| TO: | Honorable Kenneth Armbrister, Chair, Senate Committee on Natural Resources |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | SB1366 by Estes (Relating to implementing a clean coal project in this state. ), Committee Report 1st House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | ($20,000,000) |
| 2007 | $0 |
| 2008 | $0 |
| 2009 | $0 |
| 2010 | $0 |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
|---|---|
| 2006 | ($20,000,000) |
| 2007 | $0 |
| 2008 | $0 |
| 2009 | $0 |
| 2010 | $0 |
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 for the Texas Commission on Environmental Quality (TCEQ) to issue permits for clean coal projects; it 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. It would provide jurisdiction to the Railroad Commission over injection of carbon dioxide produced by clean coal projects.
The bill would change the name of the Renewable Energy Demonstration Program at the State Energy Conservation Office (SECO) at the Comptroller's Office to the Innovative Energy Demonstration Program. Contingent upon the selection of Texas as the location of a coal-based integrated sequestration and hydrogen project built in partnership with the U.S. Department of energy, the bill would direct SECO to distribute one half of the amount invested in clean coal, with a cumulative distribution limit not exceed $20 million.
The bill would expand an appraisal value limitation in Tax Code, Chapter 313, Subchapter B, to include clean coal projects. The bill would also add a deduction of the cost of clean coal projects in Tax Code, Chapter 171, Subchapter C, allowing a corporation to deduct from its 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.
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 $40 million would be invested by individuals or companies for the promotion and development of FutureGen clean coal projects in fiscal year 2006. The SECO would therefore be required to disburse $20 million of grant funding for the Innovative Energy Demonstration Program, effectively reaching the maximum grant limit for the program in the first year of its existence. Because the bill does not specify the source from which SECO would distribute funds, this estimate assumes grant payments would be made out of the General Revenue Fund.
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.
| Source Agencies: | 455 Railroad Commission, 582 Commission on Environmental Quality, 304 Comptroller of Public Accounts, 580 Water Development Board
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| LBB Staff: | JOB, WK, JRO, ZS, TL
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