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

The Senate Budget Subcommitee number two on resources, environmental protection, energy will come to order. Before we begin, let's establish a quorum. Please call the roll.

[Roll Call]

We have a quorum. We'll be discussing all the issues listed in the discussion section of the agenda. For each item, we will hear from the Department, followed by the Department of Finance and the legislative Accounting analyst Office. And then Members will have the opportunities to ask questions. We're going to start with issue number eight with DWR and the Diablo Canyon loan. Ask people to come up exit. Thank you. And I believe you have a presentation. We'll start with DWR when you're ready.

We do have some opening comments, but I'm going to start with my colleague. From the California Energy Commission and we'll. Join her right after that.

Thank you. All right, this is on. All right. Good morning. My name is Liz Gill and I'm the program manager for the reliability Analysis branch at the California Energy Commission. And this morning I'll be providing some background on the why of the Diablo Canyon extension and whether anything has changed since the passage of SB 846. So I'll be focused more on the need and the why, and then I'll pass it over to my colleague Delphine.

So climate change induced extreme events are making it more challenging, as we know, to maintain electric grid reliability. In 2020, the state experienced an extreme weather event equivalent to a one and 30 year demand situation that resulted in short rotating outages on August 14 and 15th, 2020.

In 2021, a wildfire in Oregon took down the California Oregon Electric transmission intertie, causing the state to lose 4000 import capacity during a heatwave at the hottest time of the day and really elevating the threat that wildfires pose to the state's transmission system and system wide grid reliability. This led to an emergency proclamation by the Governor ordering the agencies to take measures to bolster grid reliability. Additionally, equipment and manufacturing and supply chains were heavily disrupted and significantly slowed during the COVID-19 pandemic.

Manufacturing and these supply chains have taken a long time to recover to pre pandemic levels, let alone ramp up to meet the growth in renewable and zero carbon project demand both in California and globally. At the same time, the state was looking ahead to the retirement of significant generation assets in the 2024 to 2026 timeframe. So Diablo Canyon, which accounts for 9% of the state's total power generation and about 17% of its clean electricity, as well as several natural gas generators.

These events and planned retirement of capacity led to the conclusion that the state needed to take extraordinary measures in the near term in order to maintain grid reliability under these climate driven extreme conditions. While we allow load serving entities.

Procurement and renewable project development to catch up in 2022, the Administration brought forward analysis indicating that the state may need up to 5000 additional capacity when accounting for the unprecedented levels of planned procurement in order to maintain grid reliability during extreme events, such as what was experienced in 2020, and these events again generally fall outside of typical grid planning standards.

So in 2020, the Administration proposed in the Legislature passed both AB 205, which created the strategic Reliability Reserve, and SB 846, which provided a path for the limited extension of the claimed Diablo Canyon power plant to 2030. Just days after the Legislature passed SB 846, it became even more clear that these extraordinary measures were warranted.

August 31 was the last day of the legislative year and the day that SB 846 was voted out and was also the start of a westwide extreme heat event that started to stress the grid beyond its design capacity. On September 6, the CaISO territory reached a record new demand of 52,000 mw, which is the equivalent of a one in 27 year event.

So, as a part of SB 846, CEC was directed to determine whether the state's electric demand forecasts for 2024 through 2030 show potential for electric grid reliability deficiencies if Diablo Canyon power plant operations were not extended beyond 2025 and whether extending operations to at least 2030 is prudent.

In order to ensure electric grid reliability in consistency with the state's greenhouse gas emission reduction goals, the CEC evaluated scenarios that evaluated scenarios that reflected planned energy procurement and future demand under extreme heat events equivalent to those experienced in 2020 and 2022, while considering resource delays consistent with those that have been experienced over the past several years, as well as risks to electric transmission that bring in critical imported electricity to the state.

In February 2023, the CEC completed analysis that concluded that there is significant risk, an increased likelihood of rotating power outages without the extension of Diablo Canyon, and that it would be prudent to extend operations until the state can confirm that the necessary energy resources are online. The analysis determined that extending Diablo Canyon also provides a decided advantage in the sense that it is firm, a firm, Low carbon resource, meaning that it's generally dependable and it does not emit ghg emissions or greenhouse gas emissions.

In December 2023 and as ordered by 846. Following a nearly year long rulemaking, the CPUC approved a decision to extend Diablo Canyon's retirement dates for units 1 and 2 to October 2029 and 2030, respectively. So, again, climate change induced extreme events are making it more challenging to maintain electric grid reliability. This has not changed since SB 846 was passed, and in fact, we saw record demands during an extreme and extended heat event just days after it was passed in 2022.

We have significant levels of new clean energy resources, over 16,000 nameplate capacity, that have come online since 2020. But we know that we'll continue to need additional resources in order to maintain grid reliability and meet our state's greenhouse gas reduction goals moving forward to 2045. This was taken into account in our analysis and does not change the current outlook.

We're in a better position going into this summer because of the ongoing load serving entity procurement efforts, the resources being operationalized through the strategic reliability Reserve, and because of the extension of existing resources, including Diablo Canyon. In fact, the CEC analysis indicates that if we experience the same range of resource delays next summer that we've experienced in the past, that we'd be at risk of shortfalls, even under a standard planning metric of a one in 10 year event without Diablo Canyon.

Without Diablo Canyon, the strategic reliability Reserve would also not be sufficient to maintain reliability during the equivalent of a September 2022. Eventually. So, we know that the actions taken by the Legislature and the Administration have placed the state in a better position to avoid rotating power outages as a result of supply shortfalls during extreme events for this summer and for the next several summers.

But we must be vigilant and continue to manage and plan for all of the known and unknown variables that impact our collective ability to provide reliable, clean electricity during extreme events. Thank you, and I'll pass it to my colleague, Delphine.

Thank you very much. The microphones don't like to be touched.

They're generally very sensitive. All right. Can everyone hear me? Doesn't know this. It doesn't sound like. All right, one more time. All right. Does that seem to be working okay? Thank you very much. Apologies for that. Thank you to my colleague. I have some brief opening comments, and then we'll pass on to my colleague at Department of Finance. So, as described by Liz Gill, my CEC colleague here, the current outlook hasn't changed.

The need for Diablo Canyon and retaining its base, baseload GHD regeneration is prudent in the public interest and needed for electric reliability. SB 846 tasked DWR with administrating a state loan to support Diablo Canyon's license extension, which was needed immediately because Pacific Gas and Electric PG and E, which is Diablo's operator, was applying for a license extension in less than the standard five year requirement term required by the Nuclear Regulatory Commission to repay the loan.

PG and e applied and qualified for the Department of Energy's civil nuclear credit program, which DWR is not a party to, but they have since been able to successfully qualify for that program. Based on our discussions with PG and E, the company needs the remaining 400 million in the third quarter of 2023 to support license renewal. For example, as part of the license renewal process, the Nuclear Regulatory Commission requires extensive inspections, which PG and e must complete under a compressed deadline.

Keep in mind that the Nuclear Regulatory Commission renewal is a process PG and e actually began 15 years ago. Because it normally is such an involved process. PG and e halted that process at the state's direction and has now restarted it at the state's direction as well, but with an even more compressed timeframe. These inspections are timed to align with regular maintenance schedules at the power plant, and the first of which occurred in fall 2023 and the next is during right now, spring 2024.

Furthermore, commitments have already been made to support additional inspections with the requisite staffing equipment material support, including refueling through 2025. So PG and E has secured these commitments with expedited fulfillment and delivery, given the urgency of meeting the highly compressed deadlines under SB 846.

Similarly, the Nuclear Regulatory Commission provided a waiver to PG&E to exempt it from its normal process in order to expedite the license renewal process and devoted its own staffing and resources specifically to Diablo Canyon in order to target a license renewal decision by August 2025. So if PG and E does not receive the final 400 million in the third quarter of 2024, extension operations may be jeopardized.

PG and E has previously stated to DWR that state loan funds and DOE credit funds are the only funds available to pursue extended operations because SB 846 prohibits PG and E from requesting recovery of expenses from ratepayers to Fund the relicensing process for this state reliability asset. If PG&E's Diablo Canyon time sensitive extension funding is depleted and therefore PG&E is unable to complete its license renewal work, the Nuclear Regulatory Commission likely would void the timely renewal exception originally granted.

This would move the license retirement dates back to its current expiration dates of November 2, 2024 this year for unit one and August 26, 2025 for unit two. If Diablo Canon does not continue to pursue a license extension, it would also no longer be eligible for any of the Department of Energy's Civil Nuclear Credit award and none of the money that the state has already loaned to PG and e could be repaid using those funds.

Furthermore, if Diablo Canyon retires at its current license, expiration dates again, again as early as November 24 of this year for unit one, grid reliability could be jeopardized, as it does provide, as my colleague mentioned, approximately 9% of California's total electricity supply and represents 17% of the state's carbon free electricity mix. Although clean resources continue to be built at an unprecedented state, unprecedented pace in the state, they still face challenges coming online, such as supply chain delays and interconnection limitations.

So, based on DWR's understanding, there may also be a tight near term resource adequacy market, especially for these, for non emitting resources. So this concludes my remarks, and I'll hand it over to my colleague at Department of Finance.

Good morning. Andrew Hall with the Department of Finance. The most recent JLBC letter noted the need for a verifiable loan repayment schedule. We just wanted to note that it's likely going to be several years before that level of detail is available. There's three potential avenues for repayment, all of which have some level of uncertainty. The earliest we would know how much of the DOE nuclear Credit award will be available for repayment is 2027.

Further excess operating revenues in the final year of operations may occur after 2029 for unit one and 2030 for unit two, based on CPUC's conditionally approved extension date for operations. And lastly, at this point, we don't know if there's going to be other funds made available over the other federal funds over the next few years to help offset the loan, which would also impact that schedule. Each of these elements play a factor in the repayment timeline, which again are unknown at this time.

Okay, thank you. You had a quick clarification. We'll go to Lao. Can you do a quick clarification on that?

Well, so this is the General Fund loan to PG&E, so I'm sorry if I missed this, but is there any kind of talk about DWR trying to forgive a part or entirety of the loan? And what kind of conditions are you looking at to permit that sort of thing?

We're gonna get into a detailed questioning.

But is that what you were just mentioning?

There are, there are forgiveness provisions in the loan. It's just. It's too early to be able to know for certain whether that will be a scenario or not.

Okay. Okay. I want to ask further about that.

But yeah, we'll go into very detailed discussions about this. Let me first turn over to the.

Thank you, Mister chair. Good morning Senator, Sonja Peteck with the Legislative Analyst Office. We don't have a lot of substantive comments to add to this discussion, but we would just acknowledge that the Legislature is in a challenging position right now, given the budget deficit. But it also did agree to provide the loan of 1.4 billion to DWR for the purposes of loaning it to people PG and e to extend the life of Diablo Canyon.

And as was noted, PG&E was successful in securing an award with the Federal Government for up to 1.1 billion. However, some of the conditions associated with that federal award creates some uncertainties about both the amount and timing of possible loan repayments, as noted by Mister Hall from Department of Finance.

Okay, thank you. Well, first, I appreciate you being here as well, Doctor Gill, and presenting the background helpful, and, you know, I think we're not here to just to discuss that piece of it, but it was helpful, I think background and I think clearly, as was mentioned, being such a large percent of our power load and being greenhouse gas free, certainly I believe this was the right thing to do.

I think we're going to talk specifically, really about the loan here today, and I think that'll be the focus as we just. Senator, started with. We're going to start with some foundational stuff. Senator Blakespear. Okay, yeah, yeah. Well, why don't we go ahead, I think. Yeah, yeah. Well, I think there's things you were looking at were pretty foundational, so.

Okay, so, thank you for the presentation. I just. I wanted to have a little bit more information about PG&E reported record profits in 2023. And so I'm really just wondering, why can't PG&E Fund the Diablo Canyon extent effort using other funds that don't come from increases to ratepayers? I know that that was prohibited, but, you know, why is there no option for that?

So when. So the current DWR loan agreement was crafted based on all the provisions from SB 846. So whatever is allowable under the loan is directly derivative of what is in SB 846. Obviously, that's the current scenario, is not anything that we could have necessarily foreseen, but also was not expressed in the legislation.

So, in terms of repayment of the loan, SB 846 only detailed three main pathways, which is a, the DOE credit program, which I'll also note at the time that when SB 846 was passed, we were only still learning about this DOE program, and PG and e had not even applied for it. But the intent was for PG and E to apply for it and see if they could get into the program. So that was the first repayment option.

The second one, as Mister Hall mentioned, is revenues. In its final year of operation, California Public Utilities Commission has conditionally approved an extension to 2029 for the first unit, 2030 for the second unit. So that would be the second pathway of potential payback to the loan. And then the third one would be any other funding that PG and e could apply for. And our understanding from PG&E, not to speak for them, but they have committed to look at other sources if they qualify and are available.

But you're talking about loan repayment. And what I'm really asking about is the 400 million request for a loan now in the budget.

Correct. So, for the. The loan was crafted in order to provide monies to them for this extension, which is also under SB 846, what the state would want them to pursue. So this was not anything that PG&E had planned for in the past. So none of this was budgeted. So, as far as we understand, this is the funding that will be provided to help them with the loan, with pursuing the license renewal.

So, basically, is it. Are you saying that they are not able to do the work without it.

For the 400 million? Our understanding is that, yes, there are commitments made. So there is a schedule that they must adhere to from the Nuclear Regulatory Commission. And those are the set inspections, which are typically done when the unit is on a planned outage. They're able to, you know, open up the unit or make upgrades or have the inspectors be able to look at different things. So those are very, very carefully timed and calibrated.

There is a large amount of preparation, including staffing, including coordinating to obtain the right materials and services in order to support all those inspections. And those inspections are happening right now.

So we had one in fall, we have the current one in spring, and we have more coming up on the rotation in order to meet the Nuclear Regulatory Commission's timeline for them to try to get a final decision on Diablo Canyon license renewal by August 2025, which is the Nuclear Regulatory Commission's projected timeline for Diablo Canyon. So I think everyone's trying to work together to time it very tightly to meet those deadlines.

And that's why the remaining 400 million is needed, because PG and e continues to progress along the license renewal efforts.

Okay, thank you. I'll let some of my colleagues ask questions, too.

Sure. I'll go to Senator Dahle. Before I do, I just wanted to note for a moment, because it was quite, quite a. It was quite a moment the other day. Well, do you talk about the need for this, that batteries, because this just happened this week. Batteries built just in the last three years were providing three Diablo cannons worth of power one night this week and were the main source for the California grid.

So I do appreciate and I'm going to recognize all of our efforts to get lots of batteries on the grid and to show that that is having effect as well while this extension is going on. We go to Senator Dahle. First questions on this.

I just. I don't know. I don't know where to start because I've been here too long. I guess maybe first I just want to make a General comment. I mean, for myself, I voted against shutting it down and voted against starting it back up because we're, quite frankly, in this position where. So let me just ask the first couple questions and then maybe what happens if the loan is not executed this fiscal year?

I'm assuming, sir, you mean 400 million? Yes, correct.

Same thing that Senator Blakesford just tried to get an answer for. I mean, we can get it this way.

Fair point. So let me rephrase this. So right now, PG and E, as well as the Nuclear Regulatory Commission are on a schedule to try to allow for the inspections to continue in order to get to that hopefully final relicensing decision by August 2025. So everything is in place now to start those inspections, which began fall 2023 and are continuing.

Part of the issue is because the license renewal process was started under such an expedited timeframe, typically there is five years or more

Time to start it Back up or to shut it back down.

oh, I'm sorry.

It was 15 years in the process of shutting down. No, 10 years.

Right. So sorry. We're talking about two different pathways. So the 15 years that I referred to was the first time PG&E approached the Nuclear Regulatory Commission to relicense. So that 15 years is not uncommon for nuclear power plants to start many, many years ahead of time. The Nuclear Regulatory Commission actually has a minimum of five years ahead of time. So PG&E obviously was well ahead of the five years.

But with SB 846, what happened is now they're in that five year window and that's not allowed by the Nuclear Regulatory Commission. So, in fact, the NRC actually had to produce a waiver for PG&E to allow Diablo Canyon to go through a relicensing process in less than the standard time. Because that time was so short.

PG&E did its level best, from what we understand, to go out and expedite all of the contracts, the staffing, the materials, the nuclear fuel needed in order to go through all the inspections with the NRC. So not only has PG&E been spending money in order to meet these specific inspections that have occurred and are occurring, but they also have made financial commitments for getting those materials under an expedited manner to support the rest of those inspections coming up.

So therefore, it is very critical for PG&E to get the last 400 million because of the commitments and because of the timeframe they're under for the Nuclear Regulatory Commission to complete this relicensing.

All right, let me ask, is the relicensing of Diablo Canyon jeopardy? I mean, and if so, when is the drop dead date that the funds must be loaned?

So from our understanding is they are at a break point around spring timeframe where they will be passing potentially the $1 billion mark in terms of funding. So from what we understand, based on the kind of the forecast we have, is that in the third quarter, third quarter of 2024, they would need that remaining 400 million.

Which, which is the. November 2 of 2024 is the first unit would come offline if they don't. If FERC. FERC doesn't act and allow them to stay open.

The Nuclear Regulatory Commission.

Oh, yeah, it's not. Well, it's. Yeah, NRC. Sorry. So let me get my mind around this. They were allowed to raise rates to decommission it to start with. And then we accelerated that, actually. We said, no, we're going to. The Governor made it. He was actually the lieutenant Governor then said, we're going to. We're going to shut down the power plant. So they were able to pass that on to the ratepayers to decommission. And there's also a Fund that set aside for decommissioning that's ongoing all the time. So those monies are already set aside. Correct.

I'm sorry, I can't opine on anything outside of the DWR alone.

So let me ask it this way. Are they able to raise rates to do, to continue to run their nuclear power, the Diablo power plant, or are the taxpayers paying for it? Everybody's paying for it through the loan.

My understanding is for ongoing operations of Diablo Canyon. That is a topic of discussion at the California Public Utilities Commission, which will go through their rate proceeding. The DWR loan, funded through the General Fund, is only about transitioning into that license renewal period.

So the gentleman earlier talked about that. We don't know if they're going to repay it or not. 846 really didn't say. There was a lack of detail in here. And what's going to happen with the future monies that we're putting forth? They may not pay it back. There's nothing in there in 846 that says we're going to get our money back.

Sergio Aguilar, Department of Finance. So, 846 did clarify that there were the three options for repayment, one of them being the new loan forgiveness. Well, no, one of them being the actual DoE award, which they have been awarded up to 1.1 billion. So up to 1.1 billion has been what DoE has already kind of signaled is the maximum award they would get.

Now, that's from the feds.

Yeah. And that's what one portion of what PG and E would use to repay back the General Fund loan. So that's one avenue to repay back the General Fund loan. The other is excess revenue remaining in the final year of operation, which would be 2029 and 2030. And then the third being other potential federal funds, and then, of course, the fourth being potential forgiveness of a part of a loan, which was part of 846.

So, as the 846 had a provision that DDBR had to include a loan forgiveness provision in the actual contract with PG&E. So that is at the direction of SB 846.

And that would be. Then taxpayers of California would be picking up the tab. So the DOE did give them an installment, I guess we would call it, of 1.1.

It's up to 1.1.

How much did we get?

So do you want to speak to the timeline?

Yeah. So there's a timeline here. So it's all retroactive, the DOE. So, actually, I do want to clarify. DWR is not a party to this loan between the Department of Energy and PG&E. So I will speak.

On what's coming out of the General Fund, then.

I'll speak on what I understand of the loan.

Can I jump in here for a moment? Let me go through my understanding of it, and then maybe you can comment back to response to Senator Dolly's question. So, my understanding is the DOE award includes 741.4 million in base credits. So that's money we are highly, highly, highly likely to get, right? We're basically expected to get. But then there's 359 million in incremental transition costs.

And the loan agreement states that incremental transition costs include costs not included in General rate case that result from, quote, an unscheduled outage or an emergency operating condition, or a new compliance requirement not reasonably foreseeable as of the execution date. So one of my line of questioning. So just. Senator Dali, I think the 741 million, everyone, 0.4 million, everyone agrees we're going to get. I think that's really the expectation and the base cost.

But these incremental transition costs, do we, you know, do we expect PG and e to incur costs. Number one, is that my understanding? Correct. And then on that incremental transition cost, then of course the excess, we'll get to the excess profits in a moment, or the excess revenues in a moment. But just on this part of the incremental transition costs, do you expect PG&E to incur cost for unscheduled outage, an emergent operating condition or a new compliance requirement not reasonably foreseen? So two questions. One, is that my understanding is sort of correct. And then two, do we really expect to really get any of that incremental transition costs?

I appreciate that question, chair. So first I'll say that DWR is not a party to the actual credit award and payment agreement between Department of Energy, US Department of Energy and PG and E. From what our understanding is, everything that has been provided is also based on an estimate. So technically, from the reading that we have of the payment agreement is that there will be an audit that is conducted. So PG and E will have to provide actual historical numbers. Looking back to Department of Energy.

Department of Energy will then audit it. So in terms of those base credits, yes, that is what is expressed in the current agreement. However, we won't know until PG&E goes through all that auditing with the Department of Energy what that final number is.

As part of that audit process, PG&E can also put forward anything that it feels were cost above and beyond the initial estimate between the Department of Energy and PG&E. So our understanding is that, yes, yes, a, there's, you know, numbers on the books that will be audited when the time comes, and then, b, that PG&E can go back to Department of Energy with any, you know, changed states or, you know, any, you know, different circumstances that it happens upon, including increased costs.

So the audit is really for the. For that base, for the 741.4. But then again, just to be really clear, if there are no unscheduled outages and merchant operating conditions or new compliance requirements, then they would only receive 741.4 million. Is that your understanding?

If that is what the final audit numbers come out to be.

Okay, so, number one, hopefully, Senator Dahle.

That's how I want to just follow up with 11 last question, if I may, because I think it's important. So basically, we're expecting the DoE to backfill, hopefully a portion of the loan. So that's everybody in America can pay that pays taxes. And if they don't, then the taxpayers of California, not the ratepayers, but the taxpayers of California will pick up whatever that amount. The difference is whether if they. We don't know exactly what the taxpayers of America are going to pay.

Of the 1.0 because that's still out there. We haven't. We haven't got it reimbursement. We haven't got anything from DOE. So the second part would be then whatever the difference is, we know 400 million is for sure going to land on the backs of the General Fund or the, or the taxpayer of California.

I don't think we can.

It's not the ratepayer, it's the taxpayer. Because this isn't rate. This isn't based off of rate. Right.

The loan is not based off of rate payers. But I will clarify, as my colleagues have expressed, that there are two other sources of funding, including, you know, revenues in the last.

Well, and what are those? What are the two other sources?

Yes. One source is operating revenues in excess of cost in the last year of operations. So that would be in 2029-2030.

So that would be ratepayers money.

It would be excess revenues in excess of cost from PG and e. I don't know if I would characterize that as ratepayer money, but maybe that's beyond my swim lane. I'll pine on. And then the last one would be any other federal awards or grants or credits that PG&E would be eligible for and would have to apply for. So that's another source that could come to repay the full loan.

Well, I mean, I feel like a lot of the terms that we were sold with regards to 846 in connection to energy needs and alternative energy that were all part of the pitch have really not been fulfilled by the Administration. We were all asked to support it, and many of us didn't want to. And now we're being asked for this loan with, you know, conditions that I'm not clear on. And I just, you know, I'm. I think. I think, quite frankly, we've been sidebarring about this.

I think it feels like we're being taken advantage of here, quite frankly. And I understand there's a lot of needs, but as the chair pointed out, there's some new battery technology that's exceeding the energy contribution of Diablo Canyon on its own. So I just want to voice deep skepticism for this item, and I really hope that we'll push back, and I say this with disrespect. You're all doing your jobs. Having gone through the experience of being kind of aggressively pushed into a vote on 846. I'm really dissatisfied about the extent to which the terms have been met, and I think that this community should be pushing back.

Appreciate that. I'm going to continue to ask you a few more questions just to clarify some, but I think you're hearing some of the concerns from. From the Committee, I guess. Back to the base load for a question for a moment. The base credit, 741.4. If Diablo Canyon generated. If the generation in these years in 23-24, 25-26 fall below the forecasted level, is your understanding that the total amount collected in that year be less than the total amounts allocated in that year in the award?

In other sense, if generation falls short of forecasted levels, and there's specified in here what those levels would be, for example, in 2023, 190.9 million, which would be, we would get reimbursed at $10.76 per megawatt times 17,745,276 mw. So specific levels. So as you're understanding, if we fall below that generation, if PG&E falls below that generation in any of those years, then we would get less than the money allocated for that year from DOE. Is that your understanding?

I think that's difficult to speculate on because it would be an interplay between the generation and potentially what the market price is, and I don't have visibility into that, so I'd hate to speculate on what that is. But all told, PG&E would be required to provide all this information to DOE for the audit purpose.

Hold on 1 second. Okay, let me get to this issue of excess funds, excess operating revenues. So how confidence Administration. How confident is the Administration that Dieback will have excess operating revenues in the. And in the last several years, has Diablo Canyon generated excess operating revenues that you know of?

Again, I hate to speculate on what the market prices could be in 2029 and 2030 because it's not just Diablo Canyon, it's obviously everything else on the grid, but also where we're going with electrification. I'll give you an example. In just sort of the average market price in September 2022 was somewhere in the hundreds because of, driven largely by the heat wave that we saw at the beginning of September, whereas the average price for September last year was probably a third of that.

So it really is kind of dependent on what is going on in the year, the conditions and all the other plants that are available in the mix. Unfortunately, I wouldn't be able to speculate on what that could be in those outer years.

Got it. But just for the last several years, has Diabetes generated excess? I don't know the answer. Has Diablo Canyon generated excess operating revenues?

I do not know that off the top of my head, but we can get back to.

Okay, yeah, we would certainly want to circle back on that. And then what is expected, finally, year of operation. Just to be very clear on that.

I'm sorry, could you repeat?

What is the expected final year of operation?

So, for unit one right now, the conditional approval from the California Public Utilities Commission is October 31, 29. And then for the second unit is October 31, 2030.

Let me just do one clarification. zero, yeah, sure. Go ahead.

I just want to make a point of order. This is an article from late February. PG&E's profits hopped higher in 2023, buoyed by electricity and natural gas revenues that surged last year. The power company behemoth earned $2.24 billion in 2023, an increase of 24.6% in profits, compared with 22. And I know, you know, it's just hard to. It's hard to. The constant cries of poverty and oppression from us when we're continuing to offer such positive terms for them on every level.

It's just hard to take. And this is kind of built up frustration over many, many years, I suppose, that I'm taking in on this particular alone, but it's just hard to take.

Could you address this? I mean, this is what I was referring to, but I'd really like some. You know, there is a lot of money, and there are a lot of places where it could be found. And so, coming back to us again and again, I mean, can you just address that number 24% increase? That 2.2 billion?

Sergio Aguilar Department of finance. I mean, you know, we can't speak to PG&E's profits. And you know how that works. What we can say is, this loan follows the structure of law, which is SB 846. And that's what we're moving forward. You know, that's what we're proposing. That 400 million in budget year is really to continue what was required in SB 846. But we can't opine on PG and E's profits and what that means to what they do with that.

And. Sorry for hijacking this, Senator Allen.

No, and to be fair, that was kind of a macro comment I was making.

Gas companies and all their other stuff.

But, I mean, you're the Department of Finance, so you. You are asking on behalf of them for this loan from the Legislature. So I guess when you're reading that article and you're analyzing it, do you not see, is there been negotiation or an effort to deal with this in a different way besides just coming back to us again?

Yeah. The current proposal before the Legislature is really just a continuation of SB 46, which is what is currently required in state law.

Okay. Thank you, chair.

Well, I mean, it is required, but I guess the question comes down to the kind of conditions that we're imposing, and I do want to kind of parse apart a little bit. My earlier question to you. Can we get a kind of a conversation about the extent to which a. A loan might be for. Yeah.

The loan itself, I suppose. I don't have a problem with. It's just the idea that this is so. That could so easily be forgiven. I'd like to get more into those details and maybe you could share with us how that analysis is going to work in terms of a possible loan forgiveness.

Andrew Hall with Department of Finance. I can start. And Delphine might be able to jump in. I think what we're saying is that the provisions were built into SB 846. The final tranche of money that's being requested is a part of that. We are not aware of the timeline necessarily, and the ultimate amount that's going to be awarded from Doe. And I think that's where you're seeing some of the uncertainty, is that we're loaning the money upfront.

It's going to take years before they do their audit to know exactly what the ultimate landing place is going to be for the repayment. So there's just. There's not that level of detail today.

But could you. When I asked you earlier, I was asking about the conditions upon which. Under which DWR might forgive at least part or the entirety of the loan. And you mentioned there are certain conditions. Can you walk us through what those are? And.

Yeah, I would defer to DWR.

Thank you for that. I think in the kind of the highest level forgiveness provisions were required under SBA 46. So when that was enrolled, when that was incorporated into the DWR loan with PG&E, we looked at first where funds could come from. And so again, the three that we had articulated, that would be the only source of payment repayment for the loan.

And if PG&E were also to adhere to the other requirements of SB 846, for example, they continue to pursue a license renewal. They're operating the power plant in a safe and reliable manner. So all of those other conditions that also SB 846 required, if they adhere to those, but the sources of repayment were short, then that could trigger a forgiveness that can trigger the forgiveness provision.

How much do we really audit or drill down on those assertions when those are made? How much is this relying upon there declarations? And how much can we ground truth, those kinds of assertions that, of course, are very, very economically valuable for them to argue a certain way when it comes to a loan forgiveness of this size.

So we've done due diligence in several different ways. Obviously, one of the first and foremost activities is that PG&E continues to pursue its license of renewal with the Nuclear Regulatory Commission. So not only has PG and E reported on those progress, but DWR also has touch points with the Nuclear Regulatory Commission staff on their progress and be able to conduct the various inspections and audits that are required under their process. In addition, we coordinate very regularly with the California Public Utilities Commission.

So there's aspects and connections there that we want to make sure that PG&E is meeting. There's also paper trail that PG and e provides to DWR as we do our semi annual true up process every six months. So we have a paper trail of the costs that they're incurring in order to support the license renewal.

And we also have our colleagues at the Diablo Canyon Independent Safety Commission, and they opine on not only the safety, safe and reliable operation of Diablo Canyon, but they also take on several, you know, other salient questions with regard to not only the SB 846 loan, but also just General operations of Diablo Canyon. So we don't always default to what PG&E tells us, though we do have many conversations with them.

But there is sort of a constellation of other parties that have different roles and responsibilities that we do engage with to make sure that they are pursuing the license extension pursuant to SB 846.

Okay. LAO is here. You're with Lao. Okay. Do you have. I'm sure you've given this some thought. I know this is a macro question, but knowing what you know about the commitments made and the promises made to the Legislature under SB 846, especially with so much of the pitch, was we're going to do everything we can to address renewable energy issues. But ultimately, this is really something we desperately need because of resiliency and grid reliability. How do you think we should be thinking back from your perspective on the SB 46 deal on the macro level?

Sonja Petek with the Lao, I recognize what you're trying to ask, but it's, you know, the Legislature did pass SB 846, and, you know, the intention in that Bill was that the funding would be paid back, it would achieve certain goals, the funding would be paid back, set up certain kinds of terms and conditions that we understand have filtered down to the contract with PG and E. So at this point, we're not really in a position to comment on whether that was a good deal at the time or what changes you would make.

Does anyone have any comments about it? Because I understand we're fulfilling the terms of SBV 46 and that's what this is about and we need to fulfill our commitments. I totally understand it. But I do think that if no one's prepared to fully answer the question now, and I totally understand, it would be helpful at some point for us to get a wise Lao style analysis of the breaks down, the promises made and the extent to which the promises have been kept so far.

And I understand it's only a couple of years ago. I know there's a lot of consternation in the Legislature about a lot of the commitments that were made to us in the build up to the passage of that Bill, and I would like some. It would be nice to move from beyond frustrated chatter amongst Members to more grounded data for us to really ground truth. A lot of the wildly divergent assertion speed made about the extent to which the commitments are being met.

Yeah, thank you, Mister Allen. Let us follow up with your office and see sort of what would be possible in the timeframe that makes sense. Ok. Yeah, thank you.

Great. Well, there are still some further detailed questions I have, but I think what you're hearing that we are frustrated. I am frustrated when you hear the numbers say on PG and e profits at a time when we're asked to give additional loans, as well as in other areas of policy where the PUC is limiting distributed generation, for example, partly because of concerns about the cost of the grid. And then you see profits, and that doesn't add up. Something doesn't add up.

So you're hearing some of the frustration in a variety of ways. Just to get a couple other specifics here, one, just to get back to the base cost, because maybe I was, my initial reading was incorrect, where I was sort of saying that 741.4 million was sort of very, very likely. I mean, just to clarify, because your response sort of indicate that if their generation, say, is lower than forecast, then they may get less than that amount from Doe. Is that correct?

I want to clarify. That wasn't my intent. My intent was only to say that I don't know whether it would go up or down, so I didn't want to speculate.

Well, first of all, the 741.4 is a cap, right? Finance. There's no way that base costs would go exceed that. Is that correct? I think that's pretty clear.

We'll have to go back and verify that. We'll have to verify that.

Okay. Yeah, because that's my understanding, is that those base levels would not go up, but we could get less than the 741.4 million. So if you could confirm that, that would be very helpful. And then just one last point. I know we talked about the excess revenue generation, but relative excess revenues, really relative to cost, and that doesn't seem feasible. It doesn't seem, given historical performance. Unless, again, you'll get back to us on what those were, that that is likely.

I wanted to get to this question. Performance based disbursement, because my understanding is that in the loan we give PG and e performance based disbursements to, I think, 300 million or so to spend, number one, is that correct? And what is this funding going towards?

Yes, so that is correct. It is up to $300 million for the performance based disbursements. And per the legislation, that is a $7 per megawatt hour payment for each megawatt hour of generation for the Diablo Canyon units, and again, capped up to $300 million. So the provisions within SB 846 were pretty straightforward. It said that. So at the various highest level, no amount of the loan proceed can be treated as shareholder profits or paid out as dividends.

But specifically for the performance based disbursements, they would only be paid out to PG&E if Diablo Canyon continued to pursue an extension of its operating period and continued with safe and reliable operations of the power plant. So those were the only two provisions provided under SBA 46. So, per Senator Allen's question, that's two major things that DWR has verified, but we really went above and beyond and did more collaboration with our colleagues at the California Public Utilities Commission.

So not only did we take that basic requirement from SB 846, but we made sure in our discussions with the CPUC that we were also giving strong indication to PG&E about where these performance based disbursements would be, you know, better spent for the benefit of the state. So, for example, in 2023, PG and e identified that there were two areas that they thought the PBDs could be used towards. And again, this was discussed with California Public Utilities Commission.

So the first one was the reach program, and that's relief for energy assistance through community help. That is a program designed to assist Low income persons who are experiencing, experiencing unexpected financial hardships and are unable to pay energy bills. So that was one allocation of the performance based disbursements, and another one in 2023 was to look at funding for quality management and distribution system inspection categories that's related to electric inspections and vegetation management.

So again, we not only looked at these categories, but also PG&E confirmed that these costs were not recoverable by rates otherwise overseen by entities such as PUC or the Federal Energy Regulatory Commission. So we went above and beyond the actual legislative requirement to make sure that these funds were directed in a way that was going to be beneficial to the state overall.

You may have addressed this, but just to be clear that there is a prohibition on not allowing these performance based disbursements to be used to pay dividends or for shareholder profits.

Correct. In fact, that's for the entirety of the loan.

Entirety of the loan. And how do you enforce that?

So for the costs incurred for the actual license renewal, PG&E is required to provide DWR with a detailed specific that they have, and so DWR reviews that also in consultation with the public California, with the California Public Utilities Commission, and similarly with the performance based disbursements. All of that is reviewed by both DWR and in consultation with PUC.

Okay, again, and. But federal funds can't be used to repay that the performance based assertion? Correct. So it's a separate question, but thank you for that answer. The federal funds, can federal funds be used to repay that performance base, the PBDs, as we call them?

Yes. So I think what is a little bit confusing is that really when we look at it, it's all one loan. So should doe approve the credits and they're awarded back to be used to repay the loan, but it's the entirety of the loan, so it's not parsed out in different buckets. So it wouldn't be attributed to PBD's or not PBD's, it's just paying back the entirety of the state loan. So it can, I guess, in other words, it can apply towards PBD's. But again, it's not specifically my understanding.

I may ask the consultant to look into that a little bit.

Our understanding is that we heard directly from the company that federal funds can't be used to repay the PBD's.

If that is a stipulation on the agreement between PG&E and DOE. Again, DWR is not privy to that agreement. So whether Department of Energy wants to consider disbursements, that's not something DWR would be privy to. But from DWR's perspective, there are three buckets or three pathways that the loan can be repaid. And there's no restriction on how the loan can be repaid. So it's not as if, you know, one bucket of money. For example, the DoE funds can only repay non Pbds. For DWR's perspective, it's all one state loan. Any of those three pathways can repay the entirety of the state loan.

Okay, but just to get back to what I said earlier, really, really. The DoE has the base credits, which we said we may get, but may not get the full amount of the 741 before the $359 million in incremental transition costs, which I think we cast them doubt in this hearing whether we will get likely to get those. Those are really the. The main federal buckets, right? Those two buckets, correct? Torrent finance.

Yes, Sergio Aguilar, Department of finance from the 1.1 up to 1.1 billion award. Those are the two main buckets. But again, there are a couple of other potential pathways. So there's just uncertainty at this point.

Other federal funding you think might.

So that, that's one of the pathways acknowledging, you know, there's still a few years to go and there might be other federal funding opportunities. And that's one thing that we're exploring to extend. There are federal funding opportunities that we believe could also support this and the repayment of the loan. Then we would also work with PG and E to make sure we're trying to maximize as much of that as possible.

Okay, about three more questions here and then we'll move on unless something else comes up. But the. Just want to clear, you started with the reach program. My understanding is that's typically funded by shareholders and employees of PG&E. So has PG&E disclosed that the funding for this program has come from California taxpayers?

I'll have to go back and get more information on that. I don't know the answer to that.

Okay, that would be helpful. Okay. The two other things. The pg and e state publicly intends to extend the operations of Jabba Canyon if the Federal Government will allow it. So I just want to be clear, is it possible the loan would not be repaid until after 2030. I mean, just say it gets extended further. Is it possible the loan wouldn't get repaid till 2030 or past 2030?

Yeah, I would say the timing is definitely uncertain. We don't have a clear sense yet. I think the earliest it would be 2027 on the DoE nuclear credit war, but that's the earliest. And so there is still some uncertainty on exactly when the repayment would start.

Okay. I think we should make sure that, you know, if somehow it gets extended beyond that, that their payment happens on the timeline that we expect. So I just think that's important to clarify. And finally for DWR, and I appreciate you going through all this with us. Obviously there's a lot of detail here, but I think there's some follow up that we're going to need. DDR received 7.5 million for Administration costs of this amount. How much has Department spent and where has that funding gone?

Happy to answer that. Thus far, the latest data that I have is we are in the realm of about $2 million incurred since the beginning of our Administration of the loan with PG and E. So that's a breakdown between our staff as well as consulting. The consultants are fairly critical because I think, as most people recognize, DWR does not have innate nuclear expertise.

And so we do rely heavily on getting the right experts with the relevant nuclear industry experience, especially those that have gone through actual relicensing processes. So we have some basis for benchmarking and understanding kind of where PG and E and Diablo Canyon is as compared to all the other power plants that have nuclear power plants that have gone through a similar process. And so those are our meter expenditures at this time.

Will this amount be repaid by PG and E, these administrative costs?

So the entirety of the loan, including this administrative cost which comes out of the loan, are expected to be repaid. It's part of the repayment.

Okay. All right. We will certainly keep track of that. Let me just look quickly through. I think we covered a lot here. Just see if there's anything else that we did not cover. Well, we do have a hold open recommendation, so I think we'll probably be coming back to this one. So I appreciate you being here and answering all our questions and really look forward to continuing to discuss this.

And again, focus not on the merits of doing really just on the loan itself, and just making sure we understand before we do this, as we're asked for this additional piece, what we may or may not be on the hook for going forward. Thank you very much.

Thank you.

Right. We will continue to with DWR on the flood management proposals, issue number nine. As folks are coming up, I'll just restate again that this was a big moment for us, that the batteries just, again, just installed in just the last three years, provided three Diablo cannons worth of power on Tuesday night and was the largest source of power on our grid. So kudos to everyone involved in that effort and it's a real. Just a huge moment for California. So, worth noting. Yeah.

Shows the progress of battery power on the grid and for meeting our peak. Okay, now we'll move on to the flood management proposals and love whoever's going to lead off here. Deputy Director Newcomb, maybe. Yeah. Deputy Director Hollander. Yeah.

This is acting Deputy Director. My name is Laura Hollander over Flood Management and Dam Safety, and I believe DOF is going to start our presentation. I will introduce my other colleagues, though. I have Jeremy Eric, he's the division manager of flood management, and Steve Rothert, who's the division manager of the division of multi benefit initiatives. And we're here to answer any questions you have.

Okay, thank you.

Good morning. Meghan Larsen, Department of Finance. Included in the 2024 Governor's Budget are flood risk reduction investments such as US Army Corps of Engineers led urban projects, repair of storm damage infrastructure, and system wide multi benefit projects. Two critical flood safety efforts are seen in the urban flood risk reduction and central Valley system wide flood risk reduction BCPs. The urban flood risk reduction proposal includes 33,000,001 time General Fund to support nine US Army Corps of Engineers and urban flood risk reduction projects throughout California.

The Central Valley system wide flood risk reduction proposal includes 31.3 million General Fund to support the continuation of three existing multi benefit flood risk reduction projects in the Central Valley. These are critical investments that support public safety and also help address state liabilities, making them a high priority even with significant budget deficits. And I can. DW, of course, is here to answer any questions and provide more detail about specifics.

Great. Thank you. Anything else now or more for later for questions? Is that right? Okay, great. Love to turn to the LAO, Miss Petek.

Sonja Petek with the Lao again. I guess the first thing we wanted to note about these proposals for flood management funding is that these, along with later, we'll be talking about the Salton Sea management program. These are some of the few proposals in the Governor's Budget for new General Fund spending in light of the state's significant budget deficit problem.

And so we would suggest that the Legislature be very selective in what it does approve in terms of new General Fund spending, because every dollar of new spending comes at the expense of something else. There's not excess revenue lying around. So with this in mind, we suggest you apply high bar to any new spending proposals. And our office thinks that the proposal for 33 million for urban flood risk reduction projects does meet that higher bar for spending. Several reasons for this.

One, these projects are really part of the state plan of flood control, which is a core state responsibility and an area where the state has some liability as well. These projects provide critical public health and safety benefits in urban areas. They also leverage significant federal funding. We think that pausing these projects, because all of these projects are sort of midstream at this point. So pausing these projects could provide or could create a lot of disruptions and lead to higher costs and complications later on.

And, you know, just to underscore that, we think pausing the projects would be highly disruptive and could jeopardize the federal funding. So it's our understanding and talking with the Administration that the federal funding, which comes through the US Army Corps of Engineers, could be jeopardized if the state were to say, want to pause the projects now? So, for example, the Federal Government may say, okay, well, we're going to redirect that funding to other states.

And it's also our understanding that it would be quite difficult to restart those projects with the federal support. We also think that there are compelling reasons to proceed with the central valley system wide multi benefit projects. These are projects, or this funding would provide support in disadvantaged areas that may not be able to afford the projects on their own. A lot of these projects are in their final stages. They also reduce flood risk in the delta.

And just as the name would imply, multi benefit, they do provide additional benefits beyond just flood protection in terms of ecosystem and habitat benefits. However, compared to the urban flood risk reduction projects, the sort of immediate risk to public health and safety might be somewhat lower. So we suggest, given the budget conditions, that the Legislature might want to think about this funding, kind of weigh this funding against its other General Fund priorities this year.

There's obviously compelling reasons to approve it, but if you approve it, it comes at the expense of something else. So you might want to look at all of your budget priorities and think about it that way. So, as you probably guessed, we would recommend the Legislature approve the funding for the urban flood risk reduction projects. Think about what to do about the Central Valley system wide multi benefit projects in the context of other General Fund priorities.

And then we just wanted to note, as you're probably aware, that the Legislature already agreed to some other flood related repairs via the early action agreement that just went through. Thank you very much.

Thank you. Well, certainly many worthy projects listed here, very important projects. I'll start maybe, and then we'll turn it over. What for DWR? I guess specifically what factors are considered when prioritizing flood control projects and geographically where the highest party flood projects that you believe need attention and fixing.

I'll go ahead and start with that. In 2007, the Legislature passed the California Central Valley Flood Protection act of 2008, which required DWR to develop a plan, a Central Valley flood protection plan, which prioritizes all of our projects in the Central valley, from urban to small communities, to rule.

But some of the factors that go into the plan that we think about as we do that prioritization include, of course, population at risk, critical infrastructure at risk, resilience to climate change and changing conditions, potential for federal investment and cost share. A whole variety of factors go into how we prioritize that. And the plan is updated every five years, so we adjust our priority projects every five years.

Okay, and how are you taking into account climate change as part, part of, of this forecasting? Who's involved in this? Army Corps of Engineers, Bureau of Reclamation. How are you working with everyone as part of those efforts, too?

Sure. Yes. So we're doing quite a lot on forecasting. Everything we do with forecasting takes into account climate change. Just in the last year, we've written a roadmap for climate resilient forecast framework, which is how we plan to sort of upgrade our forecasting to take into account climate change as tools and modeling gets better.

Can we get a copy of. You may already have that, but could I get a copy of that review?

Absolutely. And specifically related to the Army Corps and the Bureau of Recrimination, we work with them directly, in particular on forecast informed reservoir operations, looking at our different weather capabilities for how we might want to operate our reservoirs differently based on what the water supply is at the time and what we project, we need downstream.

Okay. And is there a total cost, if you think about the flood control projects the state has responsible responsibility for, is there estimated cost of repairs?

Estimated cost of repairs right now for the entire Central Valley is three to 5 billion right now, and that's in our Central Valley flood protection plan, Steve.

Between three and 5 billion just for repairs? Just for repairs.

Right. And that does not include some of the delta repairs that Steve could speak to.

Okay. Yeah, sure.

I would just add that the Delta resiliency branch in my division manages the delta levees program that works with 70 plus reclamation districts in the delta to maintain and. And improve those levees. And they every five years develop a five year plan estimating the costs to bring their levees up to standard. And the most recent study was completed in 2023. And their estimate of the cost is 1.4 billion to get delta levies up to standard.

Just for the delta levies. Yeah, but that's included in the three to five.

It's not. Those are just state plan of flood control. The ones that I have three to five, what he's talking about are largely what we call non project levies. So not part of the state plan of control.

Yeah, got it. And those could be. Some of these projects could be. We talk about a climate bond. Some of those could be funded through that kind of vehicle.

Absolutely.

Okay, good. Well, I know we're discussing broadly what our binding capacity is and what will ultimately be on the ballot, but I hope you continue to bring that back to the rest of the Administration that this need and how bond would be helpful for these projects. Do my colleagues have anything on this? No. Okay. We have a hold open recommendation, so we'll hold that up and thank you for being here. Next up is issue 10. Director Bonham is here. Director Bonham, good to see you.

And this will be about Golden Eagle Conservation, I think, something important to all of us. So go ahead when you're ready. Usually it stops after a while. It's just kind of finicky initially.

Thank you, chair. Good morning, Committee Members, staff. This agenda item, which is issue 10, is very simple and straightforward. It is not a request for General Fund, it is not a request for positions, and it's an amount of money that's relatively modest, $2.4 million.

So, several years ago, unbeknownst to our Department, the United States Department of Justice Environmental Crime Section, which is within their environment and natural resources division, and the US Attorney in Wyoming brought a proceeding against a company called ESI Energy, which is owned by Nextera. That company operates about 154 wind facilities around the nation. And this proceeding that was commenced in federal court in Wyoming was about fatalities of gold eagles at that company's facilities in Wyoming and New Mexico.

As part of that proceeding and then a plea agreement and stipulated facts, it turns out the company also, for a period of 2011 to 17, had had fatalities of Golden Eagles at three facilities in California. And these facilities are in the Altamont Pass area. So the Department became aware of this when we received a check in the mail and we had to do the forensics to understand what the check was for, how it related to our funds.

This is the first budget cycle for us to come to you and ask for something that's very ministerial, if you will. The authorization to take the funds into the Fish and Game preservation Fund and then turn around and use them for purposes of that settlement. And those uses could include the Department assessing and understanding the golden eagle population dynamics in the Altamont pass. Filling in key data gaps, contracting with experts for additional study needs.

Drilling down on the effectiveness of certain models to understand the population dynamics between facilities and the eagles. Exploring the science around additional mitigation measures, because as of last summer, we also now have a new authority, under a separate set of laws, to require mitigation at wind facilities to prevent impacts to eagles. So this budget change proposal is simple. It's direct, it's for authorization to spin spend money we're receiving because of a settlement entered into elsewhere.

Great. And that's helpful. And do you believe they're taking now the steps that they need to take to reduce the risk or minimize harm?

I am intending to make a phone call to this company and to introduce myself personally and better understand their intentions with their assets that are currently in the Altamont Pass area, whether they'll be pursuing take permits from us for their existing facilities.

Okay, great. Helpful. Thanks. Senator Dahle.

Well, I just want to say, good to see you, Director Bonham. I have no problem with this. I think it's. I do want to just use this opportunity, though, to talk about, you know, something. Obviously, we didn't. Weren't too much aware of, but we found out from, you know, some other study, I guess, apparently, that looped us in, in California.

But in the material I have available to me, 82 Golden Eagles were documented at just three facilities in Altamonte Pass wind resource Area between 2011 and 2017. In April 22, the ESI Energy, LLC entered into the plea agreement with the United States District, district court in Wyoming. But the greatest take occurred at five facilities in California with a loss of 92 golden eagles. So I want all my friends in the environment and the world that think wind is not doing something.

If a farmer killed a bald eagle because they don't have the ability to do a take without, they would be penalized heavily. And the settlement was only 2.4 million for those 92 golden eagles that got killed in California.

So I think what we really need to do is maybe take a look at some of our policies around wind and take, because obviously, we weren't aware we found out about this because they did the study and we're killing a lot more golden eagles in California than I was aware of for sure.

I don't know, maybe the Department did know, but I'm assuming they didn't because I think if the public knew that we were, you know, in the matter of six years, 92 golden eagles were killed in California. That's to me, I think we need to maybe look at that at some future time about what's happening in the wind energy space at the time. We're talking about putting somewhere between 200 and 1200 giant wind turbines off the coast of California to take care of our energy problems.

So I just want to make that statement. I think there's room for some improvement here, definitely when it comes to wildlife in California and the cost to go green with wind and solar and all alternatives.

Senator, thank you for those sentiments and your expression of values around conserving wildlife in the state. There's no doubt any energy sector and development of any particular energy source will have impact to natural resources because you're siting and developing a footprint. Wind is no exception, and so too is oil. So, too is solar. And, you know, in the last several oil spills our departments responded to, we've seen similar levels of, you know, other bird mortality.

The reality is the Department will be in the middle of all of those conversations. And that is why I'm hopeful that last year's authority from the Legislature in the infrastructure package will allow us to produce more mitigation benefit on the bird front from renewable energy siting, which is an authority we didn't previously have, which.

By the way, the Legislature gave the authority to the CEC and took it away from the local government. So now that's where really it's going to happen for wind is they have the ability to be able to do that. I didn't think that was a good idea. I like local control, but the Legislature saw fit to send it to the CEC. So it is going to be a statewide opportunity for your Department to work with the CEC on permitting these processes at the local level. So I look forward to your engagement there.

Thank you. Thank you for the efforts you are doing now to go forward and to speak to the company and such and make sure that we are taking as much steps as possible possible. And as you say in every foreign, there can be negative consequences and make sure we mitigate those. I appreciate that. I think we will have a chance to vote on this one later, but I thank you for being here. We're going to go into the next item, issue 11.

I think you will be here, as well as well as some other people from natural resources on Salton Sea management, the assault sea management program. Okay, I don't know who will be starting off the resources or Director Bonham, but go ahead. One. Great.

I'll start off. Thanks. I'm Samantha Arthur, assistant secretary for Salton Sea policy at the California Natural Resources Agency, and I'm here to present the proposal on behalf of the Salton Sea Management program, which is a multi agency effort of the California Natural Resources Agency, the Department of Water Resources, who's here with us, and the Department of Fish and Wildlife.

The Salton Sea management program requests 65.2 million General Fund and 18 permanent positions starting in 2024-25, 3.3 million General Fund in 25-26 and 3.3 million Salton Sea lithium Fund in 202627. The Newsom Administration is advancing projects at the Salton Sea to protect air quality and provide critical environmental habitat. This proposed funding is needed to move forward restoration projects to follow through on the state's commitments to Colorado river management and to meet the requirements of a state waterboard order.

The Salton Sea is located in the southeastern corner of California and is the state's largest lake. The sea's main source of water is agricultural runoff from farms that get their water from the Colorado river. This creates a direct nexus between Colorado river management and the Salton Sea. And for reference, nearly 20 million Californians are reliant in full or in part on the Colorado river. Reductions in Colorado river deliveries to agricultural lands surrounding the sea can result in declines in the lake level.

The Salton Sea has been declining in elevation due to reduced inflows over the past 20 plus years. This exposes lake bed that can be emissive and contribute to air quality issues in the region of the state that is already burdened with poor air quality. Water level declines also have significant ecological consequences as habitat is lost and the sea becomes more saline. The state's role in the Salton Sea restoration is shaped by past legal cases and state legislation.

Court cases in the early 1960s divided up allocations of Colorado river water across states, giving California an allocation of 4.4 million acre feet. In 2003, the quantification settlement agreement set water budgets for California water agencies reliant upon Colorado river capped mitigation costs for those agencies and facilitated the largest agricultural to urban water transfer to bring California within its Colorado river allocation. This transfer of water out of the Imperial Valley to coastal Southern California results in less inflow into the Salton Sea.

Also in 2003, to implement the QSA the state adopted legislation codifying the state's responsibility at the Salton Sea. And then in 2017, the State Water Board set acreage milestones for the state's restoration at the sea, requiring the Natural Resources Agency to restore 29,800 acres at the sea by 2028. We're coming from behind in meeting these acreage targets for restoration, but the Administration is proud of our progress.

We've completed nearly 2500 acres of dust suppression, and we have approximately nearly 6000 acres currently under construction, including a large scale 4100 acre aquatic restoration project and 1700 acres of vegetation enhancement projects that are nearing completion. Partnership with the Legislature has been critical in funding these restoration projects, and the funding proposed in this BCP will move forward six projects we have in our project delivery pipeline in terms of land access agreements, design, permitting and construction.

We propose to Fund the staffing needed to support this project delivery, as well as eight staff for operating and maintaining projects that are the first of their kind that are nearing completion. Any reduction or delay in state funding that pulls back on momentum on these restoration projects may destabilize agreements around the Colorado river and jeopardize potential federal funding.

Additionally, any delay here in funding this request would increase costs in the future because we'd lose out on important efficiencies gained by having contractors and work on adjacent sites. Our administration's committed to carrying out restoration projects at the Salton Sea associated with the QSA and the State Water Board order, and we're eager to continue to partner with the Legislature to improve habitat and protect air quality for the communities of imperial and eastern Coachella valleys. Thanks, Abby, to take questions.

I have none. I've been following this. I'm okay.

Let's see. I do have a couple. Oh, sorry, LAO. I'm sorry.

Okay. Thank you, Mister chair Sonja Petek again from the Legislative Analyst Office. Again, this is another proposal for new General Fund spending, so we suggest you be quite selective about what you approve. We have a few points to make about the particular proposal in front of you, and then a couple of recommendations for your consideration. First, we just want to acknowledge that maintaining progress at the Salton Sea is very important for both public health and environmental reasons, and the state has accepted responsibility for this work.

We would note, however, that the Administration has been sending somewhat mixed messages to the Legislature about the urgency of this funding. In last year's budget process, the Governor had proposed reducing funding for Salton Sea projects by 169 million. The final budget agreement ended up including a smaller, yet still significant reduction of 119 million. So we were somewhat surprised to see the Administration come back in this budget process to again request funding.

And one of the reasons we're questioning whether the full 60 million is needed in this budget year is because the program is somewhat behind on meeting its acreage targets to meet the 2028 deadline. And it doesn't appear that this is all due to money, to having money on hand. There are complicated challenges associated with getting these projects done, the land access agreements, understanding the environmental conditions, working with local communities.

But what we're not clear about is whether those issues have been resolved enough for the program to spend all 60 million in the upcoming budget year. Another key point that we wanted to raise about the request for the project funding is that this funding would essentially initiate six projects. In the case of one small project, it would also include construction funding. Our concern is that if the Legislature approves the 60 million this year, what's going to happen after those projects have been started?

And if the state doesn't have funding to finish them, are we going to just leave them sort of stranded? And this also then kind of leads into the next question for your consideration, which is, how is the Administration sort of planning to Fund projects going forward more generally? So there's these six projects, but there's also additional projects to meet the stage. Phase one, sorry, phase one, acreage targets by 2028, and then there will be projects in subsequent phases following that.

And so there's a lot of questions, sort of, around how the state's going to Fund those costs. So what we would recommend for your consideration is, one, there's a small amount of funding in the proposal, $3 million to provide the state's cost share for a federal feasibility study that's being conducted with the US Army Corps of Engineers.

And we think that this modest investment probably makes sense, because if the army corps in that study determines that there are some feasible options in the Salton Sea, that opens the state up to draw down potentially significant federal support for future Salton Sea projects. We also think it might be a good idea to approve eight of the requested positions, and specifically the ones for maintenance and operations of projects that have already been completed or are nearing completion.

And this is because the state's already invested significant funds and effort to get these projects done. And we don't, you know, we don't want to just leave those in the lurch and let them start deteriorating. And then finally, we would just note in terms of the 60 million for the projects, we think, again, the Legislature's going to have to weigh these against other budget priorities. But there's a couple options you could think about.

So, for example, you could consider funding providing partial funding instead of the full 60 million. And for example, you could consider funding fewer projects and or fewer staff. You could think about some criteria to use to decide which projects to Fund. You know, you could Fund the ones that cover the most acres. You could Fund the ones that lead to the most public health benefit.

We would note in the case of one of the projects which would involve 8 million of the 60 million, this is a project that is likely to receive federal funding in the future and that federal funding doesn't require a state match. So this funding, it's our understanding from the Administration that this 8 million is sort of bridge funding until the federal funding comes in. The Legislature could consider just waiting to get the federal funding and not providing the 8 million.

Now another option is you could consider providing the full amount requested, the 60 million, but provide it for fewer projects, but to see those projects through completion rather than just starting up the projects. And my final point that I would make is just that the Legislature probably wants to be cautious in approving funding for projects that don't have the future funding sources sort of lined up or a plan at least for how completing those projects would be funded. Thank you.

Okay. Thank you. You know, certainly seems to me, you know, supporting the funding that frankly requires the match. For example, the 3 million mentioned for the Army Corps of Engineers makes a lot of sense. You raise questions about some other, obviously a lot to consider here in terms of some of the other expenses. Just so I'm clear, you mentioned eight that are in process right now.

The proposal would Fund six projects.

You mentioned some that have already been started, is that right?

I think most of them are in the sort of project initiation, can I jump? But I'm going to, yeah, I'm going to defer to the Administration.

So I think an important clarification here. So we have a project delivery pipeline, right? We need to move projects from initial scoping to geotechnical technical investigations to then design and permitting, then construction, then when we complete construction, adaptive management and monitoring. So these six projects that we've identified in our proposal are already in our pipeline, many of them already scoped. What we're asking for is really the minimum needed to move these projects forward.

About half of them are identified to take to full completion and fully construct the projects. The other half are to advance their design, permitting, land access steps. And then I think it's important to recognize that, you know, so we have 6000 acres under construction. We're driving towards a 29,800 acre goal by 2028. And we've been working very hard to scale up our efforts, both in terms of our staffing and our processes, to be able to scale up and deliver on these acres.

So we need to continue that momentum to catch up to those acreage targets and to really follow through on our commitments there. So we've identified the funding. That's the minimum needed to be able to continue our work because we have expended our funds and are advancing projects right now. And then to speak to the federal funding, we've received $70 million at the end of 2022 that is specifically required and targeted for expanding the species conservation habitat project.

So it's limited to a specific project to accelerate our efforts associated with new conservation from short term from the perio irrigation district. So I want to make sure that context is clear as well.

Great. Thank you, Senator Dahle.

So I toured the Salton Sea in the nineties before the two thousands. And so I just want to give you an opportunity because I think for the legislatures to understand if we don't move forward and we don't put, what does it look like if we wait? Because I think we're gonna have budget problems for some time now. But as far as, like, evaporation and the things that are happening on late, can you just touch on that little bit?

Because I think that's an important part of the decision making for this funding up front now. So if you, if you could.

Yeah. Thank you. So the sea continues to recede from the 2003 quantification settlement agreement. Not moving forward at this time would mean not implementing and advancing these projects, which means areas that are, as the sea continues to recede, areas that are exposed can be emissive. So it's really an issue of environmental justice and an issue of protecting air quality for the communities around the sea and then also the ecological conditions. So these projects are addressing twofold. They're addressing the ecological conditions and they're addressing air quality. So that's kind of a direct happening now. So thanks for the opportunity to.

Yeah, so I would say maybe on a few of those positions, if we, I mean, we need to get you what you need. But for me, I think we need to really take a good look at this because I think that the longer, if we don't do it, it's going to be double or triple the amount later on.

So I think that's where we need to put our business hat on and go, okay, if we put it off, it's going to be double or triple the money later on, and we might not catch up at some point if we don't, with the environmental damages that could possibly happen there. So I just want to put that out for thought.

Chair and Committee Members, I think our panel adopts wholeheartedly Senator Dali's point. If we wait, it's worse. If we delay. We can't get ahead of it, let alone caught up.

I appreciate that. Yeah. Clearly, a lot of issues involved here. The New York Times actually had a big profile of Bombay Beach. I don't know, an interesting community around the. Survive, maybe thriving on the shores there, but it was very interesting. I was just pulling that up for reference. But the. What about the extraction? Lithium extraction tax? Because we do have part of the agreement that will provide revenue for this. When do you expect lithium extraction will begin in the region?

Aaron Carson, Department of Finance. So, based on public statements and announcements by lithium extraction companies and the schedules of their projects in California, finance expects tax collections. Excuse me, related to lithium tax or lithium extraction, to begin in the next one to two years.

One to two years. Okay. And so that could be significant. There's $400 to $800 per metric ton of lithium, lithium corporate equivalent, just for inflation. And 20% of the revenue goes to the Salton Sea lithium Fund. So that's interesting. Okay. One to two years. If this. I think we've kind of probably covered this for now. Yeah. Okay. We'll move on. We have a hold open recommendation. Thank you for this. We take a very quick recess before we go for our.

Okay. And we're back. We'll ask folks for issue number 12 from the Coastal Commission to please come forward. Great, thank you. Yeah, go ahead.

Madeleine Cavalieri with the Coastal Commission. Can you hear me? Okay. How's that? How about now? Better. Okay. So, Madeleine Cavalieri, deputy Executive Director with the Coastal Commission. With this BCP, the Coastal Commission is requesting three new permanent positions to expedite state funded priority projects, including ecological restoration, wildfire resilience, and nature based climate adaptation in the coastal zone. The positions are anticipated to be funded through future interagency agreements with CAL FIRE, state parks, and the coastal conservancy, which are leading or funding the implementation of these projects.

The number of state funded restoration and adaptation projects will increase substantially in the coming years to preserve biodiversity, pursue the 30 by 30 initiative, and adapt to climate change and sea level rise, as reflected in the associated increased spending at the state and federal levels since 2021. The state has invested billions of dollars to support these projects, while Congress has also made unprecedented investments in coastal resilience with passage of the bipartisan Infrastructure law and Inflation Reduction act.

If left unchecked, the impacts of climate change will significantly increase the number and severity of coastal floods, coastal erosion and catastrophic wildfires, and the cost of emergency response to such events will rise exponentially. These priority projects reduce these impacts and the related costs by enhancing flood mitigating ecosystems, protecting shorelines from erosion, increasing wildfire resilience, and reducing fire fuel loads.

This proposal would ultimately support additional staff capacity to work collaboratively with partner agencies to ensure projects are planned and designed consistent with the Coastal Act in order to avoid regulatory delays and expedite coastal permits. Ensuring the funds will be used efficiently and effectively. Prioritizing these projects and getting them through the environmental review and permitting stages in a timely manner will also better position state and local partners to apply for shovel ready federal funding opportunities. Thanks.

Thank you. I do think we have a couple things we want to discuss directly related to this and some taking the opportunity to discuss a few other related or just General Coastal Commission issues as well. Does the first maybe the term finance?

Aaron Carson, Department of Finance. No comment, but happy to answer any questions.

Great. Just in the analysis and the agenda we talked about, the savings invested billions of dollars since 2021 to support these kinds of projects. Do you have a precise number on that?

I don't. I'm sorry.

Okay. That'd be interesting to have.

We can certainly get back to you.

We have that somewhere. And especially, as it were, all very excited about pulling down federal funds for these issues from the Infrastructure act, as you mentioned, inflation Reduction act, and just having an understanding of how that's going and where we are in that is very important to us as we look at that. How big is that backlog for technical review that is mentioned?

Yeah. So the Coastal Commission's technical review staff consists of one engineer, one geologist, and four ecologists. They review all new development in the coastal zone, including shoreline armoring, critical infrastructure such as highways, rail lines, wastewater treatment plants, ports and harbors, as well as commercial and residential development and the restoration and adaptation work that is the subject of this BCP. The backlog for technical review includes all of these project types, and it's generally substantial.

The Commission prioritizes items for technical review based on their regulatory deadlines to ensure all statutory and regulatory obligations are met, which can lead to a lack of capacity to support restoration and adaptation projects early in their planning and design, when input regarding coastal act consistency should be considered in order to maximize the efficient use of government funding. So the recent state and federal investments in restoration and adaptation work will place additional pressure on these technical review staff.

But the proposed BCP will relieve the pressure by providing targeted resources specifically to expedite permitting and to participate in the types of planning and coordination work needed to successfully design and implement projects from the beginning that are consistent with coastal act in order to utilize the funding efficiently and avoid permitting delays.

Okay, so what kind of projects are in the backlog?

This is, you know, all of the projects that are coming before the Commission. So all new development in the coastal zone, all commercial residential development, shoreline armoring, coastal infrastructure, as well as these nature based restoration and adaptation projects.

Okay, let me come back to that. Last year, we did hear about renewable energy projects. The Commission noted it needed about a dozen more positions, and this BCP asked for only three. So it needed more positions for environmental review. If so, do you have a timeline when you may be seeking to add those positions? We don't want to slow these down and hear that nothing can get done because we don't have enough people.

Yeah. This PCP is specific to ecological restoration, wildfire resilience, and nature based climate adaptation projects that are in the, that are coming forward from recent funding, not for renewable energy projects.

I need to answer on that as well, though, because this is.

Aaron Carson, Department of Finance. So the Administration is continuing to assess resource needs for offshore wind energy related resources at a variety of state entities for the 24 governors budget. We do not have an update for sharing the outcomes of that assessment.

Okay, I think I'm gonna be extremely disappointed if we all of a sudden we hear, hey, everything's being slowed down because we don't have enough people, that'd be very disappointing. So given that they said that we need a dozen more and there's only three here now. So.

Yeah, so like Miss Cavallari said, these resources are specific to projects that are already being funded prior to or since the 2122 climate package. It's a variety of projects. However, these are not related to renewable energy or offshore wind at this time.

I understand that. I just like an answer, like in writing in the next couple days, just about the renewable energy positions as well.

I'm happy to get back to your office.

I don't want to hear that, but related specifically to this same thing applies. So you feel this is enough staff to get through the backlog?

This will expedite the review of these priority projects, and it will ensure that our existing backlog is not impacted so that we can, because these are priority projects that we all know need to move forward for their benefits on the ecosystem and coastal hazards. And so that would be separate and apart from the backlog that we have of technical review items related to, you know, all of the other coastal development that comes before the Commission.

Okay. I think we're going to take the opportunity because a few other things. Senator Blakespear, do you would like to, anything you want to bring up around coastal development?

No, not at this time.

Not at this time. Okay. Well, I'll just speak then, for my own part. I know there's just been concerns that I hear, and again, maybe this is, you know, will be, will be helpful here to the extent we're talking about, but just that when people are trying to add in the coastal zone, whether that be anything from a lot of this in my district, whether it be any kind of new housing adus, whichever, it takes a long time for the Coastal Commission.

And so when we talk about housing being a priority and then from the Administration, but then I kept hearing about the coastal mission, the coastal mission that's concerning to us. Any comments on that?

I would just say that we have worked very hard in the last couple of years to prioritize resources to address the need to be looking at housing as quickly as we can. We work diligently with HCD on a regular basis, as well as our all 76 local jurisdictions up and down the coast to make sure that the planning is in place to smooth the way for projects.

And then we are, you know, doing our best with the resources that we have in order to respond to projects that are coming before us again. We are, you know, have statutory and regulatory obligations that we are balancing as we also prioritize as best we can chair.

I actually would like to share something on this topic. Thank you. Yes. So I'm a former coastal mayor and have several bills related to the Coastal Commission. And one of the things that I hear a lot is that we don't have the staffing. We're not able to follow timelines that are followed by other agencies, whether they're special districts or cities or counties. And so we don't have the staffing. And things take a long time because of that.

So part of this question around the budget is you're asking for staffing for these three positions. And I wonder about the, I wanted to understand more the decision making around what staffing to ask for, given the many things that you do deal with and that are priorities. But the reality that we're trying to harmonize some of the, all of the policies in this state, the environmental policies, the housing policies, and so, you know, the funding around the Department. Exactly.

You know, the prioritizing that's happening when you're asking for funding. So that was really the kind of the heart of my question around this.

Yeah, absolutely. I mean, we, like I said, we do our best to balance our obligations. We do follow the permit streamlining act and ensure that all projects are heard pursuant to that which is similar, similar to the local government requirements. And we have put additional resources on this issue in the last couple of years within the resources that we do have.

Okay. So what I hear you saying is that you are focused on it and that following timelines is important to you, but you don't feel like you need to be asking for money for more staffing, for positions that would help process permits from cities better.

Erin Carson, Department of Finance taking into account there was a lot of tough decisions made in this Governor's Budget. We support this proposal because it's cost neutral and it meets the workload needs that are described in the BCP.

Okay. Okay. Thank you. Thank you, chair.

Okay. Would you. I would like the answer to that about the renewal energy projects, a follow up on that and, you know, I guess Reserve the right, so to speak to, you know, come back to the Commission directly on projects and just kind of dig into a little bit more. But we do have approved as budgeted recommendations, so I think we'll have the chance to vote on this today. Thank you. All right, we'll move on to our last item, issue 13.

Establish an implementation of in stream flow objectives in the scheme Scott river and Shasta river watersheds. I'll ask folks to come on. Come on up.

Good afternoon, chair. Yeah, have both on. This is the problematic mic, so we'll see if I can get through it. Good afternoon, chair. It's good to. Can you all hear me okay?

Can you try the other mic? Yeah, try the other one.

It's too forceful. Thank you. It's like a Zen. It's very Zen.

I know its battle with the mics today.

Good afternoon, chair, Members of the Committee. It's good to be joining you here today. This request is for two permanent positions, $711,000 in contract dollars from the water Rights Fund, to be able to support the board's important work on establishing long term in stream flows on the Scott and Shasta river. As we know, this year the salmon fishery is closed yet again.

The Scott and the Shasta feed are tributaries to the Klamath River and are critical to several native species and fisheries, and importantly, to tribes and communities. And here, this board itself had a hearing back last August discussing what to do. Currently, we have emergency curtailments in place, emergency regulations that are setting belly scraping flows in the system. But we know that we need longer term solutions here in the watershed.

And again last August, the board actually held an item and provided direction to staff to begin the work of developing long term in stream flows. These resources would help us accomplish that, and again, incredibly needed, given the balancing that needs to be done, certainly in supporting the fisheries, but also bringing along growers and the agricultural industry in a way that helps us actually get to solutions here faster.

So glad to answer questions further on it, but the criticality of the request is clear to us at the board and hopefully as well here to the Legislature.

Yeah, clear to me as well. I know Senator Dahle had some comments on this. I'd like to turn it over to him.

Thanks. Good to see you again. Just wanted to just kind of holistically, because obviously, during the drought years, real heavy drought years, we had some, you know, just non flow, quite frankly, and that was an issue. And then so, been working close with the, you know, the growers up there and the folks that have water rights on. On the river.

But can you talk a little bit about the effects that taking down the dams and the quality of water in the river and how this system fits in now and what it's going to look like a couple years? I mean, we had a. We've had some really unfortunate things happen. You know, we had a 100% kill on the fish that were let out of, or released, into the stream from the hatchery just recently.

So talk a little bit about what we've seen since there. The dams have come. Have come to. We've released the water out of the dams in the. And how the Scott and the Shasta fit into that and these positions because the locals up there are very nervous about what the future looks like. And I know the tribes, too, are concerned. I think they're dealing with a lot of issues that they weren't expecting to deal with at this time.

So this is just an opportunity to maybe give us a little broader view of what's happening.

Yeah, I'm glad to do my part to answer. We Also have here still Chuck Bonham from the Director of Fish and Wildlife. That can help explain, explain some of the hatchery issues as well. Generally, the Scott and the Shasta are really critical because they are a rearing hotspot for these species. And we know the chlamys system itself is degraded, has challenges.

And the dams that have been removed here are being actively removed, have impeded what has naturally been hundreds of miles of habitat and spawning that the species used to depend on. So they've really learned to lean on the Scott and the Shasta, those cool, clear flows through the summer and fall, to be able to hang on to their existence. So the removal of the dam is complementing that ability for a restoration of the watershed.

And it's important to note that the water quality impacts with the dams as they were existing is far worse than the water quality impacts, even the temporary ones we're here seeing, certainly with dam removal as sediment moves through. But in the long term, the dams were not for drinking water or for agricultural water. They were just for hydropower. But they created stagnant, nutrient rich waters that were creating harmful algal blooms that were a real human health threat, and also pets and others that would suffer.

And also the downstream effects from then that harmful algal bloom laden water being released. And importantly, in all the analysis that was done prior to dam removals, sediment samples were taken. Importantly, the quality and impacts were reviewed and here anticipated and are temporary. Again, when you look at the long term impacts of what the dams were creating on the fishery and the watershed. But we acknowledge that there are concerns and these short term impacts as sediment moves through the system.

And I know there's been a lot of work with the regional Water Quality control board, along with, importantly, the removal corporation, around additional testing to build that public competence. Because we know, as we've seen from the emergency declaration from the county, that there is a concern around public health. We've worked actually with our Office of Environmental Human Health hazard assessment to understand of the testing that's been done.

If there's a threat to recreation in the river and have affirmative letters indicating that at the levels various metals that folks are having concern around that were found don't pose human health for limited recreation contact. And here in the winter, there may not be as many folks in the river. As things warm up and people look to recreate, it's going to be important we continue to do that testing to ensure that trust and the public confidence in this project.

And I think it's just important, again, to recognize the historic impact of what those dams were doing and acknowledge short term impacts. But those still are outweighed by the benefit ultimately to the system. Look over to Director Bonham.

Senator and chair, thank you for the indulgence. On the hatchery specific dynamic. A couple of points. As you know, our Department ran and operated a very old hatchery at the base of our iron gate dam. It struggled annually on its production goals and its other water quality and kind of fish health issues as a result of this transition in the basin. And our Department acknowledges change is challenging, including for the local community here.

We have a State of the art modern facility paid for by the licensee Pacificor on Fall Creek in early March. Our Department had fall run shunic smolts, so about the size of our finger. We took 800,000 of those from Fall Creek hatchery, and we released them above irongate dam.

They ran through the outlet pipe at Irongate Dam, and they got what we believe is called gas bubble disease, because downstream, we picked up the vast majority of those fish in mortality, exhibiting gas bubble disease symptoms, basically bubbles around their skin and color of their tissue. The reason why that disease happened is they ran through the pipe and the infrastructure created. It's basically like the bins for a diver. The reality is that dam, that reservoir, and that pipe won't be there a year from now.

It'll be removed. We acknowledge the mistake we made. No one, we consulted with tribes, federal agencies, engineers, expected that pipe would produce that problem. So here's the better news. Fall Creek hatchery is producing so many more fish in an optimal condition than the older iron gate, we actually have a surplus. We're going to hit entirely the 3.25 million production goal for this year.

And just this week, on Monday and Tuesday, to avoid this problem, we drove a next batch of about 500,000 fish downstream of iron gate, about 7 miles. And we're super pleased to report we put 90,000 coho in the river and 400,000 fall run in the river. And they look great. And it went really well. And more importantly, for the two weeks prior to this release, we did yesterday and on Monday, excuse me, Tuesday and Monday, my week is mixed up.

We put sentinel fish at different locations in this stretch of the river, and we monitored them in cages over. Over 48 hours, and they all survived, all 200. So we used 200 as kind of a test of river condition. And this river's conditions this week were optimal. 51 degrees water, high dissolved oxygen, low turbidity, clear and clean. That's what we're looking forward to in the future. A free flowing river. You and I fishing for steelhead in the upper basin when they come back.

So we know this change produces challenges at the local level, which is why on a weekly basis, I'm liaisoning both with the county and the removal corporation to keep working through problems. But everything we're seeing is within the range of impacts, all the environmental documents and permits predicted.

So on the sediment issue, I guess we call it the flush, maybe. So the. So after that initial flush and we saw, you know, those pictures were crazy, right? The drone pictures of, you know, you got fresh water. And it reminded me the Yuba up here where the gold mines were, you know, used to be when I. When you fly that today, you still see, you know, on heavy rain events.

So what is it on a average precip year, years out, are we going to continue to see that silt moving? And is there a risk of, you know, fish issues in the future, or do you think it will just flush out and it'll go away? It'll be fine.

Yes. In a General matter, here's what I'd say. And all the federal and state analysis that's been available in public for quite some time, that is now within all the federal and state permits acknowledge we're looking at like a year or two of impact at the fishery level because we've got to move 100 years of degradation from behind those reservoirs down and out the system.

But we expect it'll be temporary and near term when weighed against the long term benefits of access to 400 miles of historical habitat. And frankly, some of the best cold water springs that existed in the basin have been underneath those reservoirs. And if we can combine that work with all the replanting that's going on right now. So we put riparian growth back on the river.

The partnerships we're doing, we're spending $20 million, as you know, in the Scott and Shasta working with farmers ditch the Karuk and the Yurok, helping the board in the collaborative discussions around flow setting, dealing with the bureau in the upper basin. If we can do all these things, we can get a better future in the Klamath.

Thank you for that. So my last question is to the actual producers and what is the, I reached out to the ones I know. They're pretty active and, and want to make it have a solution, I should say. There are some that I think are still on the fight maybe, and I think there's some that are trying to figure out what the long term looks like.

So what is your engagement with those folks and as far as, like, even, you know, their rights, their, their water rights versus set aside or curtailment of the land following kind of. Just give me a background on that, what you see in the future on that.

Yeah, I can take part of that there, Senator. The last years here, starting in 2021 when the board adopted emergency curtailments, have seen a lot of progress. There's been a lot of discussion within the basin on how best to protect in stream flow, how best to create and ensure that there's some minimum within the watershed. And what the board's emergency curtailments have done is really bring landowners to the table.

Part of our success have been local cooperative solutions that were developed that the water rights system as we administer it can be a bit of a blunt tool. It's based on priority, and you're either at priority or not. And what these local cooperative solutions and the discussions we've been able to have with folks is to create a space where regardless of priority, everyone's contributing. And the way to be able to make sure we're actually meeting these minimum protections is by getting everyone to really contribute.

And yes, the water right system is there for us to make sure that we're able to do things like maintain in streamflow. But we have to admit that the priority system is a bit of a blunt one and has inequities because of the first and right nature of it.

So the goal here is to clearly articulate what are we trying to keep in the system and really unlocking the ability for water right holders, for landowners, for tribes, for everyone in the watershed to come together and say, well, how can we all contribute collectively and to have that floor there, to be able to have something for folks to aim to. So it's been, it is not an unfraught discussion. There's a lot of tension.

Certainly there's a lot of concern people's way of life, feeling that it's at jeopardy because of this work to ultimately create some equity. And there are a lot of inequities when we think of the history with our tribes, the history of protecting their food source when it comes to the native species. And what I've been heartened by is just the amount of discussion that's starting to lead to something of a different vision where folks can acknowledge that we need to keep more in the system.

And, you know, the when, how much, all of that, we're fortunate for the Department of Fish and Wildlife and all of others that are providing technical basis for the board to say, what is that balance? How do we do something that is long overdue and the longer we wait, it only becomes more difficult.

I'd like to say that, you know, we've, I think one of the things that, and I'm sure you've seen this not just in the Scott, but throughout the state where we, when we add SGMA to the issue. And in basins where I know in the Scott, they actually do recharge there. And there's the ability to recharge some places we don't have that ability, but there we do. And I think the conflict or the SGMA versus the diversion rights are in conflict, quite frankly.

And when we can divert water and actually fill those aquifers back up for later use. I know that the last time I was there, there was, you know, there was some consternation about we had all these flows and it was going right down the pipe and we could have put it in the laterals where they actually filled up our aquifers faster. And so I'm hopeful that those things will be worked out with those.

So everybody can, it's a win win for everybody if you get the aquifer form and we have plenty of water for the, for the fish at the same time. So just touch on. I wanted to mention to the chair that I have, I don't want to change a vote on this one. I'm going to lay off this. I had a no vote on it, but I want to lay off on this because I got a lot of good information.

Thank you. Thank you, Senator.

Thank you. And very important topic in just reviewing an article locally about the, how the sandwiches enclosure blow to the San Mateo county industry. So I was noticing in that there's a, it said that the federal disaster declaration last year was in 20.6 million in aid for California Fisher's. But frustration with how long it's taking to get that money out. Can you comment on that at all?

Yes, I can, Director. I'm glad I stuck around. While I wish it had been faster, it is important to know this sets a record for the fastest. So currently at the Department of Commerce federally there are countless pending disaster relief requests that have not been completed that have gone on years. So go back to April of last year and roughly at the same time the federal fishery venue unanimously voted to close commercial fishing off California shore.

Within hours, Governor Newsom and the lieutenant Governor had filed the appropriate request with the secretary of Commerce. 12 months later, we are ready to approve the spin plan that is lightning record time for several reasons. Congressman Huffman changed the process for these reviews and approvals at Commerce to shrink the timeline.

We're the first request that has gone through the new process and of that approximate 12 months, I'd argue nine or more months has been on the federal front because you've got about six to eight months of Congress even deciding if they're going to appropriate. Then you have those funds going to an entity in Portland, which is a federal Commission, of which I'm but one Member.

What our state Department has done in parallel is go do the conversation with the affected sectors and in parallel develop what's called the spend plan so that once we finally get the dollar we're good to go. Tomorrow we'll know. Any final public comments on the spin plan. We're going to work over the weekend and by Monday we expect to recommend to our federal counterparts, spend plan is fine, get us the money. So I think we're hopefully weeks away from putting dollars into people's pockets.

So now this year the federal Fishery Council unanimously voted for a second year of closure. And that was last Wednesday. By last Thursday morning, a week ago, the Governor and the lieutenant Governor again had filed the appropriate letter and we were now we will colloquially bird dog this request and see if we can shrink it for even less than 12 months to get relief to affected Californians.

Well, that is good to hear. I appreciate it and actually we'll send a note to Congressman Huffman as well to thank him for his role there. But I appreciate hearing that and understanding how diligent the Governor and lieutenant Governor and the Department have been. And again, getting that money out. Obviously we always wish it's faster, but this is helpful to hear and we hope that we'll have season open. All our work in this area contributes to having Sam season open next year. Yeah, excellent.

Well, we do have a prove as budget recommendation for this one. I think we'll have an opportunity to vote on it shortly. Thank you all. So sorry. Question on this point. Well, specific to finance, and I know we got to go because we got to do public comment and do the votes, but I want to just bring up. There was this letter that was just sent from finance last night to the Joint Legislative Budget Committee informing us that the Administration plans is to.

There are these plans to freeze all these one time General Fund expenditures with some qualifiers, which I understand in the context of all the budget challenges. But I was just, you know, if you don't want to answer this now, for the interest of time, I wanted to just get a better understanding of the scope of the directive.

You know, we've got, you know, I mean, just say, for example, the wildlife conservation Board published their agenda for the May meeting, and there's something like $126 million in projects. And, you know, they've been years in the making, a lot of the money leveraging public, private, and federal funds. And so if the freeze, for example, extends to these projects, we're leaving a lot of non state money on the table.

And so I guess, once again, if you have a quick answer now, I'd love to hear it. Otherwise, I'd love to follow up with you directly, but is this freeze that blunt, or is it more thoughtful and nuanced to ensure that we're not being Pennywise and pound fluish and leaving a lot of non state money on the table?

Yes. Andrew Hall with Department of Finance. I can give a really high level. We just got this this morning as well, but basically, it's going to be impacting anything. Section two of budget acts 21, 22 and 23. It has to apply to appropriations just from the General Fund. The appropriation is not a part of Proposition 98 guarantees. So these are all the things that would be impacted. The appropriation is not for a specified state capital outlay project or an emergency related expenditure.

There are remaining funds that are unallocated or unencumbered from the appropriation, and the total value of the unallocated or unencumbered funds is greater than $1 million. So there's a short list of criteria, I think. Anything else as far as additional details, we would need to get back to you on?

Okay. I'm specifically interested in the leveraging of non state money with the significant amounts of federal or private money that are part of a deal for projects that have been a long time in the works. As much as we need to claw back money now, we could potentially be losing a lot of money. By doing it too bluntly. So I'd love to get whatever information you can to ensure that we don't, you know, we're just not being.

We're not throwing the baby out with the bathwater or pennywise and pound foolish, as my dad used to say. So.

Understood.

Thank you. Okay. Thank you, Senator Allen, that very important point. So we look forward to following up on that. Okay, we're gonna move. Thank you. We're gonna move to public comment. Due to time constraints, we're gonna have to end public comment at 1:15. There's a lot of people here. I don't know if one 1:15 is going to work. So we're going to ask people to limit comments to 1 minute or quicker, if you can.

And for people who don't have a chance to speak, we'll send your comments to the Senate Budget Committee. But I'm sure we do have flights and such. I know there's a lot of people here, so go ahead.

Thank you, Senator and Members, chair and Members Rico Mastrodonato with the trust for public land. Senator Allen, you made most of the comments. I was going to express our concern over the freeze to expenditures. The May board meeting, for example. We have four projects ranging from Shasta all the way to Los Angeles County that will go out of contract. Land transaction deals are time sensitive. You're involving landowners that have other options.

This is how we lose land permanently to development is by falling out of contract. And there is no doubt about it that if the freeze impacts the May board meeting at the WCB all the time they put into it, the state has put into it and us as the applicant, months and months will go down the drain and we'll be pennywise and pound foolish.

Yeah. Appreciate that. Thank you. And again, I pause it. I didn't realize we had these constraints. I just apologize now. People have been waiting.

Horacio Gonzalez. On behalf of the Salton Sea Authority, we are a joint powers authority of the Coachella Valley Water District, the imperial Irrigation District, the County of Riverside, the County of imperial, and the Torres Martinez Desert, Cahuilla, a tribal people that have inhabited the Salton Sea region since time immemorial. I want to appreciate Senator Dali's comments with respect to the governor's proposed investment in the Salton Sea.

Not only would you likely experience higher costs if that investment is delayed, but unfortunately, there are some costs that you won't be able to undo in a better budget year. Right now, the rate of asthma related visits to emergency rooms and hospitalizations for kids under 17 and the imperial Valley is twice the state average. That is what's at stake here. And allowing these areas to continue to emit is only going to impact those health outcomes even more.

And again, those are not things you can undo in a better budget year. So we urge you to please approve the full investment. Thank you.

Thank you.

Good afternoon, chair Members. Paul Mason with Pacific Forest Trust. Two items very quickly. One, I'll draw your attention to the letter that we sent yesterday regarding the PG&E loan, Pacific Forest Trust, and a number of others urging you to deny that. I appreciate the conversation that was had earlier. It was pretty unsatisfying in terms of the answers. So there's a lot of other things we can do with that money.

The other is just reinforcing what Senator Allen and my colleague, Mister Mastro Donato, said about the wildlife Conservation board and the implications of such a blunt approach to a freeze. We have a huge $12 million project we've been working on for years in Senator Mcguire's district that leverages federal money that will disappear if this is just bluntly put off until 2526 whatever. So we really need a much more nuanced approach to whatever we end up doing there. Thank you.

Very important both front. Thank you.

Good afternoon. David Weissman, Executive Director, alliance for Nuclear Responsibility. On the issue of the SB 846 loan, I'd just like to repeat the sentence that Senator Laird made on the evening of the passage of the Bill. The 1.4 billion loan expenditure will be matched with 1.4 billion in federal revenue, which limits the requirement of any ratepayer or taxpayer money for that purpose. As you've explored today, the numbers no longer seem to match up in that fashion.

And therefore, we implore you to safeguard the state's General Fund against any further losses in that instance. Thank you. Thank you.

Kim Delfino, speaking on issue one, on Diablo Canyon. Just want to echo the same concerns regarding the loan for PG&E, the 400. We agree. We don't think the $400 million should go out this year. Issue 11. On behalf of Alianza and Audubon, we support the Salton Sea BcP. And I think Senator Dahle said it perfectly. I've worked on this issue for 20 years. If we do not keep that project pipeline going, that is an ecological and human health tragedy down there.

And then on issue 12, Defenders of Wildlife supports the Scott and Shasta River BCP. And finally, on the WCB issue with the Department of Finance. Freeze. Really appreciate Senator Allen asking the question. It's likely to leave somewhere along the lines of $40 million on the table.

If we do not move forward with that WCB agenda in May, defunds projects all over the State of California, including equity projects, parks, acquisitions, and we are not going to be meeting our goals and we are leaving money on the table. And I think pennywise Pounds Short is the right way to put it. Thank you.

Thank you.

Alex Loomer with the Environmental Law foundation here today on behalf of the Karuk tribe and really strong support of the BCP for the Scottish Asta flows on issue 13. These fish are cornerstone the cultural identity for the karuk, and we really need to see these flows stay in the river for the bare minimum of protecting the cultural resources for the karuk. Thank you.

Thank you.

Natalie Brown with the playing Conservation League in support of issue 13, the Scott Shasta in stream flow is also echoing support for the citizens Committee to complete the refuge, the Environmental Protection Information center, and the Native Fish Society. This BCP is in line with Governor Newsom's salmon strategy, but we need more funds to mitigate the closure of the salmon season, which was due to the salmon stock on the Klamath, which is a direct tributary from the Scott and Shasta.

This is a really important Bill for PZP, for fish, for tribes, for the people who depend on them. Thank you.

Thank you.

Good afternoon, chair. Background Members, this is Megan Cleveland with the Nature Conservancy. We want to echo the comments on issue 13 on the Scott Shasta BCP. We really appreciate the staff recommendation on that. Also appreciate the staff recommendation on the Coastal Wetlands Fund abolishment. And then finally, just to echo Senator Allen's comments, we're really concerned about that freeze.

This will impact critical conservation funding that the Wildlife Conservation Board and our state conservancies are currently considering for approval, the Senate has been a champion for our state conservancies and funding for 30 by 30, and we really ask that you continue to protect this funding and ensure that the funding can be approved during the Board Meetings. Thank you so much.

Thank you. And if you can refer to someone else's comments, that's helpful. It moves faster. Thank you.

Good afternoon, chair and Members Alejandro Solis, on behalf of Comites Civico Del Valle, a key environmental justice organization out of Imperial county serving the communities in and around the Salton Sea region and Lithium Valley. Although the state faces a substantial budget deficit, the need to move forward with Salton Sea restoration and protect the nearby communities facing ongoing health impacts is greater than ever.

While we are hopeful that the Legislature and the Governor will agree on a climate bond and that future lithium tax revenues will be used for Salton sea restoration projects. Both of these potential funding sources face significant uncertainty. We thank the Governor for the inclusion of 65 million for the SSMP to continue progress towards Salton Sea restoration. But we respectfully ask the Legislature to reconsider the $119 million in reductions to Saint Sea restoration funding. Thank you.

Thank you.

Good afternoon. Tasha Newman. On behalf of the Coachella Valley Conservation Commission, we'd like to echo the comments of the Salton Sea Authority in support of the appropriation for restoration projects there. We'd also like to, on behalf of the California Council of Land Trusts and the California Association of Resource Conservation Districts, echo the comments made with regard to potential funding freezes, especially those that could affect the wildlife conservation board. Thank you.

Thank you.

Good afternoon, Analise Rivero here. On behalf of Cal trout, trout unlimited, friends of the River Water foundation, and California Coast Keeper alliance in support of issue 13, the Scott Shasta BCP reactive regulation, only in an emergency is poor policy. This BCP will provide predictability for all water users in Scott Shasta, and it is more cost effective than relying on one off emergency regulations. Thank you.

Thank you.

Good afternoon. Michael Jarred, on behalf of the California Institute for Biodiversity in support of issue 12, providing funding for the Coastal Commission, and to thank the Senate for its championship of coastal resilience funding and ask for the preservation as much of that funding as possible, specifically for nature based solutions that provide multiple benefits, such as living shorelines. And also to echo the comments on the funding freeze. Thank you.

Yeah, absolutely. Thank you.

Good afternoon, Mister Chairman. My name is Dan Jacobson with Environment California first. And I'll keep this really fast on the Diablo stuff. No, don't keep spending that money. There's other ways to do it. Two, we can replace that with offshore wind, but we need to Fund agencies like the Coastal Commission to have the staff to do the permits. Three, there was $45 million in last year's budget to help with the ports. To be able to do offshore wind. We have to get that out the door. Thank you.

Happy birthday.

Thank you.

Good afternoon. My name is Erin Woolley. On behalf of Sierra Club California, in support of issue 11 on the Salton Sea BCP funding, the state has an ongoing obligation to meet the habitat and dust suppression projects at the Salton Sea, and it's urgently needed funding to make sure that we are continuing the project pipeline and meeting that 2028 goal. Thank you.

Thank you.

Crystal Strait. On behalf of American Clean Power California aligned with environmental California on our offshore wind agenda. Really want to appreciate the chair for asking the Department of Finance about the positions. We are concerned offshore wind leases are already using the Coastal Commission and handing over their survey information and need these positions for the permitting. As well as the Coastal Commission is also running the workgroup for fishing between fishing and offshore wind.

And so all of that means that we need to make sure that these staff for the Coastal Commission exists as was stated in AB 1373. Thank you.

We'll stay on top. Thank you.

Hi, Morgan Snider with the Surfrider foundation speaking on issue 12. I just want to reiterate what the panel noted, that high priority projects that the state Legislature should restore include projects that are eligible for federal matching funds, projects that are halfway complete, and projects that center on equity and justice. I also want to highlight the Committee's call for funding for staffing at the California Coastal Commission. This is incredibly important to get permits going and continue the work that the California Coastal Commission is doing.

And I also want to mention the importance of funding offshore wind staffing priorities. I know it was only mentioned briefly, but thank you for supporting that as well.

Okay, thank you. We have four people in 1 minute, if we can.

Neil, representing the imperial County Board of Supervisors, also in support of the funding for the Salton Sea. Align my comments with all the other excellent speakers to the question that you asked about the lithium extraction tax. We now don't anticipate that that funding will start to come in until 2026. And really it'll be a fairly small amount then and won't ramp up for years. So really need the funding now. Thank you.

Thank you.

Tomas Valoadesul. Just want to highlight the need for funding the Coastal Commission and its enforcement budget. Thank you.

Thank you.

Good afternoon. Theresa Cook. On behalf of Equinor, one of the central coast offshore wind leaseholders, want to echo the comments of American clean power and Dan Jacobson as it relates to Coastal Commission. Thank you.

Thank you.

Rebecca Marcus. On behalf of union concerned scientists, very quick, reject the $400 million for PG and E. Diablo Canyon. Thank you.

Thank you. Thank you. Appreciate all the comments and everyone being very quick. We're going to move to our vote agenda and we'll start with issues 1, 2, 4 and 5. I'd love a motion on those Senator Dahle moves. Please call the roll.

[Roll Call]

Vote is four to zero. Those measures are. Those issues are passed now. We'll go to issues 6 and 10. We'd like a motion on those. Senator Allen, please call the roll.

[Roll Call]

Okay, the vote is three to one. Those issues are adopted anyway. Let's go to issues 3712 and 13. Like a motion move. Senator Blakespear moves. Please call the roll.

[Roll Call]

Thank you. The vote is 320. Those are out. And we will hold open issues 8, 9 and 11. And thank you, everyone. If you didn't have a chance to make a comment, you can do so via our website. Appreciate, everyone, the rich discussion here today. This meeting of Budget Committee two is adjourned.