As the state grapples with the aftermath of Proposition 26, one of the state’s most important regulatory bodies ““ the California Coastal Commission ““ may find its powers crippled by the initiative’s provisions barring simple-majority votes for new fees.

The issues concerning the 12-member panel are the latest in a series of potential consequences stemming from Proposition 26 that have taken the Capitol by surprise. The measure, which redefines fees as taxes and thus requires two-thirds votes, was approved Nov. 2 by more than 414,000 votes.

“It’s yet another example of how propositions have all kinds of unintended consequences,” said Sarah Christie, the Commission’s legislative director.
At least two major enforcement issues have emerged ““ one involving developers’ fees and the other involving the so-called “rigs to reefs” plan, in which old offshore oil rigs are left in place to serve as artificial reefs and attract marine life.

The Commission, which has jurisdiction over California’s 900-mile-long coastal zone as well as oil platforms in state waters, levies regulatory charges known as “in-lieu fees” on developers, petroleum companies, homeowners, businesses and the like. The fees cover the costs of resolving any impacts on coastal property. In the case of the platforms, the fees are set according to age of the platform, water depth, whether it was decommissioned before its scheduled expiration date and other factors.

The bill authorizing “rigs to reefs,” AB 2503 by Assembly Speaker John Perez, D-Los Angeles, was approved on Aug. 31, the final day of the legislative session and later signed by Gov. Arnold Schwarzenegger. An earlier version of the bill, denounced by environmentalists, was vetoed by former Gov. Gray Davis.

The provision requiring a two-thirds vote means that at least eight of the Coastal Commission’s members would be required to approve a fee, whether for rigs to reefs, developers or anything else. Currently, seven votes are required.

“In lieu fees allow sensible development to proceed while protecting important public resources,” Bonnie Neely, the Commission’s chairwoman, said earlier. “Without them, the impacts can’t be mitigated.”

In addition to new fees, the retroactive language repeals existing fees that were approved after Jan. 1 with simple majority votes.

Proposition 26 could block hundreds of millions of dollars in tax breaks approved earlier for new alternative energy plants in Southern California, according to the plants’ proponents.
It also could undo a budget trailer bill ““ approved by the Legislature and signed by the governor — that levied fees on renewable energy plants to help defray some regulatory costs.
A hard-fought Senate bill approved in April, SB 401 by Sen. Lois Wolk, D-Davis, targeted state-federal tax conformity issues. It provided tax breaks on federal stimulus money that were intended to jump start solar energy development and other clean-energy projects.

One of the bill’s numerous provisions allows alternative energy developers to exclude the federal grant dollars from their income tax liability for 2009-10, a major financial incentive for the companies.
“This bill excludes these grants from income for 2009-2010 tax year, because an unexpected tax could cause project developers to terminate or delay the projects, causing job losses and less renewable power for the state,” a Senate analysis said.

With $10 billion in federal stimulus funding at stake, including grants and loans, the financial implications of Proposition 26 on energy alone are huge.

But the Senate bill was approved with only simple-majority votes in each house of the Legislature ““ not two-thirds votes ““ and thus is subject to repeal under Proposition 26.
“We know this is a problem,” Wolk said. “We have been looking at this and we plan to reintroduce legislation on the first day of the session, on Dec. 6,” she added.

The bill followed months of negotiations. It corrected provisions of a flawed, special-session bill that had been vetoed by the governor, and it targeted dozens of state-federal tax issues.
Another energy-linked law, part of the long-delayed state budget, required fees on renewable energy generators to cover some regulatory costs. It, too, was approved with a simple majority vote and is subject to elimination under Proposition 26.

By year’s end, solar and photo voltaic projects totaling more than 4,000 megawatts are expected to be approved. Currently, tax incentives for the projects will be available for those which begin construction by the Dec. 31 deadline. Another set of incentives, loan guarantees, carry a September 2011 deadline.

The Legislative Counsel’s office, the Legislature’s legal adviser, has been asked for opinions on the tax-credit and other already-approved legislation.

Meanwhile, getting a two-thirds vote to restore legislation eliminated under Proposition 26 may not be easy.
“The goal is to get them approved and to capture this money,” said V. John White of the Center for Environmental Efficiency and Renewable Technologies. “This problem is solvable. There are a lot of things to get done.”