80R9860 JJT-F

By: Cook of Navarro H.B. No. 3110

A BILL TO BE ENTITLED

AN ACT

relating to indemnification requirements relating to a clean coal project.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 119.006, Natural Resources Code, is amended to read as follows:

Sec. 119.006. INDEMNIFICATION. The University of Texas System, [and] the permanent university fund, and the Texas Department of Criminal Justice may enter into a lease with the commission[,] or with an owner or operator of a clean coal project[,] for the use of lands owned or controlled by the system, the [or] fund, or the department for permanent storage of carbon dioxide captured by a clean coal project, provided that such lease adequately indemnifies the system, the [and] fund, and the department against liability for personal injury or property damage incurred by the system, the [or] fund, or the department as a result of the escape or migration of the carbon dioxide after it is injected into a zone or reservoir. This section does not affect the application of Chapter 101, Civil Practice and Remedies Code, to any activity carried out by a governmental unit, as defined by that chapter.

SECTION 2. Chapter 119, Natural Resources Code, is amended by adding Section 119.007 to read as follows:

Sec. 119.007. INDEMNIFICATION BY STATE AND REPRESENTATION BY ATTORNEY GENERAL. (a) The attorney general shall represent and defend an owner or operator of a clean coal project in a civil proceeding brought against the owner or operator that arises from an escape or migration of carbon dioxide captured or sequestered by the project if, not later than the 15th day after the date the owner or operator subject to the proceeding receives service of process, the owner or operator mails to the attorney general:

(1) written notice of the proceeding; and

(2) the owner or operator's written:

(A) authorization for the attorney general to represent and defend the owner or operator in the proceeding;

(B) agreement by the owner or operator to cooperate with the attorney general in the defense of the action; and

(C) consent that the attorney general may conduct the defense as the attorney general determines is advisable and in the best interests of the owner or operator, including consent for the attorney general to employ the attorney general's own discretion in settlement.

(b) In any proceeding described by Subsection (a) in which the attorney general represents the owner or operator, the state shall pay the court costs and litigation expenses of defending the action as they are incurred, to the extent approved by the attorney general as reasonable.

(c) The attorney general in writing shall decline to represent or defend the owner or operator or shall promptly take appropriate action to withdraw as attorney for the owner or operator if the attorney general determines that:

(1) representing and defending an owner or operator under this section involves an actual or potential conflict of interest;

(2) the act or omission that gave rise to the claim was intentional, wilful, or wanton misconduct; or

(3) the act or omission that gave rise to the claim was not within the scope of the escape or migration of captured or sequestered carbon dioxide.

(d) If on the basis of an actual or potential conflict of interest the attorney general declines to represent or withdraws from representing the owner or operator and the owner or operator employs an attorney to represent and defend the owner or operator in the proceeding, the state shall pay the owner or operator's court costs, litigation expenses, and attorney's fees as they are incurred, to the extent approved by the attorney general as reasonable.

(e) If the attorney general declines to represent or defend the owner or operator or withdraws on the grounds described by Subsection (c)(2) or (3) and a court or jury later finds that the act or omission of the owner or operator was not intentional, wilful, or wanton misconduct and was within the scope of the escape or migration of captured or sequestered carbon dioxide, the state shall:

(1) indemnify the owner or operator for any damages awarded and court costs and attorney's fees assessed as part of any final and unreversed judgment; and

(2) pay the owner or operator's court costs, litigation expenses, and attorney's fees, to the extent approved by the attorney general as reasonable.

(f) The attorney general may file a counterclaim on behalf of the owner or operator if:

(1) the attorney general determines that the owner or operator is entitled to representation in a civil action under this section;

(2) the counterclaim arises out of any act or omission occurring within the scope of the operation of a clean coal project that is the subject of the civil action; and

(3) the owner or operator agrees in writing that if judgment is entered in favor of the owner or operator, the amount of the judgment will be applied to offset any judgment that may be entered in favor of the plaintiff and then to reimburse the state for court costs and litigation expenses required to pursue the counterclaim.

(g) The state shall pay to the owner or operator any positive balance of a collected judgment for a counterclaim that remains after applying the amount of the judgment to offset any judgment entered in favor of the plaintiff and to reimburse the state for court costs and litigation expenses required to pursue the counterclaim.

(h) Court costs, litigation expenses, and other costs of providing a defense or counterclaim, including attorney's fees obligated under this section, shall be paid from state funds on the warrant of the comptroller out of appropriations made to the attorney general specifically designed for the payment of costs, fees, and expenses covered by this section.

(i) This section expires on the date the FutureGen Industrial Alliance, Inc., loses its qualification as being exempt from federal taxation under Section 501(a), Internal Revenue Code of 1986, by being listed as an exempt entity under Section 501(c)(3) of that code.

SECTION 3. This Act takes effect September 1, 2007.