81R23197 E

By: King of Parker, Anchia, Hughes, Lewis, H.B. No. 469

et al.

Substitute the following for H.B. No. 469:

By: Farabee C.S.H.B. No. 469

A BILL TO BE ENTITLED

AN ACT

relating to the establishment of incentives by this state for the implementation of certain projects to capture and sequester in geological formations carbon dioxide that would otherwise be emitted into the atmosphere.

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

SECTION 1. The heading to Subchapter G, Chapter 490, Government Code, is amended to read as follows:

SUBCHAPTER G. CLEAN COAL PROJECTS AND CLEAN ENERGY PROJECTS

SECTION 2. Section 490.301, Government Code, is amended to read as follows:

Sec. 490.301. DEFINITIONS [DEFINITION]. In this subchapter:

(1) "Clean [, "clean] coal project" has the meaning assigned by Section 5.001, Water Code.

(2) "Clean energy project" has the meaning assigned by Section 120.001, Natural Resources Code.

SECTION 3. The heading to Section 490.304, Government Code, is amended to read as follows:

Sec. 490.304. CONTRACTING AUTHORITY RELATED TO IMPLEMENTING CLEAN COAL PROJECT; FRANCHISE TAX CREDIT.

SECTION 4. Subchapter G, Chapter 490, Government Code, is amended by adding Section 490.305 to read as follows:

Sec. 490.305. FRANCHISE TAX CREDIT FOR CLEAN ENERGY PROJECT. (a) The comptroller shall adopt rules for issuing to an entity implementing a clean energy project in this state a franchise tax credit.

(b) The comptroller shall issue a franchise tax credit to an entity operating a clean energy project after:

(1) the Railroad Commission of Texas has issued a certificate of compliance for the project to the entity as provided by Section 120.004, Natural Resources Code;

(2) the construction of the project has been completed;

(3) the carbon-fueled electric generating facility associated with the project is fully operational; and

(4) the Bureau of Economic Geology of The University of Texas at Austin verifies to the comptroller that the carbon-fueled electric generating facility associated with the project is sequestering at least 70 percent of the carbon dioxide resulting from the generation of electricity by the facility.

(c) The total amount of the franchise tax credit that may be issued to the entity designated in the certificate of compliance for a clean energy project is equal to the lesser of:

(1) 10 percent of the total capital cost of the project, including the cost of designing, engineering, permitting, constructing, and commissioning the project, the cost of procuring land, water, and equipment for the project, and all fees, taxes, and commissions paid and other payments made in connection with the project but excluding the cost of financing the capital cost of the project; or

(2) $100 million.

(d) The franchise tax credit is a credit against any franchise taxes that may be assessed against the income generated by a clean energy project from the generation and sale of power and the sale of any products that are produced directly or indirectly by the carbon-fueled process. The entity designated in the certificate of compliance for the project may assign the franchise tax credit to any other entity that has or acquires an interest in the income generated by the project.

SECTION 5. Subtitle D, Title 3, Natural Resources Code, is amended by adding Chapter 120 to read as follows:

CHAPTER 120. VERIFICATION, MONITORING, AND CERTIFICATION OF CLEAN

ENERGY PROJECT

Sec. 120.001. DEFINITIONS. In this chapter:

(1) "Bureau" means the Bureau of Economic Geology of The University of Texas at Austin.

(2) "Clean energy project" means a project to construct a carbon-fueled electric generating facility that will:

(A) have a capacity of at least 200 megawatts;

(B) use integrated gasification combined cycle or other pre-combustion technology;

(C) capture at least 70 percent of the carbon dioxide resulting from the generation of electricity by the facility;

(D) be capable of permanently sequestering in a geological formation the carbon dioxide captured; and

(E) be capable of supplying the carbon dioxide captured for purposes of an enhanced oil recovery project.

(3) "Commission" means the Railroad Commission of Texas.

(4) "Sequester" means the injection of carbon dioxide into a geological formation in a manner and under conditions that create a reasonable expectation that at least 99 percent of the carbon dioxide injected will remain sequestered from the atmosphere for at least 1,000 years.

Sec. 120.002. CERTIFICATION OF CLEAN ENERGY PROJECT. (a) The commission is the authority responsible for certifying whether a project has met the requirements for a clean energy project.

(b) An entity may apply to the commission for a certification that a project operated by the entity meets the requirements for a clean energy project. The application must be accompanied by:

(1) a certificate from a qualified independent engineer that the project is operational and meets the standards provided by Sections 120.001(2)(A), (B), and (C); and

(2) a fee payable to the commission.

(c) The amount of the fee prescribed by Subsection (b)(2) is $50,000 unless the commission by rule determines that a fee in a greater amount is necessary to cover the commission's costs of processing an application.

Sec. 120.003. MONITORING OF SEQUESTERED CARBON DIOXIDE. (a) An entity operating a facility seeking a certification from the Railroad Commission of Texas pursuant to Section 120.002 above shall be responsible for conducting a monitoring, measuring, and verification process that demonstrates that the project has complied with the requirements of Section 490.305(b)(4), Government Code. The entity shall contract for the Bureau of Economic Geology of The University of Texas at Austin to: design initial protocols and standards for such a process; review the conduct of the process in order to make any necessary changes in the design of protocols and standards; evaluate the results of the process; provide an evaluation of such results to the Railroad Commission of Texas; and determine whether to transmit to the comptroller the verification described in Section 490.305(b)(4), Government Code.

(b) Unless otherwise agreed by the applying entity and the Bureau of Economic Geology of The University of Texas at Austin, the contract required by Subsection (a) of this section shall provide that the entity shall compensate the Bureau of Economic Geology at The University of Texas at Austin by paying eight annual fees, the first of which shall be due at least 24 months prior to the date that the entity first supplies carbon dioxide to an enhanced oil recovery project, according to the following schedule: a fee of $700,000 in year one; a fee of $1,300,000 in year two; a fee of $1,800,000 in year three; a fee of $1,500,000 in year four; a fee of $1,200,000 in year five; a fee of $900,000 in year six; a fee of $500,000 in year seven; and a fee of $200,000 in year eight.

Sec. 120.004. ISSUANCE OF CERTIFICATE OF COMPLIANCE. (a) On verification that a project meets the requirements for certification as a clean energy project, the commission shall issue a certificate of compliance for the project to the entity operating the project and shall provide a copy of the certificate to the comptroller.

(b) The commission may not issue a certificate of compliance for more than three clean energy projects.

SECTION 6. Section 202.0545, Tax Code, is amended by adding Subsection (i) to read as follows:

(i) Notwithstanding Subsection (a), the producer of oil recovered through an enhanced oil recovery project that uses carbon dioxide that is generated by a clean energy project as defined by Section 120.001, Natural Resources Code, is entitled to a tax rate reduction under this section until the 30th anniversary of the date the comptroller first approves an application for a tax rate reduction under this section if the producer otherwise qualifies for the tax rate reduction.

SECTION 7. The comptroller shall adopt rules under Section 490.305, Government Code, as added by this Act, not later than December 31, 2010.

SECTION 8. This Act takes effect September 1, 2009.