By: Averitt S.B. No. 2111

A BILL TO BE ENTITLED

AN ACT

relating to the implementation of and incentives for projects involving the capture, transportation, injection, sequestration, geologic storage, or abatement of carbon dioxide; providing for the issuance of bonds.

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

SECTION 1. Section 382.003, Health and Safety Code, is amended by amending Subdivision (1-a) and adding Subdivision (7-c) to read as follows:

(1-a) "Advanced clean energy project" means a project for which an application for a permit or for an authorization to use a standard permit under this chapter is received by the commission on or after January 1, 2008, and before January 1, 2020, and that:

(A) involves the use of coal, biomass, petroleum coke, solid waste, or fuel cells using hydrogen derived from such fuels, in the generation of electricity, or the creation of liquid fuels outside of the existing fuel production infrastructure while co-generating electricity, whether the project is implemented in connection with the construction of a new facility or in connection with the modification of an existing facility and whether the project involves the entire emissions stream from the facility or only a portion of the emissions stream from the facility;

(B) with regard to the portion of the emissions stream from the facility that is associated with the project, is capable of achieving on an annual basis a 99 percent or greater reduction of sulfur dioxide emissions and[,] a 95 percent or greater reduction of mercury emissions[,] and achieving an annual average emission rate for nitrogen oxides of 0.05 pounds or less per million British thermal units; and

(C) captures not less than 50 percent of the [renders] carbon dioxide in the portion of the emissions stream from the facility that is associated with the project and sequesters that captured carbon dioxide by geologic storage or other means [capable of capture, sequestration, or abatement if any carbon dioxide is produced by the project].

(7-c) "Geologic storage" means the underground storage of carbon dioxide in a suitable geologic formation, including storage that is accomplished in conjunction with an enhanced oil recovery project.

SECTION 2. Subtitle C, Title 5, Health and Safety Code, is amended by adding Chapter 393 to read as follows:

CHAPTER 393. COMMISSION ADVANCED CLEAN ENERGY PROJECT GRANT AND

LOAN PROGRAM

Sec. 393.001. DEFINITIONS. In this chapter:

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

(2) "Advanced clean energy project" has the meaning assigned by Section 382.003.

(3) "Commission" means the Texas Commission on Environmental Quality.

(4) "Program" means the commission advanced clean energy project grant and loan program established under this chapter.

Sec. 393.002. PROGRAM. The commission advanced clean energy project grant and loan program is established to encourage the development of advanced clean energy projects. Under the program, the commission shall provide grants or other financial incentives for eligible projects to accelerate the commercialization of technologies for the control of air contaminant emissions by electrical power generating facilities, including technologies to capture, transport, and store carbon dioxide in an environmentally protective manner.

Sec. 393.003. ACCOUNT. (a) The commission advanced clean energy project account is an account in the general revenue fund.

(b) The account consists of:

(1) a subaccount in the account that consists of the proceeds of bonds issued under Section 393.008;

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

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

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

(c) Money in the account may be appropriated only to the commission to award grants or make or guarantee loans under this chapter.

Sec. 393.004. GRANTS. (a) Under the program, the commission may award a grant to the managing entity of an advanced clean energy project to assist in the funding of the front-end engineering and design portion of the project.

(b) The total amount of grants awarded under this section for a project may not exceed 50 percent of the total amount invested in the front-end engineering and design portion of the project by private industry sources.

Sec. 393.005. LOANS AND LOAN GUARANTEES. (a) Under the program, the commission may make or guarantee a loan to the managing entity of an advanced clean energy project in this state.

(b) If a loan or loan guarantee is to be funded by the proceeds of bonds issued under Section 393.008, the project must qualify for the loan or guarantee under Section 49-q, Article III, Texas Constitution.

Sec. 393.006. WRITTEN AGREEMENT. Before awarding a grant or making a loan under this chapter, the commission 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.

Sec. 393.007. PURCHASE OF GOODS AND SERVICES FROM SMALL AND HISTORICALLY UNDERUTILIZED BUSINESSES. A recipient of a grant, loan, or loan guarantee under this chapter is encouraged to purchase goods and services from small businesses and historically underutilized businesses, as those terms are defined by Section 481.191, Government Code.

Sec. 393.008. ISSUANCE OF BONDS. The Texas Public Finance Authority shall issue general obligation bonds in accordance with and subject to Chapter 1232, Government Code, for the purposes authorized by Section 49-q, Article III, Texas Constitution.

Sec. 393.009. GUIDELINES AND CRITERIA, GRANT APPLICATION REQUIREMENTS, AND PROJECT REQUIREMENTS. The commission by rule shall adopt guidelines and criteria, grant application requirements, and project requirements that are consistent with the requirements of Section 391.003 and Subchapters B and C, Chapter 391, to the extent those provisions can be made applicable, except that rules adopted under this section in accordance with Section 391.201(d) must require a project to document the ability of the project to meet the emissions profile in the definition of "advanced clean energy project" under Section 382.003.

SECTION 3. Subchapter H, Chapter 151, Tax Code, is amended by adding Section 151.334 to read as follows:

Sec. 151.334. COMPONENTS OF TANGIBLE PERSONAL PROPERTY USED IN CONNECTION WITH GEOLOGIC SEQUESTRATION OF CARBON DIOXIDE. Components of tangible personal property are exempted from the taxes imposed by this chapter if:

(1) the components are used, constructed, acquired, or installed to capture carbon dioxide from an anthropogenic source, transport or inject carbon dioxide from such a source, or prepare carbon dioxide from such a source for transportation or injection; and

(2) the carbon dioxide is geologically sequestered, as part of an enhanced oil recovery project or otherwise, in this state.

SECTION 4. Subsection (a), Section 202.0545, Tax Code, is amended to read as follows:

(a) Subject to the limitations provided by this section, until [the later of] the 30th [seventh] anniversary of the date that the comptroller first approves an application for a tax rate reduction under this section [or the effective date of a final rule adopted by the United States Environmental Protection Agency regulating carbon dioxide as a pollutant], the producer of oil recovered through an enhanced oil recovery project that qualifies under Section 202.054 for the recovered oil tax rate provided by Section 202.052(b) is entitled to an additional 50 percent reduction in that tax rate if in the recovery of the oil the enhanced oil recovery project uses carbon dioxide that:

(1) is captured from an anthropogenic source in this state;

(2) would otherwise be released into the atmosphere as industrial emissions;

(3) is measurable at the source of capture; and

(4) is sequestered in one or more geological formations in this state following the enhanced oil recovery process.

SECTION 5. Subdivisions (1) and (4), Section 313.021, Tax Code, are amended to read as follows:

(1) "Qualified investment" means:

(A) tangible personal property that is first placed in service in this state during the applicable qualifying time period that begins on or after January 1, 2002, and is described as Section 1245 property by Section 1245(a), Internal Revenue Code of 1986;

(B) tangible personal property that is first placed in service in this state during the applicable qualifying time period that begins on or after January 1, 2002, without regard to whether the property is affixed to or incorporated into real property, and that is used in connection with the manufacturing, processing, or fabrication in a cleanroom environment of a semiconductor product, without regard to whether the property is actually located in the cleanroom environment, including:

(i) integrated systems, fixtures, and piping;

(ii) all property necessary or adapted to reduce contamination or to control airflow, temperature, humidity, chemical purity, or other environmental conditions or manufacturing tolerances; and

(iii) production equipment and machinery, moveable cleanroom partitions, and cleanroom lighting;

(C) tangible personal property that is first placed in service in this state during the applicable qualifying time period that begins on or after January 1, 2002, without regard to whether the property is affixed to or incorporated into real property, and that is used in connection with the operation of a nuclear electric power generation facility, including:

(i) property, including pressure vessels, pumps, turbines, generators, and condensers, used to produce nuclear electric power; and

(ii) property and systems necessary to control radioactive contamination;

(D) tangible personal property that is first placed in service in this state during the applicable qualifying time period that begins on or after January 1, 2002, without regard to whether the property is affixed to or incorporated into real property, and that is used in connection with operating an integrated gasification combined cycle electric generation facility, including:

(i) property used to produce electric power by means of a combined combustion turbine and steam turbine application using synthetic gas or another product produced by the gasification of coal or another carbon-based feedstock; or

(ii) property used in handling materials to be used as feedstock for gasification or used in the gasification process to produce synthetic gas or another carbon-based feedstock for use in the production of electric power in the manner described by Subparagraph (i); [or]

(E) tangible personal property that is first placed in service in this state during the applicable qualifying time period that begins on or after January 1, 2010, without regard to whether the property is affixed to or incorporated into real property, and that is used in connection with operating an advanced clean energy project, as defined by Section 382.003, Health and Safety Code; or

(F) a building or a permanent, nonremovable component of a building that is built or constructed during the applicable qualifying time period that begins on or after January 1, 2002, and that houses tangible personal property described by Paragraph (A), (B), (C), [or] (D), or (E).

(4) "Qualifying time period" means:

(A) the first two tax years that begin on or after the date a person's application for a limitation on appraised value under this subchapter is approved, except as provided by Paragraph (B) or (C); [or]

(B) in connection with a nuclear electric power generation facility, the first seven tax years that begin on or after the third anniversary of the date the school district approves the property owner's application for a limitation on appraised value under this subchapter, unless a shorter time period is agreed to by the governing body of the school district and the property owner; or

(C) in connection with an advanced clean energy project, as defined by Section 382.003, Health and Safety Code, the first five tax years that begin on or after the third anniversary of the date the school district approves the property owner's application for a limitation on appraised value under this subchapter, unless a shorter time period is agreed to by the governing body of the school district and the property owner.

SECTION 6. Subchapter M, Chapter 5, Water Code, is amended by adding Section 5.559 to read as follows:

Sec. 5.559. ADVANCED CLEAN ENERGY PROJECT PERMITTING PROCEDURE. (a) In this section, "advanced clean energy project" has the meaning assigned by Section 382.003, Health and Safety Code.

(b) As authorized by federal law, not later than nine months after the executive director declares an application for a permit under Chapter 26 for an advanced clean energy project to be administratively complete, the executive director shall complete the 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 or Subchapters C-G, Chapter 2001, Government Code, as applicable.

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

SECTION 7. Chapter 27, Water Code, is amended by adding Subchapter C-1 to read as follows:

SUBCHAPTER C-1. INJECTION AND GEOLOGIC STORAGE OF ANTHROPOGENIC

CARBON DIOXIDE

Sec. 27.041. JURISDICTION. (a) Except as provided by Subsection (b), the railroad commission has jurisdiction over the geologic storage of carbon dioxide in, and the injection of carbon dioxide into, a reservoir that is initially or may be productive of oil, gas, or geothermal resources or a saline formation directly above or below such a reservoir.

(b) The jurisdiction of the railroad commission over the geologic storage of carbon dioxide in, and the injection of carbon dioxide into, a saline formation described by Subsection (a) is subject to the review of the legislature based on the recommendations made in the preliminary report described by Section 9, S.B. No. 2111, Acts of the 81st Legislature, Regular Session, 2009.

(c) Except as provided by Subsection (b), the railroad commission has jurisdiction over a well used for the purpose provided by Subsection (a) regardless of whether the well was initially completed for that purpose or was initially completed for another purpose and is converted to the purpose provided by Subsection (a).

SECTION 8. Section 27.038, Water Code, is repealed.

SECTION 9. (a) Not later than December 1, 2010, the Texas Commission on Environmental Quality and the Railroad Commission of Texas, in consultation with the Bureau of Economic Geology of The University of Texas at Austin, shall prepare and file with the legislature a joint preliminary report that:

(1) analyzes the requirements for the injection and geologic storage of anthropogenic carbon dioxide into saline formations that are not productive of oil, gas, or geothermal resources;

(2) recommends a permitting process for anthropogenic carbon dioxide injection wells and geologic storage facilities that are used for the injection and storage of anthropogenic carbon dioxide in saline formations not productive of oil, gas, or geothermal resources;

(3) recommends the agency or agencies that should have jurisdiction over permitting described by Subdivision (2) of this subsection or any other permitting of geologic storage facilities not subject to Subchapter C-1, Chapter 27, Water Code, as added by this Act; and

(4) assesses the status of compliance with any federal rules regulating the geologic storage and associated injection of anthropogenic carbon dioxide.

(b) The preliminary report shall include:

(1) recommended criteria for identifying candidate geologic storage sites in each of the following types of geological settings:

(A) operating oil and gas fields;

(B) depleted oil and gas fields;

(C) unmineable coal seams;

(D) saline formations;

(E) geological systems that may be used as engineered reservoirs to extract economical quantities of heat from geothermal resources of low permeability or porosity;

(F) geological systems containing igneous formations; and

(G) coalbeds being used for methane recovery;

(2) a proposed procedure for:

(A) providing an opportunity for public review of, and the presentation of comments by interested persons regarding, any activities related to geologic storage; and

(B) ensuring that the quality of the natural and cultural resources of land overlying the site of a geologic storage facility are protected from any geologic storage activities at the site;

(3) a description of the status of leasehold or mineral estate liability issues related to the geological subsurface trespass of, or caused by, anthropogenic carbon dioxide stored in private or state-owned land, including any relevant experience from enhanced recovery operations using carbon dioxide;

(4) an analysis of and recommendations to address:

(A) the attributes of the subsurface area of operations for geologic storage facilities; and

(B) the methods of financial assurance and the allocation of long-term liability for the post-operational phases of geologic storage projects;

(5) the status of any applications for permits that have been received before the report is prepared;

(6) the status of any request for primary enforcement authority for the underground injection and geologic storage of anthropogenic carbon dioxide under the underground injection control program; and

(7) any recommendations for additional legislation, modifications to the memorandum of understanding between the Texas Commission on Environmental Quality and the Railroad Commission of Texas recorded in 16 T.A.C. Section 3.30, or new rules for regulating geologic storage facilities and associated anthropogenic carbon dioxide injection wells.

SECTION 10. Section 151.334, Tax Code, as added by this Act, does not affect taxes imposed before the effective date of this Act, and the law in effect before the effective date of this Act is continued in effect for purposes of the liability for and collection of those taxes.

SECTION 11. Not later than January 1, 2010, the Texas Commission on Environmental Quality shall adopt rules as necessary to implement Section 382.003, Health and Safety Code, as amended by this Act, Chapter 393, Health and Safety Code, as added by this Act, and Section 5.559, Water Code, as added by this Act.

SECTION 12. The Railroad Commission of Texas may adopt rules as necessary to implement Section 202.0545, Tax Code, as amended by this Act, and Subchapter C-1, Chapter 27, Water Code, as added by this Act.

SECTION 13. The comptroller of public accounts may adopt rules as necessary to implement Section 202.0545, Tax Code, as amended by this Act.

SECTION 14. This Act does not make an appropriation. This Act takes effect only if a specific appropriation for the implementation of the Act is provided in a general appropriations act of the 81st Legislature.

SECTION 15. (a) Except as provided by Section 14 of this Act and Subsections (b) and (c) of this section:

(1) 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; and

(2) if this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2009.

(b) Section 393.008, Health and Safety Code, as added by this Act, takes effect on the date on which the constitutional amendment proposed by the 81st Legislature, Regular Session, 2009, authorizing the issuance of general obligation bonds to provide and guarantee loans to encourage advanced clean energy projects takes effect. If that amendment is not approved by the voters, Section 393.008, Health and Safety Code, as added by this Act, has no effect.

(c) Section 393.009, Health and Safety Code, as added by this Act, takes effect September 1, 2009, but only if Senate Bill 16, Acts of the 81st Legislature, Regular Session, 2009, becomes law. If that bill does not become law, Section 393.009, Health and Safety Code, as added by this Act, has no effect.