LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 79TH LEGISLATIVE REGULAR SESSION
 
May 20, 2005

TO:
Honorable Kenneth Armbrister, Chair, Senate Committee on Natural Resources
 
FROM:
John S. O'Brien, Deputy Director, Legislative Budget Board
 
IN RE:
HB2201 by Hughes (Relating to implementing a clean coal project in this state. ), Committee Report 2nd House, Substituted



Estimated Two-year Net Impact to General Revenue Related Funds for HB2201, Committee Report 2nd House, Substituted: a negative impact of ($2,000,000) through the biennium ending August 31, 2007.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2006 ($1,000,000)
2007 ($1,000,000)
2008 ($1,000,000)
2009 ($1,000,000)
2010 ($1,000,000)




Fiscal Year Probable (Cost) from
GENERAL REVENUE FUND
1
2006 ($1,000,000)
2007 ($1,000,000)
2008 ($1,000,000)
2009 ($1,000,000)
2010 ($1,000,000)

Fiscal Analysis

The bill would define "clean coal project" as a coal-based electric generating facility in partnership with the U.S. Department of Energy's FutureGen project. The bill would provide jurisdiction to the Texas Commission on Environmental Quality (TCEQ) for clean coal projects when carbon dioxide injection is into a zone below the base of usable quality water and is not productive of oil, gas, or geothermal resources. It would provide jurisdiction to the Railroad Commission over injection of carbon dioxide produced by clean coal projects in zones productive of oil, gas, or geothermal resources. The bill would direct the Water Development Board to provide flexibility to regional water planning groups in amending water plans to facilitate planning for water supplies to meet the demands of clean coal projects.

The bill would provide that clean coal projects are eligible for grant funding under the program. The bill would direct SECO to distribute to the managing entity of the FutureGen project an amount equal to 50 percent of the total amount invested in the project by private entities. The bill provides that cumulative distributions shall not exceed $20 million. The bill would allow the Governor to allocate money appropriated to a fund created in Chapter 490, Government Code (Chapter currently does not exist) to provide matching funds for a FutureGen clean coal project.

The bill would expand an appraisal value limitation in Tax Code, Chapter 313, Subchapter B, to include clean coal projects, and it would allow corporations to deduct from a corporation's taxable capital or from its taxable earned surplus 10 percent of the amortized cost of equipment used in clean coal projects.

The bill would take effect immediately if it would pass both houses by a two-thirds vote. Otherwise, it would take effect on September 1, 2005.


Methodology

This estimate assumes that any administrative costs incurred by the TCEQ, the Water Development Board, the Railroad Commission, and the Comptroller in implementing the provisions of the bill could be absorbed within existing agency resources.

This estimate assumes that at least $2.0 million would be invested by individuals or companies for the promotion and development of FutureGen clean coal projects in each of the fiscal years over the 2006-10 period. The SECO would therefore be required to disburse $1.0 million of grant funding to the managing entity of the FutureGen project, effectively reaching the maximum grant limit for the program in the first year of its existence. This estimate assumes grant payments would be made out of the General Revenue Fund. This estimate does not assume that any funding would be available out of the fund referenced in Chapter 490, Government Code, since that fund currently does not exist. 

Providing a 10 percent deduction for capital expenditures associated with clean coal projects would result in a loss in General Revenue to the state, because it would reduce the amount of franchise tax collected. The loss in General Revenue would depend on the number of clean coal projects and the value of equipment associated with those projects. There would also be a loss of revenue to local school districts and a corresponding cost to the Foundation School Fund because of the expansion of the appraised value limitation provisions. Again, the loss and resulting cost would depend on the number of clean coal projects and the value of equipment associated with those projects.


Local Government Impact

School districts, cities, and counties could experience a loss in property tax revenue due to the bill's provision expanding the appraisal value limitation in Tax Code, Chapter 313, Subchapter B, to include clean coal projects. The revenue loss would depend on whether a clean coal project would occur in a particular taxing unit's jurisdiction and the value of equipment associated with the project.


Source Agencies:
455 Railroad Commission, 580 Water Development Board, 582 Commission on Environmental Quality, 304 Comptroller of Public Accounts
LBB Staff:
JOB, WK, JRO, ZS, TL