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

Other Members to head on down. Well, let's get we'll start in 60 seconds. Let's do that. Well, let's go get let's go ahead and get started. We're going to ask we're going to call this hearing of budget sub 2 to order on May 1, May Day, international Day of the Worker. All right.

So let's start with issue one. This is the cap and trade spending plan. We're going to ask Brandon Merritt and Aaron Carson from Department of Finance to come up and also Helen Kerstein, who's here for LAO analysis. And we'll get started. You may proceed when read.

Good morning. Brandon Merritt, Department of Finance, here to present issue one, which is the cap and trade spending plan. So as of Governor's Budget, we estimated 24-25 auction revenues of approximately $4.1 billion, which is a decrease of approximately 600 million compared to estimates at the 2024 Budget Act.

However, strong interest earnings from the State Money Investment Fund continue to surpass projections. Specifically, the Governor's Budget projected interest earnings for the current year to be 650 million, which is $250 million over projections at the time of the 2024 Budget Act. So the Governor's Budget estimates currently estimates 25-26 auction revenues of approximately 4.2 billion.

The Governor's Budget proposed 25-26 discretionary expenditures of $1.8 billion, which follows 98% of the same spending plan that was approved at the 2024 Budget Act. The only change is a transfer of $81.2 million from GGRF to the motor vehicle account.

The discretionary spending plan for fiscal years 26-27 through 28-29 is the same as what was approved at the 2024 Budget Act. And just as a update on the February auction, the February 2025 auction revenues came in at approximately 851 million, which is 260 million less than the 1.02 billion that was estimated for each auction at Governor's Budget.

So the Department of Finance continues to review and consider changes to the 24-25 and 25-26 cap and trade budgets as part of its preparation for the May revision.

Good morning, Chair and Senators Helen Kerstein with the Legislative Analyst Office. We have a few comments. As my colleague from the Department of Finance mentioned this, the spending plan is largely what you all agreed to with the Governor last year. They're just two pretty modest changes and they're both really aimed at supporting the MBA.

One of them is a shift of $32 million of SIRUP funding from GGRF to Prop 4 that frees up some GGRF that along with some unallocated GGRF is being proposed to support that motor vehicle account.

So we think in General it's reasonable to continue your previously agreed upon spending plan as long as that's consistent with your prior and as long as the budget situation continues to be sort of similar to what you envisioned last year.

We think there are some real trade offs associated with that proposed changes that I mentioned there related to supporting the MVA. Of course it's helpful to the MVA at least on a short term basis to have that funding flow in. However, there are some downsides. We talked about that Fund shift.

I know the Committee is well aware of the trade offs there in terms of shifting Prop 4 funds and the additionality of those Prop 4 funds. So that's certainly one trade off.

The other tradeoff is that there's some unallocated GGRF that's being proposed, of course, that if you don't use it for the mva, you could use those for other purposes. And to the extent that revenues don't come in where they're anticipated, it's unclear if those funding, those dollars will be available.

Which kind of comes brings me to my next point, which is that thus far revenues have been a little bit soft relative to expectations on GGRF for the last couple of auctions. So it's unclear whether that full agreed upon spending plan over the next few years is going to be able to be maintained.

We think if those revenue numbers continue or the prices, the allowance prices continue to be where they have been at the last couple of auctions that probably your current year expenditure levels are okay, but your budget year ones, you might need to make some modifications there.

So we're recommending that the Legislature really continue to closely monitor those auctions. There's another auction planned for this month as well as the condition of the General Fund. We'll know more about that probably in a couple of weeks and make your choices accordingly and potentially adjust as necessary to reflect your priorities. Happy to answer questions.

All right. Questions for the Members. I'll start with one or two and then we'll open up to everybody.

You know, I do want to just, I wanted to dig in a little bit on this decision to shift funding to the motor vehicle account from the GGRF and I, you know, I guess I understand it's a one time Fund shift.

There are particular headwinds associated with the budget right now that being Said of course the MVA is facing a longer term budget deficit Fund deficit. And so this is not just a kind of a one off problem associated with the current budget headwinds. So what's the.

So you know, I get the nexus right, you're covering theoretically the CARB portion of the motor vehicle account. But I'd love to get a better sense of what the longer term solutions, the thinking about longer term solutions and whether this is a, whether this is a proposal for something that might be longer term.

Hi, Matthew Macedo, Department of Finance. The MVA, we're constantly monitoring it. It's currently facing operational shortfalls kind of every year but you know, year by year as revenues kind of swing up and down. We sort of evaluate that on at each Governor's Budget in May Revision.

Right now the proposal maintains the solvency of the Fund but we'll continue to look at that as next Governor's Budget comes along.

May I add just something real quick, I think just to give a little bit of context here. So the MVA has been a very long standing issue that the state, I think our office has written about it numerous times over the past number years and really I think as I understand it, it's driven by a couple of things.

The costs essentially that are in the mba, including things like employee compensation, are outpacing the growth in the revenues. And that is fundamentally a very difficult situation to deal with unless we want to again reduce those cost drivers or unless we want fees to go up, go up faster than they have been.

So I think that's, it's, it's proved to be a really difficult challenge. And one, we've done a lot of these short term solutions but I think, you know, it's important to start thinking about those. I think as you mentioned as sort of this, it's not clear that this would be really a long term solution to that challenge that the state's facing.

Right. Yeah. And then of course I think, you know, we all talk about the State of the auctions. I think everyone, you know, knows that it's all related to the current conversation about reauthorization which you know, presumably will get resolved and moving on. So I understand. I guess so. I mean I, Is there, is there a.

I would think we're working on an assumption that will get a substantive proposal through, that we'll reauthorize and that that should, is the thought amongst the analysts that that will kind of right the ship a bit and then we can go back to where things were in terms of thinking about planning on the auction proceeds or is there a sense that we need to be that the alarm bells need to be ringing a little bit more?

I'll just speak in terms of the motor vehicle account. It's certainly an option that's out there. You know, this, the proposal that's in front of the Legislature today to balance the MVA is really to cover carbs expenditures. And under reauthorization scenario, there's certainly an option to sort of Fund them, Fund their MVA activities with GGRF. But we'll continue to have those conversations.

Yeah. Yeah. Is there a sense that we're going to have to make some cuts due to, you know, revenues being down?

Well, I will say Control Section 15.14 is our essentially our mechanism each year through the Budget act that specifies the process by which departments are allowed to spend the final 25% of their appropriations after the May auction.

So that control section specifies they can only spend up to 75% until after the May auction has occurred and at which point Finance shall make a final determination for the expenditure of the remaining available auction proceeds.

So, you know, not out of the question if there's a major catastrophic drop in revenues, but is otherwise unlikely that Finance would require departments not to spend the final 25% of their appropriations. But the reality is the 65% continuous appropriations recipients would simply receive less.

But you don't anticipate, if the Mayoxin goes really poorly, how much that we're going to have to make big cuts. I mean, presumably that would have to be on the table.

That. Yeah, it's simply we're in a wait and see mode. And it's also, you know, under consideration as we prepare the mirror vision proposal.

And if I may so my understanding, I think when I looked at the numbers, even if we get to the we're pretty close to the price floor right now of the last couple of auctions. If, even if the state's at the price floor, probably current year is okay.

I think the challenge will be likely budget year because if the revenues continue at this lower level, you know, right near the price floor, you know, that could certainly, you know, certainly some of the planned expenditures may not be fully supportable.

I think the other thing is, I mean, that's assuming we sell all the allowances and that's there are a couple periods of time where that has not been the case for the state.

One was in 20162017 shortly before the last reauthorization, not all of the allowances were sold and so revenues did in that scenario decline quite substantially. And then the other one was around COVID 19. I have no indication that will happen.

But to the extent that something like that did happen, that would be a different scenario and perhaps other changes would need to be made. It does seem that if the Legislature were to reauthorize the program, that that likely, likely would put upward pressure on allowance prices.

Also, once CARB completes their regulatory process, that may also put upward pressure on allowance prices. So we could be moving from a scenario of near the floor to one that's very different within a short time frame if those things happened. But there's a lot of uncertainty around allowance prices, so it's very difficult to predict.

Yeah. Okay. Also, just what, you know, can Any, any. Are there any updates as to thinking about the. Yeah, I mean, the proceeds are. Are so down. So. But I understand the kind of the, you know, the lack of desire to be too.

To act too brusquely, I suppose, high speed rail ongoing, I mean, you know, kind of evolving conversations within your respective organizations on that issue.

Yeah, I would say it's always an active conversation as we consider current and future revenues and I can't really say much more than that.

And I guess one thing I would add is I think one of the challenges with high speed rail is that they have quite a substantial funding gap and they also have a near term need for funding. So they, to really meet the project's funding needs, they likely need to borrow.

And one of the challenges is GGRF is not well suited to securitization. It's gone up and down quite a bit. Some auctions have, you know, we only get in the tens of millions or in the past, we have up to, you know, over a billion. So it goes up and down too much to be a really good source for securitization.

And so I think one of the challenges before us as a state and certainly the Legislature, in thinking about what to do with high speed rail and how to Fund it is not just, you know, the dollar amount, but what would be necessary to make it actually match the funding needs for that project.

And again, it's not clear to me that we can. That cap and trade is something that's going to be really feasible to securitize without, for example, some secondary source of repayment.

I mean, the whole thing was supposed to be, you know, matched with significant federal funding from the very beginning. And it, of course, never come together. All Congressman McNerney's fault. Yeah. Okay. All right. Questions from other Members for this panel.

Thank the chair. Good morning. Thank you for your work and testimony. I want to talk about the Clean Cars for All program. Is that in somebody's jurisdiction here?

And we'll probably have a representative from CARB come up as well who specializes in that.

Thank you. I mean, the Clean Cars for All program has been very effective in allowing people with low income to get into zero emission vehicles. But in my region they typically run out of money before the end of the year and that requires special action.

And so what I want to do is try and figure out how to make this a regularly funded program so we don't have to do those things.

Would you be able to give any information about the overlap between the statewide Driving Clean Assistance program administered by CARB and the regional Clean Cars for All program administered by local officials or local entities?

Hi, yes, my name is Lisa Macumber, I am the chief of the Equitable Mobility Incentives branch at CARB. I'm happy to answer your questions.

So the Driving Clean Assistance program, the statewide program that CARB oversees, is intended to cover all the areas of the state that have not yet had an opportunity to participate in the Clean Cars for All programs.

So the regional programs that operate in five particular air districts, San Joaquin Valley, the Bay Area, South Coast, San San Diego and Sacramento, they do cover a large portion of disadvantaged communities within the state.

But there are disadvantaged communities and low income communities outside of those regions that haven't seen any funding that support low income and disadvantaged consumers and help them get into zero emission vehicles. So the statewide program really focuses on those territories when it comes to car scrap and replace programs similar to what the regional districts run.

The other thing the statewide program does that over, that does support the state as a whole is it offers financing assistance for the entire state. So it supports the five regions that do Clean Cars for all as well as the other regions.

And the financing assistance component of that program provides a smaller incentive since there is no car to scrap for a consumer that needs to get into an electric vehicle. And it provides low interest financing with a cap at 8% financing to help consumers really build credit, be able to finance the vehicle and participate within these programs.

So the only kind of overlap that that program really runs when it comes to the air districts is the financing assistance piece. And then we do have another smaller component, the Zero Emission Assurance Project, also known as zap, that should be launching hopefully later this year.

That for consumers that have gotten into earlier ZEVs or have are buying vehicles, they'll have a warranty that comes along with it so that if there are battery issues beyond the vehicle's normal manufacturer warranty, we'll be able to support them in either replacing the battery or replacing the vehicle.

Okay, so is CARB taking steps to ensure that the regional programs are going to be funded While the DCAP program comes online.

Yes. So the driving Clean Assistance program which is running right now, one of the really unique things about that program that's different from the air districts is that it's built off of a needs based system.

And so instead of a first come first serve program, which is what the regional districts all run, this program is intended to have funding that runs a lot, is available a lot longer, so that as funding is drawn down from it, the program closes to certain applicants so that there's always funding there, or ideally always funding there for a long time, long time for those that are in the most need.

So consumers at the lowest federal poverty level within disadvantaged communities, the districts run their programs at first come first serve, which is very common for how all of our programs, our incentive programs began. And so right now, you know, we. The funding that we've received for each of these things has.

It comes from you all, from the Legislature. Right. And so when we get the funding from you, some of that funding has been specific to the districts. The funding that went into the statewide program was a specific appropriation for the statewide program to establish that with a needs based component.

And so when a district runs out of funding, right now we look at, we do look at what funding we have available that isn't already committed and figure out how we can support.

And we have done that this last year we did have some newer funding that came that we had authority to Fund into the statewide program that we redirected to support the San Joaquin Valley Air District.

And then most recently through your passage of budget language just last gosh, a week or two ago, we've received additional funding that we are working now on getting out to both the Bay Area and the San Joaquin Air District to help support their programs.

Well, thank you. Can you speak to the farmer program?

Possibly.

Well, thank you. It's been a popular program in my district and the Central Valley. But you know, with the reduction of federal funding, we're concerned about reductions with possible replacement of Diesel with the EVs. Do you know what the status of the pharma program is? Can you speak to that?

Yes, unfortunately we are just about out of money for that program. We only have a little bit of money that was appropriated in recent years for that. It's not quite enough to divide up amongst the 20 air districts that do receive funding. And so right now we are. The program is kind of just.

They're implementing what they have, but there is no additional money at this time.

No additional money. Anything from the CARB resettlement resettlements, settlements?

No, no, unfortunately not.

Oh, wow. Okay. Lastly, the carbon capture. Carbon capture is important, you know, in terms of fighting climate change. I wasn't here when SB905 was passed, but the intent was clear. To get that with the governor's okay to get this program running as quickly as possible.

That's the next item we're going to do.

Okay, all right, I'll let that one go. Issue two. Oh, issue three. I'm sure you should know everything, but.

Certainly if you have comments on that, but we are going to go in depth on. Okay. Very prudent. Okay, thank you. Thank you, Senator Choi. Any questions or we can go on to the next issue.

Yeah, maybe I can ask a simple question about the high speed rail. Continuous allocation of the funding is largest portion, 25% of our annual revenue goes to high speed. What was if you translate that to dollar terms last year and what do you anticipate this year? The dollar transformed into dollars. How much it will be for the 25%?

Brandon Merritt, Department of Finance. I believe what you're asking is how much total dollar was received in 2023-24 versus 24-25. I don't have the exact dollar figures, but I believe for 23-24 it would have been in excess of 1 billion with a B dollars.

And then for 24-25 this current year, I believe it'll probably end up being a little less than a billion because of the overall revenue drop we're experiencing at the moment.

That gives me some idea of how 25 means percent percent means 1 billion is a large chunk of money, but the high speed rail project itself is a very costly one. Do you know 25% from this cap and trade revenue allocation, how much their portion of annual budget it makes up?

I'm sorry, I'm not sure I understand your question.

Yeah, $1 billion of their annual budget. What percentage of their needed annual budget?

Matthew Macedo, Department of Finance so it's. I don't know if the best way to think about it is a percentage of their annual budget. They have costs for the segments that they're building.

Yeah, because I assume that they have many different kinds of revenue sources for high speed budget.

So. That's correct. They have the approximately 1 billion a year right now for, for cap and trade, they were appropriated 4.2 billion in Prop 1a bonds in 2021 that they're spending down currently. And they at one point had 2.3 billion in federal funds that has been spent.

And then there are there's a mix of federal grants that have been promised to them and those total about, I want to say 4 billion or so. So that's kind of their mix of funding in total. In total amount that they've received is about 21 billion.

But the Federal Government, as I understand they said that they would not continue funding for high speed rail anymore. So that will give us a very difficult budget situation for them. Right.

Certainly that is an issue that we're considering that at this point the Federal Government hasn't actually pulled those funds back yet, but we will reevaluate as that. As that.

Yeah. Such a large sum of money, $1 billion can be used in many other places, even lowering the gas price, you know, gas. Gasoline prices, et cetera. But from the Republican side of view of the high speed rail project has been just trained to nowhere.

It has been about 17 years since it began and the original projection was about $33 billion, but now it's projecting over $130 billion. And then every year it's going to go up because of inflation and the cost of materials, has, labor cost, everything else.

So my understanding is that it has been planning after planning, study after study and no rail has been laid yet. No train on the rail yet from Fresno to Merced to Fresno is at about 170 miles.

And I'm curious how long we have to, so to speak, keep on funding that to that project that what I conceive as like a train to nowhere and come up with nothing later. Can somebody

I can perhaps help maybe a little bit. So you're correct. So they're currently. Excuse me.

Yeah, progress update, if you can make.

Sure, and I think one of the challenges is that the authority. So they do an annual plan, the last annual plan they just released March 1st. It's statutorily required by then, but it didn't include a full update. It didn't sort of meet all the requirements for a full update.

So we're still sort of working off of last year's numbers. But you are correct, they are still in the process of doing what's known as the civil work. So the foundational sort of infrastructure before they lay the tracks.

They've been working on the initial 119mile segment and then after that the idea is that they would progress to do the extensions to Merced and Bakersfield, but it will likely take some time. I think their schedule envelope as of last year was that they were hoping to initiate interim operating services on that Merced to Bakersfield.

Yes, will be completed and the rail on it, do you know?

Yes. So their plan as of last year, what they indicated was that they were shooting for between 2030 and 2033 to begin that initial operation from Merced to Bakersfield. That was their plan as of last year. The OIG indicated it's unlikely that they will be able to meet that 2030.

It's probably kind of on the later side of that. But my understanding is they have a new CEO who's relooking at the project and the schedule.

And so it is certainly possible and potentially likely that they will come up with some different schedule updates as part of they're going to do an updated project update report likely in August or at least later in the summer. And that could, that could change that timing.

But the most recent data we or information we have from them is that they're shooting for that 2030-2033 for initial operations, if that helps.

I think one of my, I don't know which one local government Committee that was proposed for another study for the I think that's the Senator Cortese's Bill proposing another study. And I made similar comments in that Committee.

Why we keep on studying, studying and wasting money instead of just doing the work, you know, constructing the foundation and put the railing they train on it. And still we would like to do more studying and studying. And that was my comment yesterday.

Anyway, I was told by someone that there was initially some proposal by French government they would like to work on that railroad project. And later after negotiations too much regulations that we could not work on the project in California and they left. And that's what I was told. But some later said we are still working with some foreign investors.

And so I wonder if that is a true statement if to your knowledge anybody is any country is negotiating investing if the investing means putting money into it or are you considering giving that project for them to take over the project and to do the revenue sharing when it is operating?

Not to my knowledge. I would have to defer to the authority to give you a full answer and I can take that back to them. I do not believe that they have any commitments from a foreign rail operator anything to invest money.

I do know that they have what's called what they call the early train operator, which is I believe Deutsche Bahn, which runs a lot of the German high speed rails. They're currently there advising the authority right now.

And if I might a couple points. So that early train operator, that's a consultant. So they're not, that's not like a P3 investor of any sort. But it does bring some expertise from other countries. But I will say my understanding is that the authority is trying to solicit private investment. This is something they've tried before.

They've tried a couple of times actually over the history of the project. They did an industry forum earlier this year. My understanding is that there were originally, I think, seven entities that suggested they were interested and I think it's down to maybe somewhat fewer than that, but that there is some interest that has been potentially expressed.

But I don't have a lot of detail and don't know that it's actually in terms of putting money at risk or how much of it is just providing a financing. So it could be just basically offering the state a more expensive lending kind of tool.

And I think that's something that the Legislature will really want to be on the lookout for because certainly, you know, it makes sense potentially to consider bringing in a private operator if we, we really are transferring risk and really we're paying a reasonable amount for that.

But there could be some concerns if it's really just kind of paying a higher interest rate than we would from borrowing from the open market in terms of bonds. So just something to think about. But I understand they are actively pursuing, trying to think about private investment.

And so I think that's something that hopefully we'll get some updates from them in the near term.

You mentioned that even initial projection of operation was planned for 2030-2035, but now it has been even revised. It may not be feasible. So that will be even 10 years from now. Still it's not going to be feasible to anticipate that operation.

And after 17 years, another 10 years, years, 27 years later, it's not going to be there. Why? What is taking up that delays and knowing that kind of, you know, slow progress, what not right mind any investor would like to make an investment in that kind of project.

I wonder, I hope someday that you can have experts who know about the progress, actual construction, the status of date of the project, rather than giving such a large sums of money without knowing where the money is being spent.

You know, 1 billion here next year, $2 billion depending upon the revenue that you get from the cap and trade. So it is, so to speak, venting my frustration.

Thank you. I share some of your concerns, Senator. I do know that the Transportation Committee has held hearings on this. I invite you to attend those. You know, some of the answers are strong, some are less.

And I think, you know, part of one of the many things we're going to be discussing as we talk about the path forward here is that. That and several other of the continuous appropriations. So appreciate your participation. I'm going to go on issue two if that's okay. Great.

We'll now move on to implementation of advanced clean fleets zero emission airport shuttle zero emission forefoot regulations. I think Kim is going to come up from CARB. She's the mobile source Regulatory Development Branch chief.

We on. Great. Good morning, Chair Allen Members. Before we hop in, I did want to acknowledge that Chair Leon Randolph and also Our Executive Director, Dr. Steve Cliff, are both unable to make it today. But I'm very excited to be here with you this morning. I'm Courtney Smith. I'm the principal deputy.

You're coming next week, I think, right?

Oh, I'm. Oh, I'm here, too, though.

We're having an info hearing on, yeah

Okay, great.

Yeah, it's all CARB, all the time.

I know. We're popular. Good. Well, I was wondering, Chair Allen, would you like me to give an overview of our agency and what we do or. We are happy to also just hop into the questions that you have.

Yeah, no, I mean, certainly folks want to ask particular questions, but I think we generally have a good sense of the agency.

Perfect. Great. Well, if I might, I did want to join my colleague Kim here for your questions around our head heavy duty vehicle requests. And if I might, before we start off, I'd love to be able to set the stage, with your permission, Chair Allen, because, you know, there has been quite an evolving landscape.

I know some of your questions that you sent over certainly acknowledge that. And I thought that it might be helpful for me to sort of tell that story and answer some of your questions at the top, if I might.

Great. All right. But we're focusing on this particular proposal. Yes, sir. Yes.

Great. So some of your questions, very much acknowledged. I think it's no secret that there is a lot of uncertainty right now, particularly as a result of federal actions that the Administration has taken, really targeted at and threatening our efforts to transition to cleaner transportation technologies.

You know, the federal Administration has taken actions to nullify California's clean vehicle standards. You know, this is bringing about a lot of uncertainty for OEMs, for fleets, for technology providers.

And in addition to that, you know, we also have recent US Federal tariff policy, which I think is raising serious concerns for many of us, not only in terms of, you know, our domestic industry's competitiveness globally, but also really importantly in terms of affordability and what that means in terms of costs for, like, the parts, the technologies, the vehicles that we need to support a cleaner transportation system.

And then there is also the issue of waivers for those who aren't aware. In January, when CARB learned and recognized that Biden's EPA was going to run out of time in terms of being able to approve our outstanding waiver requests before them, we decided to withdraw those requests so that way we could keep our Option, our options open that withdrawal.

Also, it did include a waiver request for the Advanced Clean Fleets Regulation, which is a regulation that basically requires large carriers to modernize their fleets towards zero emission starting in 2024 and then up through 2025. So for similar reasons, we also have not yet sought Authorization from the US EPA for our 0 emission forklift rule.

But that is something that we will continue to encourage compliance with. So I also just wanted to acknowledge that despite these uncertainties, we in California have had long standing leadership in this space and really, as a result of that, have created an ecosystem of programs and incentives that are helping support reducing emissions.

In particular, we have the Advanced Clean Truck Regulation, for which we still currently have a waiver. But importantly, we also have something called the Clean Truck Partnership.

And I want to talk about this with you all because I know some of your questions had to do with how we might be modifying things moving forward in the face of, of some of the federal uncertainty. So the Clean Truck Partnership is an agreement that CARB entered into in 2023, and it's between CARB and truck manufacturers.

And in fact, the manufacturers represent 90% of California's truck market. And in this agreement, truck manufacturers agreed to still meet California's vehicle standards, regardless of, of whether any entity actually challenges our unique authority under the Clean Air Act.

So this is important because in a landscape of uncertainties that are coming from the federal Administration, we have a agreement in place that provides some of that certainty here in California. I will acknowledge that even with this certainty, there are always instances in which the market can bring about things for manufacturers that do bring uncertainty.

And that's why when we design our regulations, we build in flexibilities to be able to accommodate that, whether it's federal Administration uncertainty, a pandemic, supply chain issues, or some other exogenous factors. And that's no different with our Advanced Clean Truck Regulation.

One of the things, though, that we are planning to do, and I think this was one of your questions, is, is in the spirit of that Clean Truck Partnership, CARB agreed to work with manufacturers to be able to provide flexibilities to them to help them comply.

And so that is something that, especially with the landscape we're in, we are planning to do, we're planning to bring amendments this summer to our Advanced Clean Truck Regulation to be able to provide more flexibilities.

I will say, despite having this ecosystem in place and the Clean Truck Partnership, which does bring about certainty, you know, I think it's really important to acknowledge that we have more work that we have to do. We did in withdrawing the advance clean fleets waiver request.

And because of where we are now, we are repealing portions of that, including the high priority and drainage fleet portions. We will still be continuing to implement on the state and local government provisions. But because of that, there's more work that we have to do.

These actions are very specific reductions that we've identified in our state implementation plans. So the work that we have to do is identify what additional actions we need to take to make up for those reductions that we can no longer claim. So that is something that is definitely on the horizon for us.

One of the things, too, that I want to acknowledge is that you have likely seen that our request has not been modified despite the fact that we are repealing portions of the advanced clean fleets regulation. And this is really because we still have to implement portions of acf.

We still need resources to be able to implement the airport shuttle regulation for which we do still currently have a waiver. And then lastly, you know, the fact that we have to pivot and identify additional actions that we have to take to meet these reductions, that's going to take work for us.

I definitely appreciate that this is going to raise questions for you all. You have your due diligence and responsibilities to. To voters to really dive into what that specifically looks like and what that associated workload would look like.

But unfortunately, at this juncture, just given how rapidly things are shifting, we're not able to provide specifics to you all on exactly what we plan to do to make up for those reductions. But we, of course, are very open to continuing the conversation with the Legislature as we move forward.

And I think just to sort of step back a little bit. You know, we all recognize that given the current situation, you know, there is more that we will need to be done.

And, you know, now is not the time, from our perspective, to downshift on California's efforts to address air pollution, to get to a cleaner transportation system. And it's certainly not a time to deviate from California's values just in the face of federal uncertainty.

And so we are very much looking forward to working with you all to figure out how we can continue to keep our foot on the pedal, as we say, to meet those goals. So hopefully that's helpful. I think I answered a few of your questions, but we'd love to be in conversation with you.

Yeah. All right. Thank you. Let me open up to the Members if they have any questions. Senator McNerney.

Well, thank you, for the Introduction. You gave me a new a word for my vocabulary, exogenous. So I'll have to work on my vocabulary. Again, thank you for that. So let's talk about two things. First of all, zero emission forklifts. I've met with farmers in my district. They're struggling right now.

Some of the exports have been gone. I mean, farmers are always struggling, but this is a particularly difficult period. And basically they're saying, well, they've got propane forklifts, they don't add much carbon to the atmosphere and they're being forced by CARB to go to ZEV forklifts.

And that's Is there a return on investment that makes that mandate worthwhile?

Well, if I might, Senator, just to set the stage in terms of where we are with this particular regulation, we actually are not seeking authorization authority under the US EPA. And so at this juncture, we are very much, you know, in a posture of wanting to encourage, encourage compliance. Do you want to add to that, Kim?

Yeah. So for private fleets, we won't be enforcing that regulation unless and until we get authorization from EPA.

And while we can't put an exact date on that, just I think looking at politically what's been going on, you can probably guess that that's not likely to be something we're doing in the next few years.

So the nice thing about that is that it gives us this period of sort of to do a gentle, gradual transition and to do more outreach to the kind of fleets that you're talking about.

The AG industry was actually fantastic to work with as we put together this regulation and we did build in a number of like exemptions and extensions based on their comments. But now we have this period where we're going to have sort of an optional regulation in place and we certainly anticipate working with them. And if new issues come up, we'll take that into account.

Thank you. I mean, basically what I don't want to see is, I mean, no one cares more about greenhouse gases than me, honestly. But I don't want to see a, you know, blowback resulting in political backstepping on this issue. So just giving farmers a little leeway here is going to go a long way in my opinion.

The second issue is long haul trucking. Apparently they have a $240 million budget to keep the transition to zero emission trucks on pace with expectations, and yet they're worried that the state money is going to be pretty much zeroed out.

They have less than half of that 240 million is going to be available from some settlements, but they're going to need another $140 million. And they're saying, well, we should get that from the GGRF Fund. So I'm just wondering what you might have to add to that discussion.

Well, I will acknowledge that when I mentioned our ecosystem of programs to support this transition, incentives play a really important in particular, you know, as you're trying to spur technology development, one of the key roles that incentives play is to be able to bring down some of that upfront cost, which can be a barrier.

And we're already actually seeing the market move toward a spot where the total cost of ownership for a vehicle is, you know, on the trend toward becoming comparable with its diesel counterpart.

So I just want to acknowledge that incentives do play a really important role and then in terms of, you know, decisions around future investment, of course, definitely, you know, respect the Legislature and decisions around, you know, working with the Administration on how best to decide how to divvy up the GGRF revenues.

All right, we'll go ahead. And I know that the LAO had a couple comments on the presentation and I know a couple Senators have questions as well. So let's just turn to you first and then we'll go to Senator...

Thank you so much, Senator. So just wanted to highlight and actually maybe first just stepping back. So there are two proposals before you. We're going to talk about them together because they're very similar, one of which relates to implementing the zero emission forklift regulation.

The other two, the other one is related to the advanced clean fleets and zero emission airport shuttle regulation. Together they're requesting 50 positions at about $9 million annually. So it's actually a substantial amount of funding to implement these regulations and enforce these regulations in some cases.

So our comments and concerns really are around this issue of the lack of the ability to enforce these regulations, given that in some cases, and in many cases a federal waiver is required and in many cases it's not there, as we heard, depends.

There are certain pieces they can enforce, but much of these regulations they cannot, including the zero emission forklift and most of the advanced clean fleets regulation. And it doesn't appear that it's likely that this Administration will be willing to allow a waiver within the next few years.

So given that, we think it's worth the Legislature sort of stepping back and asking the question, given the amount of money involved in implementing and enforcing these regulations that can't in some cases be enforced under current law, and in one case, at least, the CARB is actually pulling back, is this the best use of resources.

And that's really a question before you because there's a real opportunity cost with the amount of money that's being allocated, allocated here. And we think that this is especially complicated because this is.

We're dealing with a situation where the Department is being asked or the board is being asked to do like other departments, reductions to their, you know, in terms of vacancies and state operations. So on the one hand, they're getting a bunch of new positions to, you know, implement regulations, which in some, many cases they can't enforce.

On the other hand, we're making cuts to a variety of other places. We're not really even totally sure where those are. And so it makes it really hard for the Legislature to weigh. Is this where you want those extra resources to be? Is this the most effective way to do it?

So our recommendations really relate to trying to get more information from CARB about what are your choices. Clearly, these are important goals and the state has, you know, has to do something and, and some potentially significantly ambitious and, and sometimes challenging things to do.

But given, given the landscape we're in, is this still the best approach or is it worth pivoting? So getting that information, I guess again, also getting more information on the state, the state operations, reductions and reductions and then really making your choices based on your priorities.

So we know it's a hard situation for everyone and it's hard given the lack of information, but really the federal situation complicates. Complicates your choices here.

Yeah. All right, Senator Blakespear.

Okay, thank you. I appreciate hearing the LAO's perspective on this. And I have the same.

I reflect back the same things you're saying, which is that it's hard to weigh when we're not sure exactly how much we're going to need to be cutting out of our state budget and then to have this ask for these additional positions and additional money in that environment, is that the best use of resources?

I would say from my perspective right now, it's not clear to me that it is. I want us to continue to be aggressive with meeting our emissions targets. And part of it is relying on the agency to be demonstrating that we should have confidence in the ability to meet these goals and to be right sized.

I think that's the thing that I think about the most is what how do we right size? And this is across different agencies.

But I would like to ask, in light of that, the, I think out there, highly salient point right now that floats around in the ether is this idea that government needs to work better, that we need to be more efficient, we need to be able to deliver for people the things we need.

And you see many books about this, whether it's Abundance by Ezra Klein or why Nothing Works or a series of articles too in major publications about this. And being in the Legislature, I also experience the frustration of thinking I don't understand why this has to take so long.

And so I'd like to ask CARB, because I think you're backlogged on a lot of different rulemaking and issuing of guidance that is needed in various subjects. And so I'm looking at an email that was received from a CARB staffer that says the administrative process for rulemaking typically takes three to four years.

So when we pass legislation and then rulemaking starts, three to four years seems like unreasonably long. And that might be typically what it takes. But what I am looking for is what is the agency doing to be more efficient, to be more focused on results instead of process.

Instead of saying that we had this many meetings and this many people wrote comments in, what is it that we did at the end of that, that was significant and impactful to me, that's what we want from our regulatory and other agencies.

So I would like to hear some thoughts about what CARB is doing to recognize that, to be more efficient and to be more delivering of results.

Thank you, Senator, for your question. I feel like having listened to Newsom's podcast where he interviews Ezra Klein, was good prep for your question. Very much acknowledge and appreciate that, you know, there is a zeitgeist, if you will, like a recognition that government is slow and not doing enough. And we need to be mindful of that.

We've definitely had conversations within CARB around how to carry through that ethos.

I'll offer that the recent budget letters that, you know, reduced our operating and expenses as well as our position authority actually gave us the opportunity to have some of these conversations right internally to figure out where are there areas where we could, you know, pivot, decide to do with less.

And so those are some of the areas where, you know, in real time, in these last several months, you know, we've had to make some hard decisions around, you know, how do we prioritize? So that way we're making sure, you know, with our limited resources, we're doing the most towards our mission.

I'll also offer just as one example when we, you know, because we as an agency are rather unique in that we do have regulatory activities that cover a Broad, you know, a broad part of our economy. And doing that kind of regulatory and incentive work really requires a very data driven approach.

We have a lot of IT projects and contracts in place to support that work. One of the things that we've been thinking about internally is how can we, as we're moving forward with those, build off of existing systems and existing contracts so that way we are not reinventing the wheel every time.

And certainly that's part of the ethos when we think about fulfilling additional legislative mandates. How can we do that? That builds off of existing work that we have. So I would say in broad brushstrokes. Definitely appreciate your question. Concerns.

As I mentioned, we've been thinking internally about how do we shift our thinking to be responsive to the increasing concerns folks have around wanting more outcomes instead of focus on process. So very much appreciate it.

Okay, thank you. And my second question is what is our relationship, your relationship with the federal Administration? Do we have a dialogue about at any level? Maybe it's not the top level, but at other levels, or is it just a complete silence between the two?

No, we. So yeah, there are many different engagement points with our federal counterpoints. You know, we meet regularly with our counterpoints at US EPA overseeing the Office of of Air Quality, so that way we can continue our coordination with them.

In addition to that, Regional Administrator Cook just recently visited and I know that officials within the Administration had the opportunity to meet. Also, EPA Director Zeldin was recently down in the Tijuana river area recognizing the air pollution crisis that California saddled with as a result of that Trans boundary pollution issue with Mexico.

So there are areas where we are hopeful that we can be able to find common ground and continue to advance our mission. Certainly there are also other challenges, particularly when it comes to some of the efforts to nullify California's car and vehicle standards.

Okay. Yeah. I mean, obviously we want to try to maintain a dialogue to the greatest extent possible so that we can help achieve our goals.

And I'll say as a Member of the San Diego delegation, I was very glad to see the federal Administration there on the border with the Tijuana River Valley sewer disaster that's been ongoing for years and years. And I am hopeful that we'll be able to potentially make progress.

It's maybe one of the only bright light, the silver linings related to the border and tariffs and everything that is at play. So I think we need to prioritize that. So I just want to make sure I say that out loud. Thank you. Appreciate that. Thank you Chair.

Could I add one thing just in response to your initial question on efficiencies? One thing we did want to note is so part of what we're requesting is that we take 32 and a half limited term positions that we've largely filled and that have been working kind of ramping up, getting ready to implement the advanced clean fleet rule.

And if those positions aren't made permanent, we're going to need to like terminate those positions. Right. And then later when we, you know, we get this up and rolling, we'd be hiring completely different people and losing all that expertise.

So part of the reason that we're requesting those positions become permanent is in the interest of efficiency and kind of maintaining the expertise that's been built.

We're going to need that expertise to implement the state and local government parts of advancing clean fleets and to figure out ways to sort of encourage the transition to heavy duty ZEVs on a voluntary basis. So like having to like lay off those people that are positioned to help with that we don't think would be super efficient.

Thank you for your presentation. Your attempt to implementing the advanced clean fleet for zero emission heavy equipment such as airport shuttles or forklift, et cetera, et cetera. And you mentioned that you are communicating with the truck manufacturers a while ago. I wonder you are dialoguing, talking with them eventually.

To me there are many different sources of meeting the zero emission but ultimately that's. I understand the EVs, but there are other alternative sources such as hydrogen gas or liquor. There are some level and very minimal of compressed gas is another one.

But are we ultimately trying to achieve by one method of achieving the zero emission fleets ultimately? Are you targeting for the electrical vehicles or do you have any preferences of what you are endeavoring to achieve ultimately and by when?

Thanks Senator, appreciate the question. I will offer that our current regulatory regime is really focused on performance standards. So we establish requirements that aim towards having technologies that are zero emission. And this is largely driven by concerns with air quality. Right.

A lot of trucks are driving through communities, particularly around the ports, but but along interchanges and warehouses. And by moving us towards zero emission we're able to more fully address concerns that communities have with the air quality impacts to them that can be achieved through battery electric technology, but also hydrogen as well.

And then I'll offer that CARB's approach has been as we move in that direction to also make sure that other technologies are available and clean, including requirements for clean low NOx diesel emissions. Would you add anything to that, Kim?

Yeah, I mean do you have some comparison by setting some hierarchy which is the most ideal way of fueling such a heavy equipment to achieve that you call advanced advanced clean fleet, meaning that hoping to achieve the zero emission. Right.

So heavy equipments and the trucks are just a few illustrations, but there are lots of heavy cargo ships coming all over the world to our ports and I cannot doubt whether they can be electrified. They have to. You need to allow them to use some.

It may not be zero, but neo zero emissions such as hydrogen or some of the liquefied, you know, gasoline resources for them to power their vessels. So. And when you are dialoguing with the truck manufacturers, what are you trying to push you.

What kind of conversation are you having and what are the zero emission achievement goals for these fleets? Clean fleets by when?

Maybe. There we go. Maybe I can address some of that. And you're thinking exactly along the same lines that our rulemaking teams think along as we approach each of these sources. So specifically for the advanced clean fleets regulation that's targeting mainly zero emission technologies and when we Say zero emission.

In our heads, we're thinking it's probably going to be battery and fuel cell. But there's an acknowledgement that we can't always predict what technology is going to advance. So like Courtney mentioned, we try always set performance standards instead of being really specific about which technology we expect people to use.

And we try to take into account all the different use cases and ways that people use their equipment, particularly on the off road side. There's just a huge diversity in how people operate their equipment and they operate it often in locations where maybe charging infrastructure isn't already available.

And so we recognize that there's going to need to be a mix of technologies, including many of the ones that you listed out, in order to get to the end goal. We think in many cases batteries, like zero emission vehicles powered by batteries will work, but that's not like a panacea for everywhere.

And then like you were mentioning cargo ships, that is a really difficult issue. We are working to get more shore power so that those ships can like plug in when they're at port. But addressing their emissions while they're in transit is really challenging. But there are lots of technologies that are available where they can make some progress.

But it isn't just like, zero sure, just put batteries in all the ships and you're done. Right. It's really complicated. We expect a mix of technologies. zero, and timing. Sorry, timing. And generally the timing that we're shooting for is for like the advanced clean fleets rule.

It includes a provision that says as of 2036, heavy duty trucks in California can't sell new trucks here unless there's zero emissions. So that's sort of the goal. That's in part of the regulation. 36. 36, yeah, yeah. But of course there's always corner cases, special cases. So you know, I think when we say that we'll.

I'm lying. I figured that you had some kind of a, you know, goal for. By certain year and when you said that the year, I mean, is that the year that you are wishing or do you have a basis by then? Technology will be there.

You can find such a methodology will be achieved or just an effort to drive for clean air. The emission goal will be achieved by forcing by the policy. You know, I wondered when you set such a date with us, how you come up with that kind of artificial. To me. Artificial date?

Well, I think it's a very perceptive question because it's a push and pull, right? Like if the regulatory agencies never set an ambitious goal, things stay the Same, right. There's inertia and we're all used to driving cars powered by gasoline and trucks powered by diesel. And that would just sort of go on.

So there's value in an agency setting an ambitious goal like that. No more combustion in California as of 2036. But then there's reality, right? There's situations where it is difficult to go with battery or there's range considerations or there's infrastructure considerations. Right?

So as we set a goal like that as part of the regulation that as we go forward, we take in data, we listen and we adjust as we go. So like some of the adjustments that Courtney was talking about, like, okay, we didn't get the waiver for parts of acf, we got to pull that back.

We got to have a bunch of meetings and figure out what's the best way to forward and make progress. So you kind of need both like, you need the symbolic, like, hey, California is serious about ze manufacturers need to pay attention. If you make an investment in this, you're going to get your money back.

And then you need to be looking at all the technical details and adjusting course, adjusting as you move forward.

Yeah, I mentioned that. I know such a high noble goal is good, you know, to drive force to achieve that goal by that with, by trying.

But sometimes it takes cost in businesses in our lives is an artificial goal to be met and we have to pay a lot of unnecessary cost and driving out all our businesses out of our state, as you know, that's happening.

So I don't know, just a clean air achievement goal through this to me is important, but it's relatively minor. I heard that wildfire instance in Southern California that wiped out what the 35 years of effort all for achieving clean air through this kind of means. So to me it's a wildfire mitigation prevention measure.

Investing in that area will be much wiser and first priority. And then once that's controlled, then this kind of a little dance will make a difference. I mean, that's my really serious observation because we have seen smoke burning, you know, several weeks, sometimes even months, you know, wildfires. So I think that's the area CARB has to pay attention to. Thank you.

If I might respond, Senator, appreciate your perspective. One thing though I do want to elevate is that medium and heavy duty trucks, even though they only account for 6% of the traffic on the road, they make up a third of the NOx emissions from our transportation.

And so, you know, these pollutants are very concerning in terms of impacts to Californians and their health, particularly in regions of the state like San Joaquin and South coast, who are in unattainment. Right. They are not meeting federal air quality standards.

So we actually see focusing on medium and heavy duty trucks as a really critical part of our overall strategy to make sure that we're protecting Californians.

With that in mind, I'd love to get more thoughts on you, on, just on AB 1594 rulemaking, you know, especially in light of the wildfire impacts experiences.

Yeah, yeah, I can take that. Can I assume you all kind of know what AB 1594 is or?

Give the two minute, the one minute.

Okay, okay. So, yeah, so AB 1594 was a law that passed in October 2023, and it was directing CARB to changes to the Advanced Clean Fleets Rule.

And the changes were as a result of requests from public agency utilities who were concerned that we needed a little bit more flexibility in that rule in order to enable them to get their work done. And so that law did pass and CARB started well.

CARB was working with the utilities and in particular working with the California Municipal Utilities Association, CMUA.

And we got together and we came up with a proposal that looked like it would implement the direction in AB 1594, basically making it easier for utilities to get exempted from the zero emission requirements when they had a good reason for needing to do so. So we were sort of on the cusp of adopting that.

And then the fires that you were mentioning happened in January of 25, and then the, the Administration, federal Administration changed over and we realized we were going to lose parts of the ACF rule. And so given those occurrences, CMUA came back and said, whoa, whoa, wait.

Before you go forward, we think maybe there need to be some additional changes to address those. Those things. And so based on that, we've been working with CMUA and visiting individual utility fleets and going through like, their fleets in detail to see if there's any additional amendments that may be needed.

And I think we're getting close to a resolution and we think we'll likely be going to the board this summer with a proposal to implement those AB 1594 changes. I'm happy to answer any questions on details if you wanted more than that. .

Okay. All right. Okay. Are we good to move on to the next issue? I know, I mean, there's so many. Every one of these issues raises 10 more things. You know, I mean, I think one of the, one of the things we're just going to be wanting to watch on this is just the promotional Electrification and making sure we're working with the munis on that.

You know, there was, you know, a whole slew of issues raised by the fires in terms of the deployment of the electric vehicles because of charging issues. So we're obviously paying close attention to that, and we want to make sure we're coordinating, so. Okay. All right, thank you.

Let's move on now to issue three, which has to do with SB905, the carbon capture implementation that Senator McNerney was asking about. We've got a couple folks from, I guess, Matthew from CARB, and then Alan and Brandon are staying. All right, well, great. So let's turn to you, Matthew. Matt.

Thank you, Senator Allen, and thank you, Senator McNerney, for asking the questions earlier. I was really hoping my colleague, the excitement, Lisa, would just take this for me and I could sit back and have some popcorn. So. Matthew Botill with the California Air Resources Board. I oversee a number of our climate programs.

I'm happy to give a short overview of or ask for SB905 resources if you would like, or we can just hop into the discussion in the interest of time. Chair Allen or Senator McNerney, how would you like to proceed? Yeah, okay, sure. I'm sorry.

A little background and then jump in.

So the Air Resources Board requests 18 permanent positions and $2.2 million in funding. 2.2 million in 2025-26 funding and 4.3 million in 26-27 ongoing from the Cost of Implementation fee. This is part of implementing SB905, which was legislation voted on and enacted in 2022.

SB905 requires CARB to establish a carbon Capture and Utilization Storage program to evaluate ccus and carbon dioxide removal or CDR Technologies, develop monitoring and reporting schedules for CCUS projects and ensure that the projects include strategies to protect air quality, public health, minimize pollution, and minimize environmental risks.

We're also required to adopt financial responsibility regulations and establish a streamlined permit application portal for projects and a centralized database of projects, and ensure other transparency efforts around CCUS projects and CDR projects in California.

These strategies are a critical part of our approach to achieving carbon neutrality in California by 2045, and that was recognized in SB 905 and in AB 1279, which were both passed in 2022. We have been working as best we can since the initial appropriation of resources in 2023.

We were originally appropriated limited term resources as part of the Budget Act of 2023. Despite our request for permanent positions, we were also appropriated half of the original request. That we had asked for as part of the fiscal analysis and the original approval of SB905.

So we're back here today requesting that the Legislature approve permanent positions for SB905 work and the original request that we had put in place in 2023. I wish we weren't quite frankly, there's probably going to be questions about what's happened with our limited term resources since they were originally authorized for the Legislature.

I wish we were in a different place that we had been able to move forward, hire those positions, enact and implement some of the provisions of SB905 with those limited term positions.

But it has been a challenge and I'm happy to walk through kind of what our experience has been over the last year and a half as we tried to move forward with those reduced staffing and limited term positions that we were approved. So with that, happy to answer any questions. I guess I will note one other thing.

The limited term positions that we did get expire next year. So we are here kind of asking for these permanent positions in response to both the challenges we face, but also the real fact that without action, we lose that limited term authority next year and would fail to meet some of the expectations and the requirements of SB905.

Yeah. Okay. I know Senator McNerney is raring to go on this topic.

Yeah. Well, basically, I thank you for your enthusiasm, your testimony. We thank you for your enthusiasm. Well, I mean, one of the reasons I'm enthusiastic is because there's a DOE project in my district on carbon sequestration.

There's a lot of enthusiasm about there's also concern about, you know, what risk there is with the pipelines and the pipeline safety is an important part of this. So I'm supporting the pipeline safety Bill this time around. There's a good geology for carbon sequestration in the delta region and that would be permanent sequestration.

And it was clear with 905 SB905 that it was urgent that the state was going to do this as quickly as possible. So my questions are simple. What's the timeline for CARB developing the regulations for carbon capture and sequestration? And my colleague here from San Diego just said it takes three to four years to get regulations done.

So what does that look like to you now?

Yeah, no, I appreciate the comments and I think they reflect a few things.

And first, agree and respect the fact that there are a number of projects, carbon capture and utilization projects, that are moving forward in California now and largely in response to the policy environment that we're in whereby California has been clear about its leadership role on climate change and the need for carbon removal and carbon capture.

And that we have, you know, also up until, you know, largely recently, had a supportive federal Administration that has provided tax credits for CCUS projects and direct grants and others. And so there are projects that have been moving forward.

And we recognize this when we were in front of this Subcommitee a few years ago asking for the SB 905 resources, recognized the need to move forward on the 905 requirements in terms of developing regulations.

But not just regulations, there's also other requirements in 905 around developing technology protocols to help clarify the requirements for projects in California as well as these transparency elements in terms of reporting out on which products are coming through California and providing some.

Some support through the permitting process as well by helping to consolidate some of the applications of permits in California. So what we've been attempting to do with the staffing that we were given was to hire the positions. We had a number of rounds of hiring activities that were not very successful.

We did hire some limited term staff initially, many of whom expressed great concern about taking limited term positions because of a need for a permanent position or because they were leaving an existing permanent position, which has resulted in those staff since vacating the positions.

We moved forward on a number of the contract efforts that we knew would be necessary to support the rulemaking process, because that can happen independent of the staffing resources, by and large. And so those pieces are moving forward.

That's work that we're doing with the National Labs to look at the various CCUS technologies, work we're doing with the foundation for California Community Colleges to look at how these projects can deliver community benefits, and then work that we're also doing to understand the very complex web of permitting requirements that these projects face in California.

All of that is foundational work, in my view, to support the rulemaking process. But we have not initiated that rulemaking process and we are past the deadlines that are established in SB905. And as much as I'd like to be able to say we're here with a regulatory proposal that is moving through the process, it is not yet.

And that is large part due to the lack of staffing and permanent staffing on our side. And so what we would like to be able to do with the legislatures. Okay. On these resources is begin hiring those permanent positions, trying to attract the people that we think would be necessary to move quickly on a rulemaking process.

That's expertise, that regulatory expertise is Something that is somewhat challenging to find. You're looking for people that exist within the civil service that have promulgated regulations and that know these technologies. So we want to have the best case to attract those people into these positions as possible to be able to move quickly.

And to Senator Blake Spirit's comments about the timelines, the timelines can stretch to three to four years. But what we put in our BCP proposal and what we want to be able to do is move much more quickly on that, especially in the 905 context.

And some of the ways that we can do that is by getting this expertise in leveraging the contract outcomes that are already underway that we're starting to get now to be able to sort of hit the ground running, start the public process on the rulemaking proposal, work with some of the community Members that have expressed a lot of interest in this, and try and get that initial rulemaking process much sooner so that we can move that process forward to get to a board adoption on some of these regulations in the next year or two.

Okay. Well, there's. I mean, there's a lot of folks in my district and around the state that are waiting for this so that they can move forward with financing and permitting and so on. So let me summarize basically what you said. You're working hard on it, but there's no timeline yet.

So we did initiate, as I mentioned, these contracts, but also held a public workshop in February that we brought forward a number of the product developers for this conversation. And we also had a number of our contractors to show the work that they were doing.

And we, as part of that workshop, also put forward some initial questions that would help us move more quickly on the rulemaking as well. So we solicited feedback on those questions, and those are things that will help us scope a rulemaking around SB905. So we're trying to do all the things that we can to move more quickly.

The reason I'm hesitant to give you a specific deadline on when this thing will get adopted is because we still do need to do community engagement and public workshops on rulemaking scope.

And I want to be respectful for the many folks that have expressed a lot of interest in this, not just on the product development side, but on the community side that that is going to be an important part of this process, and that does take a little bit more time.

So we're going to go through the community engagement process and the public process to make sure that we get as much feedback as possible to scope this rulemaking Once we release the regulatory proposal, it can move somewhat quickly because we have Administrative Procedure act deadlines that we need to follow and meet, you know, within a matter of a year.

Well, good. I'm glad you brought up community engagement because that's, that's important. Folks need to know that this process is moving along, that they're going to have the structure in place to move forward.

And the folks that live in the area that may have little say in this want to have comfort that they're going to be okay, that there's not going to be leaks, there's not going to be injuries and so on. Yeah. Thank you.

Yep. All right, Senator Toy, thank you.

This topic is really intriguing me. Resources for carbon capturing, removal and utilization and storage programs. When you achieve your ideal staffing and set the regulations, I wonder whether your office will be doing research or are you going to contract to find somebody who can do carbon capturing activity? To me, that is science and research required.

How to capture them to begin with and then process for the removing the carbon emission and then if you remove it, why storage is necessary, how do you store them? You know, that's to me kind of contrary, contradicting, way overthinking.

When I went to China years ago, they were showing us some gadgets of the process, how the coal burning plant that the emission was really captured and the neutralizing, and that was about seven years ago, and how much progress they have made.

So there may be out there already such a technology achieved as a matter of finding whether that was, you know, hoax to me, when they presented that to me, I don't know. I'm not sure. I went there with a former Assembly and so probably he may remember having seen that too.

Anyway, to me this kind of project is very ambitious and maybe very useful and needed. But at the state level, your office may not get into actual research. It'll be way of finding how to find such researchers or labs and presenting your goals.

This is your goal and I want you to study this in three years and come back to us what kind of progress they have made, et cetera. So if you can elaborate your plan once you have full staffing, how are you going to achieve this all processes, carbon capturing and removal?

Yeah, great question. And I'm going to try and contain my excitement here because this is a topic that I care a lot about as well.

So carbon capture, utilization and storage or sequestration as well as carbon dioxide removal technologies are broad terms that represent dozens and potentially even more different approaches to being able to remove CO2 either from a combustion stream, from an energy use, or from the ambient atmosphere and either take that CO2 and use that CO2 for a value added product, or take that CO2 and store it in a place where it will not be re released back into the atmosphere.

And the technology, Senator Choi, to your questions, has been under development for decades and some of it has been deployed at scale, particularly the traditional, what we call traditional CCS or carbon capture and storage technology, where you essentially put a capture device on a concentrated plume or a source of CO2, like a power plant, like a coal power plant, for instance, or like a fuel production facility, like a refiner or an ethanol producer.

That technology has been in deployment and been used for decades. There's a number of projects throughout the world that are capturing CO2 now and taking that CO2, either transporting it via truck or pipeline, and then storing it underground to permanently remove that CO2 and prevent it from going into the atmosphere.

That is the probably most developed technology in this category of CCS and cdr. And from there things get kind of wild. So there's lots of other approaches that are looking at how do you, you.

Are skipping the removal process, just a capturing and the store story, right?

And the removal process comes in from other technologies that are looking at, or not looking at, that are actually actively deploying and building at scale now the ability to capture CO2 from the ambient atmosphere, which is more difficult because the concentrations are a lot lower.

So capturing that CO2, concentrating it, and then putting it into either an underground reservoir or another product. There's a company in Californ that uses CO2 and puts it and stores it into cement.

There's other companies that are looking at using captured CO2 from biological processes, essentially, you know, tree growth or biomass, and then turning it into oils or to other products and storing that.

So there is a vast range of approaches that are being looked at and, or in active development now from a research, development and deployment standpoint, the state has universities that are conducting a lot of the research. We also have the national labs here, two of the most prominent national labs that are focusing on this as well.

So there's a lot of research going on and a lot of actual commercial development going on in California and in the US around these topics.

And one of the reasons why we've struggled on the hiring on the limited term positions and on the downsized team that we initially received and why we're asking for more people is this complexity about the technology types and the vast range of different approaches to CCUs and CDR and a need for specialized expertise to make sure that as companies are looking to deploy those technologies in California to meet our legislatively mandated carbon neutrality goals, that we understand those technologies and that we're writing regulations that provide the guardrails for those technologies to be used here in California.

And because there's so many of them, we have to make sure that we've got the appropriate staffing, the expertise to be able to to understand them. We're not researching them, we're not deploying them, but we do need to be able to understand them and to be able to write regulatory requirements that reflect what those technologies are doing.

My final question, so my understanding is that because you are not prepared yet, you haven't done any what is the request for proposal or contract with any University or research center on one lab? You haven't.

We do actually, as part of the 2023 budget authorization, we received those limited term resources and contract money.

We were able to deploy that contract money and we now have an established contract with the National Lab, with Lawrence Livermore National Lab to conduct more detailed technology assessments and that we plan to use that in conjunction with the staff to inform our rulemaking. And so we have actually started that technology assessment process. It's underway.

It's not yet public, but it is moving forward.

Also, you have one contract that you gave that assignment, the research assignment to National Lab. Yes, I see. That's good to hear.

Thank you. I just wanted to ask one quick question about these community protections that were built into SB905 and just the extent to which you're working to make sure that they're met and timeline, etc.

Yeah. So as part of SB905, it does include a number of provisions for CARB to promulgate regulations around ensuring that operators of these projects have the financial wherewithal to address any issues that may come up with the project if it is deployed. These are things around leaks or accidents.

And so this is what we term financial responsibility regulations. It also has provisions in 905 that requires us to develop regulations to ensure CCUS products include strategies to minimize co pollutant emissions from CCUS projects and local and air water pollution impacts from construction and transportation of CCUS projects.

And I think you all are familiar with the kind of robust permitting environment that exists within California. The existing requirements around the California Environmental Quality Act. These products are still going to have to go through those established permitting processes and still have to go through CEQA. Nothing changed that within 905.

And so part of the work that we need to do with our staff is go through the 905 provisions, work with the local agencies on the permitting side, work with communities, and do this kind of gap analysis of what additional things should we consider beyond the existing requirements as part of our statewide regulations.

We have not done that process yet. We do need to do that, and that's one of the reasons why I'm a little hesitant on the timeline, because that is going to be a public process and that is going to be something that we are going to work through on the community side and on the local agency side.

Okay, let's go on to item issue 4. Thank you for your presentation, Matt, but I know you're staying around for this one too. You can do it all. Carbon capture, ethanol blending. Let's do it. Let's do it. Issue four, E15.

Happy to same. Happy to give a quick overview or if you'd like to just jump into.

The discussion just on the whole question of E15? Sure. Let's give the two minute because there's some interesting ambiguities on this issue.

Do my best to get into two minutes. So CARB is requesting 2.38 million and 10 permanent positions for the upcoming fiscal year to complete actions necessary to authorize enable the use of gasoline with up to 15% ethanol or referred to as E15 in ethanol.

This is in part in response to an October letter that CARB received from the governor directing CARB to prioritize the evaluation of E15 in California and in part to address the resource demands associated with promulgating regulations on California's fueling system and then implementing those regulations and evaluating the various different air quality effects, the enforcement effects, the fuel testing effects, and the adoption of the change in fuel spec would have on a number of other CARB programs, including programs like the low carbon fuel standard.

So we are working our way through the scientific evaluation of E15 that is required by statute that we must do that looks at evaluating whether or not changing our fuel blend from E10 to allowing the sale of E15 in California would have any adverse environmental or public health impacts. So we're working through that process now.

As that process moves forward, we would use these staff, if authorized, to initiate the rulemaking process that goes along with that scientific evaluation where we would evaluate a proposal or put forward a proposal for the change of fuel specifications that would allow for E15 use in California.

So I think one of the questions that this committee may ask and that the Legislative Analyst Office has raised is around the difference between permanent staff and limited term staff. My old friend, limited term coming back in, I made my points previously about the specialized expertise.

I'm going to kind of double down on those with respect to what we're being asked to do here. So we have been asked to prioritize E15 evaluation and consider a potential rulemaking.

What we put in front of you in terms of the ask for staff on the rulemaking side would allow us to move more quickly on that regulatory process. And I'm going to go back to why not limited term staff? And it's that about specialty expertise.

I need to hire someone into these positions that understands the regulatory process and understands the fuel system here in California, and that can work quickly through the Administrative Procedures Act. The types of folks that have that expertise are permanent civil servants, by and large.

And it's going to be very challenging for me to attract someone into that limited term position if they're coming from an existing state agency or another agency that has that permanent status. It puts at risk the ask that we've been given, which is to move this forward quickly. Can I try limited term positions? Sure.

Does it put at risk the ability to move this regulatory proposal forward more quickly? It absolutely does. So I'm happy to answer kind of any specific questions you all have on this, but just wanted to address that one point.

I know you're going to speak to that point. Yeah.

Thank you so much, chair. So we are recommending two year limited term positions for this proposal. There are a couple of reasons for it. One is we think it's premature because the department is still in the process of completing that evaluation. The scientific evaluation that was referenced, that's called a multimedia evaluation.

Under law, they have to do that before they initiate rulemaking. So it's unclear sort of what the results of that will be and whether ultimately the regulations will be promulgated and then ultimately adopted. So given that uncertainty, we think that's one piece.

We also think that there's some uncertainty about the number and types of staff that might be needed on an ongoing basis. And what you need to implement a program might be different in terms of staffing compared to what you'd want for regulatory development. So those are the reasons we do recommend modifying the proposal.

We understand sometimes it can be challenging with two year limited term positions, but the it's very difficult for the legislature to be put in this position. Right.

If every time there's sort of limited workload, there's it's impossible to provide limited term resources, how does the legislature make sure that really those resources are aligned with the needs of the department? And so I think that's probably a larger issue beyond just today. But I think you have to weigh those considerations.

I think in this case we think that it's still worth doing the limited term because of those uncertainties I mentioned. But certainly that's a trade off for you.

I guess what I'm not understanding how this impacts implementation efficacy. I understand. Yeah, yeah. Give me.

Yeah. So I mentioned how this would put at risk the ability to move forward quickly on a rulemaking. Right.

And why is that?

Because what we find Is that when we advertise, let me give you an example.

So we advertise for limited term positions that were very technical in nature and received a few dozen applications, of which maybe a handful were actually eligible for even interviewing. Right.

So basically you just don't get a good enough application pool.

Yeah. And we had a similar advertisement for permanent positions, got over 100. Right. There's a huge gap in the.

So what do you do? So you've pulled these people in for permanent, for effectively a short term project, and then you just find them other J=jobs within the system?

Not in this situation. So the rulemaking process, as the LAO mentioned, is a resource intensive process that is somewhat short term in nature, depending on is it three or four years or one to two years.

But why are we talking about E15 and why are we getting such an intense interest in E15 in California? It's because of the policy environment that California has on fuels. Many of these ethanol fuel producers are looking to sell increased volumes of ethanol into California because of the low carbon fuel standard.

Be straight up about this and what that means if we go from E10 to E15, is we would expect more interest in volumes coming to California, more unique and complicated pathways under the low carbon fuel standards.

So the proposal that we put in front of you reflects the fact that once we go from rulemaking and adoption to implementation, those staff are going to have to shift to work on the additional workload associated with those additional volumes coming in and the additional complicated applications for the low carbon fuel standard that we expect.

There is also other enforcement and fuels reporting and testing related work that's flagged in the PCP as well. So, you know, I understand the concern. I just, you know, kind of pushing back gently on the idea that this is just a one time thing and that the work isn't going to be an ongoing need.

All right, let me ask you a question about one thing I'm totally confused about is just the environmental impacts. I. So. Is it, is it a general rule of thumb? I mean, you're kind of referring to this CEC study that came out, the Transportation Fuels Assessment from last year.

Is it a general rule of thumb that increasing the ethanol content lowers pollution a little bit, but it also raises the. There's also a loss of fuel economy? Is that the general theory of the case?

So for ethanol, there are, depending on how that ethanol is produced and delivered into California, potential greenhouse gas benefits for ethanol use in California because it's not a fossil fuel, it can have a lower carbon intensity than the gasoline, the fossil gasoline, that it's carbon, that it's displacing.

Part of the multimedia evaluation effort, this is the scientific evaluation that we had to go through, or that we're going through, is to look at other potential air pollution impacts from changing the fuel blend from E10 to E15. And so it's not just about greenhouse gas emissions.

You know, CARB care is about air quality more broadly, criteria pollutant emissions and toxic emissions. And so part of that scientific evaluation was to evaluate what would the different criteria in toxic emissions be from E10 to E15.

We recently published the next step in that process, which is called like the Tier 2 report, which is the detailed emissions analysis, the emissions analysis of E15.

And by and large, across various different pollutants that come from combustion of ethanol, we found that there was no clear direct emissions dis benefit from a criteria pollutant emission standpoint for E15. So said another way, no, not necessarily an impact from use of E15 relative to E10 from an air pollution standpoint.

This was the big scientific question that we were trying to analyze. There is still more work to be done. We have to finish the multimedia evaluation. We have to go through an environment policy committee, all this stuff. But to get to your point, the criteria pollutant and toxic emissions look to be generally okay.

The greenhouse gas emissions may be more beneficial depending on how it comes to California. And so this is the, the analysis that was necessary, that is necessary to be able to consider a rulemaking in California under statutes.

Okay. And then how is this going to impact people with older cars? Yeah, yeah.

So EPA has made a number of announcements with respect to E15 and generally recommends that it only be used in 2001 and newer vehicles. There are concerns about the increased amount of ethanol impacting the fueling system in older vehicles.

And so this is, I think an important question that would be something that we would evaluate and consider as part of the rulemaking process in terms of what would be some of the other non emissions kind of outcomes or concerns associated with having E15 used in California and what are some options for addressing those.

So there is a concern on the older vehicle side that has been raised and this is something that we would need to work through and vet as part of the rulemaking process. There are other considerations with E15 as well with respect to the larger fuel transportation and distribution system too that need to be considered.

But I mean, so if is the, the vision of the E15 advocates that we would, this would just be part of the California blend at every gas station around the state or because right now there's like this kind of limited rollout, right?

Yeah. I don't want to speak to what the ethanol industry or the advocates are asking for. I think that as part of a regulatory process, we would need to go through and evaluate options for use in California and how that would look with respect to the existing fuel blend.

And, you know, other states have done this somewhat differently. Some have distinct labeling and different tankage and distribution for different blends of ethanol. Others have tried to integrate it. So those are things that would be discussed and evaluated as part of the rulemaking process with the requisite analyses, the economic and environmental analyses that come with that process.

But what if they. I mean, I know there's been a rollout in other states. How do they handle the fact that some people have older cars that really shouldn't have the E15 gas?

From my understanding, it's largely labeling in separate distribution to prevent.

So always to have an option of an E10 or lower?

Or even non ethanol blended gasoline for certain engines. Yes.

Interesting. Okay. Any questions or thoughts about this interesting issue? Yeah, yeah, sorry. You got questions? zero, McNerney's got questions. Good luck.

I mean, the chair's already stolen two of my questions, so.

I'm a question thief.

So, first of all, I mean, you mentioned the difficulty of hiring people, qualified people.

It seems to me that there's some qualified people that might be leaving Washington and would be good candidates for these positions. Yeah.

So I will just say this. At a personal level, my kind of heart goes out to the energy and environmental professionals that are experiencing these kinds of uncertainties and disruption in their lives, in their careers. We have close relationships with the energy environmental agencies at the federal level.

And oftentimes you see employees going from kind of state environmental regulation or regulatory work or energy work and moving into the federal space, taking promotions, things of that nature. So someone that takes a promotion or goes on probation to be potentially dismissed, my heart goes out to them.

From my perspective, being able to have that value proposition of uprooting your life, moving to California, potentially displacing yourself, your family, what have you, for a position that has limited certainty in its future is not a great value proposition. We have been looking through the applications that we received.

I mentioned that example of receiving over 100 applications for recent permanent position. I think one was from federal agency. So we're still monitoring the situation to see if that is the reality, that we'll start getting more applications.

And if we do, I hope that we can offer them confidence in the safety of a permanent position within our agency.

Well, one of the questions that the chair stole is about effective E15 on engines, and I think you've kind of addressed that one. My understanding is that E15 can degrade an engine if it's not properly designed.

Yeah. And it typically depends on the model year and the type of engine. And yes, that is something that I look forward to if we are given the resources being able to put as part of our regulatory evaluation, since we are required to look at these issues and look at issues of cost.

But it wouldn't affect an EV a whole lot. The other thing is producing ethanol can generate greenhouse gases. So are you taking into consideration when you use corn or other bio processes to generate ethanol, is that enough to offset, you know, the gas, you know, the fossil fuel generation of greenhouse gases?

Yeah, it is situational. But we do, in our program, in our programs take a life cycle assessment approach towards the fuels that the alternative fuels that are. That are coming into California.

And so for ethanol, that means that in order for that fuel to receive any beneficial treatment under our low carbon fuel standards, we look at the total emissions associated with the production of that corn with the conversion or other ethanol feedstock, I should say, because it's not just all corn ethanol, the conversion of that feedstock into a finished fuel.

So the biorefining of that feedstock into fuel and the transport of the fuel into California and in the ultimate tailpipe use. So we do look at that fuel life cycle and the. I'll connect this briefly to the 905 conversation. While we don't really have any ethanol production here in California, we did at one point but no longer.

There are ethanol biorefiners throughout the Midwest that are actively pursuing CCS as a strategy, which if applied on a fuel production facility, would also further shrink its greenhouse gas footprint associated with that fuel.

And then lastly, what about refineries? How difficult is it to add ethanol to gas mixtures, say at one of the refineries in Richmond or somewhere in California?

Yeah. So it's largely done downstream at the storage and distribution systems. And the question of kind of costs associated with blending and tankage and the costs associated with distribution would be something that we would have to analyze as part of the economic impacts assessment in the rulemaking process.

Interesting. All right. Okay. Thank you. Thank you. Appreciate it. Interesting issue. Okay. Regulatory fee authority issues. Let's go on to issue number five. That's Richard Boyd, who's the toxic transportation Division Chief for CARB asking for this regulatory fee authority expansion. We'll hear from you. You may proceed.

Hello, Chair. Oh, sorry. Can you guys hear me okay?

Yep, yep, I can hear you, though I don't know if sound. Yes, there you go.

Good morning, Chair and Members. Thank you for the opportunity for discussion. I'm Ajay Mangat. I am actually not Richard Boyd, Assistant Division Chief of the Transportation and Toxics division at the California Air Resources Board. So I'll be filling in for Richard today.

In regards to the regulatory fee authority trailer bill language, I was hoping to just give like a two minute spiel like Matt did on the last round and then take questions.

So in regards to the regulatory fee authority trailer bill language, the intent is to provide CARB authority to impose fees on regulated entities for the purpose of recovering reasonable costs that are incurred in regulating that entity. This would prioritize shifting the financial burden from California drivers and taxpayers to the particular regulated entity.

Historically, we've been able to move forward with regulations amidst this fee uncertainty because our fund sources, as we talked about earlier today, primarily MVA and APCF, could accommodate. However, these sources are now overburdened. As we already discussed making finding alternative sources and ensuring a polluter pays model is critical.

As such, we've started to build the fees to support regulatory development into the robust regulatory process, which evolves over the development period.

And once we determine the framework of the regulation, what it entails, the numerous community workshops, community meetings, workshops with industry and stakeholders, a robust economic analysis that is required for a lot of these regulations, and ultimately get it approved by our board, then we submit the BCP to get approval from the legislature to actually collect and utilize that fee.

So once we. So as one example, we have a transport refrigeration unit or TRU regulation that we started developing around the 2018 time frame that had the included fee for TRU owners and facilities built into the regulation and the process.

So as staff were workshopping, it was all included that this was the fee amount that was subject to that input. Ultimately, it received board approval in 2022, and then we then submitted a BCP to the legislature which was approved. So. However, a recent court ruling prohibited CARB from collecting the fees that were included in the TRU regulation.

So as a result, the truffle programmatic work that's currently still being performed is being funded by the apcf. So which we. We've talked about how the unsustainability of it. So we need this additional authority to be able to recover the costs of developing, implementing and enforcing our regulations. Pause there.

Yeah, I'm going to go to LAO for thoughts.

Thank you so much, Chair. So we're recommending rejecting the proposed trailer bill language. And really the rationale for that is that we feel like this language is quite broad. So this language would allow the board to assess fees to fund its activities related to an entire division of code, Division 26 of the Health and safety code.

That's the main division that governs CARB's operations, including related to local air pollutants and some GHG reduction activities as well. The department, as you all know, also has very broad authority under current statute to promulgate regulations.

So when you combine those two things, the board could promulgate regulations and then include fees as part of that that are quite broad in nature and could be a variety of different things, not just, you know, transportation refrigeration, but could be a number of other things as well.

So our concern is that it's not clear that such broad authority is justified. Clearly, there may be some needs in some specific areas. Clearly there's value in having polluters pay their freight, but really it's unclear to us that such a broad delegation is the way to go.

We don't think that they've adequately justified why that narrower, more targeted authority wouldn't be a feasible approach. And again, it's kind of hard for the Legislature to weigh this authorization given that it's difficult to understand how it's going to be applied in the future.

It is so broad that there may be fees that are proposed in the future that we can't yet envision today. We do think, I think it's sort of a philosophical matter that imposing fees is kind of a core responsibility for the Legislature, part of the power of the purse.

And so the Legislature should be pretty careful about delegating it too broadly. And we think, you know, the board sort of setting those fees is not really a replacement for that. So certainly understand there's the BCP process.

But at that point the board would have already approved the regulations and it's kind of harder in our view for then the Legislature to step in at that point. And it would be more appropriate for the Legislature to be consulted up front and asked to provide that authority in specific instances.

And at that point the Legislature could weigh those, you know, the trade offs associated with the proposed fees. So for those reasons, we're recommending rejecting the proposed trailer bill language. We certainly think it could be appropriate for the department to come forward with a more narrowly targeted proposal or proposals that would meet its needs.

All right, Senator Blakespear.

Yeah. So the LAO makes really good clear points. Do you want to respond to those? Like why is it so broad and not more narrowly tailored?

Sure. So one of the ways that. Sorry, David Garcia, Legislative Director for CARB. One of the problems that I would like to start my answer with is by echoing something that Chair Allen said at the beginning, which is that the MVA is kind of upside down. APCF is also in structural deficit.

And the reason CARB has been able to pay for all of the work that the Legislature has asked us to do is because we have been successful at finding the next big cheater.

We all know Volkswagen or Cummins or Hino, but as we march on towards zero emission technology, there won't be the next cheater left to find to fund our work. And so without broad authority to charge a fee for any of the work that we do, the work will become unfunded. We won't be able to do it anymore.

So that's really the reason why it is so broad.

Also, we would love, as we start amending regulations to move away from having California drivers and taxpayers pay for this work and to move over to the polluters pay model so that we aren't asking drivers in California to foot the bill for the work that the legislature has asked us to do, but instead have the regulated industry do it.

The final thing I'll say is that we actually think this gives the legislature an unprecedented level of oversight into our fees. And I'll explain that by kind of describing two situations, right?

The situation right now where the legislature specifically says we're going to give the Air Resources Board fee authority to implement a program like SB 253 Climate Corporate Disclosure.

We will come the next year and tell you, well, we know that this is the number of staff we're going to need to set up this program, but we have not yet at that point, because we don't have the staff, we will not have been able to do the work to know how many fee payers are out there, like what is the size of the regulated world.

So we couldn't tell you what the size of the fee would be, how frequently we would have to charge it. But because we come with that BCP and the legislature approved it, we then get those resources. We are then free to go out into the world.

We do our multi year regulatory process, we put the fee in place. We need not ever come back to the legislature and say this is the size of the fee. This is who we're charging it on. This is how frequently we're charging it.

In this case, and I think the one where the LAO's concerns are understandable and what were just stated, we would. If we're using our general authority to do something the legislature didn't specifically tell us, well, there was no approved BCP at that point.

So we would then have to decide what we were going to do with, you know, our general authority, something new and nonspecific. We would then have to go through the regulatory process. By the end of that, we would have a fee reg in place.

But because the Legislature had never approved a budget change proposal, we wouldn't be able to actually use that fee until the BCP was approved. It is possibly true, although extremely unlikely, that we could start collecting the fee before the legislature appropriated it for us.

But we would never do that, because if we came to the legislature and you said, no, we don't approve this BCP, we would be in the position of then having to refund every penny we collected, which would be very burdensome for us. Expensive, embarrassing, like, what's the point of that?

It would just make people very angry at us. So in that case, we would then come with a BCP and you would know exactly what the program looks like, exactly what the fees are, exactly who's being charged.

So you would have this level of oversight into the kind of fees that CARB would be charging that you currently don't have.

Okay, I hear all the things you're saying. I guess I feel that there could be more precision used in what was asked for, so that there was a way to have some of this be more specific, but then not give a carte blanc to just be able to have new regulations that have new fees on new industries.

So, of course, we know the legislature could always come back in and reassert authority, but. But giving it up proactively in this very broad way doesn't seem wise to me. So I think I'll leave it at that. Thank you.

One other thing I was thinking as you were talking was I wonder how CalRecycle is managing fees under SB 54 if that's a regulated. A group that maybe we don't know the number of regulated parties. So I don't know if you're able to answer that or.

Yeah, I can't speak directly. Andrew March, Department of Finance, can't speak directly to SB 54 and the fee structure there. As you know, the regulation is sort of in flux right now.

Okay. So you don't have any?

Not specifically, but. I mean, so I would say, like, generally when a department is going through the fee process and they're identifying fee payers, it's slightly different than a fee established through statute. Right.

So that doesn't sort of go through that regulatory process and potential environmental impact that a department's required to go through to assess the fee payers, what the sort of economic impacts of that fee would be.

So I would also say that's another trade off with having a fee established through a regulatory process versus establishing that fee in statute and providing that level of, I guess, engagement and precision that could happen through the regulatory process.

But do you know anything about SB 54's fee at all?

Like, I can't speak directly to it. Calorie cycle is in my portfolio. But I will say my level of expertise in SB 54 at this moment is waning.

That's not promising. All right.

But we're happy to follow up with you. I wasn't prepared to speak on SB5 4 today, but happy to follow up with you on sort of the fee structure and SB 54 as the regulations that were previously sort of proposed by Cal Recycle.

Okay. Okay, thank you.

Okay. Well, this is going to be an ongoing discussion, I think, but appreciate it. And. Yeah. So let's now go to. Without any further questions, we'll go to public comment. Thank you.

You may proceed. Go ahead, sir.

Good morning. My name is Dan Ress, here for the Center on Race, Poverty, and the Environment. You should have copies of our letter regarding CARB's Carbon Management Program. To summarize, it is essential that CARB promulgate rules to create community protections for carbon management projects.

And we are dismayed to see CARB refusing to commit to that rulemaking even through 2028, a full six years after the passage of SB 905, which explicitly requires this rulemaking. Yet the projects are coming now into a disastrously underregulated space, which will allow great harm to frontline communities across the state, especially the Central Valley.

SB 905 was a heavily negotiated compromise. While we remain skeptical about carbon capture, we exchanged allowing projects for guarantee of community protections through a CARB rulemaking, in addition to some other protections.

However, CARB refuses to commit to initiating this rulemaking, violating not just the plain meaning of the statute, but also the terms of the bargain and principles of environmental justice.

So far as CARB has received $7.2 million over two years for this program, but has failed to accomplish anything meaningful, they're now asking for another $11 million over three years, in a BCP that does not include this essential rulemaking. CARB says they need more time to figure out how to deploy these technologies responsibly with proper regulations.

In other words, CARB needs time before we should be deploying these technologies at all, because we shouldn't be deploying them until we can do so responsibly.

And to be clear, incorporating the vibe of community protections into its carbon management program is insufficient to meet the letter and intent of SB 905, as well as the need to protect communities from these new harms and risks. We need law, not good intentions.

So, we support giving CARB the resources it needs to complete this rulemaking, but not a blank check. We humbly request that the Legislature require that these community protections are promulgated ASAP by pausing permitting of carbon management projects until the rulemaking is complete.

Please stand with us in advocating for public health, community safety, and justice, by ensuring these protections before projects arrive and threaten our communities. Thank you.

Yes, sir.

Good morning, Chair and Members. Rico Mastrodonato, the Leg. Director for the Trust for Public Land. First off, we do support the reauthorization of cap and trade and the eventual restructuring of the expenditure plan.

And we're supporting strongly and asking the Senate to support a modest inclusion of a continuous appropriation to our built environment, through nature-based programs, green schoolyards, urban greening, urban forestry.

Our most vulnerable communities are facing the reality of more heat and more severe storms to plan, and we should prepare for that because emissions are going up, no matter what we heard today from CARB and ARB, global emissions are rising. We're setting annual records in heat every single year.

And if there is a—one thing I could think of that would be an appropriate and sensible continuous appropriation, it would be planning for extreme heat and the subsequent storms and other byproducts, because we know it's bad now and it's going to get worse for the foreseeable future, and there's no scientific debate about that.

So, I appreciate your time and consideration of that.

Thank you, sir. Thank you. Yes.

Good afternoon, Chair Allen, Senator McNerney. Isabela Gonzalez-Potter with the Nature Conservancy. On the topic of the proposed GGRF Expenditure Plan, we do urge the Legislature to maintain the $70 million currently in GGRF, in fiscal year '25-'26, for natural resource priorities.

We also urge the Legislature to reject the proposed fund shift, in the Governor's Budget, of $32 million from GGRF to Prop 4. Preaching here a little bit to the choir, given the Chair, but we feel that Prop 4 funds were intended to be additional, building on prior investments, rather than acting as backfill.

We know that was the intention of the Legislature, as well as the voters. As the Legislature contemplates future DGRF appropriations, as part of the cap-and-trade reauthorization conversations currently underway, we urge 25%, that's 25% of GGRF dollars, be dedicated to nature-based solutions and natural working lands.

We know that nature-based climate solutions are critical to addressing climate change. They are among the most cost-effective climate investments, costing approximately $96 per ton of carbon, while other sectors, such as energy, cost upwards of $170 billion—$170 per ton.

The Legislature and Administration have recognized the importance of nature-based solutions with the release of nature-based solution climate targets, required by AB 1757, and we feel that dedicating 25% of GGRF to nature-based solutions supports this goal. Thank you.

Thank you. Yes.

Mr. Chair and Members, Virgil Welch, California Carbon Solutions Coalition. We're a business labor organization working to support the deployment of critically needed carbon capture and removal technologies in California. You obviously had a lot of discussion about this item and it's, I think, very apparent that the agency needs resources to get this Program up and running.

We have 100-million-ton goal for 2045, which is a big chunk of the statewide inventory, and we need to get moving to meet that goal. Now's a time that we can move ahead on these technologies when we're facing federal uncertainty across a whole bunch of other sectors as well.

So, we would very much urge your support for making sure that the Agency has the resources to get moving on the 905 Program.

Thank you.

Mr. Chair and Members, Oracio Gonzalez, on behalf of California's Business Roundtable and the California Manufacturers and Technology Association, on Issue 5. We urge you to reject the Administration's proposal on CARB fee authority. At a time when affordability is of central concern to voters, that proposal goes in the exact opposite direction.

Right now is the time for you to really step back and assess how fees, regulations, and frankly, legislation are impacting cost of living. And for those reasons, we urge you to reject the proposal. Thank you.

Mr. Chair and Members, Chris Shimoda on behalf of the California Trucking Association. First, on Issue 5, the Fee Authority Trailer, I want to strongly agree with alleged analysts that the authority to set charges and fees is a fundamental power delegated by the state constitution to the duly elected State Legislature.

For that reason, we urge the Legislature to reject the proposed trailer bill. There's nothing preventing their resources board from sitting down with regulated industries and negotiating fees, which will then go into statute. It's the process that we undertake with every state agency and should be followed here.

Also, additionally, on Issue 1, on the expenditure plan for Cap and Trade, wanted to support ongoing funding for the HVIP Program. This is the state's cornerstone incentive program for zero-emission trucks. Currently is zeroed out in the January Budget, due to the high upfront cost of both battery, electric, and fuel cell electric vehicles.

This is going to be continued—continue to be a critical component of meeting the state's zero emission goals. Without it really, fleets are not going to be able to deploy these trucks. So, thank you.

Think it's still morning. Good, Good morning, Steve Wallach, on behalf of the POET Biofuels, they're ethanol producer, one of the largest producers in the US. We want to—we want to urge your support for the E15 funding for the—completing the rulemaking process. This is something that's long overdue and provide California residents with a cheaper, cleaner fuel.

I wanted to comment on a couple of the comments made earlier. The 1% energy reduction that's been emphasized, that's an average, it's a worst case scenario.

And in fact, the UC Riverside Study showed several of the vehicles, that they had in that study, had up to a 6% fuel efficiency increase with the E15 fuel. And also, every vehicle that's 2001 or newer is authorized to use the E15.

So, in California, that's, I think almost 96% of the vehicles. Light-duty vehicles that register in the state are already authorized, allowed to use E15. We're not seeking a mandate. We think the price and performance of the fuel will drive the economics for residents to be able to buy the fuel.

And in addition, if it's sold in California, federal law requires it to be clearly labeled. They have a specific label that must be put on all dispensers, in order to avoid any misfueling for other vehicles, like boats or motorcycles, that aren't authorized to do that. So, with that, we urge your support for that.

Good afternoon. Steven Fenaroli, with the California Farm Bureau. We represent over 24,000 farm and ranch families across the state. For, I think, a number of the reasons mentioned today, we do oppose Issue 5 and CARB's unlimited fee authority.

We'd also like to recommend ongoing funding from GGRF for a number of programs, which we know work, which dollar-per-ton do return some of the best emissions reductions. Those programs, the Farmer Program, the SAFER Program, FPIP, the Sustainable Agricultural Waste Management Program, and Livestock Methane Reduction Programs. Thank you.

Mr. Chair, Carlos Gutierrez, here on behalf of a variety of agricultural associations—the California Advanced Biofuels Alliance and the Association of Equipment Manufacturers. Regarding Item 1, the agricultural community would like to request consideration of reappropriating what was continuously appropriated GGRF fund resources, to support critical programs that were previously mentioned by the Farm Bureau.

And in regard to Issue 5, as noted by the LAO, we disagree with the Legislature should delegate such broad authority to broad—excuse me, such broad authority to the board. Thank you.

Good afternoon. Shira Spector, for California Solar and Storage Association. Regarding Issue Number 1, we support the Governor's proposal for Greenhouse Gas Reduction Fund expenditures for the Energy Commission's Demand Side Grid Support Program and Distributed Electricity Backup Assets Program.

The Demand Side Grid Support Program is already showing that customer batteries and other flexible energy resources can help keep our grid reliable, but it needs funding and certainty to be able to attract new customers and meet its potential.

The Distributed Electricity Backup Assets Program also has significant potential to use customer batteries and other flexible devices as reliability resources. The amounts in the government—in the governor's proposal for both programs were part of last year's budget plan and it's important to carry through on that plan, in this year's budget, to provide program stability and confidence.

Thank you.

Good afternoon, Mariela Racha, with the American Lung Association. The Lung Association's latest state of the art report found that 88% of Californians continue to live—to face unhealthy air. 80% of the state's smog-forming emissions come from transportation sources that CARB must continue to regulate.

On Issue 1, we support increased focus on transportation and GGRF funding, such as the Clean Cars for All, the Heavy-Duty Trucks and Farmers Program. On Issue 2, we support maintaining staffing levels at CARB to address all implementation needs.

For Issue 5, we support the Governor's proposals for fee authority to ensure adequate clean air resources, to implement the programs that we need. Thank you.

Mr. Chair and Members, hope everyone's doing well. Andrew Antwee, I'm here for a number of clients on a couple of different issues, starting with the Issue Number 1, GGRF.

For the Port of LA, we urge this body and the Legislature to sustain the multi-year funding arrangements that have been put in place for drayage trucks, zero emission vehicles at ports, cleaner port equipment. The multi-year funding plan should be sustained; the money divided between the Energy Commission on Charging fueling equipment and CARB for vehicles and other equipment, as appropriate.

Also, for LA Metro zero emission funding for transit vehicles, we support the multi-year funding agreement for that. For Advanced Energy United, zero emission funding for school buses and echo comments that were made by Cal SSA for DSGS and DIBA and for the office of Kat Taylor, we support 15% of GGRF revenues, when that conversation happens, for Smart Climate Agriculture.

And moving to Issue Number 5, the Card Regulatory Fee Authority for the Specialty Equipment Marketers Association, the California Moving and Storage Association, and the Western Propane Gas Association, we oppose. We support the LAO recommendation. We oppose the broad authority that's been requested by the Air Resources Board and for the Pacific Merchant Shipping Association, also concurring with LAO's assessment, the proposal is overly broad and not justified.

We look forward to working collaboratively with CARB on specific issues, with right-sized strategies, and thank you for your time.

I only have two, so first, Faith Conley on behalf of Bloom and Blue Planet, urging your support for the Governor's proposal to fund SB 905 implementation. Switching over to Supply Chain Federation would urge your rejection of the fee authority proposal. Thank you.

Bill McGaven, with Coalition for Clean Air. Several points which I will make quickly. First, we agree with Senator McNerney on the value of Clean Cars for All and it's important that the existing money that is at CAR be allocated so that none of the programs, at the districts or statewide, go dark while there's still those funds available.

Secondly, as the Staff Report notes, the HINO settlement will be bringing in funding and that funding comes from cheating on heavy duty vehicles. So, the money should be spent to clean up emissions from that sector, through the HVIP Program.

On the fee authority, it's important that the Legislature uphold the principle that the polluters, not the taxpayers or drivers, should be paying the cost of administering CARB programs. I understand you may want to narrow the language, but let's not stick with the status quo. Let's make sure the polluters are paying.

We support the proposed funding for AB 617, community air protection for drayage trucks and for community-based projects in transportation. We opposed using the Air Pollution Control Fund for DMV. That money should stay in reducing air pollution. Finally, Senator Blakespear, I participate in many, many CARB rulemakings and I completely agree with you. They take too long.

Unfortunately, there are proposals in the Legislature that would actually make them take even longer, by adding layers of redundant analysis. I know you held one in Committee recently, thank you. Let's make sure that we're not making that problem worse.

Good afternoon, Chair Allen and Members. My name is Maria Spencer Nyder. I'm here on behalf of the California Association of Port Authorities, representing all 11 California public ports. On Issue 1, we support the Governor's cap-and-trade spending plan, which maintains vital funding for zero emission drainage trucks and port infrastructure.

This continued investment is essential to advancing clean air goals, supporting frontline communities, and sustaining the economic competitiveness of California's ports. We appreciate Administration's recognition of the long lead times and complex planning needed to deliver zero emission freight solutions and urge you to apply hold these commitments in the final budget. Thank you for your time.

Good afternoon. Julie Malinowski Ball, on behalf of the California Electric Transportation Coalition. You've already heard express support for the HVIP program, making sure there's funding for it, that there is HINO settlement available for that. I won't repeat that. Also want to concur with Coalition for Clean Air on the need to fund the Clean Cars for All program.

So, the regional programs are—need to find long term funding. The only thing additionally that I like to add is give a shout out to zero emission school bus funding. We didn't appreciate the zeroing out of zero emission school buses and the Governor's Budget. It will have a chilling effect on that market.

You are already going to see bills coming over for the Assembly that roll back our zero emission school bus goals, without incentives. That makes it hard to defend. Thank you for your time.

Afternoon, Chair and Members. Justin Paddock with Nielsen Mercamer, on behalf of Central Valley Salinity Coalition, which is a cooperation of water agencies, local water regulators, local agencies, and environmental justice groups. Just requesting ongoing appropriations to the SAFER Program with the State Water Resources Control Board, specifically requesting 5% of GGRF annually, with a base of $200 million.

Thank you so much for your time.

Good afternoon. Kirk Blackburn, here on behalf of the Western States Trucking Association and the California Tow Truck Association, opposed to the CARB Regulatory Fee Authority Proposal. As trucking companies have already been required to purchase and maintain expensive trucks as a result of CARB rules, they're deeply concerned about any efforts to expand CARB's authority, without sufficient legislative oversight, and urge you to reject this unnecessary proposal. Thank you.

Good afternoon, Chair and Members. Ross Buckley, on behalf of the South Coast Air Quality Management District. We very much appreciate the AB 617 funding being provided in the cap-and-trade spending plan for the Air District's implementation incentives, especially given where we are in the budget.

The Program provides target support for disproportionately impacted communities, in terms of protecting public health and improving air quality. AB 617 is severely underfunded and unfortunately, its funding was reduced even further last year. There are not enough resources to support the existing communities here in the state.

In particular, in the South Coast region, which includes two thirds of the EJ communities, these communities are the—who are most harmed by these reductions. It is critical that the funding is restored to the higher levels, especially in a time where the Federal Government is looking to be stepping away from these, these communities in need.

We request continued participation of the AB 617 funding, through an ongoing and continuous appropriation. Thank you.

Juanita Martinez, on behalf of CalBroadband. Just want to echo the opposition and concerns raised by the California Truckers Association and then also, on behalf of the California Renewable Fuels Association. They are an association that represents ethanol companies. Very supportive of the proposal by CARB for the $2.3 million to do E15.

Also like to highlight and note a study that was done and commissioned by the Association, on which—showed last year a 20-cent reduction in price per gas—per gallon of gasoline—by moving to E15. And this is a trend that we saw in all of the other states that have adopted and implemented E15. Thank you.

Good afternoon. John Kendrick, on behalf of the California Chamber of Commerce, speaking first to Item 1. You know, the best thing we can do to shore up these revenues is reauthorize cap and trade. Urge you guys to do it.

I know I'm preaching to the choir there. On Item 5, we have significant concerns about the CARB Regulatory Fee Authority Budget Trailer Bill, largely aligned with what the LAO presented, comments we heard from the dais, and other comments in opposition today. Thank you.

Good afternoon. I'm Meg Snider with Axiom Advisors, here on behalf of Growth Energy, a national biofuels association, in strong support of Issue Number 4, CARB"s BCP for the E15 fuel specification.

We support the BCP, as presented in the Governor's Budget, with 2.3 million ongoing from the Air Pollution Control Fund for 10 permanent positions, to complete the regulatory process, to authorize the use of fuels with up to 15% ethanol blending.

Approving the use of E15 in California is estimated to save California's drivers as much as 20 cents per gallon and will reduce tailpipe emissions compared to E10. California is the only state that has not approved the sale and use of E15, which is approved for all gas-powered vehicles model year 2001 and newer. Thank you.

Mr. Chair and Members, Brendan Tuig, on behalf of the California Air Pollution Control Office Association, representing the air pollution control officers from all 35 local air districts.

We think the 2024-'25 Cap-and-Trade Expenditure Plan falls short, with more than a billion dollars over the next several years to backfill programs that might have merit but don't necessarily achieve meaningful public health benefits and GHG emission reductions.

We believe that the Legislature should be prioritizing programs that cost effectively achieve both greenhouse gas emissions reductions and criteria pollutant emission reductions, which get us the public health benefits as well. And also, believe the Legislature should be reconsidering the continuous appropriations and applying that same criteria to those, as well.

There's a couple of air district programs that do just what I've described. It's the AB 617 Community Air Protection Program. We think that, you know, especially with money being tight, that we should be increasing funding for that, to 300 million a year for incentives and 60 million a year for implementation.

And then, also along those lines, the Farmer Program, which achieves reductions by cleaning up dirty diesel engines, that was funded at the meager amount of 2 million a year, which is a real missed opportunity, and we think we should be funding that at $200 million per year, for the next five years.

And then, I also did just want to mention that we think there should be funding for Wood Smoke Reduction Program. Gets us black carbon emissions reductions, other reductions, and then also funding the Clean Cars for All program. Thank you for allowing me all this time, Mr. Chair, and appreciate it.

Thank you. Good afternoon, Mr. Chair. Mark Fenstermaker for several clients. Several comments first. For the California Council of Land Trusts, would echo the call from the Nature Conservancy for a continuous allocation of 25% for nature-based solutions on natural and working lands, particularly looking to implement the plan under AB 1757.

We get co-benefits of ensuring that our natural resources are carbon sinks, not carbon sources. And then, we also know that we're going to get the co-benefits of water retention, habitat, etc.

Would also call for the continued funding of the Sustainable Agricultural Lands Conservation Program, strategic investments in protecting agricultural lands at the urban fringe, ensuring that we don't see urban sprawl, which then leads to more VMT. On behalf of the Bay Area Air Quality Management District, would echo the comments from CAPCOA, as well as from South Coast, increased funding in both AB 617, as well as the Clean Cars for All program.

Both of those programs have worked very well in the Bay Area. We've seen great uptake, particularly on Clean Cars for All, where we've already spent out all of our funds. And then lastly, for Earth Justice, we do support—on Item 5, support the CARB Fee Trailer Bill.

As you heard previously, we need to ensure that the polluters are the ones paying, not the taxpayers, to ensure that these regulated industries are compliant. Thank you so much.

Good afternoon, Mr. Chair and Members. Brandon Wong, on behalf of CALSTART. I want to echo—align ourselves with the comments made by others when it comes to funding AHRIP and zero emission truck incentives.

I want to thank Senator McNerney for his comments at the top of the hearing and other Members of the Committee and Members of Committee Staff for meeting with us and engaging with us on this issue, especially amid ongoing efforts to withdraw or revoke California's waiver authority in Congress. And so, thank you.

Andrew Dawson, the California Housing Partnership, and also on behalf of Housing California. We are very much supportive of the Affordable Housing Sustainable Communities Program, also known as AHSC. Not only has AHSC produced cost-effective greenhouse gas remissions, but its co-benefits are unmatched.

We like to say that ASHC is the only program that meets all the Legislature's priorities—climate, housing, transit, affordability, and equity.

The Program has resulted in 5.7 million metric tons of greenhouse gas emission reductions, 512 million less vehicle miles traveled per year, more than 20,000 new affordable homes, 1,000 new transit vehicles, 1,500 miles of bike lanes and 28,000 transit passes, and lastly, 47,000 construction jobs. Thank you.

Good afternoon, Chair and Members. My name is Allison Hilliard, and I am the Legislative Manager with the Climate Center. Regarding Issue 1, we respectfully urge the Legislature to make significant investments from the GGRF revenues to nature-based solutions, in line with AB 1757 targets, which I know was mentioned earlier by a colleague.

California cannot achieve its Carbon Neutrality Goal and protect communities from climate change without investing in its natural, urban, and working lands.

Nature-based solutions not only provide, I'm sorry, nature-based solutions not only directly address climate change by reducing and sequestering emissions, they also buffer families from rising costs tied to extreme weather, energy, food, housing and insurance, while also providing a suit of complementary benefits like cleaner air and water.