H.B. 777 78(R)    BILL ANALYSIS


H.B. 777
By: Swinford
Agriculture & Livestock
Committee Report (Amended)


BACKGROUND AND PURPOSE 

Ethanol production is an industry of increasing significance in the United
States.  Over twenty states have either producer incentive programs in
place or other incentives in the form of tax exemptions. In order for
Texas to compete effectively in this burgeoning industry, an incentive
program is needed. 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.  This bill requires  the Texas Department
of Agriculture (Department) to provide by rule, grant funds to producers
of fuel ethanol and biodiesel as an incentive for the development of the
renewable fuel industry in Texas. 

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly
granted to the Texas Department of Agriculture in SECTION 16.006,
Agriculture Code, Title 2, of this bill. 

ANALYSIS

H.B. 777 creates a new Chapter 16 in Title 2 of the Agriculture Code and
establishes definitions of Account, ASTM, Biodiesel, Fuel Ethanol, and
Producer. 

The bill states that to be eligible to receive grants for fuel ethanol or
biodiesel produced in a plant, a producer must register with the Texas
Department of Agriculture, showing that the plant is capable of producing
fuel ethanol or biodiesel, that it is a permanent fixture and the producer
has made a substantial investment of resources in this state, in
conjunction with the plant.  The bill sets forth monthly reporting
requirements.  The bill establishes the fuel ethanol and biodiesel
production account, composed of fees and money transferred from the
general revenue fund.  The bill imposes a fee on producers of 3.2 cents
for each gallon of fuel ethanol or biodiesel produced in each registered
plant and sets limits on the amount of fees the Department may assess on
producers. 
     

H.B. 777 establishes a grant program that the Department must administer
to qualifying producers. A producer is entitled to receive a 20 cent per
gallon grant for each gallon of fuel ethanol or biodiesel produced by each
registered plant.  Producers may not receive incentives for more than 18
million gallons produced annually at any one plant and incentives will
cease on the10th anniversary of the start of production. The Department is
required to make grants at least quarterly.   If the Department determines
the amount of money credited to the account is not sufficient enough to
distribute the full amount to all eligible producers equally, they shall
proportionately reduce the amount of each grant as necessary. 

EFFECTIVE DATE

September 1, 2003.

EXPLANATION OF AMENDMENTS

Committee Amendment No. 1 adds a new Section 2 and renumbers subsequent
sections accordingly. Under the new Section 2, the comptroller of public
accounts is prohibited from making transfers from general revenue to the
Fuel Ethanol and Biodiesel Production Account during the fiscal biennium
ending August 31, 2005, created in Section 1 of the measure.