank you.

I'm Tom Knox with Valley Clean Air Now. I'm here to talk about the EV pavement technology item. Valley CAN is In strong support of the Governor's proposal. We believe that there are solutions for doing contactless payment technology for low income EV drivers. We've currently got a pilot where we've seen if you get the TAP cards out to low income EV drivers, they're used, they're effective. It's much more easy to do this at the card level than at the chargers. So we are in strong support of the Governor's proposal. Thank you.

Thank you.

Thank you, Mr. Chair and Members. Cody Boyles on behalf of Western Fairs Association. We're here with an opposed unless amended position on item number 22. I'd like to thank the Committee for their robust discussion on this. As the original sponsors of AB 1499, it's unfortunate that the funding due to Covid has not materialized to help all of our local and small fairs address the issues that you guys brought up.

Under this budget change proposal, CDFA would have 52% of the minimal funds available would be used for administrative costs. We believe that CDFA should have availability to a reasonable amount of funds to address those administrative costs. And we've provided legislation that will be starting the Senate to address that. That legislation proposal will include bridge funding for two years while fair revenues stabilize. And it will increase revenue retention from three fourths of 1% to 3.5%. Thank you.

Thank you.

Good afternoon, Chairman, Members. My name is David Bunn. I represent the Electric Vehicle Charging Association, an organization of 21 charging companies, and also CALSTART, which is an organization of over 300 businesses and companies in the zero emission vehicle realm. We're here to both strongly support item 20, the payment standards language in the trailer bill, as is. Thank you so much.

Thank you.

Patrick Welch with the California Municipal Utilities Association. Excuse me. Here to comment on issue 19, advanced clean fleets. Our members provide reliable and affordable water service and power service to a large part of the state. We've been working with ARB on this rule for well over a year now. I think what I heard today from ARB staff now is that they're going to take the rule to the board as is in late April for an up or down vote.

We have two major remaining concerns with the rule that it could affect the ability for utilities to actually respond in emergencies and natural disaster events and restore power and water service. We have significant concerns that the rule doesn't quite provide enough flexibility to allow utilities and their workers to do that. So we urge you, as you consider this BCP and providing funding for the Department to implement this rule, that you take that into account and be happy to follow up in writing and more details. Thank you.

Thank you very much.

Good afternoon. Phoebe Seaton with Leadership Counsel for Justice and Accountability. I'm here to talk primarily about the Low Carbon Fuel Standard item, item 18. We appreciate the decision to hold the item open and look forward to engaging with you and the rest of the Legislature as you take a hard look at some of the questions that you've asked and that diverse stakeholders have asked over the past several years.

As you raised, Senator Becker, CARB does not consider the full GHG emission profile of the generation of manure in the Low Carbon Fuel Standard. While it might be policy that methane and GHG emissions start and stop at the borderline of a cesspool, that's not science, and it's not reality. Also, I know that Mr. Boccadoro will refute everything that I raised, so I look forward to following back with you to refute his points.

It's not a debate, but go ahead.

I disagree. CARB does not account for increased emissions resulting from herd expansions or herd concentrations. CARB does not consider how these facilities pollute the air and water of nearby communities. Nor does it consider that in order to operate a digester, a factory farm is encouraged and incentivized to use the most intensive and environmental harmful practices. CARB does not appear to care about double counting of alleged GHG emissions claimed by multiple state programs and subsidies.

And CARB has not and does not appear to be considering the role of direct regulation in reducing emissions claimed by the Low Carbon Fuel Standard. As the Legislature reviews this program, we urge you to ensure that CARB changes course before providing more funding to this program that overstates its alleged benefits and exacerbates environmental injustice. Thank you.

Thank you.

Michael Boccadoro. I've already had my introduction. So very quickly, Ag Energy Consumers Association. First on GGRF, and I think, as the LAO has now testified and as CARB has testified, dairy methane reduction is by far the most cost effective program of any operated here in the state, and it is not funded in the current budget. So as you look to some of the discretionary funds, we hope there is some consideration.

There still is a need to build another 100 or so digester projects and several hundred alternative manure management projects in the state. We do have some federal funding that will need to be matched to leverage that $85 million, and we think we can bring in more with additional state funds. On the LCFS, there have been two petitions filed at CARB on this very topic. CARB has had a workshop and hearings on it. They've had staff respond to their request for petitions.

This issue doesn't seem to go away, but we need to move beyond. We are not in the business of producing manure. We're in the business of producing milk. As you heard from Mr. Botill, manure is a byproduct. The accounting that CARB does is consistent with that recognition. If we were in the manure manufacturing business, they might have an argument. They don't. We need to move forward. The uncertainty in the marketplace right now over LCFS is stopping our progress. We need to reduce methane. We're doing that.

The only thing stopping us right now is, unfortunately, these ongoing pursuits down the same path, same rabbit hole, by the environmental justice community. And it's preventing us from getting the methane reductions we need and the global environment needs. Thank you.

Thank you.

Good afternoon, Chair and Members. Sandra Nakagawa, Policy Director of the California Climate and Agriculture Network. Commenting on item 21 on CDFA's Climate Smart Ag Programs. We support the proposed $10 million for the Healthy Soils program and the Governor's January 10 budget. This program is consistently oversubscribed and provides climate benefits, but also helps improve water retention and prevent flood resilience. This is going to be especially important going forward, as we're going to see drier dries and wetter wets.

We're also requesting $40 million for the Alternative Manure Management Program at CDFA due to its crucial support for smaller scale dairy operations. Finally, we urge Legislature to restore the cuts that were proposed for the State Water Efficiency and Enhancement Program, SWEEP, also at CDFA. Thank you.

Thank you very much. We will now turn to the phone lines. And again, I gave the number earlier, 877-226-8163, access code 694-8930. Moderator, please tee up any folks wishing to comment on the public comment line.

Thank you, Mr. Chair. If you would like to provide public comment today, please press one, then zero at this time. That command again, one, then zero. And so far we have 14 people in queue to comment. The first will go to line 20, please.

All right, thank you. I have to ask people to limit their comments to 1 minute, but please go ahead.

Yes, good afternoon, Committee Members. My name is Chris Chavez. I'm the Deputy Policy Director at Coalition for Clean Air. First, we want to support the vote only issues number 5 and 6 relating to the implementation of the Heavy Duty Maintenance and Inspection Program, as well as the in use Locomotive Rule.

Regarding cap and trade expenditures, we again urge the Governor and the Legislature to fulfill its multi-year commitment to fund zero emission vehicles and clean transportation. Given that climate funds will be limited, however, California should prioritize projects that target low income and disadvantaged communities, as well as maximize air quality benefits and public health benefits. Cost effectiveness is not the only metric when considering equity programs. Localized air quality improvements, public health benefits, and the need for greater case management and outreach is also something that needs to be considered. We also support funding of CARB's Advanced Clean Fleets regulation, as well as additional funding for the AB 617 program. Thank you for your time.

Thank you very much. He shows us how to do it. Excellent. Next caller.

Line 26.

Good afternoon, Chair Becker and Members. My name is Darby Kernan. I'm with Roots of Change, a program of the Public Health Institute. I'm commenting on two issues today. First, on issue 21, Roots of Change respectfully request one time funding of 35 million to ensure continued support of the California Nutrition Incentive Program at CDFA, Office of Farm to Fork, which includes programs like the Statewide Market Match Nutrition Incentive Program.

In addition, we are in strong support of the Senate including $14 million to fund the Local Equitable Access to Food Program, which aims to expand electronic benefits transfer access to all certified farmers markets in California, and also seeks to increase the number of farmers markets and low income communities throughout our state. Funding is needed to implement this as well. Thank you for your time. Much appreciated.

Thank you. Next caller.

Line 31.

Good afternoon, Chair and Members. Jamie Fanous with the Community Alliance with Family Farmers, CAFF, represents over 8000 small and historically underserved family farms across California. While CAFF appreciates the maintenance of essential drought relief funding, we're disappointed by the inequitable cuts made by the Governor's proposed budget and request the Legislature reinstate the following cuts, the 100% cut amounting to $15 million to the Farm to Community Food Hub Program. No existing program at CDFA provides this type of investment to create new aggregation infrastructure for California's smallest farms.

The nearly 50% cut to the Urban Ag Program, as well as the nearly 50% cut to the Beginning Farmer and Farm Worker Training Program. Keeping equity in mind, these three programs disproportionately aim to serve California's smallest and most underserved farms. And lastly, the extreme flooding events have decimated hundreds of small farms across the coast and across the state, losing their homes, farm equipment, and more.

There is currently no federal or state programs to get them back on their feet, and we urge the Legislature to allocate at least $5 million from the Governor's proposed flood funding to be allocated in the form of relief to CDFA's California Underserved and Small Producer Program, or CUSP. We really appreciate the time and thank you very much.

Thank you very much. Next caller.

Line 33.

Good afternoon, Chair and Committee Members. This is Philip Crabbe of South Coast AQMD. We appreciate AB 617 program funding being provided in the Governor's budget for air districts implementation and incentives, especially given the state's budget shortfall. We request the continued prioritization of funding for state programs such as AB 617 that the LAO previously acknowledged is highly cost effective in addressing air quality, public health, and climate challenges. Currently, the AB 617 program is severely underfunded.

The number of communities in the program has grown statewide, but there are not enough resources to support existing AB 617 communities. Although the South Coast region contains almost two thirds of EJ communities in the state, we cannot support additional AB 617 communities due to a lack of resources. To address this, we respectfully ask that AB 617 funding be restored to last year's levels, and should GGRF revenues surpass current estimates, that you consider additional investments in this worthy program.

This will help cover actual program costs and cost, effectively reduce emissions that help meet federal air quality standards, and protect the health of disadvantaged communities statewide. Thank you so much.

Thank you very much. Next caller.

Line 32.

Good afternoon, Chair and Members. Rebecca Baskins with Kahn, Soares, & Conway, here on behalf of various ag organizations. First and foremost, thank you for holding this hearing today. We wanted to highlight again the lack of funding proposed in the budget for the Farmer Program. As noted in the LAO's analysis, the Legislature does have more cap and trade auction revenue at its behest, and we encourage you to make the most efficient investment that provides the best bang for your buck, and that's the Farmer Program.

This program enables California farmers to more expeditiously turn over high emission diesel tractors and equipment to cleaner or zero emissions. Most importantly, funding for the program results in immediate air quality improvements for all communities. As for the Advanced Clean Fleet regulation, we agree with CARB in regards to keeping the fleet size at 15 instead of the requested 10, as reducing the fleet size would greatly impact small businesses.

We also cautioned CARB and Legislature to really take a look at the ACF as written because the state's infrastructure is just not prepared for the increased load on the system, as it currently lacks stability to meet today's needs. We look forward to working with you further on this. Thank you.

Thank you very much. Next caller.

Line 27.

Good afternoon, Chair Becker and Members. My name is Sam Greenlee, Executive Director with Alchemist CDC in Sacramento. And I am in strong support of the Senate including $14 million in funding for SB 907, which was signed into law last year and created a Local Equitable Access to Food Program, also known as LEAF. While this program is important in good times, it is essential in hard economic times like the present.

Whether the economy is growing or slowing, LEAF provides essential support to food insecure Californians and California's small farms while stimulating local economies. We also support funding 35 million for California Nutrition Incentive Program, also known as CNIP. Thank you.

Thank you very much. Next caller.

Line 39.

Hi, my name is Sonia Mora. I am the founder of the Woodland Farmers Market in Woodland. I'm in full support of the SB 907, the LEAF program, since I've seen firsthand how the EBT program has benefited our community members in Yolo County, and especially in Woodland. The funding of the LEAF this year would help us to reach so many more community members to educate them on their ability and benefit of using the EBT at our local farmers market and how this affects them financially and more importantly, how it improves their quality of life through health and nutrition.

The EBT program, along with a Market Match Program at our farmers market, allows the community to have affordable access to the freshest produce possible. And since everything is picked ripe and fresh and harvested locally, the taste of the peach, the strawberry, the cucumber is so much better. It actually gets eaten and not wasted. We hear this from many customers, especially when it comes to our Kids Farmers Market Program.

The funding of this program would also help to support our local family farms, which we also are slowly disappearing. Please fund this program this year and help our families in our community. Thank you so much for your support and time.

Thank you. Next caller.

Line 36.

Good afternoon. This is Derek Polka calling from the Los Angeles Regional Food Bank. Calling in support of requesting the 14 million for the Local Equitable Access to Food Program passed as SB 907 last year. As other callers have mentioned, CalFresh is a critical piece to ensuring food security, and this month actually was the last month of the emergency allotments. So any way to maximize CalFresh benefits for low income households will really help mitigate the food cliff that we'll be facing in the next few days. So thank you, and we urge your support.

Thank you very much. Next caller.

Line 40.

Good afternoon, folks. Chair Becker and Members, my name is Lee Wallach. I'm with the Motor Avenue Farmers Market. I'm in strong support of Senate including the 14 million funding for SB 907. Research, as you've heard, has constantly found that customers, including EBT customers and CalFresh customers, who shop at farmers market, eat more fresh fruits and vegetables and are more likely to meet the recommended five or more servings per day for good health, for basic good health.

LEAF will improve nutrition and public health for Californians, low income Californians. Also, much of the organics and grocery stores come from out of the country. At our grocery stores, they're coming by ship and by rail. Farmers markets were picked the day before by Californians, by family farms who would reinvest in our economy in California. This is a win win, Californians for Californians. Thank you for your consideration.

Thank you very much. Next caller.

Line 41.

Good afternoon, Chair Bennett and Members, I'm Frank Tamborello of Hunger Action LA, serving thousands of people in the Los Angeles area with the Market Match Program. We're in strong support of the Assembly including the $14 million in funding for SB 907, which, as you've heard, was signed into law last year but didn't have funding attached to it. This would expand EBT access at all certified farmers markets in California and help us to increase the number of farmers markets in low income communities throughout our state.

We're also urging you to support funding at $35 million for the California Nutrition Incentives Program. This has funded programs that have saved families from inflation and bolstered our local small acreage fruit and vegetable farmers. Thank you very much.

Thank you. We will consider in the Senate as well, but thank you for your call. Next caller.

Line 46.

Mr. Chair and Members. Dan Chia with Omni Government Relations. Here on behalf of FLO EV Charging in support of issue 20, the credit card payment standard trailer bill language. Thank you so much.

Great. Thank you very much.

Line 44.

Thank you, Chair and Members of the Committee. Jesse Cuevas on behalf of Xeal Energy in support of issue number 20. Xeal offers electric vehicle charging across the state and supports the trailer bill language to align the state's EV equipment standards with the NEVI standards. This alignment will bring California much needed federal funding to support EV charging infrastructure. Thank you.

Thank you very much. Next caller.

Line 42.

Good afternoon, Chair Becker and Members. My name is Sarah, and I am with Heart of the City Farmers Market in the Tenderloin of San Francisco as the Food Access Program Manager. I am in strong support of the Senate including $14 million in funding for SB 907, also known as Local Equitable Access to Food, or LEAF. BIPOC Californians are disproportionately impacted by a lack of access to nutritious food.

And LEAF offers a low cost and high impact investment to address this disparity by supporting existing farmers markets and stimulating the creation of new farmers markets in food deserts. Being located in the Tenderloin has left our farmers market with being the only option for local affordable produce for our really sensitive population, and having the access to farmers markets with the Market Matching Program has changed their diets for the better. Thank you.

Thank you very much. Next caller.

Line 43.

Good afternoon, Chair Becker and Members. My name is Genevieve LeBlanc and I'm the Food Policy Lead with Blue Zones Project Monterey County. And I'm in strong support of the Senate including 14 million in funding for SB 907, also known as LEAF. And by providing high quality CalFresh EBT access at certified farmers market, LEAF will help millions of federal nutrition dollars to directly reach California's small and mid sized farms, and it will not only support these farmers, but also stimulate the local economy and their community. Thank you.

Thank you very much. Moderator, how many callers are remaining?

Right now, we have three more left.

Okay, great. Go ahead.

Line 47.

Hi, good afternoon. This is Andy Naja-Riese with the Agricultural Institute of Marin. I'll keep this short. We're asking the Senate to provide one time funding of $35 million for the California Nutrition Incentive Program at our certified farmers markets, as well as $14 million in funding to support SB 907, the Local Equitable Access to Food. Thank you.

Thank you very much. Next caller.

Line 48.

Good afternoon, Chair Becker and Members. This is Lena Brook with the Natural Resources Defense Council, and I am calling in about two programs related to item number 21. The first is the Farm and Community Food Hubs Program. We respectfully request that $15 million be restored for this program, which is designed to create new aggregation, processing, and distribution centers throughout the state. These are essential to enable smaller scale farmers to reach markets that they otherwise would not have access to, including institutional accounts.

Second, we also request that the Pilot Organic Transition Program continue to be funded at the $5 million level next fiscal year. This will enable California's historically underserved producers to access organic markets by helping them mitigate a risky three year transition process that they need to go through in order to achieve organic certification. Investments in both of these programs will increase equity in California's food system. Thank you.

Thank you. Next caller.

Line 35.

Thank you, Mr. Chair and Members. Faith Conley with NextGen California. Urging the Committee to consider our request for 14 million one time funding the Local Equitable Access to Food, or LEAF, Program. At a time of inflation and at the end of the emergency maximum allowance of CalFresh to low income Californians this week, the funding is imperative for recipients of EBT to be able to maximize that benefit at local farmers markets. Thank you.

Thank you very much. Next caller.

Line 30.

Good afternoon, Chair and Members. Jeanne Merrill representing the Center for Food Safety. Regarding the Sustainable Agriculture package, unfortunately, the Governor's proposal guts funding in FY 23-24 for multi-benefit Climate Smart Agriculture Programs like Healthy Soils, Alternative Manure Management, Organic Transition, and the Pollinator Habitat Programs.

We ask that funding for these programs be restored so that small and midscale farmers and underserved farmers can continue to access technical and financial assistance to transition to climate smart farming. We simply won't hit our climate goals without multi-benefit agricultural solutions to the climate crisis.

On the issue of the Low Carbon Fuel Standard, we ask that the Legislature continue to weigh in on the LCFS as CARB is underway with its rulemaking and the program continues to prop up digester fuels with questionable climate benefits, significant impacts on adjacent communities, and distortions to the dairy market. Thank you.

Thank you very much. Next caller.

Line 45.

Good afternoon, Chair Becker and Members. My name is Portia Bramble, Executive Director for the North Coast Growers' Association. We operate 11 certified farmers markets in Humboldt County and have a nearly 50 year history of supporting small farmers.

I am also speaking in strong support of the Senate including 14 million in funding for SB 907, which was signed into law last year and created the LEAF, Local Equitable Access to Food Program, which aims to expand Electronic Benefits Transfer and CalFresh access at all certified farmers markets in California, and also seeks to increase the number of farmers markets in low income communities throughout the state.

This funding will not only support existing farmers and farmers markets, but will help create new farmers markets in underserved and food insecure communities. Funding was not included in the Governor's budget, but is needed to implement the bill. We also support the inclusion of $35 million in funding for continuing CNIP, the California Nutrition Incentive Program, which funds Market Match healthy food incentives at farmers markets. This is critical to supporting small farmers and ensuring access to affordable, fresh, and nutritious foods.

We strongly urge you to support inclusion of funding for both LEAF and CNIP programs. Thank you for your time and your continued support for family farmers across California.

Thank you very much. Is that the last caller, Moderator?

Mr. Chair, that was the last comment that we have.

Okay, well, thanks for all who participated in public comment. We'll now move to the vote only calendar, and we will start with issues 10 through 15, and I would like a motion on those issues. Senator Dahle moves. Please call the roll.

[Roll Call]

The vote is 3 to 0. Those items are out. Now we will move on to issues 1,2, 4 through 6 and 8. I'd love a motion on those issues. Senator McGuire motions. Please call the roll.

[Roll Call]

Vote is 2 to 1. Those items are out. Now, finally, to issues 3, 7, 9 and 16. I would love a motion on those items. Senator McGuire motions. Please call the roll.

[Roll Call]

The vote is 2 to 0. Those items are out. Thanks again to all who participated here, both in person or on the phone. You can send, again, additional all comments in on our website in writing to the Budget and Fiscal Review Committee. Thank you to all the panelists and everyone who participated for your patience and cooperation. We've concluded the agenda for today's hearing. Senate Budget Subcommitee 2 is adjourned.