California – The Not-So-Golden State

June 6, 2012 |

By James L. Stewart, Chairman of the Board, BioEnergy Producers Association

For the eighth consecutive year, Chief Executive.net has ranked California as the worst state in the nation in which to do business, and its legislature’s historic attitude toward gasification-related advanced biofuels, biobased chemicals and electricity production is a stunning example of the reason why.

For seven years, a group of Democratic legislators controlling California’s Environmental Committees have blocked the statutory and regulatory changes necessary to create a fair and balanced business environment that will enable these technologies to invest and operate with confidence in the state. In so doing, the legislature has posited as irrelevant such issues as energy independence, national security, a better environment and job creation.

In California today, conversion technologies face a permitting process more rigorous than is required to site and construct a major solid waste landfill, a process that, even if it were successful, could take at least five years.

And among other roadblocks, there is a scientifically inaccurate definition of gasification in statute, which, if taken literally, would imply an emissions standard (i.e. zero emissions) that is impossible for any biorefinery, let alone any petroleum refinery or power plant, to meet.

As a result, California’s emerging biobased technology companies have either moved out of the state, or sited elsewhere, renewable energy projects amounting to at least $1 billion in capital investment.

Plasco wins on solid waste gasification-to-electricity bid

In 2010, Plasco Energy Group was declared the winner of a two-year competitive proposal process to construct a solid waste gasification-to-electricity facility at a landfill owned by the Salinas Valley Solid Waste Authority.

During that same year, the Senate Environmental Quality Committee blocked passage of comprehensive corrective legislation sponsored by the BioEnergy Producers Association.  In so doing, the Committee swept aside endorsements from approximately 100 stakeholders, including the California Energy Commission, the California Air Resources Board and CalRecycle (the successor agency to the former Integrated Waste Management Board).

Several months later, CalRecycle issued a formal ruling that Plasco could meet the intent of the existing definition of gasification.  This ruling had the effect of qualifying the electricity to be produced by Plasco for California’s RPS, and enabling the Salinas Valley Solid Waste Authority to obtain landfill reduction credit for the solid wastes it would provide as feedstocks for the project.

Legally, there could have been no other interpretation, because it would never be the intent of the legislature to pass a law with which no one can comply. CalRecycle rightly interpreted “zero emissions” to mean no emissions above the local standards that apply to all businesses in the state, including oil refineries and power plants.

Subsequent to the November 2010 ruling, California’s Governor Jerry Brown personally telephoned Plasco expressing interest in its technology, which further encouraged the company to move forward.

Demand from Cal Democrat to rescind CalRecycle ruling

Then, in March 2011, the office of Senator Darrell Steinberg, President Pro Tem of the State Senate, demanded that CalRecycle rescind the ruling, a direct slap at the renewable energy industry, sending a message that these new technologies were not welcome in the state.

For more than a year, the agency held firm, but then, on May 23rd, Caroll Mortensen, the newly-appointed Director of CalRecycle, issued a letter rescinding the agency’s opinion, in effect, undermining the economic viability of Plasco’s project, and the trust that private companies and local governmental agencies should be able to place in the actions of state government.

This rescission came after Plasco and the Salinas Valley Solid Waste Authority had, in good faith, made a significant 18-month financial commitment to comply with CEQA and other permitting requirements in costly detrimental reliance upon what they understood to be a formal opinion by the State of California.

It should be noted that there exists within the legislature an entrenched alliance of unelected Democratic staff consultants for the state’s environmental committees, who have no accountability to the citizens of California, and who, for seven years, have collaborated to thwart every attempted revision of statute that would provide regulatory certainty for this industry.

Removing findings from market study

In 2005, members of these committees demanded that findings favorable to conversion technologies be removed from a legislatively mandated, peer-reviewed market study of the impact of conversion technology development on recycling.  They threatened to block the confirmation of the appointments of Rosario Marin and Rosalie Mule to the Integrated Waste Management Board unless this was done–and it was done quickly.

It is strange that Plasco’s rescission letter arrived one week before the scheduled confirmation of the new Director of CalRecycle, and the decision came abruptly and without any prior consultation with the stakeholders impacted by the decision.  Her confirmation hearing has now been deferred until late June.

Firestorm of protest

The rescission notice created a firestorm of protest from the jurisdictions and biobased technology providers who seek to make productive use of the 30 million tons of post-recycled municipal solid waste that California places in landfills each year.  The organic materials in this waste stream contain the energy equivalent of more than 50 million barrels of crude oil.

In an attempt to relieve the Governor’s office of embarrassment from the events of the past two weeks, his office has now offered to support legislation this session that would classify Plasco’s commercial scale facility in Salinas Valley as a “pilot” project that would qualify for the state’s RPS. There is no certainty, however, that if Plasco continues in good faith to invest in the Salinas permitting process, the effort to carve out an exception for their project will actually pass.

Further, such legislation would not address the issue of landfill reduction credit, so critical to the public jurisdictions that want to designate their post-recycled waste streams as feedstocks for renewable energy production, and it would leave out in the cold all of the other thermal-based alternative energy companies that may be assessing the potential for projects in California.

In a parallel action intended to counter the backlash of its recent decision, CalRecycle now proposes to establish “feedstock performance standards” that could eventually replace the inaccurate gasification definition in statute.  The stated goal of this alternative would be to allow facilities, no matter what the technology, to qualify for the RPS. This could be a step in the right direction, but the standards that the solid waste feedstocks must meet are as yet undefined, and because of the past influence of the members who dominate the environmental committees, stakeholders are wary of the outcome.

Prolonging investment and operational uncertainty

This vague and ambiguous process is certain to prolong investment and operational uncertainty for this industry for at least another two years.  It is fraught with risk for biobased technology companies, as it is destined to give priority to the recycling of products, such as paper or plastics, over the recycling of carbon, i.e., ignoring the concept of the highest and best use of organic wastes, and restricting conversion technologies to primarily inorganic materials that are of limited value to the industry.  It will not likely address what has been the basic issue of this controversy from the beginning–equal access to California’s waste streams in a free market economy.

Meanwhile, a substantial portion of California’s recovered waste stream materials continue to be exported to Asia and elsewhere, beyond the state’s regulatory oversight.  Although their destinations, end uses and life-cycle benefits are not documented, these materials obtain credit as recycling the moment they leave the docks.

The bottom line is that, where conversion technologies are concerned, California has taken another sideways step, and the state is not likely to see the beginnings of a viable waste-based alternative energy industry much before this end of this decade.

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