HBA-SEP C.S.H.B. 788 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 788
By: Swinford
Agriculture & Livestock
4/24/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Methyl Tertiary Butyl Ether (MTBE) is a gasoline additive that has
contributed to lower ozone levels but constitutes a threat to water
supplies and public health causing several states to ban MTBE.   A viable
oxygenate alternative is ethanol.  The use of  nontoxic ethanol could help
to: preserve clean water, maintain clean air achievements in ozone
non-attainment areas, contribute to rural economic development, and provide
an additional market for feedgrain producers.   To promote ethanol use,
several states have instituted producer payments which range from $0.20 to
$0.40 per gallon.  While a payment of less than $0.20 could keep Texas
grain ethanol in production, a higher producer incentive encourages ethanol
production from alternative sources, and places Texas producers in a better
position in which to compete with out-of-state producers who also receive
payments.  C.S.H.B. 788 establishes producer incentives for the production
of ethanol and biodiesel. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Department of Agriculture in
SECTION 1 (Section 16.002, Agriculture Code) in this bill. 

ANALYSIS

C.S.H.B. 788 amends the Agriculture Code to require the Department of
Agriculture (department) to provide by rule for the distribution, no less
often than quarterly, of grant funds to producers of fuel ethanol and
biodiesel as an incentive for the development of the fuel ethanol and
biodiesel industry.  The bill provides that to be eligible for a grant, a
producer must apply to the department for the registration of the plant.
The bill sets forth qualification requirements for the plant and requires
the department to register all qualified plants.  The bill provides that,
until the 10th anniversary of the date production of the plant begins, a
producer is entitled to receive 20 cents for each gallon of fuel ethanol or
biodiesel produced in the plant.  
The bill establishes the fuel ethanol and biodiesel production account,
composed of money transferred by the legislature from the general revenue
fund.  The bill requires a producer to report monthly to the department and
prohibits a producer from receiving grants for more than 15 million gallons
of fuel at any one registered plant in each fiscal year.  A producer who
fails to submit a report is ineligible to receive a grant for the period in
which the report was not filed.  If the department determines that the
amount of money credited to the account is not sufficient to distribute the
full amount of grant funds to eligible producers for a fiscal year, the
department is required to proportionately reduce the amount of each grant
for each gallon of fuel ethanol or biodiesel produced as necessary to
continue the incentive program during the remainder of the fiscal year.   

EFFECTIVE DATE

September 1, 2001.



 COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 788 modifies the original to reduce, from 30 to 15, the number of
gallons of fuel in each fiscal year, rather than for each fiscal year
beginning on or after September 1, 2004, at any one registered plant for
which a producer may receive grants.  The substitute provides that if the
Department of Agriculture determines that the amount of money credited to
the account is not sufficient to distribute the full amount of grant funds
to eligible producers for a fiscal year, the department is required to
proportionately reduce the amount of each grant for each gallon of fuel
ethanol or biodiesel produced as necessary to continue the incentive
program during the remainder of the fiscal year.  The substitute also
modifies the effective date.