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.

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

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

SECTION 3. The heading to Section 490.302, Government Code, is amended to read as follows:

Sec. 490.302. USE OF MONEY FOR CLEAN COAL PROJECT OR ADVANCED CLEAN ENERGY PROJECT.

SECTION 4. Section 490.302, Government Code, is amended by adding Subsection (c) to read as follows:

(c) Notwithstanding Section 490.102:

(1) until September 1, 2010, the governor may allocate money appropriated to the fund by the legislature to provide matching money for an advanced clean energy project as described by Chapter 393, Government Code, that captures not less than 70 percent of any carbon dioxide produced by the combustion of fuel and sequesters that captured carbon dioxide by geologic storage or other means; and

(2) beginning September 1, 2010, the governor may allocate money appropriated to the fund by the legislature to provide matching money for an advanced clean energy project as described by Chapter 393, Government Code, if the governor did not allocate money as provided by Subdivision (1).

SECTION 5. Section 490.303, Government Code, is amended to read as follows:

Sec. 490.303. ELIGIBILITY OF CLEAN COAL PROJECT OR ADVANCED CLEAN ENERGY PROJECT FOR MONEY. Notwithstanding any other provision of this subchapter, a clean coal project or an advanced clean energy project constitutes an opportunity for emerging technology suitable for consideration for a grant under Subchapter C, incentives as provided by Subchapter D, grant matching as provided by Subchapter E, and acquisition of research superiority under Subchapter F.

SECTION 6. 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 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;

(B) 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 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 any [renders] carbon dioxide produced by the combustion of fuel 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 7. 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.

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 393.001. DEFINITIONS. In this chapter:

(1) "Account" means the commission 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) "Commission" means the Texas Commission on Environmental Quality.

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

Sec. 393.002. PROGRAM. (a) 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 in order 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.

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

(c) The account consists of:

(1) a sub-account in the account that consists of the proceeds of bonds issued under Subsection (i);

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

(3) funds allocated to the account by the governor under Section 490.302;

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

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

(d) Money in the account may be appropriated only to the commission to award grants or service debt associated with the administration of the loan program established by Section 393.002 and funded by the proceeds of bonds issued under Subsection (i).

(e) 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. 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.

(f) Before awarding a grant or making a loan under this section, 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.

(g) Under the program, the commission 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 (i), the project must qualify for the loan or guarantee under Section 49-q, Article III, Texas Constitution.

(h) 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, Government Code.

(i) 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.

(j) This subsection applies only to an advanced clean energy project described by Section 490.302(c)(1), Government Code. The other provisions of this section apply to an advanced clean energy project described by Section 490.302(c)(1), Government Code, only to the extent they do not conflict with this subsection. If the governor allocates funds to the account under Section 490.302(c)(1), the commission shall solicit proposals for the construction in this state of an advanced clean energy project described by that section, conduct a review of proposals submitted in conjunction with a review team made up of an equal number of representatives from the Railroad Commission of Texas, the Public Utility Commission of Texas, and the comptroller's office, and distribute to the managing entity of the project selected an amount equal to 50 percent of the total amount invested in the project by private industry sources. The limitations provided by Subsection (e) on the purpose for which a grant under this section may be awarded and on the amount of a grant do not apply to a grant under this subsection. The managing entity of the project shall provide records as considered necessary by the commission to justify grants under this subsection. Cumulative distributions under this subsection may not exceed $200 million. The commission shall develop an application review process to implement this subsection that specifies the submission deadline, processing time frame, and award announcement schedule necessary to ensure that applications are evaluated in time to select a winner and make the initial distributions of money before September 1, 2010. The commission, in conjunction with the review team, shall develop application review criteria that take into consideration the criteria developed by the commission to evaluate grants or loans for advanced clean energy projects under the other provisions of this chapter. The application review criteria must give particular emphasis to the relative economic benefit of the proposed project to this state.

Sec. 393.003. GUIDELINES, CRITERIA, GRANT APPLICATIONS, AND PROJECT REQUIREMENTS. (a) The commission shall adopt grant guidelines and criteria, grant application criteria, and project requirements consistent with the requirements of Sections 391.003-391.205, except the documentation requirements of Section 391.201(d) shall not relate to baseline emission reductions, but rather the ability of a project to meet the emissions profile in the definition of "advanced clean energy project" under Section 382.003.

[Sections 393.004-393.400 reserved for expansion]

SECTION 8. Section 151.318(a), Tax Code, is amended by adding Subsection (a)(12) to read as follows:

(a) The following items are exempted from the taxes imposed by this chapter if sold, leased, or rented to, or stored, used, or consumed by a manufacturer: . . . (12) components of tangible personal property that 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, if the carbon dioxide is geologically sequestered, as part of an enhanced oil recovery project or otherwise, in this state.

SECTION 9. Section 202.0545(a), Tax Code, is amended to read as follows:

(a) Subject to the limitations provided by this section, until [the later of] the 10th [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 10. Subchapter C, Chapter 312, Tax Code, is amended by adding Section 312.404 to read as follows:

Sec. 312.404. TAX ABATEMENT AGREEMENT FOR ADVANCED CLEAN ENERGY PROJECT IN COUNTY REINVESTMENT ZONE. (a) In this section, "advanced clean energy project" has the meaning assigned by Section 382.003, Health and Safety Code.

(b) An agreement made under this subchapter with the owner of property that is an advanced clean energy project may include a provision that defers the effective date of the agreement to a later date agreed to by the taxing unit and the owner of the property.

(c) If the effective date of an agreement is deferred under Subsection (b), the agreement may have a term ending not later than 10 years after the effective date of the agreement, notwithstanding Sections 312.204 and 312.208.

SECTION 11. Section 313.007, Tax Code, is amended to read as follows:

Sec. 313.007. EXPIRATION. (a) Subchapters B, C, and D expire December 31, 2020 [2011].

(b) Notwithstanding the other provisions of this chapter, a school district may approve an application for a limitation on appraised value under Subchapter B or C on or after December 31, 2011, only if the applicant intends to use the property in connection with an advanced clean energy project, as defined by Section 382.003, Health and Safety Code.

SECTION 12. Sections 313.021(1) and (4), 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 13. 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 14. Subchapter B, Chapter 27, Water Code, is amended by amending Section 27.022 to read as follows:

Sec. 27.022. JURISDICTION OVER ANTHROPOGENIC CARBON DIOXIDE INJECTION. (a) The commission has jurisdiction over the injection of anthropogenic carbon dioxide except as provided by Subchapter C-1.

(b) The commission shall adopt rules and procedures reasonably required for the performance of its powers, duties, and functions under this section [produced by a clean coal project, to the extent authorized by federal law, into a zone that is below the base of usable quality water and that is not productive of oil, gas, or geothermal resources by a Class II injection well, or by a Class I injection well if required by federal law].

SECTION 15. 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) The railroad commission has jurisdiction over injection of anthropogenic carbon dioxide into a reservoir that is initially productive of oil, gas, or geothermal resources or a saline formation directly above or below that reservoir. Any well initially completed under the jurisdiction of the railroad commission shall remain under the jurisdiction of the railroad commission, notwithstanding the well's subsequent use for the injection of anthropogenic carbon dioxide.

(b) This subchapter does not apply to the injection of fluid through the use of a Class II injection well as defined by 40 C.F.R. Section 144.6(b) for the sole purpose of the enhanced recovery of oil or gas.

SECTION 16. Section 393.002(i), Health and Safety Code, as added by this Act, takes effect only if 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 is approved by the voters. If that amendment is not approved by the voters, Section 393.002(i), Health and Safety Code, Government Code, as added by this Act, has no effect.

SECTION 17. Section 27.038, Water Code, is repealed.

SECTION 18. 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, Section 5.559, Water Code, as added by this Act, Chapter 27, Water Code, as mended by this Act.

SECTION 19. The Railroad Commission of Texas may adopt rules, as necessary, to implement Section 202.0545, Tax Code, as amended by this Act, and Chapter 27, Water Code, as amended by this Act.

SECTION 20. The comptroller may adopt rules, as necessary, to implement Section 202.0545, Tax Code, as amended by this Act.

SECTION 21. The change in law made by this Act to Section 151.318, Tax Code, 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 22. 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, 2009.