Enrolled Bill Summary

House Bill 3732	House Author:  Hardcastle et al.
Effective:  See below	Senate Sponsor:  Averitt et al.

            House Bill 3732 amends the Texas Clean Air Act, in the Health and Safety Code, to define certain advanced clean energy projects that:  (1) involve the use or creation of specified fuels in connection with electricity generation or cogeneration; (2) are capable of reducing mercury, sulfur dioxide, and nitrogen oxide emissions by specified amounts; (3) render any resultant carbon dioxide (CO₂) capable of capture, sequestration, or abatement; and (4) are the subject of a permit application under that act received by the Texas Commission on Environmental Quality (TCEQ) during the 2008-2019 calendar years.   The specified fuels include coal, petroleum coke, biomass, solid waste, and derivative liquid fuels or hydrogen fuel cells.  The bill contains related provisions governing TCEQ air-quality permitting procedures for such a project.  A permit applicant need not prove beforehand, as part of a best available control technology (BACT) analysis or lowest achievable emission rate analysis, that that the proposed project technology is commercially feasible, but neither do the technology used or emission reductions achieved by an advanced clean energy project that receives an incentive set by themselves a BACT or emission benchmark for other Texas Clean Air Act permit applicants to have to match.

            Among other incentives, the bill amends the Government Code to establish an advanced clean energy project grant and loan program administered by the comptroller's State Energy Conservation Office (SECO).  Under the program, SECO may make or guarantee a loan to the managing entity of an eligible Texas project, or it may award a grant to that entity in an amount not to exceed 50 percent of the private industry investment in the project.  The bill requires the TCEQ and SECO twice jointly, not later than September 1, 2012, and September 1, 2016, to give the legislature a status update on the program and an assessment of whether the emissions criteria for advanced clean energy projects should be adjusted.  Not later than September 1, 2015, the TCEQ must report to the legislature assessing whether the program should be extended because of a continuing need for project incentives.

            The bill amends the Tax Code to provide for the transfer to the program's account, each fiscal biennium through FY2020, of the first $30 million of gross receipts tax revenues collected from electric, gas, and water utilities and allocated to the general revenue fund.  The total amount of advanced clean energy program grants and loans or loan guarantees from that source may not exceed $20 million and $10 million, respectively, per fiscal biennium.  The bill exempts sales of electricity generated by an advanced clean energy project from the gross receipts tax.  It amends the Texas Economic Development Act, in the Tax Code, to qualify an advanced clean energy project for the limitation on appraised value of property subject to school district maintenance and operation taxes.  The bill requires the TCEQ to prepare a nonexclusive list of facilities, devices, or methods for pollution control that may qualify for an exemption from property taxes, sets out numerous items to be included in that list, and makes related changes to provisions relating to the determination of rollback tax rates.  It provides for an additional oil severance tax rate reduction--in addition to the baseline reduction for which new and enhanced oil recovery (EOR) projects are eligible--if an EOR project eligible for the baseline reduction uses CO₂ that: (1) is captured from anthropogenic sources; (2) would otherwise be released into the atmosphere as industrial emissions; (3) is measurable at the source of capture; and (4) is sequestered geologically.  The additional tax rate reduction applies until the seventh anniversary of the date that the comptroller first approves an application for such a reduction or until the effective date of a U.S. Environmental Protection Agency final rule regulating CO₂ as a pollutant, whichever comes later.  The reduction is adjusted proportionately for EOR projects, the CO₂ for which comes partly from anthropocentric sources and partly from other sources.  To qualify for the additional tax rate reduction, the operator must be certified by the Railroad Commission of Texas, TCEQ, or both, and the bill sets a related standard for certification requiring a finding that at least 99 percent of the CO₂ will remain sequestered for at least 1,000 years.

            The bill takes effect September 1, 2007, with two exceptions.  Provisions authorizing issuance of state general obligation bonds to fund SECO loans or loan guarantees do not take effect at all, because a joint resolution to propose an associated constitutional amendment was not adopted by the legislature, and thus the amendment does not go before Texas voters.  Provisions eliminating the transfer of gross receipts tax revenues to the advanced clean energy project program take effect September 1, 2020.