By: Averitt S.B. No. 1785

(In the Senate - Filed March 9, 2007; March 21, 2007, read first time and referred to Committee on Natural Resources; April 26, 2007, reported adversely, with favorable Committee Substitute by the following vote: Yeas 11, Nays 0; April 26, 2007, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 1785 By: Averitt

A BILL TO BE ENTITLED

AN ACT

relating to the implementation of clean energy projects in this state, including certain tax exemptions and rollbacks.

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

SECTION 1. Chapter 447, Government Code, is amended by adding Section 447.013 to read as follows:

Sec. 447.013. ADVANCED CLEAN ENERGY PROJECT GRANT AND LOAN PROGRAM. (a) In this section:

(1) "Account" means the advanced clean energy project account established under this section.

(2) "Advanced clean energy project" has the meaning assigned by Section 382.003, Health and Safety Code.

(3) "Program" means the advanced clean energy project grant and loan program established under this section.

(b) The advanced clean energy project grant and loan program is established to encourage the development of advanced clean energy projects that produce reliable and affordable electric power in an environmentally protective manner. The program is administered by the state energy conservation office.

(c) The advanced clean energy project account is an account in the general revenue fund.

(d) The account consists of:

(1) a subaccount in the account that consists of the proceeds of bonds issued under Subsection (j);

(2) revenues allocated to the account under Section 182.122, Tax Code;

(3) any amount appropriated by the legislature for the account;

(4) gifts, grants, and other donations received for the account; and

(5) interest earned on the investment of money in the account.

(e) Money in the account may be appropriated only to the state energy conservation office to award grants or to make or guarantee loans under this section. The total amount of grants that may be awarded under this section in any state fiscal biennium from revenues described by Subsection (d)(2) may not exceed $20 million. The total amount of loans that may be made or guaranteed under this section in any state fiscal biennium from revenues described by Subsection (d)(2) may not exceed $10 million.

(f) Before awarding a grant or making a loan under this section, the state energy conservation office shall enter into a written agreement with the entity to which the grant is to be awarded or the loan is to be made. The agreement may specify that if, as of a date specified by the agreement, the entity has not used the grant or loan for the purposes for which the grant or loan was intended, the entity shall repay the amount of the grant or the amount of the loan and any accrued interest, as applicable, under terms specified by the agreement.

(g) Under the program, the state energy conservation office may award a grant to the managing entity of an advanced clean energy project in an amount not to exceed 50 percent of the total amount invested in the project by private industry sources. The managing entity of the project must provide any information considered necessary by the state energy conservation office to determine whether the entity qualifies for the grant.

(h) Under the program, the state energy conservation office may make or guarantee a loan to the managing entity of an advanced clean energy project in this state. If the loan or guarantee is to be funded by the proceeds of bonds issued under Subsection (j), the project must qualify for the loan or guarantee under Section 49-p, Article III, Texas Constitution.

(i) A recipient of a grant or loan under this section is encouraged to purchase goods and services from small businesses and historically underutilized businesses, as those terms are defined by Section 481.191.

(j) The Texas Public Finance Authority shall issue general obligation bonds as authorized by Section 49-p, Article III, Texas Constitution.

SECTION 2. Section 382.003, Health and Safety Code, is amended by adding Subdivisions (1-a), (3-a), (7-a), and (11-a) to read as follows:

(1-a) "Advanced clean energy project" means a project that:

(A) involves the use of coal, biomass, petroleum coke, or solid waste in the generation of electricity, or the creation of liquid fuels, outside of the existing fuel production infrastructure;

(B) on an annual basis, is capable of achieving a 99 percent reduction of sulfur dioxide emissions, a 95 percent reduction of mercury emissions, and an emission rate for nitrogen oxides of 0.05 pounds per million British thermal units; and

(C) renders carbon dioxide capable of capture, sequestration, or abatement.

(3-a) "Coal" has the meaning assigned by Section 134.004, Natural Resources Code.

(7-a) "Federally qualified clean coal technology" means a technology or process, including a technology or process applied at the precombustion, combustion, or postcombustion stage, for use at a new or existing facility that will achieve a 97 percent reduction of sulfur dioxide emissions, an emission rate for nitrogen oxides of 0.08 pounds per million British thermal units, and significant reductions in mercury emissions associated with the use of coal in the generation of electricity, process steam, or industrial products, including the creation of liquid fuels, hydrogen for fuel cells, and other coproducts. The technology used must comply with applicable federal law regarding mercury emissions and must render carbon dioxide capable of capture, sequestration, or abatement. Federally qualified clean coal technology includes atmospheric or pressurized fluidized bed combustion technology, integrated gasification combined cycle technology, methanation technology, magnetohydrodynamic technology, direct and indirect coal-fired turbines, undiluted high-flame temperature oxygen combustion technology that excludes air, and integrated gasification fuel cells.

(11-a) "Solid waste" has the meaning assigned by Section 361.003.

SECTION 3. Subchapter C, Chapter 382, Health and Safety Code, is amended by adding Section 382.0566 to read as follows:

Sec. 382.0566. ADVANCED CLEAN ENERGY PROJECT PERMITTING PROCEDURE. (a) An application for a permit under this chapter for an advanced clean energy project must be received by the commission on or after September 1, 2008, and before September 1, 2020.

(b) As authorized by federal law, not later than nine months after the executive director declares an application for a permit under this chapter for an advanced clean energy project to be administratively complete, the executive director shall complete its technical review of the application.

(c) The commission shall issue a final order issuing or denying the permit not later than nine months after the executive director declares the application technically complete. The commission may extend the deadline set out in this subsection up to three months if it determines that the number of complex pending applications for permits under this chapter will prevent the commission from meeting the deadline imposed by this subsection without creating an extraordinary burden on the resources of the commission.

(d) The permit process authorized by this section is subject to the requirements relating to a contested case hearing under this chapter, Chapter 5, Water Code, or Subchapters C-G, Chapter 2001, Government Code, as applicable.

(e) An applicant for a permit under this chapter for an advanced clean energy project is not required to prove, as part of an analysis of whether the project will use the best available control technology or reduce emissions to the lowest achievable rate, that the federally qualified clean coal technology or advanced clean energy technology proposed to be used in connection with the project has been demonstrated to be feasible in a commercial operation.

(f) The commission shall adopt rules to implement this section.

SECTION 4. Section 11.31, Tax Code, is amended by adding Subsections (k), (l), and (m) to read as follows:

(k) The Texas Commission on Environmental Quality shall adopt rules establishing a nonexclusive list of facilities, devices, or methods for the control of air, water, or land pollution, which must include:

(1) coal cleaning or refining facilities;

(2) atmospheric or pressurized and bubbling or circulating fluidized bed combustion systems and gasification fluidized bed combustion combined cycle systems;

(3) ultra-supercritical pulverized coal boilers;

(4) flue gas recirculation components;

(5) syngas purification systems and gas-cleanup units;

(6) enhanced heat recovery systems;

(7) exhaust heat recovery boilers;

(8) heat recovery steam generators;

(9) superheaters and evaporators;

(10) enhanced steam turbine systems;

(11) methanation;

(12) coal combustion or gasification byproduct and coproduct handling, storage, or treatment facilities;

(13) biomass cofiring storage, distribution, and firing systems;

(14) coal cleaning or drying processes, such as coal drying/moisture reduction, air jigging, precombustion decarbonization, and coal flow balancing technology;

(15) oxy-fuel combustion technology including undiluted high-flame temperature oxygen combustion that excludes air, amine or chilled ammonia scrubbing, fuel or emission conversion through the use of catalysts, enhanced scrubbing technology, modified combustion technology such as chemical looping, and cryogenic technology; and

(16) any other equipment designed to prevent, capture, abate, or monitor nitrogen oxides, volatile organic compounds, particulate matter, mercury, carbon monoxide, carbon dioxide, or any criteria pollutant.

(l) The Texas Commission on Environmental Quality by rule shall update the list adopted under Subsection (k) at least once every three years. An item may not be removed from the list unless the commission finds compelling evidence to support the conclusion that the item does not provide pollution control benefits.

(m) Notwithstanding the other provisions of this section, if the facility, device, or method for the control of air, water, or land pollution described in an application for an exemption under this section is a facility, device, or method included on the list adopted under Subsection (k), the executive director of the Texas Commission on Environmental Quality, not later than the 30th day after the date of receipt of the information required by Subsections (c)(2) and (3) and without regard to whether the information required by Subsection (c)(1) has been submitted, shall determine that the facility, device, or method described in the application is used wholly or partly as a facility, device, or method for the control of air, water, or land pollution and shall take the actions that are required by Subsection (d) in the event such a determination is made.

SECTION 5. Section 26.045, Tax Code, is amended to read as follows:

Sec. 26.045. ROLLBACK RELIEF FOR POLLUTION CONTROL REQUIREMENTS. (a) The rollback tax rate for a political subdivision of this state is increased by the rate that, if applied to the total current value, would impose an amount of taxes equal to the amount the political subdivision will spend out of its maintenance and operation funds under Section 26.012(16)[, Tax Code,] to pay for a facility, device, or method for the control of air, water, or land pollution that is necessary to meet the requirements of a permit issued by the Texas [Natural Resource Conservation] Commission on Environmental Quality.

(b) In this section, "facility, device, or method for control of air, water, or land pollution" means any land, structure, building, installation, excavation, machinery, equipment, or device, and any attachment or addition to or reconstruction, replacement, or improvement of that property, that is used, constructed, acquired, or installed wholly or partly to meet or exceed rules or regulations adopted by any environmental protection agency of the United States or this state for the prevention, monitoring, control, or reduction of air, water, or land pollution.

(c) To receive an adjustment to the rollback tax rate under this section, a political subdivision shall present information to the executive director of the Texas [Natural Resource Conservation] Commission on Environmental Quality in a permit application or in a request for any exemption from a permit that would otherwise be required detailing:

(1) the anticipated environmental benefits from the installation of the facility, device, or method for the control of air, water, or land pollution;

(2) the estimated cost of the pollution control facility, device, or method; and

(3) the purpose of the installation of the facility, device, or method, and the proportion of the installation that is pollution control property.

(d) Following submission of the information required by Subsection (c), the executive director of the Texas [Natural Resource Conservation] Commission on Environmental Quality shall determine whether [if] the facility, device, or method is used wholly or partly as a facility, device, or method for the control of air, water, or land pollution. If the executive director determines that the facility, device, or method is used wholly or partly to control pollution, the director shall issue a letter to the political subdivision stating that determination and the portion of the cost of the installation that is pollution control property.

(e) The Texas [Natural Resource Conservation] Commission on Environmental Quality may charge a political subdivision seeking a determination that property is pollution control property an additional fee not to exceed its administrative costs for processing the information, making the determination, and issuing the letter required by this section. The commission may adopt rules to implement this section.

(f) The Texas Commission on Environmental Quality shall adopt rules establishing a nonexclusive list of facilities, devices, or methods for the control of air, water, or land pollution, which must include:

(1) coal cleaning facilities;

(2) atmospheric or pressurized and bubbling or circulating fluidized bed combustion systems and gasification fluidized bed combustion combined cycle systems;

(3) ultra-supercritical pulverized coal boilers;

(4) flue gas recirculation components;

(5) syngas purification systems and gas-cleanup units;

(6) enhanced heat recovery systems;

(7) exhaust heat recovery boilers;

(8) heat recovery steam generators;

(9) superheaters and evaporators;

(10) enhanced steam turbine systems;

(11) methanation;

(12) coal combustion or gasification byproduct and coproduct handling, storage, or treatment facilities;

(13) biomass cofiring storage, distribution, and firing systems;

(14) coal cleaning or drying processes such as coal drying/moisture reduction, air jigging, precombustion decarbonization, and coal flow balancing technology;

(15) oxy-fuel combustion technology including undiluted high-flame temperature oxygen combustion that excludes air, amine or chilled ammonia scrubbing, fuel or emission conversion through the use of catalysts, enhanced scrubbing technology, modified combustion technology such as chemical looping, and cryogenic technology; and

(16) any other equipment designed to capture, abate, or monitor nitrogen oxides, volatile organic compounds, particulate matter, mercury, carbon monoxide, carbon dioxide, or any criteria pollutant.

(g) The Texas Commission on Environmental Quality by rule shall update the list adopted under Subsection (f) at least once every three years. An item may not be removed from the list unless the commission finds compelling evidence to support the conclusion that the item does not render pollution control benefits.

(h) Notwithstanding the other provisions of this section, if the facility, device, or method for the control of air, water, or land pollution described in a permit application or in a request for any exemption from a permit that would otherwise be required is a facility, device, or method included on the list adopted under Subsection (f), the executive director of the Texas Commission on Environmental Quality, not later than the 30th day after the date of receipt of the information required by Subsections (c)(2) and (3) and without regard to whether the information required by Subsection (c)(1) has been submitted, shall determine that the facility, device, or method described in the permit application or in the request for an exemption from a permit that would otherwise be required is used wholly or partly as a facility, device, or method for the control of air, water, or land pollution and shall take the action that is required by Subsection (d) in the event such a determination is made.

(i) A political subdivision of the state seeking an adjustment in its rollback tax rate under this section shall provide to its tax assessor a copy of the letter issued by the executive director of the Texas [Natural Resource Conservation] Commission on Environmental Quality under Subsection (d). The tax assessor shall accept the copy of the letter from the executive director as conclusive evidence that the facility, device, or method is used wholly or partly as pollution control property and shall adjust the rollback tax rate for the political subdivision as provided for by Subsection (a).

SECTION 6. Section 182.022, Tax Code, is amended by adding Subsection (c) to read as follows:

(c) Notwithstanding any other provision of this chapter, a tax under this chapter may not be imposed on gross receipts from the sale of electricity generated by an advanced clean energy project, as defined by Section 382.003, Health and Safety Code.

SECTION 7. Section 182.122, Tax Code, is amended to read as follows:

Sec. 182.122. ALLOCATION OF TAX. (a) Revenues collected under this chapter are allocated:

(1) one-fourth to the foundation school fund; and

(2) three-fourths to the general revenue fund.

(b) The comptroller shall transfer to the advanced clean energy project account the first $30 million of the revenues collected under this chapter that are allocated to the general revenue fund under Subsection (a)(2) in any state fiscal biennium.

SECTION 8. Effective September 1, 2020, Section 182.122, Tax Code, is amended to read as follows:

Sec. 182.122. ALLOCATION OF TAX. Revenues collected under this chapter are allocated:

(1) one-fourth to the foundation school fund; and

(2) three-fourths to the general revenue fund.

SECTION 9. Subsection (b), Section 313.024, Tax Code, as effective January 1, 2008, is amended to read as follows:

(b) To be eligible for a limitation on appraised value under this subchapter, the entity must use the property in connection with:

(1) manufacturing;

(2) research and development;

(3) a clean coal project, as defined by Section 5.001, Water Code;

(4) an advanced clean energy [a gasification] project, as defined by Section 382.003, Health and Safety Code [for a coal and biomass mixture]; or

(5) renewable energy electric generation.

SECTION 10. The state energy conservation office shall establish the advanced clean energy grant and loan program under Section 447.013, Government Code, as added by this Act, not later than January 1, 2008.

SECTION 11. No technology, or level of emission reduction, solely by reason of the use of the technology, or the achievement of the emission reduction, by one or more facilities receiving incentives under this Act, shall be considered to be adequately demonstrated or achievable for purposes of the best available control technology analysis or lowest achievable emission rate analysis conducted by the Texas Commission on Environmental Quality under applicable law.

SECTION 12. Not later than January 1, 2008, the Texas Commission on Environmental Quality shall adopt rules required under Section 382.0566, Health and Safety Code, and Subsection (k), Section 11.31, Tax Code, as added by this Act, and Subsection (f), Section 26.045, Tax Code, as amended by this Act.

SECTION 13. (a) Not later than September 1, 2010, 2012, 2014, 2016, and 2018, the Texas Commission on Environmental Quality and the state energy conservation office shall issue a joint report to the legislature providing a status update on the implementation of the advanced clean energy project grant and loan program and an assessment of whether the emissions profile set out in Paragraph (B), Subdivision (1-a), Section 382.003, Health and Safety Code, as added by this Act, should be adjusted to increase or decrease elements of the emissions profile.

(b) Factors to be considered in the assessment of the emissions profile shall include:

(1) the technical and economic feasibility of meeting all of the elements of the emissions profile in a commercially viable project, as documented by the United States Department of Energy;

(2) the technical and economic feasibility of projects to meet all of the elements of the emissions profile and still use a diverse range of fuels, including lignite; and

(3) the adequacy of the incentives provided by this Act to continue to attract investment in and federal funding for advanced clean energy projects in this state.

(c) Any adjustments to the emissions profile implemented by the legislature in response to a report required by this section shall not apply to an application deemed administratively complete on or before the date of the report.

SECTION 14. Subsection (j), Section 447.013, Government Code, as added by this Act, takes effect only if the constitutional amendment proposed by the 80th Legislature, Regular Session, 2007, authorizing the issuance of general obligation bonds to provide and guarantee loans to encourage the use of carbon-free hydrogen energy is approved by the voters. If that amendment is not approved by the voters, Subsection (j), Section 447.013, Government Code, as added by this Act, has no effect.

SECTION 15. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.

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